Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q4 2017 Earnings Presentation
39 slides from Customers Bancorp's earnings presentation, January 2018
Slide 1: Highly Focused, Above Average Growth
Highly Focused, Above Average Growth Bank Holding Company Member FDIC Investor Presentation January, 2018 NYSE: CUBI
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation, as well as other written or oral communications made from time to time by us, contains forward‐looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements relate to f
Slide 3: Forward-Looking Statements
Forward-Looking Statements • timely development and acceptance of new banking products and services and perceived overall value of these products and services by users, including the products and services being developed and introduced to the market by the BankMobile division of Customers Bank; • ch
Slide 4: Forward-Looking Statements
Forward-Looking Statements • the levels of usage of other BankMobile student customers following graduation of additional product and service offerings of BankMobile or Customers Bank, including mortgages and consumer loans, and the mix of products and services used; • our ability to implement chang
Slide 5: Investment Proposition
Investment Proposition Highly Focused, Innovative, Relationship Banking Based Commercial Bank Providing; Business bank with a unique private banking service model; $10 billion in assets and growing Strong Organic Growth, Well Capitalized, Branch Lite Bank in Attractive Markets Highly skilled teams t
Slide 6: Top Strategic Priorities
Top Strategic Priorities • Strengthen Capital • At December 31, 2017, Customers substantially achieved all capital targets • Targets: 7.0% TCE, 9.0% Tier 1 Leverage, 9.0% CET1, 11% Tier 1 Risk Based, and 13% Total Risk Based • Grow and Successfully Divest BankMobile in 2018 • Announced on October 19
Slide 7: 2018 Outlook
2018 Outlook Community Business Banking: targeting diluted EPS of $2.75 to $3.00 • This is our core franchise which will remain after the spin-off and merger of BankMobile is complete in mid-2018 • 12% to 15% growth in total assets • FTE net interest margin between 2.70% to 2.80% • Efficiency ratio
Slide 8: Q4 2017 and 2017 Consolidated Results
Q4 2017 and 2017 Consolidated Results • Q4 2017 Net Income to Common Shareholders of $18.0 million, and Diluted Earnings Per Common Share of $0.55. Results include a GAAP vs. Adjusted EPS(1) deferred tax asset re‐measurement charge of $5.5 million ($0.17 per diluted share) and a $7.3 million benefit
Slide 9: Q4 2017 Highlights: Community Business Banking Segment
Q4 2017 Highlights: Community Business Banking Segment Community Business Bank Segment GAAP vs. Adjusted EPS(1) $1.00 Community Business Banking segment Q4 2017 profits of $22.2 million ($0.68 per diluted share) and 2017 profits of $77.6 million ($2.38 per diluted $0.80 share) $0.82 $0.73 • Adjusted
Slide 10: 2017 Q4 Organic Loan Growth
2017 Q4 Organic Loan Growth Loans ($ in 000s) December 31, March 31, June 30, September 30, December 31, Growth 2016 2017 2017 2017 2017 QOQ YOY Commercial: Multi‐family $3,215 $3,438 $3,550 $3,769 $3,647 ‐$123 ‐3% $432 13% Mortgage warehouse 2,171 1,739 2,159 2,013 1,845 ‐168 ‐8% ‐326 ‐15% Commerci
Slide 11: 2017 Q4 NIM: +17 bps sequentially; -5 bps from Q4 2016
2017 Q4 NIM: +17 bps sequentially; ‐5 bps from Q4 2016 NIM Trends: • FTE NIM(1) expanded17 bps sequentially to 2.79%, due largely to favorable mix shift in assets and liabilities given planned balance sheet reductions, and a rebound prepayments. • NIM narrowed 5 bps from the year ago period, primari
Slide 12: Q4 2017 Highlights: BankMobile Segment
Q4 2017 Highlights: BankMobile Segment Bank Mobile Segment GAAP vs. Adjusted EPS(1) BankMobile segment loss of $4.2 million (-$0.13 per diluted $0.10 share) in Q4 2017 $0.05 $0.04 • BankMobile processed over $9.5 billion of student loan $0.00 $0.02 disbursements in 2017. ‐$0.05 ‐$0.07‐$0.07 EPS ‐$0.
Slide 13: BankMobile Segment Expanded Financials
BankMobile Segment Expanded Financials BankMobile Segment Income Statement ($ in 000s) Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Interest income $3 $3 $4 $10 $15 $7 $7 $10 Interest expense $7 $7 $7 $17 $20 $18 $16 $15 Fund Transfer Pricing $1,723 $1,306 $1,381 $2,466 $4,247 $2,
Slide 14: BankMobile Spin-off / Merger
BankMobile Spin-off / Merger KeyKey Steps Steps in Spin-off / Merger CUBI Shareholders Flagship Shareholders New Investors 2 3 Flagship Raises CUBI Equity Flagship 4 Customers Bank 1 BankMobile Technologies (BMT) Event Target Date Customers announced spin‐off of BankMobile and merger of BankMobile i
Slide 15: Capital Plan: Internal Targets are Within Sight
Capital Plan: Internal Targets are Within Sight The Q4 2017 reduction in balance sheet size boosted capital ratios at least 50 bps Ratio Regulatory Internal Consolidated Customers Capital Target Bancorp Bank Sub Requirement(1) 2017 Q4 (Est.) 2017 Q4 (Est.) Tier 1 Leverage >=5.00% >=9.00% 8.94% 9.74%
Slide 16: Customers Bank
Customers Bank Executing On Our Unique High Performing Banking Model 16
Slide 17: Customers Business Model
Customers Business Model Private Banking High Tech / Source High Touch Model Excellence in Branch Lite Service Experienced Strong Asset Leadership Quality Unique Single Customer Point of Superior Risk Centric Contact Model Management Approach to Winning Model Relationship driven but never deviate fr
Slide 18: Banking Strategy – Community Business Banking
Banking Strategy – Community Business Banking Very Experienced Teams Exceptional Service Risk Based Incentive Compensation Consumer & Residential, $0.3 B, 4% Community Business Bank is Focused on the following businesses: • Banking Privately Held Businesses – Commercial C&I loans are 39% of the port
Slide 19: Our Competitive Advantage: A Highly Experienced Management Team
Our Competitive Advantage: A Highly Experienced Management Team Years of Banking Name Title Experience Background Jay S. Sidhu Chairman & CEO 42 Chairman and CEO of Sovereign Bank & Sovereign Bancorp, Inc. EVP, Commercial Middle Market, Regional President and Managing Director of Corporate Richard A
Slide 20: Performance Trend
Performance Trend $80 Net Income & Earnings Per Share $2.31 $2.50 $70 $1.96 $1.97 $2.00 $60 $1.57 $1.55 $50 $1.30 $1.50 $40 $30 $1.00 $20 $0.50 $10 $0 $0.00 2012 2013 2014 2015 2016 2017 Net Income Available to Common Shareholders Fully Diluted EPS 180% 160% 140% 120% 117% 100% 100% 80% 60% 40% 20%
Slide 21: Results in: Organic Growth of Deposits with Controlled Costs
Results in: Organic Growth of Deposits with Controlled Costs Customers’ strategies of single point of contact and recruiting known teams in target markets produce rapid deposit growth with low total cost Total Deposit Growth ($mm) Average DDA Growth ($mm) CAGR: 23% CAGR: 41% $8.0 $1,600 $1.3 $539 $6
Slide 22: Lending Strategy
Lending Strategy High Growth with Strong Credit Quality Continuous recruitment and retention of high quality teams Centralized credit committee approval for all loans Loans are stress tested for higher rates and a slower economy Insignificant delinquencies on loans originated since new manag
Slide 23: Build an Outstanding Loan Quality Portfolio
Build an Outstanding Loan Quality Portfolio Asset Quality Indicators Continue to be Strong NPL Charge Offs 3.50% 3.33% 1.20% 1.09% 3.00% 2.64% 1.00% 2.50% 2.06% 1.83% 0.80% 0.68% 2.00% 1.70% 1.70% 1.44% 1.36% 0.60% 0.48% 0.48% 0.45% 0.45% 1.50% 1.08% 0.42% 0.91% 0.89% 0.76% 0.40% 0.28% 1.00% 0.72% 0
Slide 24: C&I & Owner Occupied CRE Banking Strategy
C&I & Owner Occupied CRE Banking Strategy Banking Privately Held Business Private & Commercial Banking Target companies with up to $100 million annual Commercial Loan and Deposit Growth ($mm) revenues $4.5 Single point of contact $4.0 LOAN CAGR: 17% NE, NY, PA & NJ markets $3.5 $4.0 $3.4 $4.0
Slide 25: Multi-Family Banking Strategy
Multi‐Family Banking Strategy Banking High Net Worth Families Focus on families that have income producing real estate in their portfolios Multi-Family Loan and Deposit Growth ($mm) Private banking approach $4.0 $3.6 Focus Markets: New York & Philadelphia $3.2 MSAs $2.9 $3.0 Average Loan Siz
Slide 26: Community Banking Segment Building Efficient Operations
Community Banking Segment Building Efficient Operations Staff Expense Ratio Occupancy Expense Ratio 0.50% 0.40% 0.40% 0.40% 0.38% 2.00% 1.71% 1.74% 1.71% 1.73% 1.73% 1.69% 0.37% 0.34% 1.45% 1.45% 1.43% 1.38% 1.36% 1.41% 0.39% 0.39% 0.40% 0.38% 1.03% 1.03% 0.25% 0.22% 0.34% 0.33% 0.83% 0.78% 0.19% 0.
Slide 27: Deposit, Lending and Efficiency Strategies Result in Disciplined & Profitable Growth
Deposit, Lending and Efficiency Strategies Result in Disciplined & Profitable Growth Net Interest Income ($mm) (1) Net Interest Income Simulation (1)(2) 4Q '17 vs. 4Q '16 Growth 7% 1.0% 0.34% $300.0 0.17% CAGR: 30% $267.3 0.0% % Change in Net Interest Income over $249.5 0.00% $250.0 Q4 ‐0.75% ‐0.89%
Slide 28: Deposit, Lending and Efficiency Strategies Result in Disciplined & Profitable Growth
Deposit, Lending and Efficiency Strategies Result in Disciplined & Profitable Growth • Strategy execution has produced superior growth in revenues and earnings Efficiency Ratio(1) 70% 62% 59% 57% 57% 60% 55% 51% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 Adjusted Community Banking Segment
Slide 29: Building Customers Bank to Provide Superior Returns to Investors
Building Customers Bank to Provide Superior Returns to Investors Tangible BV per Share (1) Recent Performance Results $24.00 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 $22.00 CAGR: 11% $20.00 ROA 0.8% 1.1% 0.9% 0.3% 0.8% $18.00 $16.00 ROCE 10.5% 13.8% 11.8% 2.3% 10.1% $14.00 FTE NIM 2.84% 2.73% 2.78% 2
Slide 30: Contacts
Contacts Company: Robert Wahlman, CFO Tel: 610‐743‐8074 rwahlman@customersbank.com Jay Sidhu Chairman & CEO Tel: 610‐301‐6476 jsidhu@customersbank.com Bob Ramsey Director of IR and Strategic Planning Tel: 484‐926‐7118 rramsey@customersbank.com 30
Slide 31: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Customers believes that the non-GAAP measurements disclosed within this document are useful for investors, regulators, management and others to evaluate our results of operations and financial condition relative to other financial institutions. These n
Slide 32: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Tangible Common Equity to Tangible Assets - Customers Bancorp, Inc. Consolidated ($ in thousands) 2017 2016 Q4 2017 Q3 2017 GAAP - Total Shareholders' Equity $ 920,964 $ 855,872 $ 920,964 $ 910,642 Reconciling Items: Preferred Stock (217,471) (217,471)
Slide 33: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Tangible Book Value per Common Share - Customers Bancorp, Inc. Consolidated ($ in thousands, except per share data) 2017 2016 2015 2014 2013 2012 GAAP -Total Shareholders' Equity $ 920,964 $ 855,872 $ 553,902 $ 443,145 $ 386,623 $ 269,475 Reconciling I
Slide 34: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Adjusted Net Income to Common Shareholders - Customers Bancorp, Inc. Consolidated ($ in thousands, not including per share amounts) Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net i
Slide 35: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Adjusted Net Income to Common Shareholders - Community Banking Business Segment ($ in thousands, not including per share amounts) Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net inc
Slide 36: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Adjusted Net Income (Loss) to Common Shareholders - BankMobile Segment ($ in thousands, not including per share amounts) Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 USD Per Share USD Per Share USD Per Share USD Per Share USD Per Share GAAP net income (loss
Slide 37: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Adjusted Community Banking Business Segment Net Income Available to Common Shareholders 2017 2016 2015 2014 2013 2012 GAAP net income available to common shareholders $ 77,567 74,500 56,596 41,855 32,910 23,818 Reconciling Items (after tax): Loss of de
Slide 38: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Adjusted Non-interest Income ($ in thousands) 2017 2016 2015 2014 2013 2012 GAAP Non-interest income $ 78,910 $ 56,370 $ 27,717 $ 25,126 $ 22,703 $ 28,958 Reconciling Items: Religare impairment 12,934 7,262 - - - - Gains on sales of investment securiti
Slide 39: Reconciliation of Non-GAAP Measures - Unaudited
Reconciliation of Non‐GAAP Measures ‐ Unaudited Customers Bancorp, Inc. Consolidated - Net Interest Margin, tax equivalent Twelve months ended December 31, 2017 2016 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 GAAP Net interest income $ 267,343 $ 249,497 $ 68,300 $ 68,019 $ 68,606 $ 62,418 $ 64,128 Tax-