Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Debt Investor Presentation (August 2021)
52 slides from Customers Bancorp's debt investor presentation, Aug 3, 2021
Slide 1: Fixed Income Investor Presentation | August 2021
Fixed Income Investor Presentation | August 2021 NYSE : CUBI “High Tech Forward - Thinking Bank Supported by High Touch” Customers Bancorp, Inc.
Slide 2: Forward-Looking Statements
2 2 Forward - Looking Statements In addition to historical information, this presentation contains "forward - looking statements" within the meaning of the safe ha rbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to future events or future predict
Slide 3: Biographies
3 3 Biographies Jay S. Sidhu Executive Chairman Age: 69 Mr. Sidhu is Chairman and Chief Executive Officer of Customers Bancorp and Executive Chairman of Customers Bank. He joined Customers Bank in 2009, previously known as New Century Bank. From 2006 to 2009, Mr. Sidhu served as the Chairman and CEO
Slide 4: Table of Contents
Table of Contents I. Overview IV. Outlook & Takeaways ‒ Franchise Overview and Evolution ‒ Sling Shot Build in Capital Levels ‒ Balance Sheet Growth and Remix ‒ Capital Deployment Priorities: Capital Stack, ‒ Capital Growth Optimization and Balance Sheet Growth ‒ Risk Management Priorities ‒ Financi
Slide 5: Issuer Preliminary Term Sheet
5 5 Issuer (Ticker) Preliminary Term Sheet (1) An explanation of the significance of ratings may be obtained from the rating agency. Generally, rating agencies base their rati ngs on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriat
Slide 6: I. Overview
|. Overview Customers Bancorp, Inc.
Slide 7: Customers Bancorp: At a Glance
7 7 Customers Bancorp: At a Glance Source: S&P Global Market Intelligence and Company Documents / Data as of 6/30/2021, unless otherwise noted (1) Calculated based on shares outstanding of 32.4M (2) Q2 2021 capital ratios estimated pending completion of final regulatory filings (3) Non - GAAP Measur
Slide 8: 2Q 2021 Highlights: Exceptional Profitability and Growth
8 8 2Q 2021 Highlights: Exceptional Profitability and Growth Core EPS (1) : $1.76 Core Earnings (1) : $59.3M Core Return on Average Common Equity (1) : 23.7% 2Q 2021 Performance (vs. 2Q 2020) 1.30% vs. 0.68% in 2Q 2020 Core ROAA (1) $13.3B +1.5% Core Assets (1 )(2) 0.24% - 24 bps NPAs / Total Assets
Slide 9: Start Up to >$13Bn in Assets in ~11 Years
9 9 (1) Non - GAAP Measure, refer to Appendix for reconciliation Start Up T o >$13Bn In Assets I n ~11 Y ears Tech - Focused , Relationship Driven Asset Quality & Deposit Growth Experienced Management Team • The Bank was effectively launched in 2010 to clean up a $250 million - in - assets failing b
Slide 10: Loan & Deposit Portfolio Composition
10 10 Loan & Deposit Portfolio Composition 6 % CAGR (2)(3) 15% CAGR (3) Deposit Portfolio ($mm) Loans and Leases, Excluding PPP ($mm) (1)(2) Source: S&P Global Market Intelligence & Company documents (1) C&I includes owner occupied CRE, r esidential includes manufactured housing loans (2) Excludes P
Slide 11: Loan Portfolio Composition: Diversification Over Time
11 11 Loan Portfolio Composition : Diversification Over Time 38% 7% 13% 16% 1% 16% 7% 1% 1% Multifamily Owner Occupied CRE Investment CRE Commercial & Industrial Construction Mortgage Warehouse Residential Manufactured Housing Consumer Installment December 31, 2018 June 30, 2021 Total Loans – $8.5bn
Slide 12: Historical Capital Ratios: Customers Bancorp Inc.
12 12 13.1% 13.0% 13.0% 12.2% 11.9% 13.2% 2016 2017 2018 2019 2020 2Q 2021 8.5% 8.8% 9.0% 8.0% 8.1% 9.5% 2016 2017 2018 2019 2020 2Q 2021 9.1% 8.9% 9.7% 9.3% 8.6% 8.4% 2016 2017 2018 2019 2020 2Q 2021 6.6% 7.0% 7.4% 7.1% 6.4% 7.7% 2016 2017 2018 2019 2020 2Q 2021 Historical Capital Ratios: Customers
Slide 13: Customers Bancorp: High Tech, High Touch Bank
13 13 Customers Bancorp: High Tech, High Touch Bank Branch Light / Private Banking Teams Superior Digital Capabilities Digital Lending & Deposits Embedded Finance / Banking - as - a - Service • Among the least branch - reliant banks in the U.S. Private Banking Teams work out of Private Banking Offic
Slide 14: Strategic Priorities
14 14 Strategic Priorities Geographic Expansion • Added new teams in Florida, Texas and Pennsylvania and a reboot of Chicago • Conversations to add additional teams within next 6 - 12 months SBA Growth • Planned launch of digital 7(a) program in 3Q 2021 • Capitalize on increase to 90% guaranty on tr
Slide 15: Environmental, Social & Governance Report
15 15 Environmental, Social & Governance Report Environmental, social and governance (ESG) considerations are integrated across our business units and incorporated into the policies and principles that govern how our company operates. We continuously seek to address some of the practical challenges
Slide 16: 2020 ESG Milestones
16 16 2020 ESG Milestones Just days after the death of George Floyd, the bank held a company - wide virtual “Family Meeting” to provide an outlet of support to our Team Members. Executive leaders addressed over 600 Team Members who were then invited to share their stories, feelings and concerns. Cus
Slide 17: II. Q2 2021 Results & Key Highlights
II. Q2 2021 Results & Key Highlights
Slide 18: 2Q 2021 vs. 2Q 2020 Highlights
18 18 2Q 2021 vs. 2Q 2020 Highlights Strong Earnings PPP Revenue High Asset Quality Growing Loan Portfolio Deposit Growth Profitability Hold Co. Capital Ratios (1) Tangible Book Value • Diluted EPS of $1.72 in 2Q 2021 versus $0.61 in 2Q 2020 • Core EPS (2) of $1.76 in 2Q 2021 versus $0.68 in 2Q 2020
Slide 19: Paycheck Protection Program
19 19 Paycheck Protection Program $ 400M + in Anticipated Pre - Tax Revenue (1) As of 7/19/2021 Includes all PPP loans facilitated by Customers Bank (originated and purchased) Industry - Leading PPP Program • Completed approximately 325,000 PPP loan applications totaling about $9.5 billion (1) • Foc
Slide 20: Balance Sheet: Loan Growth & Mix
20 28% 13% 18% 27% 14% Commercial & Industrial Investment CRE Consumer Loans Mortgage Warehouse Multi-Family Balance Sheet: Loan Growth & Mix (1) Excludes PPP loan balances, Non - GAAP Measure, refer to Appendix for reconciliation (2) CAGR calculated based on 2.5 years Highly Diversified Portfolio w
Slide 21: Balance Sheet: Deposit Growth & Mix
21 Balance Sheet: Deposit Growth & Mix Continued Significant Funding Mix Improvement Achieved • Total deposit growth of $2.9B (27%) YoY, which included $2.4B (52%) increase in demand deposits • CD’s declined $1.2B (66%) YoY, making up only 4.5% of total deposits at 6/30/2021 • Average cost of deposi
Slide 22: Income Statement: Margin Trend
22 Income Statement: Margin Trend Significant Improvement Achieved Due to Maintaining Loan Yields While Reducing Funding Costs • Net interest income, tax equivalent, excluding PPP was $103.0M (1) and increased 25% over 2Q20 • Net interest margin, tax equivalent, excluding PPP (1 ) improved to 3.3% ‒
Slide 23: Continuing to Execute on Community Bank & Niche Business Strategies
23 23 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 busines ses and deposit gathering • Loans, excluding mortgage warehouse, expected to gr
Slide 24: III. Credit Risk Management
Ill. Credit Risk Management Customers Bancorp, Inc.
Slide 25: Outstanding Through-the-Cycle Credit Quality
25 25 Outstanding Through - the - Cycle Credit Quality: Peak COVID in Rear - View Window $ in millions Nonperforming Assets / Assets Reserves / Nonperforming Loans Net Charge Offs & Provision Expense • The provision for credit losses on loans and leases in Q2 2021 was $3.3 million, compared to a $2.
Slide 26: Credit: Credit Quality and Reserves Remain Above Average
26 Credit: Credit Quality and Reserves Remain Above Average Highlights: • Credit quality remains strong as evidenced by NPAs / total assets of only 0.24% at 6/30/21 • Bolstered by the implementation of CECL on January 1, 2020, the coverage for credit loss reserves for loans and leases HFI, excluding
Slide 27: Credit: Loan & Lease Deferments
27 27 Credit: Loan & Lease Deferments (1) The 6/30/2021 figures are all actual deferrals with none pending (2) "% of Portfolio" ratio excludes PPP loan balances • Principal deferments were only 0.9% of total portfolio (excluding PPP) • Loans in COVID - 19 “At - Risk” Industries represent only 10% of
Slide 28: Credit: Allowance for Credit Losses for Loans and Leases
28 28 Credit: Allowance for Credit Losses for Loans and Leases (1) Utilized Moody’s June 2021 Baseline forecast with qualitative adjustments for 2Q 2021 provision (2) Excludes Mortgage Warehouse loans reported at fair value, loans held for sale and PPP Loans ($ in thousands) Amortized Cost Allowance
Slide 29: Consumer Installment Loans Well Diversified
29 29 17.2% 26.8% 21.8% 11.4% 4.4% 0.6% 17.8% Debt to Income Ratio 0-9.99% 10 – 19.99% 20 – 29.99% 30 – 39.99% 40 – 49.99% > 50% Unknown Consumer Installment Loans Well Diversified Insignificant exposure to stressed professions $91K Avg Income 740 Avg FICO Portfolio Avg DTI is 20.8% Note: Data as of
Slide 30: Consumer Installment Loans Performance
30 30 Consumer Installment Loans Performance Note: Customers Bancorp’s impairment percentages are considered 1 day+ delinquent or in forbearance; Industry chart is from DV01 Insights COVID - 19 Performance Report dated June 30, 2021 Continued Outperformance • At industry peak for consumer forbearanc
Slide 31: IV. Outlook & Takeaways
IV. Outlook & Takeaways Customers Bancorp, Inc.
Slide 32: Financial Outlook
Financial Outlook ‒ Sling Shot Build in Capital Levels ‒ Capital Deployment Priorities: Capital Stack Optimization and Balance Sheet Growth ‒ Financial Guidance
Slide 33: Sling Shot – Increase in Tangible Common Equity & Total Risk Based Capital
33 Sling Shot – Increase in Tangible Common Equity & Total Risk Based Capital Customers Bancorp: Actual & Projected Capital Metrics Note: Note: The “Actual & Projected Capital Metrics” chart includes our estimates of future performance and does not consider any stock buyback or redemptions. Please r
Slide 34: Capital Base and EPS Expansion
34 34 Capital Base and EPS Expansion PPP Revenue • Acquired over 250,000 new customers through PPP with negative customer acquisition costs • Cross selling products/services to convert PPP customers to Customers Bank customers • Effectively acted as a non - dilutive capital raise • Expected to provi
Slide 35: Long Term Guidance
35 35 Long Term Guidance Note: The “Path to Core EPS of $6.00 by 2025” includes our estimates of future performance; Please refer to the Forward - Looking Statements slide for more information (1) Excludes PPP loan balances, a non - GAAP measure; Please refer to the Appendix for reconciliation Path
Slide 36: 2021 YE Outlook
36 36 2021 YE Outlook • The balance of commercial loans to mortgage companies is expected to decline to $1.6 - $2.4 billion at December 31, 2021 • Continued NIM expansion driven by combination of increased yield and lower funding costs • Increasing 2021 and 2022 Core EPS guidance to $6.00 • Meaningf
Slide 37: Key Takeaways
Key Takeaways The Company is Well Positioned to Execute on its 2021 and 2025 Long - Term Strategies • 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 c
Slide 38: V. Appendix
V. Appendix Customers Bancorp, Inc.
Slide 39: Liquidity
39 39 Liquidity Liquidity Sources ($000's) 2Q 20 3Q 20 4Q 20 1Q 21 2Q 21 YOY Change Cash and Cash Equivalents $1,022,753 $325,594 $615,264 $512,241 $393,663 ($629,090) FHLB Available Borrowing Capacity $1,078,520 $929,508 $684,936 $713,673 $1,466,067 $387,547 FRB Available Borrowing Capacity $152,41
Slide 40: Kroll Credit Ratings Summary
40 40 Kroll Credit Ratings Summary Source: Kroll Bond Rating Agency (1) Kroll Ratings Scale: https:// www.krollbondratings.com/understanding - ratings/methodologies/rating - scales CUBI’s Kroll ratings reflect an overall strong credit profile Entity Type Rating (1) Outlook Customers Bancorp, Inc. Se
Slide 41: Historical Interest Coverage
41 41 Historical Interest Coverage Historical Interest Coverage Source: S&P Global Market Intelligence and Company Documents (1) Assumes 3.00% coupon rate for illustrative purposes (2) Income before taxes for the three months ended June 30, 2021 represents income from continuing operations before ta
Slide 42: Detailed Financial Ratios
42 Detailed Financial Ratios
Slide 43: Customers believes that the non - GAAP measurements disclosed within this document are useful
43 43 Customers believes that the non - GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions . These non - GAAP financial measures are f
Slide 44: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
44 44 Reconciliation of Non - GAAP Measures – Unaudited (Cont.) ($ in thousands, not including per share amounts) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net income to common shareholders $58,042 $ 1.72 $33,204 $ 1.01 $52,831
Slide 45: Reconciliation of Non-GAAP Measures – Adjusted Net Income and Adjusted ROAA
45 45 Reconciliation of Non - GAAP Measures – Unaudited (Cont.) Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp ($ in thousands) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 GAAP net income $ 61,341 $ 36,595 $ 56,245 $ 50,515 $ 22,718 Reconciling items (after tax): Incom
Slide 46: Reconciliation of Non-GAAP Measures – Core Efficiency Ratio
46 46 Reconciliation of Non - GAAP Measures – Unaudited (Cont.) Core Efficiency Ratio ($ in thousands) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 GAAP net interest income $138,757 $132,731 $122,946 $107,439 $ 91,982 GAAP non-interest income $ 16,822 $ 18,468 $ 16,083 $ 24,864 $ 11,711 (Gains) losses on
Slide 47: Reconciliation of Non-GAAP Measures – Tangible Equity
47 47 Reconciliation of Non - GAAP Measures – Unaudited (Cont.) Tangible Equity ($ in thousands) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 GAAP - Total shareholders' equity 1,250,729$ 1,188,721$ 1,117,086$ 1,051,491$ 1,007,847$ Reconciling items: Goodwill and other intangibles (3,853) (3,911) (14,298)
Slide 48: Reconciliation of Non-GAAP Measures – Tangible Common Equity to Tangible Assets
48 48 Reconciliation of Non - GAAP Measures – Unaudited (Cont.) Tangible Common Equity to Tangible Assets - Customers Bancorp ($ in thousands) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 GAAP - Total shareholders' equity 1,250,729$ 1,188,721$ 1,117,086$ 1,051,491$ 1,007,847$ Reconciling items: Preferred
Slide 49: Reconciliation of Non-GAAP Measures – Core Assets
49 49 Reconciliation of Non - GAAP Measures – Unaudited (Cont.) Core Assets ($ in thousands) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 GAAP - Total assets 19,635,108$ 18,817,660$ 18,439,248$ 18,778,727$ 17,903,118$ Reconciling items: Loans receivable, PPP (6,305,056) (5,178,089) (4,561,365) (4,964,105
Slide 50: Reconciliation of Non-GAAP Measures – Net Interest Margin
50 50 Reconciliation of Non - GAAP Measures – Unaudited (Cont.) Net Interest Margin, Tax Equivalent, Excluding PPP - Customers Bancorp ($ in thousands, except per share data) Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 GAAP net interest income 138,757$ 132,731$ $ 122,946 $ 107,439 $ 91,982 PPP net inter
Slide 51: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
51 51 Reconciliation of Non - GAAP Measures – Unaudited (Cont.)
Slide 52: Reconciliation of Non-GAAP Measures – Deferments
52 52 Reconciliation of Non - GAAP Measures – Unaudited (Cont.) Deferments to Total loans and leases, excluding PPP ($ in thousands) Q2 2021 Q1 2021 Total loans and leases 16,967,022$ 16,168,306$ PPP loans (6,305,056) (5,178,089) Loans and leases, excluding PPP 10,661,966$ 10,990,217$ Commercial def
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