Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q3 2023 Earnings Presentation
34 slides from Customers Bancorp's earnings presentation, Oct 27, 2023
Slide 1: Investor Presentation: Q3 2023
Let’s take on tomorrow. Investor Presentation: Q3 2023 “A Forward-Thinking Bank with Strong Risk Management“ October 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements customers bancorp 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 sta
Slide 3: A Forward-Thinking Bank with Strong Risk Management
A Forward-Thinking Bank with Strong Risk Management Let’s take on tomorrow. Significant earnings beat driven by organic growth, higher margin, and well- Q3’23 controlled expenses amplified by outsized discount accretion Earnings Review Results exceeded consensus estimates excluding outsized discount
Slide 4: 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 ©2023 CUSTOMERS BANCOR
Slide 5: Q3'23 Financial Highlights
1.0 Q3’23 EARNINGS REVIEW Financial Highlights Let’s take on tomorrow. Q3’23 Q3’23 (vs. Q2’23) Highlights Profitability Balance Sheet Credit Diluted EPS Core EPS1,2 3.70% $21.9B 0.14% $2.58 $2.59 vs. 3.15% -1% +1 bps ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED NIM Total Assets NPA Ratio Net
Slide 6: 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 Insured Deposits1 / Total Deposits $ billions percent • Total deposits increased $245 million QoQ while • CUBI’s insured deposits1 as a percentage of total paying down $937
Slide 7: Net Interest Margin Expanded Significantly in Q3'23
2.0 STRENGH OF THE FRANCHISE Net Interest Margin Expanded Significantly in Q3’23 Let’s take on tomorrow. Net Interest Income NIM $ millions percent • Third consecutive quarter of substantial increase in • Continued margin expansion despite industry net interest income headwinds driven by higher yiel
Slide 8: Strategic Portfolio Remix Complete and Maintaining Strong Liquidity
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 • Loan originations focused on holistic relationships • Loan to deposit ratio is 75%, 13 percentage point
Slide 9: 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 non-interest expense as percent of core non-i
Slide 10: Securities Portfolio is Best-Positioned Among Regional Bank Peers
2.0 STRENGH OF THE FRANCHISE Securities Portfolio is Best-Positioned Among Regional Bank Peers Let’s take on tomorrow. Investment Securities – AFS AFS + HTM Unrealized Losses as % of TCE2 Book yield and duration percent • Strategic portfolio actions taken during Q2’22-Q4’22 • CUBI’s AOCI as % of TCE
Slide 11: Robust Liquidity Position with More Than 200% Coverage of Uninsured Deposits
3.0 STRONG CAPITAL AND LIQUIDITY Robust Liquidity Position with More Than 200% Coverage of Uninsured Deposits Let’s take on tomorrow. Immediately Available Liquidity Immediately Available Liquidity / Uninsured Deposits1 $ billions percent • Redeemed $510 million of callable FHLB • CUBI’s ratio of im
Slide 12: Achieved $45 Tangible Book Value Target One Quarter Ahead of Plan
3.0 STRONG CAPITAL AND LIQUIDITY Achieved $45 Tangible Book Value Target One Quarter Ahead of Plan Let’s take on tomorrow. Tangible Book Value1 per share AOCI • 5-year CAGR in TBV1 has been over 15%2 $50.14 • YTD TBV1 growth of 16% already $4.78 exceeded 5-year CAGR despite ©2023 CUSTOMERS BANCORP,
Slide 13: Achieved 11.0-11.5% CET1 Capital Target Range One Quarter Ahead
3.0 STRONG CAPITAL AND LIQUIDITY Achieved 11.0-11.5% CET1 Capital Target Range One Quarter Ahead of Plan Let’s take on tomorrow. CET1 Risk-Based Capital percent +170 bps 11.3% 10.3% +100 bps 9.8% 9.6% 9.6% • Increased TCE/TA3 by Q3’22 Q4’22 Q1’23 Q2’23 Q3’231 approximately 50 bps Total Risk-Based Ca
Slide 14: Credit Quality Remains Strong
4.0 MAINTAINING SUPERIOR CREDIT QUALITY Credit Quality Remains Strong Let’s take on tomorrow. NPLs $ millions • NPLs and NPA ratio stable over the last five quarters $28 $31 $32 $28 $30 • Increase in consumer NCO ratio driven by impact Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 of lower balances from consumer lo
Slide 15: Management Outlook
5.0 MANAGEMENT OUTLOOK Management Outlook Let’s take on tomorrow. Metrics Prior Guidance – FY 2023 Current Outlook – FY 2023 Loans1,2 Flat to some decline Deposits Flattish with focus on reducing high-cost deposits NIM1 2.85-3.05%2 - High end of the range 3.20-3.25% in Q4’23 ©2023 CUSTOMERS BANCORP,
Slide 16: Concluding Perspectives
Concluding Perspectives Let’s take on tomorrow. $2.1 billion of core deposit growth and corresponding reduction in wholesale Improving Deposit funding over the last two quarters Franchise Robust core deposit pipeline remains in excess of $1.5 billion Third consecutive quarter of NIM expansion driven
Slide 17: Analyst Coverage
ANALYST COVERAGE 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. Wedbush Securities Inc. Michael Perito David Chiaverini Maxim Group I
Slide 18: Appendix
APPENDIX SSeeeaeeeSeoee®s SSSeeeaeeeSeoee®& SSeSeeeeeSeoees& SSeEeeeaeeaeaeeeoeoees SSeeaee2eSseeneen28eG
Slide 19: Customers Bancorp Overview
Customers Bancorp Overview customers bancorp Let’s take on tomorrow. A Forward-Thinking Super-Community Bank Focused on Superior Customer Service Through High-Tech, High-Touch Model Customers Bancorp, Inc. NYSE: CUBI Community Banking Headquarters West Reading, PA Deep relationship-based community b
Slide 20: 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, Q3 ’23 percent, Q3 ’23 • Spot yield: 5.43% • Spot yield: 4.34% • Effective duration: ~1.6 years • Effective duration: ~3.0
Slide 21: 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 ~$106k 660-679 700-749 0-9.99% 40 – 49.99% <$50K >$100K 680-699 750+
Slide 22: Selected 2023 Proxy Peers
Selected 2023 Proxy Peers Let’s take on tomorrow. • Associated • Fulton • Atlantic Union • Independent • BankUnited • Northwest • Commerce • Old National • Community Bank System • Pinnacle ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED • FB Financial • Sandy Spring • First Busey • United Commun
Slide 23: Robust Sources of Liquidity
Robust Sources of Liquidity Let’s take on tomorrow. Liquidity Sources ($000's) 3Q 23 2Q 23 1Q 23 4Q 22 3Q 22 YOY Change Cash and Cash Equivalents $3,419,974 $3,155,224 $2,046,685 $455,807 $404,465 $3,015,509 FHLB Available Borrowing Capacity $1,253,609 $835,464 $860,578 $2,265,499 $2,999,524 ($1,745
Slide 24: Allowance for Credit Losses for Loans and Leases
Allowance for Credit Losses for Loans and Leases Let’s take on tomorrow. ($ in thousands) September 30, 2023 Amortized Cost2 Allowance for Credit Losses Lifetime Loss Rate1 Loans and Leases Receivable: Commercial: Commercial and Industrial, including Specialty Lending $ 6,617,508 $ 24,986 0.38% Mult
Slide 25: 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 26: Reconciliation of Non-GAAP Measures – Core Earnings
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core Earnings - Customers Bancorp Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 ($ in thousands, except per share data) USD Per share USD Per share USD Per share USD Per share USD Per share GAAP net income to common sharehold
Slide 27: Core Return on Average Assets
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core Return on Average Assets - Customers Bancorp ($ in thousands) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 GAAP net income $ 86,756 $ 47,574 $ 53,721 $ 28,711 $ 63,912 Reconciling items (after tax): Severance expense —
Slide 28: 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) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 GAAP net income to common shareholders $ 82,953 $ 44,007 $ 50,265 $ 25,623 $ 61,364 Reconciling items (af
Slide 29: Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision
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) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 GAAP net income $ 86,756 $ 47,574 $ 53,721 $ 28,711 $ 63
Slide 30: 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) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 GAAP non-interest expense $ 89,466 $ 89,297 $ 80,133 $ 78,419 $ 76,198 ©2023 CUSTOMERS BANCORP, INC
Slide 31: 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) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 GAAP total shareholders' equity $ 1,561,607 $ 1,456,652 $ 1,421,020 $ 1,402,961 $ 1,386,931 ©2023 CU
Slide 32: 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) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 GAAP total shareholders' equity $ 1,561,607 $ 1,456,652 $ 1,421,020 $ 1,402,961 $ 1
Slide 33: Total Loans and Leases, Excluding Consumer HFS and PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Total loans and leases, excluding Consumer HFS - Customers Bancorp ($ in thousands) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Total loans and leases $ 13,713,482 $ 13,910,907 $ 15,063,034 $ 15,794,671 $ 15,336,688 ©2023 C
Slide 34: 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 HFI, excluding PPP - Customers Bancorp ($ in thousands) Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED Loans and leases