Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q4 2023 Earnings Presentation
41 slides from Customers Bancorp's earnings presentation, Jan 26, 2024
Slide 1: Investor Presentation: Q4 2023
Let’s take on tomorrow. Investor Presentation: Q4 2023 “A Forward-Thinking Bank with Strong Risk Management“ January 2024
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: A Forward-Thinking Bank with Strong Risk Management
A Forward-Thinking Bank with Strong Risk Management Let’s take on tomorrow. Q4’23 Core EPS1 of $1.90 exceeded consensus estimates through continued deposit Earnings Review transformation, higher margin, and well-controlled expenses $1.1 billion of core deposit2 growth offset $0.6 billion of planned
Slide 4: Delivering On Our Promises
Delivering On Our Promises Let’s take on tomorrow. What We Promised in 2018 What We Accomplished (Q4’23) Higher Capital TCE/TA1: 7.0%+ 7.0%1 Ratios Grow TBVPS 1 9% CAGR between 2009 and 2018 15% CAGR1,2 ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED NIM Expansion NIM: 2.75% z 3.31% NIM Improve
Slide 5: Our Priorities Remain Unchanged
Our Priorities Remain Unchanged Let’s take on tomorrow. Moderate growth by focusing on holistic and strategic relationships and building a strong franchise Focus on further strengthening our balance sheet, improving Let’s take on tomorrow. liquidity, capital ratios and margins ©2024 CUSTOMERS BANCOR
Slide 6: 2024 Areas of Focus
2024 Areas of Focus Let’s take on tomorrow. 1 Continue deposit transformation and grow loan portfolio Maintain strong margin through deployment of securities cash flow, 2 excess cash and deposit growth into higher yielding loans Let’s take on tomorrow. ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESE
Slide 7: Financial Highlights - GAAP
1.0 Q4’23 EARNINGS REVIEW Financial Highlights - GAAP Let’s take on tomorrow. Q4’23 FY’23 Q4’23 (vs. Q3’23) Highlights Profitability Balance Sheet Credit Diluted EPS 3.31% $21.3B 0.13% $1.79 $7.32 vs. 3.70% -2% -1 bps ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED NIM Total Assets NPA Ratio Net
Slide 8: Financial Highlights - Core
1.0 Q4’23 EARNINGS REVIEW Financial Highlights - Core Let’s take on tomorrow. Q4’23 FY’23 Q4’23 (vs. Q3’23) Highlights Profitability Balance Sheet Credit Core EPS1,2 3.31% $21.3B 0.13% $1.90 $7.72 vs. 3.70% -2% -1 bps ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED NIM Total Assets NPA Ratio Cor
Slide 9: Sustainable Organic Growth While Improving Liquidity Position
2.0 STRENGH OF THE FRANCHISE Customers Bank has Demonstrated Sustainable Organic Growth While Significantly Improving Our Liquidity Position… Let’s take on tomorrow. Total Assets Gross Loans - HFI $ billions $ billions 17% $21.3 9% $12.9 $9.8 $8.5 ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED
Slide 10: Increasing EPS by 4x and ROCE by 2x Over Five Years
2.0 STRENGH OF THE FRANCHISE …and Increasing Our EPS by 4x and ROCE by 2x Over the Last Five Years Let’s take on tomorrow. NII Diluted EPS $ millions per share $687 $7.32 22% 33% $258 $1.78 ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED 2018 2023 2018 2023 NIM ROCE percent percent 3.29% 17.3% +
Slide 11: Successfully Executing on Deposit Franchise Transformation
2.0 STRENGH OF THE FRANCHISE Successfully Executing on Deposit Franchise Transformation Let’s take on tomorrow. Total Deposits $ billions • Total deposits declined by $275 million QoQ while paying down $743 million in $18.2 $17.7 $18.0 $18.2 $17.9 wholesale CDs $1.9 $3.5 $4.8 $4.4 $4.5 • $1.1 billio
Slide 12: Robust Deposit Pipeline will Continue to Transform Funding Base
2.0 STRENGH OF THE FRANCHISE Robust Deposit Pipeline will Continue to Transform Funding Base Let’s take on tomorrow. Core Deposits1 Wholesale CDs $ billions $ billions $14.9 $5.3 +$3.1 $11.9 +26% -$2.3 -44% $3.0 ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED Q1’23 Q4’23 Q1’23 Q4’23 FHLB Advance
Slide 13: Net Interest Margin Continues to Demonstrate Positive Trends
2.0 STRENGH OF THE FRANCHISE Net Interest Margin Continues to Demonstrate Positive Trends Let’s take on tomorrow. Net Interest Income NIM $ millions percent • Net interest income continues in an upward • Margin exceeded management guidance of trajectory1 despite modest interest-earning asset 3.20-3.
Slide 14: Strategic Portfolio Remix Complete, Strong Liquidity Position
2.0 STRENGH OF THE FRANCHISE Strategic Portfolio Remix Complete and Continuing to Maintain Strong Liquidity Position Let’s take on tomorrow. Loans – HFI Loans – HFI / Deposits $ billions percent • Anticipate deploying securities cash flow, excess • Loan to deposit ratio is 72%, 17 percentage cash, a
Slide 15: Customers Operates with Industry-Leading Efficiency
2.0 STRENGH OF THE FRANCHISE Customers Operates with Industry-Leading Efficiency Let’s take on tomorrow. Core Non-Interest Expense1 Core Non-Interest Expense1 / Average Assets $ millions percent • Disciplined expense management resulting in flat • CUBI’s core non-interest expense1 as percent of core
Slide 16: Robust Liquidity Position with Greater than 200% Coverage of Uninsured Deposits
3.0 STRONG CAPITAL AND LIQUIDITY Robust Liquidity Position with Greater than 200% Coverage of Uninsured Deposits Let’s take on tomorrow. Immediately Available Liquidity $ billions • Sold $295 million of AFS $8.5 securities in Q4’23 at roughly book value +$3.2 ©2024 CUSTOMERS BANCORP, INC. / ALL RIGH
Slide 17: 22% Growth in Tangible Book Value in 2023
3.0 STRONG CAPITAL AND LIQUIDITY 22% Growth in Tangible Book Value in 2023; TBV has More Than Doubled Over the Last 5 Years Let’s take on tomorrow. AOCI Tangible Book Value1 • 22% growth in TBV1 in 2023 per share • 5-year CAGR in TBV1 has been 15%2 despite AOCI headwinds compared to 4% for regional
Slide 18: Achieved 12.2% CET1 and TCE/TA of 7.0%
3.0 STRONG CAPITAL AND LIQUIDITY Achieved 12.2% CET1 and TCE/TA of 7.0% Let’s take on tomorrow. CET1 Risk-Based Capital percent +260 bps • Increase of 12.2% approximately 90 bps 10.3% ` 11.3% +90 bps in CET1 during Q4’23 9.6% 9.6% and 260 bps since Q1’23 Q4’22 Q1’23 Q2’23 Q3’23 Q4’231 Total Risk-Bas
Slide 19: Credit Quality Remains Strong
4.0 MAINTAINING SUPERIOR CREDIT QUALITY Credit Quality Remains Strong Let’s take on tomorrow. NPLs $ millions $31 $32 $28 $30 $27 • NPLs and NPA ratio stable over the last five quarters Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 NPAs as Percent of Total Assets • Office and retail CRE each represent percent only
Slide 20: 2024 Management Outlook
5.0 MANAGEMENT OUTLOOK 2024 Management Outlook Let’s take on tomorrow. Metrics Outlook for FY 2024 ROAA 1.15% – 1.25% Financial Efficiency Ratio Mid – 40’s Targets Net Interest Margin 3.20% – 3.40% ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED Deposit Growth 10% – 15% core deposit1 growth; low
Slide 21: Concluding Perspectives
Concluding Perspectives Let’s take on tomorrow. $3.1 billion of core deposit1 growth with corresponding reduction in wholesale Improving Deposit funding over the last three quarters Franchise Robust core deposit pipeline remains at approximately $1.5 billion Net interest margin of 3.31% exceeded our
Slide 22: Analyst Coverage
ANALYST COVERAGE B.Riley Securities, Inc. Maxim Group Inc. Hal Goetsch Michael Diana D.A. Davidson Companies Piper Sandler Companies Peter Winter Frank Schiraldi Hovde ` Group Raymond James David Bishop Steve Moss Jefferies Group LLC Stephens Inc. Casey Haire Matt Breese Keefe, Bruyette & Woods Inc.
Slide 23: Appendix
APPENDIX SSeeeaeeeSeoee®s SSSeeeaeeeSeoee®& SSeSeeeeeSeoees& SSeEeeeaeeaeaeeeoeoees SSeeaee2eSseeneen28eG
Slide 24: Customers Bancorp Overview
Customers Bancorp Overview A Forward-Thinking Bank with Strong Risk Management Customers Bancorp, Inc. Portsmouth NYSE: CUBI Boston Corporate & Specialized Banking Providence NYC Community Banking West Reading, PA Bay Chicago Headquarters PA Area Denver Washington, D.C. Raleigh/Durham Southern Calif
Slide 25: Securities Portfolio Generating Attractive Returns with Minimal Credit and Duration Risk
Securities Portfolio Generating Attractive Returns with Minimal Credit and Duration Risk Let’s take on tomorrow. Investment Securities – AFS Investment Securities – HTM percent, Q4’23 percent, Q4’23 • Spot yield: 5.12% • Spot yield: 4.31% • Effective duration: ~1.5 years • Effective duration: ~3.0 y
Slide 26: Consumer Installment Loans – Portfolio Credit Metrics
Consumer Installment Loans – Portfolio Credit Metrics Let’s take on tomorrow. Weighted average life of ~2.1 years FICO Score1 Deb t to Income Ratio1 Borrower Income Average FICO Score1 ~734 Average DTI1 ~19% Average Borrower Income ~$107k 660-679 700-749 0-9.99% 40 – 49.99% <$50K >$100K 680-699 750+
Slide 27: Selected 2023 Proxy Peers
Selected 2023 Proxy Peers Let’s take on tomorrow. • Atlantic Union • Independent • Commerce • Northwest • Community Bank System • Old National • FB Financial • Pinnacle • First Busey • Sandy Spring ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED • F.N.B. • United Community • Fulton • WesBanco No
Slide 28: Robust Sources of Liquidity
Robust Sources of Liquidity Let’s take on tomorrow. Liquidity Sources ($000's) 4Q 23 4Q 22 YOY Change Cash and Cash Equivalents $3,846,346 $455,807 $3,390,539 FHLB Available Borrowing Capacity $1,180,972 $2,265,499 ($1,084,527) FRB Available Borrowing Capacity $3,436,000 $2,510,189 $925,810 Investme
Slide 29: Allowance for Credit Losses for Loans and Leases
Allowance for Credit Losses for Loans and Leases Let’s take on tomorrow. ($ in thousands) December 31, 2023 2 Amortized Cost Allowance for Credit Losses Lifetime Loss Rate1 Loans and Leases Receivable: Commercial: Commercial and Industrial, including Specialty Lending $ 6,211,105 $ 23,503 0.38 % Mul
Slide 30: 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 31: Reconciliation of Non-GAAP Measures – Core earnings
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core earnings - Customers Bancorp ($ in thousands except per share data) Twelve Months Ended December 31, Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 2023 2022 USD Per share USD Per share USD Per share USD Per share USD Per
Slide 32: Reconciliation of Non-GAAP Measures – Core ROAA
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core return on average assets - Customers Bancorp ($ in thousands except per share data) Twelve Months Ended December 31, Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 2023 2022 GAAP net income $ 62,092 $ 86,756 $ 47,574 $ 53
Slide 33: Reconciliation of Non-GAAP Measures – Core ROCE
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core return on average common equity – Customers Bancorp ($ in thousands) Twelve Months Ended December 31, Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 2023 2022 GAAP net income to common shareholders $ 58,223 $ 82,953 $ 44,
Slide 34: Reconciliation of Non-GAAP Measures – Adjusted PPNR
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Adjusted net income and adjusted ROAA - pre-tax pre- provision - Customers Bancorp ($ in thousands, except per share data) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 GAAP net income $ 62,092 $ 86,756 $ 47,574 $ 53,721 $ 28
Slide 35: Reconciliation of Non-GAAP Measures – Core efficiency ratio
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core efficiency ratio - Customers Bancorp ($ in thousands, except per share data) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 GAAP net interest income $ 172,506 $ 199,773 $ 165,271 $ 149,899 $ 135,137 GAAP non-interest inco
Slide 36: Core non-interest expense to average assets
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core non-interest expense to average assets - Customers Bancorp ($ in thousands except per share data) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 ©2024 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED GAAP non-interest expens
Slide 37: Tangible common equity to tangible assets
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Tangible common equity to tangible assets - Customers Bancorp ($ in thousands except per share data) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 GAAP total shareholders' equity $ 1,638,394 $ 1,561,607 $ 1,456,652 $ 1,421,02
Slide 38: 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) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 GAAP total shareholders' equity $ 1,638,394 $ 1,561,607 $ 1,456,652 $ 1,421,020 $ 1
Slide 39: Total loans and leases, excluding PPP and consumer HFS
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Total loans and leases, excluding PPP and consumer HFS - Customers Bancorp ($ in thousands except per share data) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Total loans and leases $ 13,202,084 $ 13,713,482 $ 13,910,907 $ 1
Slide 40: Core loans held for investment to total deposits
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core loans held for investment (Total loans and leases HFI, excluding PPP) to total deposits - Customers Bancorp ($ in thousands except per share data) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Total loans and leases HFI
Slide 41: Coverage of credit loss reserves for loans and leases HFI
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Coverage of credit loss reserves for loans and leases HFI, excluding PPP - Customers Bancorp ($ in thousands except per share data) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Loans and leases receivable $ 11,963,855 $ 12,6