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| 8-K - FORM 8-K - Customers Bancorp, Inc. | customers8k.htm |
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Annual Shareholders Meeting
June 27, 2012
2
This presentation as well as other written or oral communications made from time to time by us, may contain certain
forward-looking information within the meaning of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. These statements relate to future events or future predictions, including events
or predictions relating to our future financial performance, and are generally identifiable by the use of forward-
looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “plan,” “intend,” “target,” or “anticipates”
or the negative thereof or comparable terminology, or by discussion of strategy or goals that involve risks and
uncertainties. These forward-looking statements are only predictions and estimates regarding future events and
circumstances and involve known and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such forward-looking statements. This information is
based on various assumptions by us that may not prove to be correct.
forward-looking information within the meaning of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. These statements relate to future events or future predictions, including events
or predictions relating to our future financial performance, and are generally identifiable by the use of forward-
looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “plan,” “intend,” “target,” or “anticipates”
or the negative thereof or comparable terminology, or by discussion of strategy or goals that involve risks and
uncertainties. These forward-looking statements are only predictions and estimates regarding future events and
circumstances and involve known and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such forward-looking statements. This information is
based on various assumptions by us that may not prove to be correct.
Important factors to consider and evaluate in such forward-looking statements include:
· changes in the external competitive market factors that might impact our results of operations;
· changes in laws and regulations, including without limitation changes in capital requirements under the federal
prompt corrective action regulations;
prompt corrective action regulations;
· changes in our business strategy or an inability to execute our strategy due to the occurrence of unanticipated
events;
events;
· our ability to identify potential candidates for, and consummate, acquisition or investment transactions;
· the timing of acquisition or investment transactions;
· constraints on our ability to consummate an attractive acquisition or investment transaction because of
significant competition for these opportunities;
significant competition for these opportunities;
· the failure of the Bank to complete any or all of the transactions described herein on the terms currently
contemplated;
contemplated;
· local, regional and national economic conditions and events and the impact they may have on us and our
customers;
customers;
· ability to attract deposits and other sources of liquidity;
· changes in the financial performance and/or condition of our borrowers;
· changes in the level of non-performing and classified assets and charge-offs;
Forward-Looking Statements
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Forward-Looking Statements
· changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under
relevant regulatory and accounting requirements;
relevant regulatory and accounting requirements;
· the integration of the Bank’s recent FDIC-assisted acquisitions may present unforeseen challenges;
· inflation, interest rate, securities market and monetary fluctuations;
· the timely development and acceptance of new banking products and services and perceived overall value of
these products and services by users;
these products and services by users;
· changes in consumer spending, borrowing and saving habits;
· technological changes;
· the ability to increase market share and control expenses;
· continued volatility in the credit and equity markets and its effect on the general economy; and
· the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as
well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other
accounting standard setters;
well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other
accounting standard setters;
· the businesses of the Bank and any acquisition targets or merger partners and subsidiaries not integrating
successfully or such integration being more difficult, time-consuming or costly than expected;
successfully or such integration being more difficult, time-consuming or costly than expected;
· material differences in the actual financial results of merger and acquisition activities compared with
expectations, such as with respect to the full realization of anticipated cost savings and revenue enhancements
within the expected time frame;
expectations, such as with respect to the full realization of anticipated cost savings and revenue enhancements
within the expected time frame;
· revenues following any merger being lower than expected; and
· deposit attrition, operating costs, customer loss and business disruption following the merger, including, without
limitation, difficulties in maintaining relationships with employees being greater than expected.
limitation, difficulties in maintaining relationships with employees being greater than expected.
These forward-looking statements are subject to significant uncertainties and contingencies, many of which are
beyond our control. Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Accordingly, there
can be no assurance that actual results will meet expectations or will not be materially lower than the results
contemplated in this presentation. You are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this document or, in the case of documents referred to or incorporated by
reference, the dates of those documents. We do not undertake any obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the
occurrence of unanticipated events, except as may be required under applicable law.
beyond our control. Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Accordingly, there
can be no assurance that actual results will meet expectations or will not be materially lower than the results
contemplated in this presentation. You are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this document or, in the case of documents referred to or incorporated by
reference, the dates of those documents. We do not undertake any obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the
occurrence of unanticipated events, except as may be required under applicable law.
4
Where We Stand Today
§ Well-capitalized and profitable bank headquartered in Wyomissing, PA with over
$2.0 billion in assets, 14 branches in suburban Philadelphia, Hamilton, NJ and
Rye, NY. Proforma, $3.0 billion assets and about $250 million in equity.
$2.0 billion in assets, 14 branches in suburban Philadelphia, Hamilton, NJ and
Rye, NY. Proforma, $3.0 billion assets and about $250 million in equity.
§ Ranked #1 Top Performing Bank in Pennsylvania and #4 among America’s top
performing banks with assets under $3 billion by American Banking Journal in
2010
performing banks with assets under $3 billion by American Banking Journal in
2010
§ Raised about $107 million of common equity (about $30 million in 2011, $60
million in 2010, $17 million in 2009). Book value up about 35% over the past two
years.
million in 2010, $17 million in 2009). Book value up about 35% over the past two
years.
§ Management team with extensive community banking and M&A experience
§ Expect to be 7th largest bank in PA in terms of assets, upon consummation of
Acacia Federal Savings Bank acquisition
Acacia Federal Savings Bank acquisition
§ Total deposits now over $1.8 billion with average branch size over $125 million
§ Significant board and management ownership
5
Timeline of Recent Events
2011
2009
§ Formed bank holding company, Customers Bancorp, in April 2010
§ Recruited experienced senior management and developed strategic 5 year plan
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Q1 2010
|
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§ Customers raises $60M
of common equity in private placement |
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July 2010
|
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§ Acquisition of USA Bank (Port
Chester, NY); assumes $221M of assets, $179M of deposits in FDIC assisted transaction |
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June 2009
|
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§ Jay Sidhu is appointed
Chairman & CEO of New Century Bank with $260M assets § Customers raises $13.6M of
common equity through “friends and family” |
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September 2010
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§ Customers surpasses $1Bn in assets
§ Acquisition of ISN Bank (Cherry Hill, N.J.); assumes $84M
of assets, $72M of deposits in FDIC assisted transaction |
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September 2011
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§ Completion of acquisition of Berkshire Bancorp (Wyomissing, PA);
acquires $133M of assets, $122M of deposits § Berkshire acquisition increases Customers’ assets to over $2Bn
§ Customers raises $13M of common equity in private placement
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June 2011
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§ ABA Banking Journal ranks
Customers 4th among 3,077 community banks in the U.S. for 2010 (Customers ranked #3,002 in 2009) |
Source: SNL Financial, Company documents
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Directors
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Management Team
§ Experienced and cohesive management team with an average tenure of 30 years
leadership experience
leadership experience
§ Management interests aligned with shareholders
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Management Team Track Record
§ Jay Sidhu, Customers Bank Chairman and CEO, served at Sovereign from 1986 to 2006
§ As CEO, Mr. Sidhu oversaw the growth from a $500 million asset financially-challenged thrift to a
$90 billion financial institution
$90 billion financial institution
§ Sovereign had more than 785 branch locations spanning from Maryland to New Hampshire
100%
600%
1100%
1600%
2100%
2600%
3100%
3600%
4100%
Dec-87
Jun-89
Nov-90
May-92
Oct-93
Apr-95
Sep-96
Mar-98
Aug-99
Feb-01
Jul-02
Jan-04
Jun-05
Dec-06
SNL Bank Index
S&P 500
SOV
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Franchise Overview
All data as of March 31, 2012
Source: SNL Financial, Company data
Branch Franchise
§ Assets: ~$2.0 billion
§ Gross Loans: ~$1.5 billion
§ Deposits: ~$1.8 billion
§ Tangible Common Equity: ~$148 million
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Investment Highlights
§ Identified existing problems at New Century Bank in 2009
§ Customers is now a well-capitalized, scalable bank; which we believe to be
adequately reserved for legacy issues
adequately reserved for legacy issues
§ Achieved 0.7% ROA while increasing book value per share about 35% over the last
24 months.
24 months.
§ New management and board members significantly invested
Strong
Bank
Foundation
Proven
Management
Team
Management
Team
Organic
Growth
Strategy
Growth
Strategy
§ Management team has worked together for 15+ years building community banks
§ Successfully executed and integrated acquisitions and delivered on organic growth
strategies
strategies
§ Community bank experience supported by selected niche asset generation expertise
§ Branch expansion model with convenient "high touch, high tech” strategy bringing the
bank to the customer
bank to the customer
§ Targeting 15% to 25% annual organic deposit growth rate
§ Focus on doing a few things well: community banking supported by 1 or 2 niches
Disciplined
M&A
Opportunities
M&A
Opportunities
§ Potential M&A opportunities in current and contiguous markets for:
§ Small bank acquisitions
§ Branch divestitures
§ FDIC-assisted transactions
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Our Business Model
§ Focus on doing a few things well
§ Conservative underwriting in lending
– In-market small business lending, multi-family lending and basic
consumer lending supplemented with niche low-risk specialty lending
business
consumer lending supplemented with niche low-risk specialty lending
business
§ Continue leveraging low-cost deposit model
– Focus on larger branches with a specialized product set
– Lower staffing and real estate expenses (fixed costs) will allow us to
pass along some of the savings to customers
pass along some of the savings to customers
– Create a stable source of funding and, over long run, drive the "all-in
cost of funds" below wholesale funding costs
cost of funds" below wholesale funding costs
§ Acquisitions where we can buy franchises cheaper than building from
scratch
scratch
§ Focus on risk management leading to low unexpected losses
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Critical Success Factors
1. Talent - Acquire and retain very experienced, talented and high producing
team members dedicated to exceptional service, personal development, and
profitable growth
team members dedicated to exceptional service, personal development, and
profitable growth
2. Absolute Focus on Asset Quality
3. Focus on Profitability - Revenues equal to two times expenses
4. Risk Management Culture
§ Focus on internal controls at board and management levels with best
practices in corporate governance standards
practices in corporate governance standards
§ ERM (Enterprise Risk Management) process in place
§ No significant reliance on wholesale markets
5. Solid Capital Levels to support risks and growth
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High Touch, High Tech
Concierge Banking
§ Brings banker to the
customer, home or
office, 12 hours a
day, 7 days a week
customer, home or
office, 12 hours a
day, 7 days a week
§ Appointment banking
approach
approach
§ Customer access to
senior level
management
senior level
management
Sales Force
§ Bankers own a
portfolio of
customers
portfolio of
customers
§ Customer
acquisition &
retention strongly
incentivized
acquisition &
retention strongly
incentivized
Pricing
§ Low cost banking
model allows for more
pricing flexibility
model allows for more
pricing flexibility
§ Significantly lower
overhead costs vs. a
traditional branch
overhead costs vs. a
traditional branch
§ Pricing/profitability
measured across
relationship
measured across
relationship
Technology
§ Implementation of
technology suite allows
for unique product
offerings:
technology suite allows
for unique product
offerings:
§ Remote account
opening & deposit
capture
opening & deposit
capture
§ Internet/mobile
banking
banking
§ ATM Deployment
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Lending Strategy
Commercial Lending
Small Business
§ Target companies with less than
$5.0 million annual revenue
$5.0 million annual revenue
§ Loans (incl. SBA loans)
originated by branch network
and specialist small business
relationship managers
originated by branch network
and specialist small business
relationship managers
Specialty Lending
§ Warehouse Lending
§ Diversify earning assets and
revenue stream
revenue stream
§ Lower interest rate and credit
risk line of business
risk line of business
Business Banking
§ Target companies with $5.0 to
$20.0 million annual revenue
$20.0 million annual revenue
§ Mobile loan offices
Multifamily & CRE
§ Focus Markets: New York &
Philadelphia MSAs
Philadelphia MSAs
§ Average Loan Size: $5.0 million
Real Estate Secured Lending
§ Home equity and residential
mortgage
mortgage
§ Conservative underwriting
standards (>700 FICO score)
standards (>700 FICO score)
§ No indirect auto, unsecured
loans or credit cards
loans or credit cards
Consumer Lending
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Bank Roll-Up Opportunity
Total Assets ($B)
§ Potential Sizeable consolidation opportunity in the region
Ø Source: SNL Financial
Ø Note: Data for all institutions headquartered in PA, NJ, NY, MD, CT and DE with assets less than $2B
# of Banks: 40
# of Banks: 474
# of Banks: 41
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Key Financial Targets
Profitability
§Return on Equity = 10% or greater
§Return on Assets = .90 to 1.00%
§Net Interest Margin = 3.00% to 3.25%
§Efficiency Ratio = 50%
Capital
§Tier 1 Leverage Ratio = 8% or greater
§Total-Risk Based Capital Ratio = 12% plus
Balance Sheet / Revenue Mix Targets
§Loan-to-Deposit Ratio = 90% to 100%
§Fee Revenue / Total Revenue = 15% to 25%
§Deposit Mix = 40% or less CD
§Loan Mix = 50% Commercial / 50% Consumer
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Key Financial Targets
continued
These long-term goals should not be regarded as an indication that Customers Bancorp considered, or now considers, them to
be necessarily predictive of actual future results, and these goals should not be relied upon as such. These goals were based
necessarily on the information prepared by Customers Bancorp using a variety of assumptions and estimates including, without
limitation, those relating to the rate of organic growth by Customers Bank, interest rates, industry performance, general
business, economic, regulatory, market and financial conditions and other future events, as well as other matters specific to
Customers Bancorp's business. The assumptions and estimates underlying these goals may not be realized and are inherently
subject to significant business, economic and competitive uncertainties, risks and contingencies, all of which are difficult to
predict and many of which are beyond Customers Bancorp's control. The assumptions and estimates used to create these
goals are subjective in many respects and involve judgments made with respect to, among other things, market size and
growth rates, market share, future pricing and interest rates, levels of operating expenses, and probability of success, all of
which are difficult to predict. These goals constitute forward-looking information, and there can be no assurance that the
assumptions and estimates used to prepare these goals will prove to be accurate, and actual results may materially differ.
These and other forward-looking statements are expressly qualified in their entirety by the risks and uncertainties described
above and the risk factors contained in our 2011 Form 10-K, as updated by our Form 10-Q for the first quarter of 2012
be necessarily predictive of actual future results, and these goals should not be relied upon as such. These goals were based
necessarily on the information prepared by Customers Bancorp using a variety of assumptions and estimates including, without
limitation, those relating to the rate of organic growth by Customers Bank, interest rates, industry performance, general
business, economic, regulatory, market and financial conditions and other future events, as well as other matters specific to
Customers Bancorp's business. The assumptions and estimates underlying these goals may not be realized and are inherently
subject to significant business, economic and competitive uncertainties, risks and contingencies, all of which are difficult to
predict and many of which are beyond Customers Bancorp's control. The assumptions and estimates used to create these
goals are subjective in many respects and involve judgments made with respect to, among other things, market size and
growth rates, market share, future pricing and interest rates, levels of operating expenses, and probability of success, all of
which are difficult to predict. These goals constitute forward-looking information, and there can be no assurance that the
assumptions and estimates used to prepare these goals will prove to be accurate, and actual results may materially differ.
These and other forward-looking statements are expressly qualified in their entirety by the risks and uncertainties described
above and the risk factors contained in our 2011 Form 10-K, as updated by our Form 10-Q for the first quarter of 2012
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Conclusion
§ Unique bank platform; current banking dislocation provides significant
potential opportunity for M&A growth that is supported by a strong
organic business model
potential opportunity for M&A growth that is supported by a strong
organic business model
§ Management team with proven capability of organic growth,
integrating acquisitions and delivering above average shareholder
returns
integrating acquisitions and delivering above average shareholder
returns
§ Considerable potential opportunities for traditional M&A
§ Strive to create above average shareholder returns over the long term
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Summary
Experienced Management
Organic Growth Platform
Low Risk Profile
Capital to Support Risks & Growth