Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q1 2020 Earnings Presentation
39 slides from Customers Bancorp's earnings presentation, May 4, 2020
Slide 1: First Quarter 2020 Earnings Conference Call
First Quarter 2020 Earnings Conference Call May 4, 2020 NYSE: CUBI
Slide 2: Protecting Our Customers, Communities and Team
Protecting Our Customers, Communities and Team Team Members Consumers Businesses Communities • 85% of our team • 24/7 Customer Care • Over $5 billion(1) in loans • Customers Bank made members are working Center; mobile app and for small businesses in numerous financial remotely with minimal online b
Slide 3: Serving Our Customers
Serving Our Customers Paycheck Protection Loan Modifications Customer Assistance Program • Committed to helping small • Developed a programmatic • Most branches remain open to businesses, not for profits and deferred payment initiative to serve our customers, in addition communities, Customers has p
Slide 4: First Quarter 2020 Highlights
First Quarter 2020 Highlights Earnings Earnings Deposits Deposits • $7.0 million GAAP earnings in Q1 2020, EPS $0.22 • Total deposits up 13% over last year • $38.6 million adjusted PPNR(1) • Demand deposits up 38% over last year • Adjusted PPNR up $13.3 million or 53% over 1Q19 • $23.1 million provi
Slide 5: Financial Highlights: First Quarter 2020 Highlights Cont.
Financial Highlights: First Quarter 2020 Highlights Cont. Bank Tier 1 Equity Capital 9% Growth Loans and Leases $10,334 18% Growth $1,167 $ in Millions resulting in $ in Millions 10.7% CET1 $8,746 $1,071 1Q2019 1Q2020 1Q2019 1Q2020 Adjusted PPNR(1) 53% Growth Deposits 13% Growth, $ in Thousands $38,
Slide 6: Tangible Book Value Per Share
Tangible Book Value Tangible Book Value Per Share(1) TBV/Share(1) 8.6% CAGR $25.60 $36.48 Stock Price(2) $10.93 $26.78 $26.10 $23.81 Value Proposition $17.95 Trading at 43% of TBV $10.93 Highlights: • Significant discount to TBV provides potential $18.39 $20.49 $21.90 $23.32 $26.17 $25.60 upside bas
Slide 7: Our Top Risk Management Priorities
Our Top 5 Risk Management Priorities
Slide 8: Our Top 5 Risk Management Priorities
Our Top 5 Risk Management Priorities • Conservative underwriting Portfolio Management & • Conservative reserving Maintaining Superior Asset • Active portfolio management Quality • Operating in pre-recessionary environment since 2019 • Q1 2020 margin(1) expanded 40 bps compared to Q1 2019 Preserving
Slide 9: 1) Portfolio Management & Maintaining Superior Asset Quality
1) Portfolio Management & Maintaining Superior Asset Quality
Slide 10: Portfolio Management: Details of Portfolio / Asset Quality
Portfolio Management: Details of Portfolio / Asset Quality • $2.6 billion total outstanding for 1Q 2020, Up 29% over last year C&I Loans(1) • Middle market and business banking $1.5 billion total • Specialty Lending $677 million • Equipment Finance $364 million Avg Yield 4.7% • $1.8 billion average
Slide 11: Portfolio Management: Commercial Loan Portfolio
Portfolio Management: Commercial Loan Portfolio Commercial Loans Highlights: 8.8% Annual Growth • Customers is a Business Bank with “relationship banking” strategy, being executed through the “single point of $8,929 $8,435 $8,419 $8,585 contact” model $7,887 $2,549 $2,054 $2,306 $2,573 • Very experi
Slide 12: Portfolio Management: Commercial Loan Portfolio Cont.
Portfolio Management: Commercial Loan Portfolio Cont. Business Line 1Q20 4Q19 1Q19 YoY ∆$ YoY ∆% ($ in millions) C&I(1) $2,560 $2,382 $1,982 $578 29.2% CRE 1,383 1,342 1,162 221 19.0% Multi-Family 2,069 2,390 3,209 (1,139) (35.5)% Loan to Mortgage Companies (Mtg. Warehouse) 2,573 2,306 1,535 1,038 6
Slide 13: Portfolio Management: Our Efforts to Accommodate Deferment Requests
Portfolio Management: Our Efforts to Accommodate Deferment Requests C&I Loans • Maximum deferments of 90 days at a time • Customer information solicited prior to approval • Active portfolio management on a weekly/monthly basis • Use Main Street and SBA lending programs wherever possible to support c
Slide 14: Portfolio Management: Commercial Loan Deferments
Portfolio Management: Commercial Loan Deferments Deferments by Portfolio As of March 31, 2020 As of April 24, 2020 Total Outstanding Loan # Loan $ % Loan # Loan $ % ($ in millions) C&I Transportation 2 $1.7 0.00% 7 $17.0 0.81% Restaurants 1 $0.6 0.00% 9 $4.5 0.21% Middle Market 3 $3.1 0.15% 48 $13.6
Slide 15: Portfolio Management: Other Consumer Loan Exposure Breakdown
Portfolio Management: Other Consumer Loan Exposure Breakdown FICO Score Debt to Income Ratios Borrower Income $103K Avg Income 744 Avg FICO Portfolio average DTI 3.4% 0% is 21.9% 7% 16% 15.8% 18% 16% 38% 39.7% 32% 41.0% 28% 43% 0-9.99% 10 – 19.99% 20 – 29.99% 750+ 700-749 660-699 <$49,999 $50K -$99,
Slide 16: Portfolio Management: Consumer Loan Portfolio
Portfolio Management: Consumer Loan Portfolio Business Line ($ in millions) 1Q20 4Q19 1Q19 YoY ∆$ YoY ∆% Other Consumer >750 FICO $505 $469 $64 $442 n/a 700-749 FICO 571 511 58 513 n/a 660-699 FICO 238 194 22 216 n/a <660 FICO 0 0 0 0 n/a Total Other Consumer $1,315 $1,174 $144 $1,171 n/a Residentia
Slide 17: Portfolio Management: Consumer Loan Deferments
Portfolio Management: Consumer Loan Deferments Deferments by Portfolio As of March 31, 2020 As of April 24, 2020 Total Outstanding Loan # Loan $ % Loan # Loan $ % ($ in millions) Other Consumer FICO <750 1,267 $23.7 3.09% 2,558 $39.3 5.19% FICO >750 427 $11.2 2.42% 658 $12.3 2.70% Income > $75,000 9
Slide 18: Portfolio Management: Outstanding Credit Quality
Portfolio Management: Outstanding Credit Quality NPA Amount NPAs to Total Assets $63.2 M One investment CRE 0.24% NPA % of Assets credit already under LOI for disposition 0.53% Highlights: 0.29% 0.29% 0.29% • Q1 2020 NPA’s impacted 0.22% 0.19% 0.19% by one investment CRE credit where Customers Bank
Slide 19: Portfolio Management: CECL and Reserve Build
Portfolio Management: CECL and Reserve Build Components of CECL “Day 2”(1) Provision $22.3M and Reserve Build Economic & Portfolio Other Factors(3) 2.1% of Net Charge-Offs Change $12.5 Loan HFI “Day 1”(1) ACL ($5.9) $9.8 Adoption Impact 1/1/2020 (2) $152.6 $79.8 $136.2 0.8% of Loan HFI $56.4 ALLL 12
Slide 20: Portfolio Management: CECL and Reserve Build Cont.
Portfolio Management: CECL and Reserve Build Cont. Allowance for Credit Losses on Loans & Leases As of March 31, 2020 Q1 2020 Estimated Loans & Leases Allowance for Lifetime Loss Provision for ($ in thousands) HFI Outstanding Credit Losses Rate Credit Losses Commercial C&I $2,072,952 $18,806 0.91% $
Slide 21: 2) Preserving & Expanding Margin
2) Preserving & Expanding Margin
Slide 22: Margin Expands as Planned
Preserving & Expanding Margin Margin Expands as Planned Highlights: $ in Millions 5.0% • Focus on building core deposits for core loans 4.5% $81.3 $75.7 $77.6 • Funding costs down 16bps 4.0% in Q1 2020 compared to $67.3 $65.0 $64.0 $64.7 Q4 2019 $61.5 3.5% $59.3 • Considerable 3.0% opportunities to
Slide 23: 3) Strong Liquidity
3) Strong Liquidity Customers 2 Bancorp, Inc.
Slide 24: Liquidity
Liquidity Strong Deposit Growth Loans and Leases Held for Average Liquid Assets 19% Increase Since 2018 Investment to Deposit Ratio for 1Q2020 $2,807 99% 98% $8,414 $4,241 $3,203 $7,425 $7,042 88% $1,842 $589 $772 1Q2018 1Q2019 1Q2020 1Q2018 1Q2019 1Q2020 Investment Mortgage Cash Total Borrowing Sec
Slide 25: 4) Capital Management
4) Capital Management Customers 2 Bancorp, Inc.
Slide 26: Capital Allocation and Management
Capital Allocation and Management Customers Bank Customers Bancorp Tier 1 Leverage 10.1% Tier 1 Leverage 9.1% 1Q2020 1Q2020 Total Risk 12.3% Based Capital Total Risk Based 11.8% 1Q2020 Capital CET 1 10.7% 1Q2020 Equity Capitalization 1Q2020 $458 Excess $586 Capital $400 Over Well $217 Capitalized $2
Slide 27: 5) Maintaining & Improving Profitability
5) Maintaining & Improving Profitability
Slide 28: Maintaining & Improving Profitability: Profitability
Maintaining & Improving Profitability: Profitability ($ in thousands except EPS) 1Q2020 4Q2019 1Q2019 $ YoY ∆ % YoY ∆ GAAP Metrics Reported EPS (Diluted) $0.22 $0.75 $0.38 ($0.15) (41.2)% ROAA 0.4% 1.0% 0.7% n/a (0.3)% ROCE 3.5% 11.6% 6.4% n/a (2.9)% Book Value Per Share $23.98 $26.66 $24.44 ($0.46)
Slide 29: Maintaining & Improving Profitability: Non-Interest Expense
Maintaining & Improving Profitability: Non-Interest Expense Non-Interest Expense 1Q20 1Q19 YoY ∆ ($ in millions) $66.5 $59.6 $59.6 $58.7 Personnel $28.3 $25.8 $ 2.5 $54.0 Technology & 77% 13.0 12.0 1.1 Communication Professional 7.7 4.6 3.1 68% Services 67% 66% 62% Occupancy 3.0 2.9 .1 60% 57% 57% 5
Slide 30: Key Take Aways
Key Take Aways The Company is well positioned to execute on its 2020 and 2025 / 2026 LT strategies • NIM expected to remain above 3.0% for 2020 • Operating expenses expected to moderate over next few quarters • Tax rate expected to be 22-23% for 2020 • Excluding PPP Loans, balance sheet at year end
Slide 31: Appendix
Customers Bancorp, Inc. Appendix 31
Slide 32: Forward-Looking Statements
Forward-Looking Statements In addition to historical information, this presentation may contain ”forward-looking statements” within the meaning of the ”safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to
Slide 33: BankMobile Income Statement
BankMobile Income Statement BankMobile Segment Income Statement ($ in 000s), Except Per Share Data Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Interest income $ - $ 2 $ 1 $ 2 $ 1 $ - $ 2 $ 1,344 $ 2,590 $ 6,761 $ 12,383 $ 11,084 $ 11,194 In
Slide 34: 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 Keefe, Bruyette & Woods Michael Perit
Slide 35: 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 36: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Core Earnings - Customers Bancorp Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Per Per Per Per Per (dollars in thousands except per share data) USD share USD share USD share USD share USD share GAAP net income to common shareholders $ 7,027 $0.22 $2
Slide 37: 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 (dollars in thousands except per share data) Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 GAAP net income $ 10,642 $ 27,526 $ 27,066 $ 9,296 $ 15,440 Reconciling items
Slide 38: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Common Equity to Tangible Assets - Customers Bancorp (dollars in thousands except per share data) Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 GAAP - Total shareholders' equity $ 972,179 $ 1,052,795 $ 1,019,150 $ 991,405 $ 978,373 Reconcili
Slide 39: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Book Value per Common Share - CAGR - Customers Bancorp (dollars in thousands except share and per share data) Q1 2020 Q1 2015 GAAP - Total shareholders' equity $ 972,179 $ 457,952 Reconciling Items: CECL adjustment 65,821 — Preferred s