Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q2 2021 Earnings Presentation
42 slides from Customers Bancorp's earnings presentation, Jul 29, 2021
Slide 1: Customers Bancorp, Inc. Second Quarter 2021 Earnings Conference Call
Customers Bancorp, Inc. “High Tech Forward-Thinking Bank Supported by High Touch” Second Quarter 2021 | Earnings Conference Call July 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: I. Overview
I. Overview Customers 2 Bancorp, Inc.
Slide 4: Customers Bancorp: At a Glance
Customers Bancorp: At a Glance Customers Bancorp NYSE: CUBI Headquarters West Reading, PA Branches 12 FTE Employees 594 Market Capitalization(1) $1.2B (as of 7/27/21) Bank Total Capital Ratio(2) 13.7% Tangible Book Value(3) $31.82 Lines of Business Community Banking: Specialty Lending: Digital Banki
Slide 5: 2Q 2021 Highlights: Exceptional Profitability and Growth
2Q 2021 Highlights: Exceptional Profitability and Growth Core EPS(1): Core Earnings(1): Core ROCE(1): $1.76 $59.3M 23.7% 2Q 2021 Performance (vs. 2Q 2020) Profitability Balance Sheet Credit 1.30% $13.3B 0.24% vs. 0.68% in 2Q 2020 +1.5% -24 bps Core ROAA(1) Core Assets(1)(2) NPA Ratio $10.7B +1.3% 1.
Slide 6: Customers Bancorp: Overview
Customers Bancorp: – Overview Start up - Tech focused, Asset quality & Experienced to >$13Bn in assets Relationship driven Deposit Growth Management Team in ~11 years • The Bank was effectively • Single point of contact • Keen focus on asset • Management team launched in 2010 to model: “Private Bank
Slide 7: II. Business Highlights
ll. Business Highlights Customers 2 Bancorp, Inc.
Slide 8: 2Q 2021 vs. 2Q 2020 Highlights
2Q 2021 vs. 2Q 2020 Highlights Strong Earnings PPP Revenue High Asset Quality Growing Loan Portfolio • Diluted EPS of $1.72 in 2Q • Expect to earn over $400+ • The NPAs ratio was 0.24% and • Total loans and leases increased 2021 versus $0.61 in 2Q 2020 million in total pre-tax net coverage ratio exc
Slide 9: Balance Sheet: Loan Growth & Mix
Balance Sheet: Loan Growth & Mix Loan Growth 2Q 2021 Loan Mix(1) $ in Billions CAGR(excl. PPP) = 9.3% (1)(2) $17.0 $15.8 14% $4.6 $6.3 28% $10.1 $1.8 $1.5 $8.5 $2.4 $3.7 $2.9 $3.3 27% $2.3 $1.6 $1.9 $1.5 $1.6 13% $0.7 $1.4 $1.4 $1.3 $1.2 $2.4 $2.9 $2.9 $1.9 18% 2018 2019 2020 2Q '21 Commercial & Ind
Slide 10: Balance Sheet: Deposit Growth & Mix
Balance Sheet: Deposit Growth & Mix Deposit Growth 2Q 2021 Deposit Mix $ in Billions $13.9 CAGR = 30% (1) $0.6 4.5% $1.4 10.3% $11.3 19.5% $0.7 $1.3 $8.6 $4.9 $7.1 $1.7 $4.6 $1.7 $0.9 $0.4 $4.2 35.4% $3.5 30.3% $3.1 $2.4 $1.2 $0.8 $2.7 $2.4 $1.1 $1.3 2018 2019 2020 2Q '21 Noninterest Bearing DDAs In
Slide 11: Income Statement: Margin Trend
Income Statement: Margin Trend Net Interest Margin Growth (Excl. PPP)(1) Loan Yield (Excl. PPP)(1) & Deposit Cost 3.3% 4.8% 4.9% 4.6% 4.7% 4.4% 4.5% 4.4% 3.0% 4.3% 4.3% 3.0% 3.0% 4.1% 4.1% 3.0% 2.9% 2.9% 2.8% Spread - 2.7% Spread - 2.6% 2.6% 2.6% $103.0 1.8% 1.8% 3.9% $97.7 $98.0 1.7% 1.7% 1.6% 1.5%
Slide 12: Strategic Priorities
Strategic Priorities • Added new teams in Florida, Texas and Pennsylvania and a reboot of Chicago Geographic Expansion • Commercial Conversations to add additional teams within next 6-12 months • Planned launch of digital 7(a) program in 3Q 2021 SBA Growth • Capitalize on increase to 90% guaranty on
Slide 13: Fee Revenue Growth
Fee Revenue Growth SBA Revenue Summary Significant fee revenue growth ($ in millions) ~$6.0 opportunities across SBA 7(a) and consumer installment loan $3.1 ~$80.0 portfolios enabled by Tech team Gain on Sale Loan Volume $1.5 • YTD gain on sale revenue from $41.5 these products has already far $23.1
Slide 14: Credit: Credit Quality and Reserves Remain Above Average
Credit: Credit Quality and Reserves Remain Above Average Recent Credit Quality Metrics Highlights: • Credit quality remains strong as evidenced by NPAs/Total Assets of only 0.24% at 6/30/21. 2.50% 0.80% 2.00% CECL Adoption 0.60% • Bolstered by the adoption of CECL Reserves / Loans Impact on January
Slide 15: Credit: Loan & Lease Deferments
Credit: Loan & Lease Deferments Total Loan & Lease Deferments (1) 3/31/21 6/30/21 Principal % of Principal % of ($'s in millions) Deferred Portfolio(2) Deferred Portfolio(2) C&I and Investment CRE: Commercial & Industrial $5.4 0.2% $0.0 0.0% SBA $7.3 7.6% $3.4 3.5% Investment CRE & Multi-Family $13.
Slide 16: Credit: Allowance for Credit Losses for Loans and Leases
Credit: Allowance for Credit Losses for Loans and Leases (1) CECL Method June 30, 2021 Allowance for Credit Annualized Net ($ in thousands) Amortized Cost Losses Lifetime Loss Rate Charge Off Ratio Loans and Leases Receivable: Commercial Multi-Family $1,497,485 $5,028 0.34% 0.00% Commercial & Indust
Slide 17: IV. Technology Driven Business Model
IV. Technology Driven Business Model
Slide 18: Customers Bancorp: High Tech, High Touch Bank
Customers Bancorp: High Tech, High Touch Bank • Digitally originate consumer • Among the least branch-reliant installment loans directly banks in the U.S. Private Banking Teams work out of Private • Implemented a gain on sale Banking Offices. strategy in 2Q 2021 Branch light / • The Bank maintains 1
Slide 19: Paycheck Protection Program: $400M+ in Anticipated Pre-Tax Revenue
Paycheck Protection Program $400M+ in Anticipated Pre-Tax Revenue Industry-Leading PPP Program • Completed approximately 325,000 PPP loan applications totaling about $9.5 billion(1) • Focused on providing access to the smallest and most underserved businesses with an average loan size of ~$30,000 •
Slide 20: V. Outlook
V. Outlook Customers 2 Bancorp, Inc.
Slide 21: 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: • Our participation in the Paycheck 17.0% Pro forma TCE/TA ~10%(2) Protection Program, as well as strong core earnings, will have a “sling shot” effect on 10.0
Slide 22: Tangible Book Value
Tangible Book Value Tangible Book Value Per Share(1) TBV/Share(1) 29.0% YoY Growth $31.82 $40.00+ (1) Stock Price(2) $37.73 $31.82 $30.01 $27.92 $24.62 $25.97 Value Proposition Trading at 119% of TBV Highlights: • Significant potential 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 4Q 2021E upside based on
Slide 23: 2021 YE Outlook
2021 YE Outlook Metric YE 2020 2021 YE Outlook Loans excl. PPP & • The balance of commercial Mortgage $7.6B Mid to High Single loans to mortgage companies Digit Growth Warehouse(1) is expected to decline to $1.6- $2.4 billion at December 31, Net Interest Margin 2021. 2.96% 3.25% - 3.50% excl. PPP(2)
Slide 24: Long Term Guidance
Long Term Guidance Path to Core EPS of $6.00 in 2025 Position at 6/30/21 Growth Assumptions Expectations in 2025 • $13.3 billion in core assets(1) • Asset growth of 7.0%-10.0% per • $18-$20 billion in assets with • 33.7 million average diluted year on average in the 2021-2025 about $1.9 billion in c
Slide 25: Investment Thesis
Investment Thesis Clear and Unique Strategy Executed by an Experienced Team: A high tech forward- thinking bank supported by high touch Record Earnings Performance: Now expect to report about $6.00 per share in core earnings by 2025, one year sooner than previous guidance High Growth Franchise: Core
Slide 26: VI. Appendix
VI. Appendix Customers 2 Bancorp, Inc.
Slide 27: 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 28: 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 29: Liquidity
Liquidity YOY Liquidity Sources ($000's) 2Q 20 3Q 20 4Q 20 1Q 21 2Q 21 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 $152,410 $215
Slide 30: 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% 17.9% 17.8% 17.2% 0.6% 30.7% 24.3% 4.4% 31.8% 11.4% 26.8% 51.4% 43.9% 21.8% 0-9.99% 10 – 19.99% 20 – 29.99% 30 – 39.99% 750+ 700-749 660-699 <$49,999 $50K -$99,9
Slide 31: Consumer Installment Loans Performance
Consumer Installment Loans Performance CUBI Industry 16.0% 12.0% 8.0% 4.46% 4.0% 0.9% 0.0% 01/31/19 02/28/19 03/31/19 04/30/19 05/31/19 06/30/19 07/31/19 08/31/19 09/30/19 10/31/19 11/30/19 12/31/19 01/31/20 02/29/20 03/31/20 04/30/20 05/31/20 06/30/20 07/31/20 08/31/20 09/30/20 10/31/20 11/30/20 12
Slide 32: Detailed Financial Ratios
Detailed Financial Ratios 32
Slide 33: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non-GAAP Measures - Unaudited Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our core results of operations and financial condition relative to other financial institutions. Th
Slide 34: Reconciliation of Non-GAAP Measures – Core Earnings
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Core Earnings - Customers Bancorp ($ 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
Slide 35: Reconciliation of Non-GAAP Measures – Adjusted Net Income and ROAA
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): Income tax ex
Slide 36: Reconciliation of Non-GAAP Measures – Core Efficiency Ratio
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 investm
Slide 37: Reconciliation of Non-GAAP Measures – Tangible Equity
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: (1) Goodwill and other intangibles (3,853) (3,911) (14,298
Slide 38: Reconciliation of Non-GAAP Measures – Tangible Common Equity to Tangible Assets
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 st
Slide 39: Reconciliation of Non-GAAP Measures – Core Assets
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 40: Reconciliation of Non-GAAP Measures – Net Interest Margin Excluding PPP
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 interest in
Slide 41: Reconciliation of Non-GAAP Measures – Deferments
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 deferme
Slide 42: Contacts
Contacts Leadership: Analysts: Carla Leibold B. Riley Financial CFO of Customers Bancorp, Inc and Customers Steve Moss Bank D.A. Davidson Company Jay Sidhu Russell Gunther Chairman & CEO of Customers Bancorp, Inc and Executive Chairman of Customers Bank Hovde Group Will Curtiss Sam Sidhu President o