Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q3 2020 Earnings Presentation
41 slides from Customers Bancorp's earnings presentation, Oct 29, 2020
Slide 1: Third Quarter 2020 Earnings Conference Call
Third Quarter 2020 Earnings Conference Call October 29, 2020 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: Q3 2020 Investor Presentation Agenda
Q3 2020 Investor Presentation I. Overview A. Franchise B. Key Features II. Financial Highlights A. Capital Trends B. Credit Quality C. Deposit Mix Shift III. Outlook A. Strategic Priorities B. Guidance IV. Appendix 3
Slide 4: I. Overview
I. Overview Customers 2 Bancorp, Inc.
Slide 5: Customers Bancorp: Franchise Overview
Customers Bancorp: Franchise Overview $13.8B(1) $10.8B 1.43%(1) NYSE: CUBI $11.6B(1) Adjusted PTPP Core Assets Loans & Leases Total Deposits ROAA, 3Q20 Headquarters: West Reading, PA Management Team Since: 2009 Financial Offices: 22 FTE Employees: 881 Mkt. Cap: $353 million (CUBI) vs. ~$1.5 billion
Slide 6: Customers Bancorp: Key Features
Customers Bancorp: Key Features Customers is a high performing relationship-driven commercial bank primarily servicing the Mid- Atlantic and New England regions. From Startup to ~$14 Billion in Core Assets(1) in ~10 Years • The Bank was effectively launched in 2009 by the current management team to
Slide 7: II. Financial Highlights
Il. Financial Highlights Customers 2 Bancorp, Inc.
Slide 8: Third Quarter 2020 Highlights
Third Quarter 2020 Highlights Earnings Deposits Deposits • Diluted EPS of $1.48 in 3Q20 versus $0.74 in 3Q19 • Demand deposits up 71% YOY • Core EPS(2) of $1.20 in 3Q20 versus $0.74 in 3Q19 • Total cost of deposits down 115 bps YOY to 0.67% • Expect to earn $100 million in pre-tax origination fees f
Slide 9: Capital Trends
Capital Trends Highlights: • Our participation in the Paycheck Protection Program Customers Bancorp: Actual & Projected will have a “sling shot” effect Capital Metrics on tangible common equity. • Tangible Common Equity (TCE) to Total Assets (TA) Ratios are currently deflated due primarily to a temp
Slide 10: Credit Quality and Reserves Remain Above Average
Credit Quality and Reserves Remain Above Average Highlights: Recent Credit Quality Metrics • Credit quality remains strong as evidenced by NPAs/TA declining to 0.34% at 9/30/20 from 0.48% three months earlier. CECL Day 1 Adoption Impact: $79.8M • NPAs include $18.4M tied to one CRE loan located in M
Slide 11: Allowance for Credit Losses for Loans and Leases by Segment
Allowance for Credit Losses for Loans and Leases by Segment CECL Method September 30, 2020 Allowance Amortized for Credit Lifetime Loss ($ in thousands) Cost Losses1 Rate Loans and leases receivable: Commercial Multi-family 1,950,300 15,026 0.77% Commercial and industrial 2,220,715 12,926 0.58% Comm
Slide 12: Criticized Loans
Criticized Loans (Special Mention, Substandard, Doubtful & Loss) Criticized loans, often considered a harbinger of potential credit stress, are Commercial Criticized Loans Trend relatively flat compared to the level at year-end 2019. Commercial criticized loans- to-total loans and leases(2) were onl
Slide 13: Loan & Lease Deferments
Loan & Lease Deferments (expected to decrease further in 4Q20 and 1Q21) Customers Bancorp: Total Loan & Lease Deferments 7/24/20 9/30/20(1) % of % of Dollars in millions Deferments Portfolio Deferments Portfolio C&I and Investment CRE: C&I $45.9 2.1% $18.6 0.8% SBA $13.4 13.4% $6.0 4.8% Investment C
Slide 14: COVID-19 At-Risk Industries
COVID-19 At-Risk Industries Remaining Portfolio COVID-19 At-Risk Industries as identified by Customers Entertainment totaled only 5.8% of loans at -only Total Loans1 9/30/20, excluding PPP at 9/30/20: Dining $11.6B loans(1). CRE Retail Sales COVID-19 At-Risk Industries (9/30/20) Colleges and Loan %
Slide 15: Hospitality Loans
Hospitality Loans Portfolio as of 9/30/20 • Total portfolio of approximately $404.0M, which represents approximately 3.5% of the Bank’s total loans excluding PPP balances Portfolio Composition • Nearly 19.0% ($82.0M) is currently operating under government contracts for transitional housing • Approx
Slide 16: Healthcare Loans
Healthcare Loans Portfolio as of 9/30/20 • Total portfolio of approximately $310M excluding PPP loans • Total number of clients: 29 • Average loan size: $13M Portfolio Composition • Portfolio consists of Senior Living credit facilities with the majority (97%) in the Skilled Nursing sector • Total nu
Slide 17: Multifamily, Investment CRE & Construction Loans
Multifamily, Investment CRE & Construction Loans Multifamily Portfolio: 9/30/20 • Weighted average LTV is 60% • Average principal balance per loan is $6.9M • Well-seasoned portfolio with a weighted average of 3.5 years since origination • Conservative underwriting with minimum Debt Service Coverage
Slide 18: Banking the Mortgage Companies
Banking the Mortgage Companies Overview • Loans to mortgage companies (mortgage warehouse) totaled $3.9 billion at 9/30/20, up $1.4 billion or 55% year-over year. • The majority of this growth was achieved in 3Q20, driven by greater refinance activity due to sharply lower interest rates, an increase
Slide 19: Consumer Installment Loans
Consumer Installment Loans FICO Score (1) Debt to Income Ratio Borrower Income 4.6% 741 Avg FICO Portfolio average DTI $101K Avg Income is 20.8% 15.4% 14.9% 18.1% 21.9% 37.2% 1.2% 35.5% 4.5% 24.7% 11.8% 47.3% 41.8% 21.1% 0-9.99% 10 – 19.99% 20 – 29.99% <$49,999 $50K -$99,999 >$100K n/a 750+ 700-749
Slide 20: Consumer Installment Loans Performance Remains Strong
Consumer Installment Loans Performance Remains Strong Impairment Breakdown Impairment Breakdown 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 8/31/2019 10/31/2019 12/31/2019 2/29/2020 4/30/2020 6/30/2020 8/31/2020 CB-Direct CB-MPLs Industry Continued Outperformance • At industry peak for consumer
Slide 21: Deposit Mix Shift
Deposit Mix Shift 9/30/19 9/30/20 9.0% 21.5% 10.8% 21.3% 37.4% Noninterest Bearing DDAs Interest Bearing DDAs Money Market Accounts Savings Accounts Certificates of Deposit Significant Funding Mix Improvement Achieved Due to PPP Participation and Core Trends • The non-time deposits-to-total deposits
Slide 22: III. Outlook
Ill. Outlook Customers 2 Bancorp, Inc.
Slide 23: Continuing to Execute on Community Bank & Niche Business Strategies
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 businesses and deposit gathering • Loans expected to grow about 7% to 10% over the next year • Ou
Slide 24: Fintech Related Priorities
Fintech Related Priorities Fintech Strategy • Continue to develop an in-house digital bank augmented by a fintech partner ecosystem by leveraging existing technology capabilities • Customers’ technology application partnerships are what enabled our success in the SBA’s Paycheck Protection Program •
Slide 25: Financial Guidance
Financial Guidance 1. Non-GAAP Measure, refer to Appendix for reconciliation The Company is well positioned to execute on its 2020, 2021 and 2026 objectives • Loan growth, excluding PPP and mortgage warehouse balances, is expected to average in the mid-to-high single digits over the next several qua
Slide 26: 2026 Core EPS Target
2026 Core EPS Target Path to Core EPS of $6.00 by 2026 Position at year-end 2020 • $12.0-13.0 billion in assets • 31.7 million diluted shares outstanding Growth Assumptions • Asset growth of 7.0%-10.0% per year on average in the 2021-2026 period • Diluted shares outstanding growth of 1.0% per annum
Slide 27: IV. Appendix
lV. Appendix Customers 2 Bancorp, Inc.
Slide 28: Liquidity
Liquidity YOY Liquidity Sources ($000) 3Q19 4Q19 1Q20 2Q20 3Q20 Change Cash (Int. Earning Deposits) $169,663 $179,410 $237,390 $1,022,753 $325,594 $155,931 FHLB Available Capacity $1,111,661 $1,159,970 $882,013 $1,078,520 $929,508 ($182,153) FRB Available Capacity $183,878 $136,842 $9,931 $152,410 $
Slide 29: Paycheck Protection Program
Paycheck Protection Program ~$100M in Anticipated Origination Fee Growth Customers Bank leveraged its technology platform to partner with leading fintechs becoming a top PPP Loan originator in the country • Customers Bank rose to the challenge of helping American small PPP Lenders Ranked business pr
Slide 30: Loan Portfolio
Loan Portfolio 9/30/20(1) (1). Excludes PPP loan balances, Non-GAAP Measure, refer to Appendix for reconciliation 30
Slide 31: CUBI and Paycheck Protection Program Newsworthy
CUBI and Paycheck Protection Program Newsworthy “Consider: Customers Bank, which set up an online portal to handle PPP applications in April. The initial loans coming in were rather large, averaging around $150,000 to $200,000, said Sam Sidhu, “As complaints mounted last month [April] that big banks
Slide 32: Detailed Financial Ratios
Detailed Financial Ratios 32
Slide 33: BankMobile Income Statement
BankMobile Income Statement Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Interest income $ 1 $ 2 $ 1 $ - $ 2 $ 1,344 $ 2,590 $ 6,761 $ 12,383 $ 11,084 $ 11,194 $ 11,118 $ 10,753 Interest expense $ 10 $ 6 $ 8 $ 125 $ 50 $ 179 $ 166 $ 210 $ 24
Slide 34: 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 35: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Core Earnings - Customers Bancorp ($ in thousands, not including per share amounts) Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net income to common shareholders $ 47,085 $
Slide 36: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision - Customers Bancorp ($ in thousands) Nine Months Ended September 30, Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 2020 2019 GAAP net income $ 50,515 $ 22,718 $ 3,100 $ 27,526 $ 27,066 $ 7
Slide 37: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Coverage of credit loss reserves for loans and leases held for investment, excluding PPP ($ in thousands) Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Loans and leases receivable $ 12,664,997 $ 12,032,874 $ 7,353,262 $ 7,318,988 $ 7,336,237 Loans re
Slide 38: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Commercial criticized loans and leases receivable to total loans and leases, excluding PPP ($ in thousands) Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Special mention loans $ 126,361 $ 105,110 $ 75,838 $ 111,157 $ 68,878 $ 114,524
Slide 39: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Book Value per Common Share - Customers Bancorp ($ in thousands, except per share data) Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 GAAP -Total shareholders' equity $ 1,051,491 $ 1,007,847 $ 964,636 $ 1,052,795 $ 1,019,150 Reconciling item
Slide 40: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Equity ($ in thousands) Q3 2020 GAAP - Total shareholders' equity $ 1,051,491 Reconciling items: Goodwill and other intangibles (14,437) Tangible equity $ 1,037,054 Tangible Common Equity to Tangible Assets, Excluding PPP - Customers B
Slide 41: Contacts
Contacts Leadership: Analysts: Carla Leibold B. Riley Financial CFO of Customers Bancorp, Inc and Customers Steve Moss Bank Tel: 484-923-8802 D.A. Davidson Company cleibold@customersbank.com Russell Gunther Jay Sidhu Chairman & CEO of Customers Bancorp, Inc. and Hovde Group Will Curtiss Executive Ch