Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q1 2021 Earnings Presentation
45 slides from Customers Bancorp's earnings presentation, Apr 29, 2021
Slide 1: Customers Bancorp, Inc. First Quarter 2021 Earnings Conference Call
Customers Bancorp, Inc. “High Tech Forward-Thinking Bank Supported by High Touch” First Quarter 2021 | Earnings Conference Call April 29, 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 to
Slide 3: Environmental, Social & Governance Report
Environmental, Social & Governance Report Our Communities Use of investment and philanthropic capital to expand access to economic opportunity in the communities Environmental, social and governance (ESG) where we do business has been core to Customers since its founding more than 10 years ago. cons
Slide 4: 2020 ESG Milestones
2020 ESG Milestones Customers Bank contributed Just days after the death Customers Bank joined the Customers Bank was the winner nearly $400,000 to help of George Floyd, the bank Federal Home Loan Bank of of the highly coveted feed those most in need during held a company-wide virtual Pittsburgh in
Slide 5: I. Overview
I. Overview Customers 2 Bancorp, Inc.
Slide 6: Customers Bancorp: Q1 Highlights & Franchise Overview
Customers Bancorp: Q1 Highlights & Franchise Overview 1Q21 Performance vs. 1Q20 NYSE: CUBI $2.14(1) $70.3M(1) 31.03%(1) 1.61%(1) 1.90%(1) Core EPS Core Net Core ROCE Core ROAA Adjusted Income Headquarters: West Reading, PA PTPP ROAA vs. $0.16 in vs. 2.55% in vs. 0.30% in vs. $5.1M in vs. 1.55% in 1Q
Slide 7: A High Performing Technology and Relationship-Driven Commercial Bank
Customers Bancorp: A High Performing Technology and Relationship-Driven Commercial Bank Key Features: From Startup to ~$13.6 Billion in Total Assets (excl. PPP)(1) in ~11 Years • The Bank was effectively launched in 2010 by the current management team to clean up a $250 million-in-assets failing ban
Slide 8: II. Business Highlights
ll. Business Highlights Customers 2 Bancorp, Inc.
Slide 9: Q1 2021 Highlights
Q1 2021 Highlights Earnings Deposits Deposits • Diluted EPS of $1.01 in 1Q21 versus ($0.02) in 1Q20 • Demand deposits up 96% over 1Q20 • Core EPS(2) of $2.14 in 1Q21 versus $0.16 in 1Q20 • Total cost of deposits down 98 bps YOY to 0.53% • GAAP Net income of $33.2M and Core Net Income of $70.3M in 1Q
Slide 10: Loan Growth & Loan Mix
Loan Growth & Loan Mix Loan Growth $ in Billions 1Q 2021 Loan Mix(1) 5% CAGR = 7%(1)(2) 15% $4.6 $5.2 20% 1% $11.3 $11.0 31% $10.1 11% $8.3 $8.7 $8.5 3% 13% 2016 2017 2018 2019 2020 1Q '21 1% (1) Gross Loans (excl. PPP) PPP Loans CRE Owner Occupied Commercial & Industrial Construction Investment CRE
Slide 11: Deposit Growth and Deposit Mix
Deposit Growth and Deposit Mix Deposit Growth $ in Billions 1Q 2021 Deposit Mix 5.3% CAGR = 13%(1) 11.9% 21.5% $12.5 $11.3 $8.6 35.3% 25.9% $7.3 $6.8 $7.1 2016 2017 2018 2019 2020 1Q '21 Total Deposits Noninterest Bearing DDAs Interest Bearing DDAs Money Market Accounts Savings Accounts Certificates
Slide 12: Margin Trend
Margin Trend Net Interest Margin Growth (Excl. PPP)(1) Loan Yield (Excl. PPP)(1) & Deposit Cost 3.00% 3.00% 4.8% 4.9% 2.99% 4.6% 4.7% 2.97% 4.4% 4.4% 4.5% 4.3% 4.3% 4.1% 4.1% 2.89% 2.86% 2.83% Spread - 2.7% Spread - $97.7 $98.0 1.8% 3.8% 2.64% 1.7% 1.7% 1.7% 1.8% $87.5 1.6% 1.5% 2.59% $81.3 $82.7 2.
Slide 13: Continuing to Execute on Community Bank & Niche Business Strategies
Continuing to Execute on Community Bank & Niche Business Strategies C&I Lending • Continue to focus on building franchise value by expanding our community banking strategy, lending to small-to-mid sized businesses and deposit gathering • Loans, excluding mortgage warehouse, expected to grow about 7%
Slide 14: III. Credit Risk Management
lll. Credit Risk Management Customers 2 Bancorp, Inc.
Slide 15: Credit Quality and Reserves Remain Above Average
Credit Quality and Reserves Remain Above Average Recent Credit Quality Metrics Highlights: • Credit quality remains strong as 2.50% 0.80% evidenced by NPAs/Total Assets of only 0.26% at 3/31/21. 2.00% 0.60% Reserves / Loans • NPAs / Assets CECL Adoption Impact Bolstered by the adoption of CECL 1.50%
Slide 16: Allowance for Credit Losses for Loans and Leases
Allowance for Credit Losses for Loans and Leases (1) CECL Method March 31, 2021 Allowance for Credit Annualized Net ($ in thousands) Amortized Cost Losses Lifetime Loss Rate Charge Off Ratio Loans and Leases Receivable: Commercial Multi-Family $1,679,682 $8,026 0.47% 0.27% Commercial & Industrial $2
Slide 17: Loan & Lease Deferments
Loan & Lease Deferments Total Loan & Lease Deferments 7/24/20 12/31/20 3/31/2021 (1) % of Principal % of Principal % of (2) (2) (2) ($'s in millions) Deferments Portfolio Deferred Portfolio Deferred Portfolio C&I and Investment CRE: Commercial & Industrial $45.9 2.1% $5.4 0.2% $5.4 0.2% SBA $13.4 13
Slide 18: Consumer Installment Loans
Consumer Installment Loans (1) FICO Score Debt to Income Ratio Borrower Income 740 Avg FICO Portfolio average DTI $91K Avg Income is 20.8% 15.1% 16.5% 22.3% 34.5% 24.9% 0.8% 32.7% 4.2% 24.9% 10.9% 50.3% 42.5% 20.4% 0-9.99% 10 – 19.99% 20 – 29.99% 30 – 39.99% 750+ 700-749 660-699 <$49,999 $50K -$99,9
Slide 19: Consumer Installment Loans Performance Remains Strong
Consumer Installment Loans Performance Remains Strong CUBI Industry 16.00% 12.00% 8.00% 4.00% 0.00% 01/31/19 02/28/19 03/31/19 04/30/19 05/31/19 06/30/19 07/31/19 08/31/19 09/30/19 10/31/19 11/30/19 12/31/19 01/31/20 02/29/20 03/31/20 04/30/20 05/31/20 06/30/20 07/31/20 08/31/20 09/30/20 10/31/20 11
Slide 20: IV. Technology Driven Business Model
IV. Technology Driven Business Model
Slide 21: Customers Bancorp: High Tech High Touch Bank
Customers Bancorp: High Tech High Touch Bank 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 $1.0 billion
Slide 22: Selected Technology Partnerships
Selected Technology Partnerships Internal External Embedded/Banking as a Service IBS Digitization Driving Increased Technology Drives Substantial Unique Embedded Technology Efficiency Performance Partnerships To date, we have digitized and automated 140+ Our technology capability has contributed 12%
Slide 23: Paycheck Protection Program: $400M+ in Anticipated Pre-Tax Revenue
Paycheck Protection Program $400M+ in Anticipated Pre-Tax Revenue Industry-Leading PPP Program • Customers Bank rose to the challenge of helping American small business preserve employment by initially quickly and effectively launching a nationwide SBA Paycheck Protection Program (“PPP”) lending pro
Slide 24: PPP Forgiveness Update
PPP Forgiveness Update A top lender in nation with over $9.5B in PPP loans to ~300k customers (~2% of all PPP loans) PPP Portfolio Forgiveness Status ($ in millions) 42,487 2,500 (99.7%) 2,000 $2,192 Loan Amount $1,787 $1,781 $1,776 1,500 13,013 1,000 (99.4%) $831 500 $463 $460 $453 0 12/31/2020 3/3
Slide 25: Blockchain Product Capabilities & Use Cases
Blockchain Product Capabilities & Use Cases Customers Bank expects to launch a real time (T-0) blockchain-based B2B payments platform in 2021. The platform will enable CB customers to transact intra-bank with instant settlement. The platform goal is to acquire low-cost deposits and grow our relation
Slide 26: V. Outlook
V. Outlook Customers 2 Bancorp, Inc.
Slide 27: 1Q 2021 Financial Highlights – Strong Earnings Momentum
1Q 2021 Financial Highlights – Strong Earnings Momentum • Net income available to common shareholders of $33.2 million, or $1.01 per diluted share, includes net loss from discontinued operations of $38.0 million, or $(1.16) per diluted share. • Net income from continuing operations of $74.6 million,
Slide 28: Sling Shot – Increase in Tangible Common Equity & Total Risk Based Capital
Sling Shot – Increase in Tangible Common Equity & Total Risk Based Capital Customers Bancorp: Actual & Projected Capital Metrics Highlights: Pro forma 17.0% TCE/TA • Our participation in the Paycheck 10.1%(2) Protection Program, as well as strong core 10.0% earnings, will have a “sling shot” effect
Slide 29: Tangible Book Value Per Share
Tangible Book Value Tangible Book Value Per Share(1) TBV/Share(1) 28.9% 1 Year Growth $30.01 ~$40.00 (1) Stock Price(2) $36.33 $32.23 $30.01 $27.92 $24.62 $25.97 Value Proposition $23.27 Trading at 107% of TBV Highlights: • Trading at TBV provides 1Q2020 2Q2020 3Q2020 4Q2020 1Q2021 4Q2021E significa
Slide 30: Capital Base and EPS Expansion
Capital Base and EPS Expansion PPP Revenue Capital Allows for Further EPS Expansion Common Stock Buyback Balance Sheet Growth & Preferred Equity Call • Acquired over 250,000 new Both strategies are accretive to • Capital increase provides customers through PPP with negative EPS strong runway to cont
Slide 31: Financial Guidance
Financial Guidance 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 commercial loans to mortgage companies is expected to decline to $1.
Slide 32: 2026 Core EPS Target
2026 Core EPS Target Path to Core EPS of $6.00 in 2026 Position at March 31, 2021 • $13.6 billion in core assets(1) • 32.2 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 an
Slide 33: VI. Appendix
VI. Appendix Customers 2 Bancorp, Inc.
Slide 34: Liquidity
Liquidity YOY Liquidity Sources ($000's) 1Q 20 2Q 20 3Q 20 4Q 20 1Q 21 Change Cash and Cash Equivalents $237,390 $1,022,753 $325,594 $615,264 $512,241 $274,852 FHLB Available Borrowing Capacity $882,013 $1,078,520 $929,508 $684,936 $713,673 ($168,340) FRB Available Borrowing Capacity $9,931 $152,410
Slide 35: Detailed Financial Ratios
Detailed Financial Ratios 35
Slide 36: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures - Unaudited Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. Th
Slide 37: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Core Earnings - Customers Bancorp ($ in thousands, not including per share amounts) Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net income to common shareholders $ 33,204 $
Slide 38: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) 38
Slide 39: Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp ($ in thousands) Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020 GAAP net income $ 36,595 $ 56,245 $ 50,515 $ 22,718 $ 3,100 Reconciling items (after tax): Income tax exp
Slide 40: Coverage of Credit Loss Reserves, Excluding PPP
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 Q4 2020 Q3 2020 Q2 2020 Q1 2020 Loans and leases receivable $ 12,714,578 $ 12,136,733 $ 12,664,997 $ 12,032,874 $ 7,353,262 Loans
Slide 41: Tangible Equity and Tangible Book Value per Share
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Equity ($ in thousands) Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020 GAAP - Total shareholders' equity $ 1,188,721 $ 1,117,086 $ 1,051,491 $ 1,007,847 $ 964,636 Reconciling items: Goodwill and other intangibles (3,911) (14,298) (14,437) (14
Slide 42: Tangible Common Equity to Tangible Assets
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Common Equity to Tangible Assets - Customers Bancorp ($ in thousands) Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020 GAAP - Total shareholders' equity $ 1,188,721 $ 1,117,086 $ 1,051,491 $ 1,007,847 $ 964,636 Reconciling items: Preferred stoc
Slide 43: Net Interest Margin, Tax Equivalent, Excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Net Interest Margin, Tax Equivalent, Excluding PPP - Customers Bancorp ($ in thousands, except per share data) Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020 GAAP net interest income $ 132,731 $ 122,946 $ 107,439 $ 91,982 $ 81,321 PPP net interest inc
Slide 44: Charge-offs and Deferments, Excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Charge-offs, excluding PPP ($ in thousands, except per share data) Q1 2021 Net charge-offs $ 12,521 Average loans and leases $ 15,329,111 Average PPP loans (4,623,213) Average commercial loans to mortgage companies (3,122,098) Adjusted average
Slide 45: Contacts: Leadership and Analysts
Contacts Leadership: Analysts: Carla Leibold B. Riley Financial CFO of Customers Bancorp, Inc and Customers Steve Moss Bank D.A. Davidson Company Russell Gunther Jay Sidhu Chairman & CEO of Customers Bancorp, Inc. and Hovde Group Executive Chairman of Customers Bank Will Curtiss Richard Ehst Jefferi