Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — FY2020 Earnings Presentation
42 slides from Customers Bancorp's earnings presentation, Jan 28, 2021
Slide 1: High Tech Forward-Thinking Bank Supported by High Touch
“High Tech Forward-Thinking Bank Supported by High Touch” & Fourth Quarter & Full Year 2020 ' Earnings Conference Call January 28, 2021 NYSE: CUBI &
Slide 2: Forward-Looking Statements
Forward-Looking Statements - In addition to historical information, this presentation may contain ”forward-looking statements” within the meaning of the ”safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect
Slide 3: Q4 2020 Investor Presentation
Q4 2020 Investor Presentation - I. Overview A. Franchise B. Key Features II. Financial Highlights . A. Capital Trends B. Credit Quality C. Deposit Mix Shift III. Outlook A. Strategic Priorities B. Guidance IV. Appendix 3
Slide 4: I. Overview
I. Overview # Customers Bancorp, Inc.
Slide 5: Customers Bancorp: Franchise Overview
Customers Bancorp: Franchise Overview - $13.9B(1) $11.3B(1) $11.3B 24.26% 1.63%(1) NYSE: CUBI Total Assets Total Loans Total ROCE Adjusted (excl. PPP) and Leases Deposits 4Q20 PTPP Headquarters: West Reading, PA (excl. PPP) ROAA 4Q20 Management Team with 30 years average experience Financial Offices
Slide 6: Customers Bancorp: Key Features
Customers Bancorp: Key Features - Customers is a high performing technology and relationship-driven commercial bank primarily servicing the Mid-Atlantic and New England regions. From Startup to ~$14 Billion in Total Assets (excl. PPP)(1) in ~11 Years • ) The Bank was effectively launched in 2010 by
Slide 7: Customers Bancorp: Digital Bank Transformation
Customers Bancorp: Digital Bank Transformation Branch Light Strategy Supported by Private Banking Teams • Customers Bank is among the least branch-reliant banks in the U.S. Private Banking Teams work out of Private Banking Offices. • The Bank maintains 12 branches, yielding an average of $942 millio
Slide 8: II. Financial Highlights
ll. Financial Highlights Customers Bancorp, Inc.
Slide 9: Fourth Quarter & Full Year 2020 Highlights
Fourth Quarter & Full Year 2020 Highlights Earnings Deposits Deposits • Diluted EPS of $1.65 in 4Q20 versus $0.75 in 4Q19 • Demand deposits up 84% YOY • Core EPS(2) of $1.65 in 4Q20 versus $0.75 in 4Q19 • Total cost of deposits down 107 bps YOY to 0.58% • Diluted EPS of $3.74 in 2020 versus $2.05 in
Slide 10: Sling Shot – Increase in Tangible Common Equity
Sling Shot – Increase in Tangible Common Equity Highlights: Customers Bancorp: Actual & Projected • Added $118 million in retained earnings in Capital Metrics 2020 (Excl. day 1 CECL impact) • Our participation in the Paycheck 13.5% 9.0% Protection Program, as well as strong core 13.0% earnings, will
Slide 11: Credit Quality and Reserves Remain Above Average
Credit Quality and Reserves Remain Above Average Highlights: • Credit quality remains strong as Recent Credit Quality Metrics evidenced by NPAs/Total Assets of only 0.39% at 12/31/20. • NPAs at year-end included CECL Adoption Impact $17.3M tied to one CRE loan located in MA that was resolved in Janu
Slide 12: Loan Portfolio & Mix Shift
Loan Portfolio & Mix Shift 12/31/19 12/31/20(1) Total Loans (excl. PPP) - $10.1B Total Loans (excl. PPP) - $11.3B (1). Excludes PPP loan balances, Non-GAAP Measure, refer to Appendix for reconciliation 12
Slide 13: Components of Reserve Build in 2020
Components of Reserve Build in 2020 (1) “Day 1” is January 1, 2020 . (2) Utilized Moody’s December 2020 Baseline forecast with qualitative adjustments for 4Q20 provision. Excludes reserve for unfunded commitments with ACL balances of $3.4M, $4.2M, $3.8M, $3.3M, and $2.3M as of January 1, 2020, March
Slide 14: Allowance for Credit Losses for Loans and Leases
Allowance for Credit Losses for Loans and Leases (1) CECL Method 12/31/2020 Allowance for ($ in thousands) Amortized Cost Credit Losses Lifetime Loss Rate Loans and leases receivable: Commercial Multifamily $1,761,301 $12,620 0.72% Commercial and Industrial $2,289,441 $12,239 0.53% Commercial Real E
Slide 15: Loan & Lease Deferments
Loan & Lease Deferments Customers Bancorp: Total Loan and Lease Deferments 7/24/2020 9/30/2020 12/31/2020(1) ($ in millions) Deferments % of Portfolio Deferments % of Portfolio Deferments % of Portfolio C&I and Investment CRE C&I $45.9 2.1% $18.6 0.8% $5.4 0.2% SBA $13.4 13.4% $6.0 4.8% $7.4 6.9% In
Slide 16: Majority Deferments - Principal Only
Majority Deferments - Principal Only 12/31/2020 Commercial Loan Deferments ($ in millions) Total Deferments Principal Only % of Portfolio Principal & Interest % of Portfolio C&I $5.4 $0.0 0% $5.4 100.0% SBA $7.4 $0.0 0% $7.4 100.0% Investment CRE & Multifamily $39.9 $38.0 95% $1.9 4.8% Hotels $125.9
Slide 17: COVID-19 At-Risk Industries
COVID-19 At-Risk Industries Remaining Portfolio COVID-19 At-Risk Industries as identified by Customers Entertainment totaled only 6.1% of loans at -only 12/31/20, excluding PPP Total Loans1 at 12/31/20: loans(1) Dining $11.3B CRE Retail Sales COVID-19 At-Risk Industries (12/31/20) Colleges and Loan
Slide 18: Hospitality Loans
Hospitality Loans Portfolio as of 12/31/2020 • Total portfolio of approximately $406M, which represents approximately 3.6% of the Bank’s total loans excluding PPP balances Portfolio Composition • Nearly 20.0% ($81.0M) is currently operating under government contracts for transitional housing • Appro
Slide 19: Healthcare Loans
Healthcare Loans Portfolio as of 12/31/2020: • Total portfolio of approximately $359M • Total number of clients 24 • Average loan size ~$15M Portfolio Composition: • Portfolio consist of Senior Living credit facilities with the majority (95%) in the Skilled Nursing sector • Total number of beds 5500
Slide 20: Multifamily, Investment CRE & Construction Loans
Multifamily, Investment CRE & Construction Loans Multifamily Portfolio: 12/31/20 • Weighted average LTV is 61% • Average principal balance per loan is $4.9M • Well-seasoned portfolio with an average of 3.8 years since origination • Conservative underwriting of a minimum Debt Service Coverage Ratio o
Slide 21: Banking the Mortgage Companies
Banking the Mortgage Companies Overview • Loans to mortgage companies (mortgage warehouse) totaled $3.7 billion at 12/31/20, up $1.4 billion or 59% year-over year. • The majority of this growth was achieved in 3Q20, driven by greater refinance activity due to sharply lower interest rates, an increas
Slide 22: PPP 1/2 Forgiveness Update
PPP 1/2 Forgiveness Update A top lender in nation with over $5B in PPP loans to over 100k customers (2% of all PPP loans) PPP Portfolio Forgiveness Status ($ in millions) Loan Amount Loan Count (99.7%) (99.4%) Strong Forgiveness Performance • As of 12/31/20 we had 13,013 forgiveness applications sub
Slide 23: PPP 3 Program Update
PPP 3 Program Update • Opened up application portal on Monday January 11th • Established an end-to-end white label “PPP-as-a-Service” technology platform for banks, lenders and referral partners that includes loan processing, origination, funding, servicing and forgiveness • Revised fee structure of
Slide 24: Consumer Installment Loans
Consumer Installment Loans (1) FICO Score Debt to Income Ratio Borrower Income 0.0% 740 Avg FICO Portfolio average DTI $91K Avg Income is 19.2% 14.5% 20.2% 16.7% 36.2% 25.8% 32.7% 4.3% 11.5% 25.2% 49.3% 41.5% 21.1% 0-9.99% 10 – 19.99% 20 – 29.99% 750+ 700-749 660-699 <$49,999 $50K -$99,999 >$100K n/
Slide 25: Consumer Installment Loans Performance Remains Strong
Consumer Installment Loans Performance Remains Strong Continued Outperformance • At industry peak for consumer forbearance, CB overall remained less than half the industry average • Further, CB Direct was approximately 70% below industry average Note: Customers Bancorp’s impairment percentages are c
Slide 26: Deposit Growth and Mix Shift
Deposit Growth and Mix Shift 12/31/19 12/31/20 5.8% 10.6% 19.3% 20.8% 11.6% 15.5% 21.1% 40.3% 14.3% 40.7% Noninterest Bearing DDAs Interest Bearing DDAs Noninterest Bearing DDAs Interest Bearing DDAs Money Market Accounts Savings Accounts Money Market Accounts Savings Accounts Certificates of Deposi
Slide 27: III. Outlook
Il. Outlook Customers Bancorp, Inc.
Slide 28: Continuing to Execute on Community Bank & Niche Business Strategies
Continuing to Execute on Community Bank & Niche Business Strategies C&I Lending • Continue to focus on building franchise value by expanding our community banking strategy, lending to small-to-mid sized businesses and deposit gathering • Loans expected to grow about 7% to 10% over the next year • Ou
Slide 29: Financial Guidance
Financial Guidance 1. Non-GAAP Measure, refer to Appendix for reconciliation • Our updated financial guidance is as follows: • Loan growth, excluding PPP and mortgage warehouse balances, is expected to average in the mid-to-high single digits over the next several quarters. • The balance of commerci
Slide 30: 2026 Core EPS Target
2026 Core EPS Target Path to Core EPS of $6.00 in 2026 Position at year-end 2020 • $13.9 billion in core assets1 • 31.7 million diluted shares outstanding Growth Assumptions • Asset growth of 7.0%-10.0% per year on average in the 2021-2026 period • Diluted shares outstanding growth of 1.0% per annum
Slide 31: IV. Appendix
IV. Appendix Customers Bancorp, Inc.
Slide 32: Liquidity
Liquidity YOY Liquidity Sources ($000) 4Q19 1Q20 2Q20 3Q20 4Q20 Change Cash (Int. Earning Deposits) $179,410 $237,390 $1,022,753 $325,594 $615,264 $435,854 FHLB Available Capacity $1,159,970 $882,013 $1,078,520 $929,508 $684,936 ($475,033) FRB Available Capacity $136,842 $9,931 $152,410 $215,000 $22
Slide 33: Paycheck Protection Program: $100M+ in Anticipated Origination Fee Growth
Paycheck Protection Program $100M+ in Anticipated Origination Fee Growth Customers Bank leveraged its technology platform to partner with leading fintechs becoming a top PPP Loan originator in the country • Customers Bank rose to the challenge of helping American small PPP Lenders Ranked business pr
Slide 34: Detailed Financial Ratios
Detailed Financial Ratios 34
Slide 35: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures - Unaudited Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. Th
Slide 36: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Core Earnings - Customers Bancorp ($ in thousands, not including per share amounts) Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net income to common shareholders $ 52,831 $
Slide 37: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp ($ in thousands) Twelve Months Ended December 31, Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 2020 2019 GAAP net income $ 56,245 $ 50,515 $ 22,718 $ 3,100 $ 27,526 $
Slide 38: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Coverage of credit loss reserves for loans and leases held for investment, excluding PPP ($ in thousands) Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 Loans and leases receivable $ 12,136,733 $ 12,664,997 $ 12,032,874 $ 7,353,262 $ 7,318,988 Loans r
Slide 39: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Total loans and leases, excluding PPP ($ in thousands) Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 Total loans and leases $ 15,832,251 $ 16,605,279 $ 15,290,202 $ 10,321,431 $ 10,051,074 PPP loans (4,561,365) (4,964,105) (4,760,427) - - Loans and l
Slide 40: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Book Value per Common Share - Customers Bancorp ($ in thousands, except per share data) Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 GAAP -Total shareholders' equity $ 1,117,086 $ 1,051,491 $ 1,007,847 $ 964,636 $ 1,052,795 Reconciling item
Slide 41: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Equity to Tangible Assets, excluding PPP loans Tangible Equity ($ in thousands) ($ in thousands) Q4 2020 Q4 2019 Q4 2020 GAAP - Total assets $ 18,439,248 $ 11,520,717 GAAP - Total shareholders' equity $ 1,117,086 Reconciling items: Rec
Slide 42: Contacts
Contacts Leadership: Analysts: Carla Leibold B. Riley Financial CFO of Customers Bancorp, Inc and Customers Steve Moss Bank Tel: 484-923-8802 D.A. Davidson Company cleibold@customersbank.com Russell Gunther Hovde Group Jay Sidhu Will Curtiss Chairman & CEO of Customers Bancorp, Inc. and Executive Ch