Customers Bancorp to Sell Baby Bonds

Customers Bancorp (CUBI) will be selling a small issue of $25 subordinated notes with a due date in 2034. Details are not known but I believe the issuance will be 1-1.5 million shares (bonds).

Of course CUBI has numerous issues of preferred stock outstanding and they have always seemed to be favorites with investors.

Their preferreds outstanding can be found here. All 4 issues outstandings are fixed-to-floating rate issues.

Note that within the preliminary prospectus for the new notes the company states they ‘may redeem shares of our preferred stock once they become redeemable’. The next issue available for redemption is the CUBI-C 7% issue which is redeemable in June, 2020.

The preliminary prospectus can be found here.

16 thoughts on “Customers Bancorp to Sell Baby Bonds”

  1. I’ll be sad to see those CUBI-C’s called. Bought them last X-Mas eve for $24.28. My annualized yield if called 6/15/2020 will be an amazing 13.66%

    I feel like Archie Bunker singing “Those were the days.”

    1. BlueJoseph – that was a really great buy on CUBI-C at 24.28 on 12/24/18, however, I’m not quite sure what you mean by getting an “annualized yield” of 13.66%. I think the proper way to figure the actual yield you will have achieved for the period of time you owned CUBI-C if it is called on its first call date of 6/15/2020 would be to figure a bond equivalent “Yield to Maturity,” which I should actually more accurately describe as “YIeld to Call” or “Yield To Worst” since CUBI-C doesn’t really have a stated maturity of 6/15/2020 ,on a quarterly paying 7% security due 6/15/2020 bought on 12/24/18 at 24.28. Not that this more accurate yield is anything to sneeze at, but I think you’re fooling yourself if you believe you’re achieving a 13.66% “annualized yield.” The more accurate Yield to Maturity/Yield to Call/Yield To Worst for what you will have achieved would be approx 9.12%, NOT 13.66%. Still, what a wonderful results no matter what! Great buy! How are you figuring 13.66%? And BTW, based on Yahoo Finance historical data, I bet you bot on the day or two AFTER Christmas, not Christmas Eve, but figuring for one of those dates would only add a mere skosh to your achieved yield.

      1. You’re exactly correct on all counts. My spreadsheet shows purchase on 12/26/18. – Eyesight error.

        The YTM calc which uses Excels “Yield” function for some reason was using todays date and not date of purchase. – useful in evaluating a potential purchase but an error on the portfolio.

        I’m obliged to you for your thorough look.

    1. 2WR, What a coincidence to our discussion last night re CUBI. ROA and ROE are growing and P/B on common is attractive on value basis. Maybe a takeover candidate down the road? Given the company’s focus on margin, hard to imagine CUBI-C not being redeemed, at call date yet quote is unchanged at last look providing an opportunity for a strategic exit.

      1. Alpha – As you know, I was beating the drum on all CUBI preferreds except CUBI-F back in July because of their high likelihood of being called (and my willingness to accept YTC as my goal yield) due to them all being F/F with very high LIBOR + rates. given CUBI has improved greatly as a credit since their original issuance they should all be refundable at much lower LIBOR + rates when their first calls come due. CUBI itself is well aware of the impact of refunding their preferreds and has mentioned and quantified the impact on earnings per share in at least the last 2 quarterly CCs…. With CUBI-C last at 25.49, I think it’s in no man’s land for exiting, but actually closer to being a buy than a sell… I have a bid in at 25.36 right now and a sell in at over 26. And yes, I was wondering about the takeover possibility as well…. Thanks also for your thoughts on the equity.

        1. The problem is in the commons shares and the loan expansion under Sidhu. How could are the loans? What’s been reserved for loan loss, what hasn’t.

          I see it’s share price is struggling. TotL market cap under a billion

            1. Steve – Guess you’ll like it even less given they’ve doubled the size of the issue to $65mil and officially priced it at 5 3/8%. 15 year is an unusual starting maturity for a baby bond, that’s for sure…….

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