Customers Bancorp, Inc · NYSE:CUBI
Customers Bancorp — Q2 2023 Earnings Presentation
41 slides from Customers Bancorp's earnings presentation, Jul 28, 2023
Slide 1: Investor Presentation: Q2 2023
Let’s take on tomorrow. Investor Presentation: Q2 2023 “A Forward-Thinking Bank with Strong Risk Management“ July 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. Q2’23 Recurring earnings comfortably beat consensus estimates Earnings Review Significant net interest margin expansion to 3.15% in Q2’23 Venture Banking acquisition from FDIC further improves outlook for continued Q2’23 Str
Slide 4: Our Priorities Remain Unchanged
Our Priorities Remain Unchanged Let’s take on tomorrow. Moderate growth and tactically shrink our balance sheet away from non-strategic relationships Focus on further strengthening our balance sheet, improving Let’s take on tomorrow. liquidity, capital ratios and margins ©2023 CUSTOMERS BANCORP, INC
Slide 5: Q2'23 Earnings Review: Financial Highlights
1.0 Q2’23 EARNINGS REVIEW Financial Highlights Let’s take on tomorrow. Q2’23 Q2’23 Highlights Profitability Balance Sheet Credit Diluted EPS Core EPS1,2 3.15% $22.0B 0.13% $1.39 $1.65 NIM Total Assets NPA Ratio ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED Net Income Core Earnings1,2 0.88% 1.0
Slide 6: Leading Banking Partner for Venture Backed Companies
2.0 Q2’23 STRATEGIC TRANSACTIONS Customers Bank Has Become a Leading Banking Partner for Venture Backed customers bancorp Companies Let’s take on tomorrow. • Acquisition of $631 million1 venture banking loan portfolio from the FDIC at approximately Boston customers 85% of book value bancorp New York
Slide 7: Exited Non-Core Relationships in the Quarter
2.0 Q2’23 STRATEGIC TRANSACTIONS Exited Non-Core Relationships in the Quarter Providing Balance Sheet Capacity for FDIC Venture Banking Portfolio Let’s take on tomorrow. Fund Finance Loan Sale Consumer Installment Loan Sale ($670 million in commitments) ($557 million in balances) • Expedited exiting
Slide 8: Deposit Remix and Reducing Cost of Deposits
3.0 STRENGH OF THE FRANCHISE Successfully Executing on Deposit Remix and Reducing Cost of Deposits Despite Increase in Rates Let’s take on tomorrow. Total Deposits Insured Deposits1 / Total Deposits $ billions percent • Total deposits increased by ~$200 million QoQ with core • CUBI’s insured deposit
Slide 9: Net Interest Margin Expanded Significantly in Q2'23
3.0 STRENGH OF THE FRANCHISE Net Interest Margin Expanded Significantly in Q2’23 Let’s take on tomorrow. Net Interest Income NIM $ millions percent • Delivered record quarterly net interest income1 • Margin expansion in the quarter driven by higher yield on earning assets and lower cost of liabiliti
Slide 10: Exiting Non-Strategic Assets and Strong Liquidity Position
3.0 STRENGH OF THE FRANCHISE Continuing to Exit Non-Strategic Assets and Maintained Strong Liquidity Position Let’s take on tomorrow. Loans – HFI Loans – HFI / Deposits $ billions percent • Reduction in HFI loans driven by exiting non-strategic • Loan to deposit ratio is 77%, 9 percentage relationsh
Slide 11: Customers Operates a Highly Efficient Business Model
3.0 STRENGH OF THE FRANCHISE Customers Operates a Highly Efficient Business Model Let’s take on tomorrow. Core Non-Interest Expense1 Core Non-Interest Expense1 / Average Assets $ millions percent • Increase QoQ primarily related to higher FDIC • CUBI’s non-interest expense as percent of expense aver
Slide 12: Securities Portfolio Best-Positioned Among Regional Bank Peers
3.0 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 TCE Book yield and duration percent • Best-in-industry IRR/ALM and bond portfolio • CUBI’s AFS + HTM unrealized losse
Slide 13: Robust Liquidity Position with Over 200% Coverage
4.0 STRONG LIQUIDITY AND CAPITAL 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 • Total overall liquidity of $11.2 billion as of Q2’23 • CUBI
Slide 14: Consistent Outsized Growth in Tangible Book Value
4.0 STRONG LIQUIDITY AND CAPITAL Consistent Outsized Growth in Tangible Book Value Let’s take on tomorrow. Tangible Book Value1 per share AOCI • TBV1 has increased 1.8x since Q4’18 compared to a median of 1.1x for regional bank peers3 • TBV1 increase achieved solely $5.29 through organic capital ©20
Slide 15: Increasing Capital Levels and on Track for 2023 Target
4.0 STRONG LIQUIDITY AND CAPITAL Increasing Capital Levels and on Track to Achieve our 2023 Year-End Target Let’s take on tomorrow. CET1 Risk-Based Capital CET1 Risk-Based Capital percent percent 11.0-11.5% 10.3% 9.7% 9.8% 9.6% 9.6% +0.7% ~0.6% 0.5% 10.3% 11.0% Q2’22 Q3’22 Q4’22 Q1’23 Q2’231 Q2’231
Slide 16: Credit Quality Remains Strong, Reserves at ~500% of NPLs
5.0 MAINTAINING SUPERIOR CREDIT QUALITY Credit Quality Remains Strong and Reserves at ~500% of NPLs Let’s take on tomorrow. NPLs Strategically avoided office and retail $ millions $28 $28 $31 $32 $28 sectors of commercial real estate Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Office CRE Retail CRE NPAs as Percen
Slide 17: De-Risking Consumer Installment Portfolio
5.0 MAINTAINING SUPERIOR CREDIT QUALITY De-Risking Consumer Installment Portfolio While Generating Fee and “Fee-Like” Income through Held-for-Sale Strategy Let’s take on tomorrow. Consumer Installment HFI Consumer Installment HFS Strategy 47% decline in consumer installment HFI portfolio over the la
Slide 18: Management Outlook
6.0 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 2.85-3.05% - Expanding margin throughout the year High end of the range ©2023
Slide 19: Concluding Perspectives
Concluding Perspectives Let’s take on tomorrow. Core deposit growth of ~$900 million replaced wholesale deposits of ~$700 million; non-interest bearing deposits were 25% of total deposits Improving Deposit Average cost of deposits declined by 21 bps (spot cost down 1 bp) despite Franchise interest r
Slide 20: Analyst Coverage
ANALYST COVERAGE B. Riley Financial, Inc. Maxim Group Inc. Hal Goetsch Michael Diana D.A. Davidson Companies Piper Sandler Companies Peter Winter Frank Schiraldi Hovde Group Stephens Inc. David Bishop Matt Breese Jefferies Group LLC Wedbush Securities Inc. Casey Haire David Chiaverini Keefe, Bruyett
Slide 21: Appendix
APPENDIX SSeeeaeeeSeoee®s SSSeeeaeeeSeoee®& SSeSeeeeeSeoees& SSeEeeeaeeaeaeeeoeoees SSeeaee2eSseeneen28eG
Slide 22: 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 23: Securities Portfolio Generating Attractive Returns
Securities Portfolio Generating Attractive Returns with Minimal Credit and Duration Risk Let’s take on tomorrow. Investment Securities – AFS Investment Securities – HTM P ercent, Q2’23 P ercent, Q2’23 • Spot yield: 5.38% • Spot yield: 4.41% • Effective duration: ~1.5 years • Effective duration: ~3.0
Slide 24: Consumer Installment Loans – Portfolio Credit Metrics
Consumer Installment Loans – Portfolio Credit Metrics Let’s take on tomorrow. Weighted average life of ~2.0 years FICO Score1 Deb t to Income Ratio1 Borrower Income Average FICO Score1 ~733 Average DTI 1~19% Average Borrower Income ~$105k 660-679 700-749 0-9.99% 40 – 49.99% <$50K >$100K 680-699 750+
Slide 25: Selected 2023 Proxy Peers
Selected 2023 Proxy Peers Let’s take on tomorrow. • Associated • Independent • Atlantic Union • Northwest • BankUnited • Old National • Commerce • Pinnacle • FB Financial • Sandy Spring ©2023 CUSTOMERS BANCORP, INC. / ALL RIGHTS RESERVED • First Financial (OH) • United Community • First Merchants •
Slide 26: Robust Sources of Liquidity
Robust Sources of Liquidity Let’s take on tomorrow. Liquidity Sources ($000's) 2Q 23 1Q 23 4Q 22 3Q 22 2Q 22 Cash and Cash Equivalents $3,155,224 $2,046,685 $455,807 $404,465 $245,178 FHLB Available Borrowing Capacity $835,464 $860,578 $2,265,499 $2,999,524 $2,924,637 FRB Available Borrowing Capacit
Slide 27: Allowance for Credit Losses for Loans and Leases
Allowance for Credit Losses for Loans and Leases Let’s take on tomorrow. June 30, 2023 Amortized Cost2 Allowance for Credit Losses Lifetime Loss Rate1 ($ in thousands) Loans and Leases Receivable: Commercial: Commercial and Industrial, including Specialty Lending $ 6,689,307 $ 29,0924 0.43 % Multifa
Slide 28: 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 29: Core Earnings - Customers Bancorp
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core Earnings - Customers Bancorp Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 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 30: Core Earnings, excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core Earnings, excluding PPP - Customers Bancorp Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 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 avai
Slide 31: 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) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net income $ 47,574 $ 53,721 $ 28,711 $ 63,912 $ 58,650 Reconciling items:
Slide 32: Adjusted Net Income and ROAA, excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Adjusted Net Income and Adjusted ROAA - Pre-Tax Pre-Provision, excluding PPP - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net income $ 47,574 $ 53,721 $ 28,711 $ 63,912 $ 58,650 Less
Slide 33: 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) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net income $ 47,574 $ 53,721 $ 28,711 $ 63,912 $ 58,650 Reconciling items (after tax): Severance expense 14
Slide 34: 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) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net income to common shareholders $ 44,007 $ 50,265 $ 25,623 $ 61,364 $ 56,519 Reconciling items (af
Slide 35: Adjusted Annualized Net Charge-Offs
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Adjusted Annualized Net Charge-Offs ($ in thousands, except percentages) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Annualized Net charge- Annualized Net charge- Net charge- Annualized Net charge- Annualized Net charge- An
Slide 36: Core Non-Interest Expense
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Core non-interest expense - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP non-interest expense $ 89,297 $ 80,133 $ 78,419 $ 76,198 $ 76,205 Severance expense (182) (809) — (1,363) — Imp
Slide 37: 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) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP total shareholders' equity $ 1,456,652 $ 1,421,020 $ 1,402,961 $ 1,386,931 $ 1
Slide 38: Tangible Common Equity to Tangible Assets, excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Tangible Common Equity to Tangible Assets, excluding PPP - Customers Bancorp ($ in thousands except per share data) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP total shareholders' equity $ 1,456,652 $ 1,421,020 $ 1,402
Slide 39: Total Interest Earning Assets, excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Total interest earning assets, excluding PPP - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Interest earning deposits $ 3,101,097 $ 1,969,434 $ 397,781 $ 362,945 $ 178,475 Investment securi
Slide 40: 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) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Loans and leases receivable $ 12,826,531 $ 13,391,610 $ 14,143,047 $
Slide 41: Net Interest Income and Margin, excluding PPP
Reconciliation of Non-GAAP Measures – Unaudited (Contd.) Let’s take on tomorrow. Net Interest Income, excluding PPP - Customers Bancorp ($ in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 GAAP net interest income $ 165,271 $ 149,899 $ 135,137 $ 159,032 $ 164,852 PPP net interest (income) expens