Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q2 2020 Earnings Presentation
58 slides from Customers Bancorp's earnings presentation, Jul 30, 2020
Slide 1: Second Quarter 2020 Earnings Conference Call
Second Quarter 2020 Earnings Conference Call July 30, 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: Q2 2020 Investor Presentation
Q2 2020 Investor Presentation 1. Introduction and Overview; How We Built Customers Bancorp Over 10 Years 2. Second Quarter 2020 Highlights 3. Our Top Priorities- An Update • Portfolio Management & Maintaining Superior Asset Quality • Digital Businesses • Digital Lending 4. Financial Result Details •
Slide 4: Introduction and Overview
1) Introduction and Overview How we Built Customers Bancorp Over 10 Years
Slide 5: Franchise Overview
Franchise Overview ~$12Bn(1) $10.5Bn(1) $11.0Bn 1.39%(1) NYSE: CUBI In Loans & Adjusted In Core Assets Deposits Leases (excluding PTPP ROAA PPP Loans) Headquarters: West Reading, PA Management Team Since: 2009 Financial Offices: 21 Employees: 868 Mkt. Cap: $379 million (CUBI) vs. + $1.0 billion for
Slide 6: Customers Bancorp Highlights
Customers Bancorp Highlights Customers is a high performing relationship driven commercial bank servicing the Northeast and Mid-Atlantic From Startup to $12 Billion in Core Total Assets(1) in 10 Years • Bank started in 2009 by current management team to clean up a $250 million in assets failing bank
Slide 7: Paycheck Protection Program: ~$100M in Origination Fee Growth
Paycheck Protection Program ~$100M in 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 business preserve employment by quickly an
Slide 8: Paycheck Protection Program
Paycheck Protection Program Nationwide Success Delivering Help Where Needed Most 8
Slide 9: Second Quarter 2020 Highlights
2) Second Quarter 2020 Highlights
Slide 10: Second Quarter 2020 Highlights
Second Quarter 2020 Highlights Earnings Deposits Deposits • $19.1 million GAAP earnings in Q2 2020, EPS $0.61 • Total deposits up 34% over last year • $50.8 million adjusted PTPP income(1) • Demand deposits up 97% over last year • Adjusted PTPP up $24.6 million or 94% over Q2 2019 • $20.9 million pr
Slide 11: Financial Highlights: Second Quarter 2020 Highlights Cont.
Financial Highlights: Second Quarter 2020 Highlights Cont. Bank Tier 1 Equity Capital 9% Growth Loans $15,290 8% Growth $1,168 resulting in excluding PPP loans $4,760 (PPP 10.6% CET1 Loans) $1,069 $9,721 $10,530 2Q2019 2Q2020 2Q2019 2Q2020 Adjusted PTPP(1) Deposits 34% Growth, $51 94% Growth $10,966
Slide 12: Loan & Deposit Portfolio Composition
Loan & Deposit Portfolio Composition Loan Portfolio (HFI & HFS) Deposit Portfolio 8.6% CAGR (excluding PPP) 14.7% CAGR $15,290 $10,966 $2,666 (PPP $8,649 $4,760 Loans) $7,304 $1,235 $10,051 $7,142 $339 $6,800 $1,870 $8,545 $1,258 $8,708 $1,174 $524 $804 $1,669 $8,272 $69 $420 $5,910 $332 $457 $7,251
Slide 13: Historical & Projected Capital Ratios: Customers Bancorp Inc.
Historical & Projected Capital Ratios: Customers Bancorp Inc. CUBI Tang. Common Equity / Tang. Assets(1) CUBI Tier 1 Leverage Ratio (2) 7.7% (2) 1.4% 10.3% 7.4% 6.3% 9.7% 7.0% 7.1% 9.1% 9.3% 6.6% 8.9% 8.8% 6.2% 5.9% 1.9% 7.2% 4.3% 2015 2016 2017 2018 2019 2Q2020 4Q2020E 2015 2016 2017 2018 2019 2Q20
Slide 14: Outstanding Credit Quality
Outstanding Credit Quality: Classified Loans / Total Loans Nonperforming Assets / Assets $86.4 1.39% (2) 1.26% $17.6 1.04% $50.5 0.86% 0.74% (2) $19.1 0.48% $139.7 $132.2 $130.4 $107.1 0.42% 0.15% 0.19% 0.14% .38% (2) (3) $71.6 .26% (2) (3) $15.8 $17.8 $21.5 $31.4 $68.8 2Q2019 3Q2019 4Q2019 1Q2020 2
Slide 15: Tangible Book Value
Tangible Book Value Tangible Book Value Per Share(1) TBV/Share(1) 7.3% CAGR / 9.1% CAGR (excluding CECL)(1) $24.62 $30.00 $36.48 Stock Price(2) $26.76 $25.00 $12.02 $20.00 $26.89 $26.10 $23.81 Value Proposition $15.00 $17.95 Trading at 49% of TBV $10.00 $12.02 Highlights: $5.00 • Significant discoun
Slide 16: Our Top Priorities
3) Our Top Priorities A) Portfolio Management & Maintaining Superior Asset Quality B) Digital Businesses C) Digital Lending
Slide 17: A) Portfolio Management & Maintaining Superior Asset Quality
A) Portfolio Management & Maintaining Superior Asset Quality
Slide 18: Portfolio Management: Details of Portfolio / Asset Quality
Portfolio Management: Details of Portfolio / Asset Quality • $2.6 billion total outstanding, excluding PPP loans for Q2 2020, up 21% over last year C&I Loans, excluding PPP Loans(1) • Middle market and business banking $1.5 billion total • Specialty Lending $635 million • Equipment Finance $516 mill
Slide 19: Portfolio Management: Commercial Loan Portfolio
Portfolio Management: Commercial Loan Portfolio Commercial Loans Highlights: 4.7% Annual Growth Excluding PPP Loans • Customers is a Business Bank with 61.0% Annual Growth Including PPP Loans “relationship banking” strategy, being executed through the “single point of $13,613 contact” model (PPP • V
Slide 20: 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 21: Portfolio Management: Commercial Loan & Lease Deferments
Portfolio Management: Commercial Loan & Lease Deferments Deferments as of July 24, 2020 Portfolio Active Deferments Dollars in millions # Loans $ Balance # $ % of Portfolio C&I and Investment CRE (1) C&I 2,067 $2,233.0 69 $45.9 2.1% SBA 392 $100.0 4 $13.4 13.4% Investment CRE 333 $758.6 25 $54.8 7.2
Slide 22: Portfolio Management: CECL and Reserve Build
Portfolio Management: CECL and Reserve Build Components of CECL and Reserve Build ACL Q2 Net Q2 ACL 6/30/2020 (2) Q1 Net Q1 Charge- Provsion 3/31/2020 (2) 2.2% of Charge- Provsion Offs “Day 1”(1) Offs 2.0% of $20.9 Loan HFI (3) (4) $31.8 (3) (4) ($10.3) Adoption ACL Loan HFI Impact 1/1/2020 (2) ($18
Slide 23: Portfolio Management: CECL and Reserve Build Cont.
Portfolio Management: CECL and Reserve Build Cont. Allowance for Credit Losses on (2) Loans & Leases As of June 30, 2020 ($ in thousands) Loans & Leases HFI Allowance for Estimated Lifetime Outstanding Credit Losses Loss Rate Commercial C&I 2,099,442 $12,301 0.59% CRE 1,918,379 43,195 2.25% Multi-Fa
Slide 24: B) Digital Businesses
B) Digital Businesses Customers 2 Bancorp, Inc.
Slide 25: Digital Businesses
Digital Businesses Fintech Strategy • Existing robust in-house technology capabilities have supported development of an in-house digital bank augmented by a fintech partner ecosystem • CB’s technology application partnerships ensured broad national access to SBA’s PPP • Deep relationships with Marke
Slide 26: C) Digital Lending
C) Digital Lending Customers 2 Bancorp, Inc.
Slide 27: Consumer Lending: Other Consumer Loan Exposure Breakdown
Consumer Lending: Other Consumer Loan Exposure Breakdown FICO Score Debt to Income Ratio Borrower Income 3.8% 744 Avg FICO Portfolio average DTI $103K Avg Income is 21.9% 17.1% 12.4% 16.8% 24.9% 38.2% 23.7% 38.3% 1.3% 4.5% 44.6% 11.9% 41.0% 21.1% 750+ 700-749 660-699 0-9.99% 10 – 19.99% 20 – 29.99%
Slide 28: Consumer Lending: Impairment
Consumer Lending: Impairment Impairment Breakdown 16.2% 16.0% Industry Average CB Direct CB MPLs 14.0% 12.0% 10.0% 9.0% 8.0% 6.0% 5.0% 4.0% 2.0% 0.0% Continued Outperformance • At industry peak for consumer forbearance, CB overall remained less than half the industry average • Further, CB Direct was
Slide 29: Consumer Lending: CB Temporary Relief Recovery
Consumer Lending: CB Temporary Relief Recovery CB Temporary Relief recovering at a higher rate as they exit hardship • A high % of COVID relief loans recovering back to current, has meant CB Direct loans are over-performing other MPLs, and the industry during the pandemic. Percentage of Loans Recove
Slide 30: Consumer Lending: Consumer Loan Portfolio / Deferments
Consumer Lending: Consumer Loan Portfolio / Deferments Deferments as of July 24, 2020 Portfolio Active Deferments % of Dollars in millions # Loans $ Balance # Principal Portfolio Other Consumer 105,990 $1,244.7 1,553 $22.6 1.8% Home Mortgage 1,793 $319.2 144 $34.9 10.9% Manufactured Housing 1,866 $6
Slide 31: Financial Result Details
4) Financial Result Details Customers 2 Bancorp, Inc.
Slide 32: Preserving & Expanding Margin
Preserving & Expanding Margin Margin Excluding PPP Loans Remains Strong Highlights: • Focus on building core 5.0% 4.7% 4.6% deposits for core loans 4.6% 4.6% $92.0 4.4% 4.3% 4.5% 4.2% 4.2% • Funding costs down 16 4.2% 4.0% $75.7 $77.6 $81.3 bps in Q1 2020 compared 3.5% $67.3 $64.0 $64.7 3.6% to Q4 2
Slide 33: Liquidity
Liquidity Strong Deposit Growth Loans and Leases Held for Average Liquid Assets 50% Increase Since 2018 Investment to Deposit Ratio(1)(2) for 2Q2020 $2,296 $10,966 98% 94% $8,186 $7,296 66% $4,953 $3,546 $2,456 $705 $385 (1) 2Q2018 2Q2019 2Q2020 2Q2018 2Q2019 2Q2020 Investment Mortgage Cash Total Li
Slide 34: Capital Allocation and Management
Capital Allocation and Management Customers Bank Customers Bancorp Tier 1 Leverage 9.6% 8.8% Tier 1 Leverage 2Q2020 2Q2020 Total Risk 12.3% Total Risk Based Based Capital 11.9% Capital 2Q2020 2Q2020 CET 1 10.6% Shareholders’ Equity $1,008(1) $217 2Q2020 $462 $559 Excess $329 Capital $399 Over Well $
Slide 35: Improving Profitability: Profitability
Improving Profitability: Profitability ($ in thousands except EPS) 2Q2020 1Q2020 2Q2019 $ YoY ∆ % YoY ∆ GAAP Metrics Reported EPS (Diluted) $0.61 -$0.02 $0.18 $0.43 236.9% ROAA 0.62% 0.11% 0.36% n/a 0.3% ROCE 10.0% -0.3% 3.0% n/a 7.0% Book Value Per Share $25.1 $23.7 $24.8 $0.28 1.1% Consolidated Ef
Slide 36: Improving Profitability: Non-Interest Expense
Improving Profitability: Non-Interest Expense Non-Interest Expense $66 $64 ($ in millions) 2Q20 2Q19 YoY ∆$ $60 $60 $59 77% Personnel $31.3 $26.9 4.4 Technology & 13.3 12.4 0.9 67% 66% Communication 62% Professional Services 4.6 5.7 (1.2) 58% 57% 57% 53% 51% 52% Occupancy 3.0 3.1 (0.0) Other 11.3 11
Slide 37: Summary & Outlook
5) Summary & Outlook Customers 2 Bancorp, Inc.
Slide 38: 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 between 2.9% and 3.0% for full year 2020 (excluding PPP loans) • Operating expenses expected to remain flat over next few quarters • Tax rate expected to be 22%-23% for 2020 •
Slide 39: Questions
Questions Customers 2 Bancorp, Inc.
Slide 40: Appendix
Customers Bancorp, Inc. Appendix 40
Slide 41: 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 42: Paycheck Protection Program Application Status
Paycheck Protection Program Application Status Number of Loans Received 124,152 SBA Approved & Funded 99,612 Withdrawn / Denied 24,540 Loan Amount Received $6,077,979,566 SBA Approved & Funded $5,213,474,573 Withdrawn / Denied $864,504,994 Average Loan Amount Received $48,996 SBA Approved & Funded $
Slide 43: Q2 2020 Overview
Customers Bancorp, Inc. Q2 2020 Overview Eee CUSTOMERS BANCORP, INC. AND SUBSIDIARIES EARNINGS SUMMARY - UNAUDITED (Dollars in thousands, exce ‘share data and stock ‘Six Months Ended freed) aa e ag ef @ @ June 0 2020 2020 2019 2019 2019 2020 2019 GAAP Profitability Metrics: ‘Net income available to
Slide 44: 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 Q2 2020 Interest income $ - $ 2 $ 1 $ 2 $ 1 $ - $ 2 $ 1,344 $ 2,590 $ 6,761 $ 12,383 $ 11,084 $ 1
Slide 45: 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 46: 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) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net income to common shareholders $ 19,137 $
Slide 47: 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) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 GAAP net income $ 22,718 $ 3,100 $ 27,526 $ 27,066 $ 9,296 Reconciling items
Slide 48: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision, excluding PPP - Customers Bancorp ($ in thousands) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 GAAP net income $ 22,718 $ 3,100 $ 27,526 $ 27,066 $ 9,296 Reconciling items (after tax):
Slide 49: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Core Return on Average Common Equity - Customers Bancorp (dollars in thousands except per share data) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 GAAP net income to common shareholders $ 19,137 $ (515) $ 23,911 $ 23,451 $ 5,681 Reconciling items (a
Slide 50: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Adjusted ROCE - Pre-Tax Pre-Provision - Customers Bancorp ($ in thousands) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 GAAP net income to common shareholders $ 19,137 $ (515) $ 23,911 $ 23,451 $ 5,681 Reconciling items (after tax): Income tax expen
Slide 51: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Net Interest Margin, Tax Equivalent - Customers Bancorp ($ in thousands) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 GAAP Net interest income $ 91,982 $ 81,321 $ 77,593 $ 75,735 $ 64,679 Tax-equivalent adjustment 225 205 187 184 183 Net interest in
Slide 52: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible book value and tangible book value per common share - CAGR ($ in thousands, except per share data) Q2 2020 Q4 2019 Q4 2018 Q4 2017 Q4 2016 Q2 2015 GAAP - Total shareholders' equity $ 1,007,847 $ 1,052,795 $ 956,816 $ 920,964 $ 855,872
Slide 53: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Common Equity to Tangible Assets - Customers Bancorp ($ in thousands) Q2 2020 2019 2018 2017 2016 2015 GAAP - Total shareholders' equity $ 1,007,847 $ 1,052,794 $ 956,816 $ 920,965 $ 855,872 $ 553,902 Reconciling items: Tangible common
Slide 54: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Tangible Equity and ACL to Tangible Assets - Customers Bancorp ($ in thousands) Q2 2020 2019 2018 2017 2016 2015 GAAP - Total shareholders' equity $ 1,007,847 $ 1,052,794 $ 956,816 $ 920,964 $ 855,872 $ 553,902 Reconciling items: Allowance for
Slide 55: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Average Liquid Assets ($ in thousands, except per share data) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Investment Securities $ 726,809 $ 589,120 $ 601,758 $ 666,767 $ 678,886 Fair value adjustment, investment securities (21,025) (22,833) (16,804
Slide 56: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Commercial and industrial loans and leases including commercial real estate owner-occupied and loans to mortgage companies, excluding PPP ($ in thousands) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 Total commercial & industrial $ 7,592,539 $ 2,017
Slide 57: Reconciliation of Non-GAAP Measures – Unaudited (Cont.)
Reconciliation of Non-GAAP Measures – Unaudited (Cont.) Non-performing assets, excluding one investment CRE NOO relationship ($ in thousands) Q2 2020 Q1 2020 Non-performing loans $ 86,266 $ 50,359 OREO 131 131 One investment CRE NOO relationship (17,600) (19,050) Non-performing assets, one investmen
Slide 58: 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