Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q1 2023 Earnings Presentation
39 slides from Customers Bancorp's earnings presentation, Apr 28, 2023
Slide 1: Investor Presentation: Q1 2023
Let’s take on tomorrow. Investor Presentation: Q1 2023 “A Forward-Thinking Bank with Strong Risk Management“ April 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements Let’s take on tomorrow. 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 st
Slide 3: A Forward-Thinking Bank with Strong Risk Management
A Forward-Thinking Bank with Strong Risk Management Let’s take on tomorrow. Comfortably beat consensus estimates Q1’23 Earnings Review Net interest margin expected to expand by ~20 basis points during the year Diversified and stable deposit base (81% insured1) Strength of the Franchise Dramatic incr
Slide 4: Our Priorities
Let’s take on tomorrow. Our Priorities • With a potential looming recession, we will further moderate growth/shrink and focus on further Let’s take on tomorrow. strengthening our balance sheet while improving capital ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED ratios and margins • We will no
Slide 5: Financial Highlights – GAAP
1.0 Q1’23 EARNINGS REVIEW Financial Highlights – GAAP Let’s take on tomorrow. Q1’23 Q1’23 (vs. Q4’22) Highlights Profitability Balance Sheet Credit Diluted EPS 2.96% $21.8B 0.15% $1.55 vs. 2.67% +4% 0 bps ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED NIM Total Assets NPA Ratio Net Income1 1.03
Slide 6: Financial Highlights – Adjusted/Core
1.0 Q1’23 EARNINGS REVIEW Financial Highlights – Adjusted/Core Let’s take on tomorrow. Q1’23 (vs. Q4’22) Q1’23 (vs. Q4’22) Highlights Profitability Balance Sheet Credit Core EPS1 Core EPS ex PPP1,2 2.80% $21.5B 0.15% $1.58 $1.28 vs. 2.87% +8% 0 bps ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED
Slide 7: Significant Non-Interest Bearing Deposit Remix with Industry Leading Insured Deposits
2.0 STRENGTH OF THE FRANCHISE Significant Non-Interest Bearing Deposit Remix with Industry Leading Insured Deposits of 81% Let’s take on tomorrow. Total Deposits Insured Deposits1 / Total Deposits $ billions percent • Total deposits down less than $150 million since 02/28 • CUBI’s insured deposits1
Slide 8: Remix into Floating Rate Low-to-No Credit Risk Loans
2.0 STRENGTH OF THE FRANCHISE Remix into Floating Rate Low-to-No Credit Risk Loans Has Positioned the Balance Sheet to Perform in Dynamic Environments Let’s take on tomorrow. Loans ex PPP – HFI1 Loans ex PPP – HFI1 / Deposits $ billions percent • Increase in remix to low-to-no credit risk loans to •
Slide 9: Payroll Protection Program Was a Huge Success
2.0 STRENGTH OF THE FRANCHISE Payroll Protection Program Was a Huge Success Let’s take on tomorrow. PPP Loans $ millions $998 • PPP program nearly complete with a $750 million reduction in loans outstanding in Q1’23 ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED • By the end of Q2’23, we are pr
Slide 10: Our Securities Portfolio is Best-Positioned Among All Regional Banks
2.0 STRENGTH OF THE FRANCHISE Our Securities Portfolio is Best-Positioned Among All Regional Banks Let’s take on tomorrow. Investment Securities – AFS AFS + HTM Unrealized Losses as % of TCE Book yield and duration percent • Best-in-industry IRR/ALM and bond portfolio • CUBI’s AFS + HTM unrealized l
Slide 11: Net Interest Margin is Expected to Expand Throughout 2023
2.0 STRENGTH OF THE FRANCHISE Net Interest Margin is Expected to Expand Throughout 2023 Let’s take on tomorrow. Loan ex PPP yield vs. Deposit cost NIM ex PPP1 percent percent • Spread between spot loan yield ex PPP and spot • NIM positioned to expand given increasing spread deposit cost has widened
Slide 12: Best-in-Class Efficiency Through Disciplined Expense Management
2.0 STRENGTH OF THE FRANCHISE Best-in-Class Efficiency Through Disciplined Expense Management Let’s take on tomorrow. Core Non-Interest Expense1 Core Non-Interest Expense1 / Average Assets $ millions percent • Non-interest expense has grown ~8% over the • CUBI’s non-interest expense as percent of la
Slide 13: Robust Liquidity Position with More Than 2.7x Coverage of Uninsured Deposits
3.0 STRONG LIQUIDITY POSITION Robust Liquidity Position with More Than 2.7x Coverage of Uninsured Deposits is the Highest in the Industry Let’s take on tomorrow. Immediately Available Liquidity Immediately Available Liquidity / Uninsured Deposits1 $ billions percent • No FRB and BTFP borrowings as o
Slide 14: Consistent Growth in Tangible Book Value
4.0 STRENGTHENING CAPITAL BASE Consistent Growth in Tangible Book Value Let’s take on tomorrow. Tangible Book Value1 P er share • Tangible book value per share AOCI (“TBV”)1 has increased 1.8x compared to a median of 1.1x for regional bank peers2 since Q4’18 $45.96 $5.00 $38.97 • TBV1 increase achie
Slide 15: Improving Capital Position with Decisive Commitment to Increasing Capital Levels
4.0 STRENGTHENING CAPITAL BASE Improving Capital Position with Decisive Commitment to Increasing Capital Levels Throughout 2023 Let’s take on tomorrow. CET1 Risk-Based Capital CET1 Risk-Based Capital percent percent 9.9% 9.7% 9.8% 9.6% 9.6% 0.5%-0.8% 11.0-11.5% 0.8%-1.1% 0.5% Q1’22 Q2’22 Q3’22 Q4’22
Slide 16: Credit Quality Remains Strong and Reserves at ~400% of NPLs
5.0 MAINTAINING SUPERIOR CREDIT QUALITY Credit Quality Remains Strong and Reserves at ~400% of NPLs Let’s take on tomorrow. NPLs $ millions $44 $28 $28 $31 $32 Continue to maintain superior credit quality Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 NPAs as Percent of Total Assets • Commercial real estate (ex mult
Slide 17: Continue to De-risk the Consumer Installment Portfolio
5.0 MAINTAINING SUPERIOR CREDIT QUALITY Continue to De-risk the Consumer Installment Portfolio Through Lowering Balances While Increasing Credit Quality Let’s take on tomorrow. Consumer Installment HFI $ billions • The consumer installment HFI portfolio has declined • Continued shift to asset-lite s
Slide 18: Management Outlook
6.0 MANAGEMENT OUTLOOK Management Outlook Let’s take on tomorrow. Metrics Prior Guidance – FY 2023 Revised Outlook – FY 2023 Assets - Flat to some decline Loans ex PPP1 Low-mid single digits growth Flat to some decline Deposits Flattish with focus on reducing high-cost deposits NIM ex PPP 1 2.85-3.0
Slide 19: Questions and Answers
QUESTIONS AND ANSWERS SSeeeeeSeoeoees& SSeSeeeaeeSseoeee®& SSeeeaeeSeoee®& SSeeeaeeaeeeeeoes SSeeeaeeeSseeee28eG
Slide 20: Analyst Coverage
ANALYST COVERAGE B. Riley Financial, Inc. Maxim Group Inc. Hal Goetsch Michael Diana D.A. Davidson Companies Piper Sandler Companies Peter Winter Frank Schiraldi Hovde Group Stephens Inc. David Bishop Matt Breese Jefferies Group LLC Wedbush Securities Inc. Casey Haire David Chiaverini Keefe, Bruyett
Slide 21: Appendix
APPENDIX SSeeeeeSeoeoees& SSeSeeeaeeSseoeee®& SSeeeaeeSeoee®& SSeeeaeeaeeeeeoes SSeeeaeeeSseeee28eG
Slide 22: Selected 2022 Proxy Peers
Selected 2022 Proxy Peers Let’s take on tomorrow. • Associated • Independent • Atlantic Union • Northwest • BankUnited • Old National • Commerce • Pinnacle • FB Financial • Sandy Spring ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED • First Financial (OH) • United Community • First Merchants •
Slide 23: 70% of Our Loan Book is in Low-to-No-Credit Risk Verticals
70% of Our Loan Book is in Low-to-No-Credit Risk Verticals Let’s take on tomorrow. Low-to-No Credit Risk Loan Portfolio ~70% of loan book1 is in low-to-no risk credit risk verticals Q1’23 , $ billions Fund Finance2 • No experienced delinquencies or losses since inception in 2015 • Asset-based struct
Slide 24: Consumer Installment Loans – Portfolio Credit Metrics
Consumer Installment Loans – Portfolio Credit Metrics Let’s take on tomorrow. Weighted average life of ~1.9 years FICO Score1 Deb t to Income Ratio1 Borrower Income1 Average FICO Score1 ~737 Average DTI 1~20% Average Borrower Income ~$106k 660-679 700-749 0-9.99% 40 – 49.99% <$50K >$100K 680-699 750
Slide 25: Additional Liquidity Detail
Additional Liquidity Detail Let’s take on tomorrow. Liquidity Sources ($000's) 1Q 23 4Q 22 3Q 22 2Q 22 1Q 22 YOY Change Cash and Cash Equivalents $2,046,685 $455,807 $404,465 $245,178 $274,600 $1,772,086 FHLB Available Borrowing Capacity $860,578 $2,265,499 $2,999,524 $2,924,637 $3,213,767 ($2,353,1
Slide 26: Allowance for Credit Losses for Loans and Leases
Allowance for Credit Losses for Loans and Leases Let’s take on tomorrow. March 31, 2023 Allowance for Credit ($ in thousands) Amortized Cost2 Losses1 Lifetime Loss Rate1 Loans and Leases Receivable: Commercial: Commercial and Industrial $ 6,814,864 $ 20,050 0.29 % Multifamily 2,195,211 15,084 0.69 %
Slide 27: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures - Unaudited Let’s take on tomorrow. 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 fi
Slide 28: Core Earnings, Excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core Earnings, Excluding PPP - Customers Bancorp ($ in thousands, not including per share amounts) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net i
Slide 29: Core Return on Average Assets, excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core Return on Average Assets, excluding PPP - Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 GAAP net income $ 53,721 $ 28,711 $ 63,912 $ 58,650 $ 76,761 Less: PPP net income (loss) (after t
Slide 30: Adjusted Net Income and Adjusted ROAA - PTPP, excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision, excluding PPP - Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 GAAP net income $ 53,721 $ 28,711 $ 63,912 $ 58,650 $ 76,761 Less
Slide 31: Core Return on Average Common Equity
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core Return on Average Common Equity – Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 GAAP net income to common shareholders $ 50,265 $ 25,623 $ 61,364 $ 56,519 $ 74,896 Reconciling items (af
Slide 32: Annualized Net Charge-Offs
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Annualized Net Charge-Offs ($ in thousands, expect percentages) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2021 Annualized Net Annualized net charge- Annualized Annualized charge- net charge- Net charge- off to Net charge- net
Slide 33: Core Non-Interest Expense
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core non-interest expense- Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 GAAP non-interest expense $ 80,133 $ 78,419 $ 76,198 $ 76,205 $ 73,807 Severance expense (809) — (1,363) — — Impairme
Slide 34: Tangible Book Value per Common Share
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Tangible Book Value per Common Share - Customers Bancorp ($ in thousands, except per share data) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED GAAP - Total shareholders' equ
Slide 35: Tangible Common Equity to Tangible Assets, Excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Tangible Common Equity to Tangible Assets, Excluding PPP - Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 GAAP - Total shareholders' equity $ 1,421,020 $ 1,402,961 $ 1,386,931 $ 1,353,390 $ 1
Slide 36: Total Loans and Leases, Excluding PPP (Core Loans)
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Total loans and leases, excluding PPP (Core loans) – Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Total loans and leases $ 15,063,034 $ 15,794,671 $ 15,336,688 $ 15,664,353 $ 14,073,518 PPP
Slide 37: Interest Earning Assets, Excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Interest earning assets, excluding PPP - Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Interest earning deposits $ 1,969,434 $ 397,781 $ 362,945 $ 178,475 $ 219,085 Investment securities, at
Slide 38: Coverage of Credit Loss Reserves, Excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Coverage of credit loss reserves for loans and leases held for investment, excluding PPP – Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Loans and leases receivable $ 13,391,610 $ 14,143,047
Slide 39: Net Interest Margin, Tax Equivalent, Excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Net Interest Margin, Tax Equivalent, Excluding PPP - Customers Bancorp ($ in thousands) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 GAAP net interest income $ 149,899 $ 135,137 $ 159,032 $ 164,852 $ 164,699 PPP net interest