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Customers Bancorp Reports Strong Q1 2014 Net Income and Record Organic Loan and Deposit Growth

WYOMISSING, PA--(Marketwired - April 21, 2014) - Customers Bancorp, Inc. (NASDAQ: CUBI), the parent company of Customers Bank (collectively "Customers"), reported earnings of $8.1 million for the quarter ended March 31, 2014 ("Q1 2014") compared to earnings of $7.2 million for the quarter ended March 31, 2013 ("Q1 2013"), an increase of 13.2%. Q1 2014 fully diluted earnings per share was $0.32. Total shares outstanding at March 31, 2014 were 24.3 million, up from 18.5 million shares outstanding at March 31, 2013. 

During Q1 2014 Customers funded loan balances (including mortgage warehouse loans held for sale) grew $841 million to $4.1 billion, an increase of 26.2% for the quarter. Deposits grew by $646 million to $3.6 billion, an increase of 21.8%. Loan growth was predominately in multi-family loans, up $495 million, adjustable rate 1-4 family residential mortgage loans, up $260 million, and commercial real estate and commercial and industrial loans, up $135 million.

Other financial highlights for Q1 2014 included:

  • Total assets at March 31, 2014 were $5.0 billion, up $0.9 billion (20.7%) from the December 31, 2013 balance of $4.2 billion, and up $1.6 billion (45.0%) from the March 31, 2013 balance of $3.5 billion.
  • Loans receivable (not covered by FDIC loss share) were $3.3 billion at March 31, 2014, an increase of $0.9 billion (37.4%) from the December 31, 2013 balance of $2.4 billion, and up $1.8 billion (117.2%) from the March 31, 2013 balance of $1.5 billion.
  • Loans held for sale (principally mortgage warehouse loans) were $698 million at March 31, 2014, down $50 million (6.7%) from the December 31, 2013 balance of $748 million, and down $662 million (48.7%) from the March 31, 2013 balance of $1.4 billion.
  • Total deposits increased $646 million (21.8%) during Q1 2014 to $3.6 billion as of March 31, 2014. Total deposits increased $1.1 billion (42.2%) from March 31, 2013.
  • Net interest income was $29.5 million for Q1 2014 compared to $22.5 million for Q1 2013, an increase of 31.0%.
  • Total revenues (net interest income plus non-interest income) before provisions for loan losses grew from $27.4 million in Q1 2013 to $37.1 million in Q1 2014, an increase of 35.3%.
  • Provision expense for Q1 2014 was $4.4 million, principally as a result of the provision recorded to reflect the first quarter loan growth. This compares with a recovery of $0.5 million in Q4 2013 and a recovery of $0.1 million in Q1 2013.
  • Q1 2014 pre-tax pre-provision income of $15.9 million was up $2.6 million, or 19.5%, from Q4 2013, and up $5.0 million, or 45.9%, from Q1 2013. The pre-tax pre-provision ratio remained relatively stable at approximately 1.5% of average assets.
  • Q1 2014 non-interest expense of $21.2 million declined $1.1 million (5.1%) from Q4 2013 non-interest expense and increased $4.7 million (28.5%) compared to Q1 2013 non-interest expense of $16.5 million.
  • Non-performing loans not covered by FDIC loss share agreements were $12.6 million at March 31, 2014, a decrease of $0.9 million (6.7%) from the December 31, 2013 non-performing non-covered amount of $13.5 million. Non-covered non-performing loans were 0.32% of total non-covered loans as of March 31, 2014.
  • Total reserves for loan losses on originated loans were 165.4% of non-performing loans and 0.89% of all loans held for investment.
  • Commercial and industrial loans, including owner occupied commercial real estate loans totaled $801 million as of March 31, 2014, up $38 million (4.9%) from December 31, 2013, and up $131 million (19.6%) from the March 31, 2013 balance of $670 million.
  • Capital ratios1 remained strong but declined during the period due to the increase in income producing assets. March 31, 2014 estimated Tier 1 Leverage was 9.10%, and Total Risk-Based Capital was 11.45%. The Company's capital ratios exceed the levels established for "well capitalized" banks.

"In Q1 2014 we focused our energies on increasing earning assets and aggregating deposits, more fully utilizing the capital raised during 2013," stated Jay Sidhu, Chairman and CEO of Customers Bancorp, Inc. "We originated nearly $700 million of loans during the first quarter of 2014 while maintaining our underwriting standards, and grew our deposits by over $600 million. In doing so we positioned the Company to achieve great things in 2014 and future years. We will continue to focus on developing revenues and controlling our expenses to build shareholder value as we move deeper into 2014."

1 Tier 1 Leverage and Total Risk-Based Capital ratios as of March 31, 2014 are estimated.

                                                                            
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EARNINGS SUMMARY - UNAUDITED                                                
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(Dollars in thousands, except per-                                          
 share data)                                                                
                                            Q1           Q4           Q1    
                                           2014         2013         2013   
                                     ---------------------------------------
                                                                            
Net income available to common                                              
 shareholders                         $      8,136 $      9,010 $      7,189
Basic earnings per share "EPS"        $       0.34 $       0.37 $       0.39
Diluted EPS                           $       0.32 $       0.36 $       0.38
Average shares outstanding              24,260,518   24,527,087   18,471,207
                                                                            
Pre-tax pre-provision return on                                             
 average assets                               1.5%         1.4%         1.5%
Return on average assets                      0.8%         0.9%         1.0%
Return on average common equity               8.4%         9.1%        10.6%
Equity to assets at period end                8.0%         9.3%         8.0%
Net interest margin, tax equivalent           2.9%         3.1%         3.3%
Reserves to non performing loans                                            
 (NPL's)                                    165.4%       152.9%       104.8%
                                                                            
Tangible book value per common share                                        
 (period end) (1)                     $      16.35 $      15.81 $      14.78
Period end stock price                $      20.87 $      20.46 $      16.75
                                                                            
(1) Calculated as total equity less goodwill and other intangibles divided  
 by common shares outstanding at period end.                                
                                                                            

Net Income, Earnings Per Share and Tangible Book Value

Q1 2014 net income of $8.1 million is up $0.9 million, or 13.2%, from Q1 2013. Q1 2014 diluted earnings per share is $0.32 with 25.3 million diluted shares, compared to Q1 2013 earnings of $7.2 million and diluted earnings per share of $0.38 with 18.9 million diluted shares. Customers' tangible book value per share increased to $16.35 as of March 31, 2014 compared to $14.78 as of March 31, 2013, an increase of 10.6%. The increase in net income in Q1 2014 compared to Q1 2013 is primarily due to increased net interest income, fueled by strong loan growth, while maintaining outstanding asset quality and growing deposits. The increasing tangible book value reflects Customers' strategic commitment to consistently maintain and grow tangible book value per share with the expectation that it will eventually result in superior shareholder value creation.

Net Interest Margin

The net interest margin decreased 14 basis points to 2.93% in Q1 2014 compared to Q4 2013, and decreased 33 basis points from Q1 2013. The Q1 2014 net interest margin has decreased due to the run-off of maturing higher yielding loans, and addition of lower yielding loans as we grew the loan portfolio by $900 million in Q1 2014. In addition, certain deposits and borrowings were extended during the quarter with higher rates and longer terms to maturity to better insulate the bank from future movement in interest rates.

Non-Interest Income

Q1 2014 non-interest income of $7.6 million was down $0.3 million compared to $7.9 million in Q4 2013, and up $2.7 million compared to $4.9 million in Q1 2013. The Q1 2014 non-interest income decrease compared to Q4 2013 resulted from lower mortgage warehouse transaction fees (down $0.6 million) activity reflecting the seasonal decrease in volume, mortgage banking fees (down $0.7 million) as originations decreased in the period, and gains on sale of Small Business Administration ("SBA") loans (down $0.5 million), offset in part by an increase in gains on sales of securities (up $1.6 million) as Customers shortened the duration of the securities portfolio. 

Non-Interest Expense

Operating expenses in Q1 2014 of $21.2 million decreased $1.1 million compared to Q4 2013 operating expenses of $22.3 million. Q1 2014 operating expenses supported greater business activities as Customers grew its loan portfolio significantly during Q1 2014 and the Company continued to invest in its commercial and industrial lending teams while rightsizing its mortgage banking business. These investments resulted in a larger organization and increased occupancy, technology, and other operating costs. However, these increased needs were largely offset in the quarter by efforts to manage costs and increase operating efficiencies including strategic realignment of staffing and compensation, higher bonus accrual in Q4 2013, and deferral of direct origination costs on the large volume of new loan originations.

Provision for Loan Losses and Asset Quality

The Q1 2014 provision for loan losses was $4.4 million, compared to a Q4 2013 provision reversal of ($0.5) million, and a Q1 2013 provision reversal of ($0.1) million2. The Q1 2014 provision is primarily the result of $0.9 billion in loan growth during the quarter.

Customers separates its loan portfolio into "covered" and "non-covered" loans for purposes of analyzing and managing asset quality. Covered loans are those loans that are covered by FDIC purchase and assumption, or loss sharing, agreements, and for which Customers is reimbursed 80% of allowable incurred losses. Covered loans totaled $61.6 million as of March 31, 2014, $66.7 million as of December 31, 2013, and $102.0 million as of March 31, 2013. Non-accrual covered loans totaled $5.5 million at March 31, 2014, $5.6 million at December 31, 2013 and $10.4 million at March 31, 2013. Covered real estate owned totaled $9.3 million as of March 31, 2014, $7.0 million as of December 31, 2013 and $4.3 million as of March 31, 2013.

2 Beginning in Q4 2013, the provision for loan losses is being reported net of the amount of estimated credit losses on covered loans to be recovered from the Federal Deposit Insurance Corporation (the "FDIC") pursuant to specific purchase and assumption, or loss sharing, agreements. Prior period amounts have been reclassified to be consistent with the Q4 2013 presentation. Previously changes in the amount recoverable from the FDIC had been reported as a separate amount in non-interest income.

Non-covered loans are all loans not covered by the FDIC agreements. Non-covered loans includes loans accounted for as held for sale as well as loans accounted for as held for investment. Non-covered loans totaled $4.0 billion as of March 31, 2014, $3.1 billion as of December 31, 2013, and $2.9 billion as of March 31, 2013. Non-accrual non-covered loans totaled $12.6 million as of March 31, 2014 (0.32% of total non-covered loans), $13.5 million (0.43% of total non-covered loans) as of December 31, 2013 and $21.4 million (0.75% of total non-covered loans) as of March 31, 2013. Non-covered loans 30 to 89 days delinquent at March 31, 2014 totaled $10.3 million, or 0.26% of non-covered loans.

Conference Call

                                                                            
Date:                    April 21, 2014                                     
Time:                    4:15 pm ET                                         
US Dial-in:              877-941-1427                                       
International Dial-in:   480-629-9664                                       
Conference ID:           4678335                                            
Webcast:                 http://public.viavid.com/index.php?id=108593       
                                                                            

Institutional Background

Customers Bancorp, Inc. is a bank holding company located in Wyomissing, Pennsylvania engaged in banking and related businesses through its bank subsidiary, Customers Bank. Customers Bank is a community-based, full-service bank with assets of approximately $5.0 billion. A member of the Federal Reserve System and deposits insured by the Federal Deposit Insurance Corporation ("FDIC"), Customers Bank provides a range of banking services to small and medium-sized businesses, professionals, individuals and families through offices in Pennsylvania, New York, Rhode Island, Massachusetts, and New Jersey. Committed to fostering customer loyalty, Customers Bank uses a High Tech/High Touch strategy that includes use of industry-leading technology to provide customers better access to their money, as well as a continually expanding portfolio of loans to small businesses, multi-family projects, mortgage companies and consumers.

Customers Bancorp, Inc. is listed on the NASDAQ exchange under the symbol CUBI. Additional information about Customers Bancorp, Inc. can be found on the company's website, www.customersbank.com.

"Safe Harbor" Statement

In addition to historical information, this press release may contain "forward-looking statements" which are made in good faith by Customers Bancorp, Inc., pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. These forward-looking statements include statements with respect to Customers Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words "may," "could," "should," "pro forma," "looking forward," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.'s control). Numerous competitive, economic, regulatory, legal and technological factors, among others, could cause Customers Bancorp, Inc.'s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management's current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.'s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K. Customers Bancorp, Inc. does not undertake to update any forward looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank.

                                                                            
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CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS                  
 ENDED - UNAUDITED                                                          
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(Dollars in thousands, except per                                           
 share data)                                                                
                                                                            
                                           Q1           Q4           Q1     
                                          2014         2013         2013    
                                     ---------------------------------------
Interest income:                                                            
 Loans receivable, including fees     $    28,355  $    24,801  $    16,099 
 Loans held for sale                        5,083        6,604       10,884 
 Investment securities                      3,040        2,980          829 
 Other                                        116          112          108 
                                     ------------ ------------ -------------
  Total interest income                    36,594       34,497       27,920 
                                                                            
Interest expense:                                                           
 Deposits                                   5,415        5,279        5,136 
 Federal funds purchased                        -            -            - 
 Borrowings                                 1,667        1,524          259 
                                     ------------ ------------ -------------
 Total interest expense                     7,082        6,803        5,395 
                                     ------------ ------------ -------------
  Net interest income                      29,512       27,694       22,525 
 Provision for loan losses                  4,368         (512)        (117)
                                     ------------ ------------ -------------
  Net interest income after provision                                       
   for loan losses                         25,144       28,206       22,642 
                                     ------------ ------------ -------------
                                                                            
Non-interest income:                                                        
Gain on sale of investment securities       2,832        1,274            - 
Mortgage warehouse transactional fees       1,759        2,335        3,668 
Bank-owned life insurance income              835          824          476 
Mortgage banking income                       409        1,142            - 
Deposit fees                                  214          187          130 
Accretion of FDIC loss sharing                                              
 receivable                                     -            -            - 
Gain/(loss) on sale of SBA loans               (1)         450           50 
Other                                       1,541        2,153          624 
                                     ------------ ------------ -------------
  Total non-interest income                 7,590        7,915        4,898 
                                                                            
Non-interest expense:                                                       
Salaries and employee benefits              9,351       10,625        7,397 
Occupancy                                   2,637        2,520        1,910 
Professional services                       2,282        2,399          706 
FDIC assessments, taxes, and                                                
 regulatory fees                            2,131        2,058        1,347 
Technology, communication and bank                                          
 operations                                 1,560        1,307          841 
Loan workout expenses                         441          570          674 
Advertising and promotion                     414          301          115 
Other real estate owned expense               351          403           36 
Merger related expenses                         -          132            - 
Stock offering expenses                         -            -            - 
Other                                       2,002        2,118        3,454 
                                     ------------ ------------ -------------
  Total non-interest expense               21,169       22,301       16,480 
                                     ------------ ------------ -------------
Income before tax expense                  11,565       13,820       11,060 
  Income tax expense                        3,429        4,810        3,871 
                                     ------------ ------------ -------------
    Net income                        $     8,136  $     9,010  $     7,189 
                                     ------------ ------------ -------------
                                                                            
Basic earnings per share              $      0.34  $      0.37  $      0.39 
Diluted earnings per share                   0.32         0.36         0.38 
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
CONSOLIDATED BALANCE SHEET -                                                
 UNAUDITED                                                                  
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(Dollars in thousands)                                                      
                                                                            
                                      March 31,   December 31,    March 31, 
                                        2014          2013          2013    
                                   -----------------------------------------
               ASSETS                                                       
Cash and due from banks             $    73,544  $      59,339  $     6,731 
Interest earning deposits               216,923        173,729      174,409 
                                   ------------- -------------- ------------
 Cash and cash equivalents              290,467        233,068      181,140 
Investment securities available for                                         
 sale, at fair value                    458,302        497,573      162,030 
Loans held for sale                     697,532        747,593    1,359,817 
Loans receivable not covered by                                             
 Loss Sharing Agreements with the                                           
 FDIC                                 3,294,908      2,398,353    1,516,844 
Loans receivable covered under Loss                                         
 Sharing Agreements with the FDIC        61,639         66,725      102,011 
Allowance for loan losses               (26,704)       (23,998)     (26,439)
                                   ------------- -------------- ------------
 Total loans receivable, net of                                             
  allowance for loan losses           3,329,843      2,441,080    1,592,416 
FHLB, Federal Reserve Bank, and                                             
 other stock                             50,430         42,424       34,081 
Accrued interest receivable               9,629          8,362        6,119 
FDIC loss sharing receivable              8,272         10,046       12,043 
Bank premises and equipment, net         11,234         11,625        9,546 
Bank-owned life insurance               105,303        104,433       66,746 
Other real estate owned                  15,670         12,265        9,414 
Goodwill and other intangibles            3,673          3,676        3,686 
Other assets                             33,876         41,028       21,586 
                                   ------------- -------------- ------------
 Total assets                       $ 5,014,231  $   4,153,173  $ 3,458,624 
                                   ------------- -------------- ------------
                                                                            
   LIABILITIES AND SHAREHOLDERS'                                            
               EQUITY                                                       
Demand, non-interest bearing        $   634,578  $     478,103  $   242,509 
Interest Bearing Deposits             2,971,754      2,481,819    2,293,317 
                                   ------------- -------------- ------------
Total deposits                        3,606,332      2,959,922    2,535,826 
Federal funds purchased                       -         13,000       90,000 
Other borrowings                        970,250        771,750      539,000 
Accrued interest payable and other                                          
 liabilities                             36,711         21,878       16,888 
                                   ------------- -------------- ------------
 Total liabilities                    4,613,293      3,766,550    3,181,714 
                                   ------------- -------------- ------------
                                                                            
Common stock                             24,826         24,756       18,531 
Additional paid in capital              308,820        307,231      213,022 
Retained earnings                        79,144         71,008       45,503 
Accumulated other comprehensive                                             
 (loss) income, net                      (3,598)        (8,118)         354 
Treasury stock, at cost                  (8,254)        (8,254)        (500)
                                   ------------- -------------- ------------
 Total shareholders' equity             400,938        386,623      276,910 
                                   ------------- -------------- ------------
  Total liabilities & shareholders'                                         
   equity                           $ 5,014,231  $   4,153,173  $ 3,458,624 
                                   ------------- -------------- ------------
                                                                            
                                                                            
                                                                            
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Average Balance Sheet / Net Interest Margin (Unaudited)                     
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(Dollars in thousands)                                                      
                                      Three Months Ended March 31,          
                           -------------------------------------------------
                                     2014                     2013          
                           ------------------------ ------------------------
                                           Average                  Average 
                                Average   yield or       Average   yield or 
                                Balance    cost (%)      Balance    cost (%)
                           ------------- ---------- ------------- ----------
           Assets                                                           
Interest earning deposits  $    187,085      0.25%  $    174,637      0.25% 
Investment securities           516,902      2.35%       143,028      2.32% 
Loans held for sale             566,535      3.64%     1,123,420      3.93% 
Loans                         2,842,050      4.03%     1,390,719      4.69% 
Less: Allowance for loan                                                    
 losses                         (24,524)                 (26,299)           
                           -------------            -------------           
Total interest earning                                                      
 assets                       4,088,048      3.62%     2,805,505      4.03% 
Non-interest earning assets     282,192                  156,969            
                           -------------            -------------           
 Total assets              $  4,370,240             $  2,962,474            
                           -------------            -------------           
                                                                            
        Liabilities                                                         
Interest checking          $     57,067      0.81%  $     35,892      0.43% 
Money market                  1,397,299      0.63%       994,464      0.69% 
Other savings                    38,312      0.43%        26,699      0.52% 
Certificates of deposit       1,252,871      1.01%     1,192,330      1.15% 
                           -------------            -------------           
Total interest bearing                                                      
 deposits (1)                 2,745,549      0.80%     2,249,385      0.93% 
Other borrowings                551,339      1.22%       171,333      0.61% 
                           -------------            -------------           
Total interest bearing                                                      
 liabilities                  3,296,888      0.87%     2,420,718      0.90% 
Non-interest bearing                                                        
 deposits (1)                   666,775                  254,859            
                           -------------            -------------           
Total deposits & borrowings   3,963,663      0.72%     2,675,577      0.82% 
Other non-interest bearing                                                  
 liabilities                     11,619                   12,550            
                           -------------            -------------           
 Total liabilities            3,975,282                2,688,127            
Shareholders' equity            394,958                  274,347            
                           -------------            -------------           
Total liabilities and                                                       
 shareholders' equity      $  4,370,240             $  2,962,474            
                           -------------            -------------           
                                                                            
Net interest margin                          2.92%                    3.25% 
                                         ----------               ----------
Net interest margin tax                                                     
 equivalent                                  2.93%                    3.26% 
                                         ----------               ----------
                                                                            
(1) Total costs of deposits (including interest bearing and non-interest    
 bearing) were 0.64% and 0.83% for the three months ended March 31, 2014    
 and 2013, respectively.                                                    
                                                                            
                                                                            
                                                                            
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Asset Quality as of March 31, 2014 (Unaudited)                              
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(Dollars in thousands)                                                      
                                 Non Accrual     Other Real   Non Performing
    Loan Type     Total Loans       /NPL's      Estate Owned  Assets (NPA's)
----------------------------------------------------------------------------
Pre September                                                               
 2009 Originated                                                            
 Loans                                                                      
 Legacy                 $67,244         $8,946         $5,197        $14,143
 Troubled debt                                                              
  restructurings                                                            
  (TDR's)                 1,738            658              -            658
----------------------------------------------------------------------------
Total Pre                                                                   
 September 2009                                                             
 Originated                                                                 
 Loans                   68,982          9,604          5,197         14,801
----------------------------------------------------------------------------
                                                                            
Originated Loans                                                            
 (Post 2009)                                                                
 Warehouse                5,386              -              -              -
 Manufactured                                                               
  Housing                 4,303              -              -              -
 Commercial             958,709            493              -            493
 MultiFamily          1,553,426              -              -              -
 Consumer/                                                                  
  Mortgage              128,559              -              -              -
 TDR's                      320              -              -              -
----------------------------------------------------------------------------
Total Originated                                                            
 Loans                2,650,703            493              -            493
----------------------------------------------------------------------------
                                                                            
Acquired Loans                                                              
 Berkshire               11,054          1,963            813          2,776
 Total FDIC                                                                 
  (covered and                                                              
  non covered)           39,400          5,456          9,329         14,785
 Manufactured                                                               
  Housing               125,612              -            331            331
 Flagstar                                                                   
  (Commercial)          128,883              -              -              -
 Flagstar                                                                   
  (Residential)         254,447              -              -              -
 TDR's                    3,075            553              -            553
----------------------------------------------------------------------------
Total Acquired                                                              
 Loans                  562,471          7,972         10,473         18,445
----------------------------------------------------------------------------
                                                                            
Acquired                                                                    
 Purchased                                                                  
 Credit Impaired                                                            
 Loans                                                                      
 Berkshire               47,797              -              -              -
 Total FDIC -                                                               
  Covered                21,709              -              -              -
 Manufactured                                                               
  Housing 2011            5,175              -              -              -
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Total Acquired                                                              
 Purchased                                                                  
 Credit Impaired                                                            
 Loans                   74,681              -              -              -
----------------------------------------------------------------------------
Unamortized                                                                 
 fees/discounts            -290                                             
----------------------------------------------------------------------------
Total Loans Held                                                            
 for Investment       3,356,547         18,069         15,670         33,739
----------------------------------------------------------------------------
Total Loans Held                                                            
 for Sale               697,532              -              -              -
----------------------------------------------------------------------------
Total Portfolio      $4,054,079        $18,069        $15,670        $33,739
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
Asset Quality as of March 31, 2014 (Unaudited)                              
----------------------------------------------------------------------------
(Dollars in thousands)                                                      
                                                                     Total  
                                                                   Reserves 
                 Allowance                       Total    NPL's/      to    
                 for loan   Credit     Cash     Credit     Total     Total  
    Loan Type     losses     Mark     Reserve  Reserves    Loans     NPL's  
----------------------------------------------------------------------------
Pre September                                                               
 2009 Originated                                                            
 Loans                                                                      
 Legacy             $2,095        $-        $-    $2,095    13.30%    23.42%
 Troubled debt                                                              
  restructurings                                                            
  (TDR's)               56         -         -        56    37.86%     8.51%
----------------------------------------------------------------------------
Total Pre                                                                   
 September 2009                                                             
 Originated                                                                 
 Loans               2,151         -         -     2,151    13.92%    22.40%
----------------------------------------------------------------------------
                                                                            
Originated Loans                                                            
 (Post 2009)                                                                
 Warehouse              40         -         -        40     0.00%     0.00%
 Manufactured                                                               
  Housing               86         -         -        86     0.00%     0.00%
 Commercial          7,111         -         -     7,111     0.05%  1442.39%
 MultiFamily         6,219         -         -     6,219     0.00%     0.00%
 Consumer/                                                                  
  Mortgage             518         -         -       518     0.00%     0.00%
 TDR's                   -         -         -         -     0.00%     0.00%
----------------------------------------------------------------------------
Total Originated                                                            
 Loans              13,974         -         -    13,974     0.02%  2834.48%
----------------------------------------------------------------------------
                                                                            
Acquired Loans                                                              
 Berkshire             512         -         -       512    17.76%    26.08%
 Total FDIC                                                                 
  (covered and                                                              
  non covered)         857         -         -       857    13.85%    15.71%
 Manufactured                                                               
  Housing                -         -     3,177     3,177     0.00%     0.00%
 Flagstar                                                                   
  (Commercial)           -         -         -         -     0.00%     0.00%
 Flagstar                                                                   
  (Residential)          -         -         -         -     0.00%     0.00%
 TDR's                 141         -         -       141    17.98%    25.50%
----------------------------------------------------------------------------
Total Acquired                                                              
 Loans               1,510         -     3,177     4,687     1.42%    58.79%
----------------------------------------------------------------------------
                                                                            
Acquired                                                                    
 Purchased                                                                  
 Credit Impaired                                                            
 Loans                                                                      
 Berkshire           4,367         -         -     4,367     0.00%     0.00%
 Total FDIC -                                                               
  Covered            4,195         -         -     4,195     0.00%     0.00%
 Manufactured                                                               
  Housing 2011         507         -         -       507     0.00%     0.00%
----------------------------------------------------------------------------
Total Acquired                                                              
 Purchased                                                                  
 Credit Impaired                                                            
 Loans               9,069         -         -     9,069     0.00%     0.00%
----------------------------------------------------------------------------
Unamortized                                                                 
 fees/discounts                                              0.00%     0.00%
----------------------------------------------------------------------------
Total Loans Held                                                            
 for Investment     26,704         -     3,177    29,881     0.54%   165.37%
----------------------------------------------------------------------------
Total Loans Held                                                            
 for Sale                -         -         -         -     0.00%     0.00%
----------------------------------------------------------------------------
Total Portfolio    $26,704        $-    $3,177   $29,881     0.45%   165.37%
----------------------------------------------------------------------------
                                                                            

Jay Sidhu
Chairman & CEO 
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President & COO
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