Wyomissing, Pa.-based Customers Bancorp Inc. said it is restating its financial statements for certain prior periods after finding "a material weakness" in internal controls around financial reporting.
The company said that its financial statements for the years ended Dec. 31, 2015, to Dec. 31, 2017, for the three months ended March 31, 2017, and 2018, and for the three and six months ended June 30, 2017, and 2018, can no longer be relied upon. It is restating its financial statements for those periods to classify its mortgage warehouse loans as held for investment rather than held for sale.
Customers chose to restate its financial statements following its determination it had misclassified cash flows related to its commercial mortgage warehouse lending activities between operating and investing activities on its consolidated statements of cash flows. The related loan balances were incorrectly classified as held for sale rather than held for investment.
The bank believed its classification was appropriate at the time. In preparing its interim financial statements for the third quarter, executives reviewed accounting and regulatory guidance that indicated these loans should be classified as held for investment instead of held for sale. Management chose the most conservative approach of declaring its previous results as unreliable and restating them. Customers said other banks have made similar reclassifications without a restatement, according to the Form 8-K.
The misclassification had no effect on total cash balances, total loans, the allowance for loan losses, total assets, total capital, regulatory capital ratios, net interest income, net interest margin or net income to shareholders during the restatement periods.
Customers, which filed its 10-Q filing for the Sept. 30 ended quarter on Nov. 13, said it exceeded the prescribed time period for filing the quarterly report in order to finalize financial statement presentation of cash flow activities associated with its commercial mortgage warehouse lending activities.
