Q3 2023 Customers Bancorp Inc Earnings Call

You can scroll to Q3, 'twenty three results and click download presentation.

You can also download a PDF of the full press release at the spot.

Our investor presentation includes important details that we will walk through on this morning's webcast.

I encourage you to download and use the document.

Before we begin we would like to remind you that some of the statements. We make today may be considered forward looking.

These forward looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated.

Please note that these forward looking statements speak only as of the date of this presentation and we undertake no obligation to update these forward looking statements in light of new information or future events, except to the extent required by applicable securities laws.

Please refer to our SEC filings, including our Form 10-K, and 10-Q for a more detailed description of the risk factors that may affect our results.

Copies may be obtained from the SEC or by visiting the Investor Relations section of our website.

At this time, it's my pleasure to introduce customers Bancorp Chair Jay Sidhu.

Okay.

Thank you, Dave and good morning, ladies and gentlemen, welcome to customer Bancorp, Inc. Third quarter 2023 earnings call.

Joining me. This morning are customers bank resident and CEO, Sam to do customers Bancorp CFO, Carla Leibold customers Bank CFO Bill Watkins.

Chief Credit Officer, Andy Bowman, I really want to thank Andy for all of their service to the company and as you. All know he is retiring from the bank after exceptional service through us and you'll be leaving us the end of the year.

We are pleased to share customers Bancorp's results with you this morning.

This quarter's results demonstrate the strength of our franchise with continued positive momentum across all our top financial priorities that include deposits margin liquidity profitability and capital.

Unknown Executive: .com. You can scroll to Q3 23 results and click Download Presentation. You can also download a PDF of the full press release at the spot.

Unknown Executive: Our investor presentation includes important details that we will walk through on this morning's webcast. I encourage you to download and use the document.

Unknown Executive: Before we begin, we would like to remind you that some of the statements we make today may be considered forward looking. These forward looking statements are subject to a number of risk and uncertainties that may cause actual performance results to differ materially from what is currently anticipated. Please note that these forward looking statements speak only as of the date of this presentation.

All of this while maintaining our strong risk management principles.

We used a little our team members throughout the bank.

Whose commitment and hard work makes our success possible.

I also want to thank our clients who place their trust in customers bank everyday as we try to execute flawlessly and celebrating their banking needs.

Unknown Executive: And we undertake no obligation to update these forward looking statements in light of new information or future events, except for the extent required by applicable securities laws. Please refer to our SEC filings, including our Form 10K and 10Q. For a more deep detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of our website.

Looking at slide three.

We wish to again demonstrate our customers bank is.

Forward thinking bank with strong risk management.

We will cover five major topics and this morning's presentation.

Ill cover a few highlights and my colleagues will cover each topic in more detail.

First in terms of quarterly performance, we delivered another strong quarter that significantly exceeded street estimates across every metric based on strong underlying performance.

Jay Sidhu: At this time is my pleasure to introduce customer's bank or chair, Jay Sidhu, Jay. Thank you, Dave and good morning, ladies and gentlemen. Welcome to customer bank or saying third quarter 2023 earnings call. Joining me this morning are customer's bank president and CEO Sam Sidhu. Customer's bank or CFO Carla Leibold customer's bank, PFO Phil Watkins and our chief credit officer Andy Bowman. I would really want to thank Andy for all his service to the company.

As measured by return on assets return on equity.

Margin expansion.

All of our expenses all of these while materially improving our capital ratios.

Second.

We continue to create franchise value across the bank.

We saw the market disruption as an opportunity to create and deepen client relationships.

Jay Sidhu: And as you all know, he's retiring from the bank after exceptional service to us and you'll be leaving us end of the year. We are pleased to share customer's bank or results with you this morning. This whole results demonstrate the strength of our franchise with continued positive momentum across all our top financial priorities that include deposits, margin, liquidity, profitability and capital. All of this while maintaining our strong risk management principles. We salute our team members throughout the bank whose commitment and hard work makes our success possible.

As an example, we are so proud of our team members in the tech and venture banking group that have not only met but exceeded our expectations.

As a result of strong deposit growth from our borrowers.

Acquired taken venture banking portfolio is already self funded one quarter.

Head of our schedule and there is excellent momentum to build our client base, our brand and generate attractive deposit and loan opportunities going forward.

We would also like to once again welcome these fantastic new clients to our firm who are driving innovation and progress in our economy.

Jay Sidhu: I also want to thank our clients who place their trust in customer's bank every day as we try to execute flawlessly and serving their banking needs. Looking at slide three, we wish to again demonstrate our customer's bank is a forward thinking bank with strong risk management. We will cover five major topics in this morning's presentation. I'll cover a few highlights and my colleagues will cover each topic in more detail. First, in terms of quarterly performance, we delivered another strong quarter that significantly exceeded speed estimates across every metric based on strong underlying performance as measured by return on assets, return on equity, margin expansion, control of our expenses, all of these while materially improving our capital ratios.

We generated one 3 billion of core deposit growth in the quarter.

As promised we use these deposits to improve the overall quality of our funding base by paying down high cost wholesale deposits and redeeming some of our high cost outstanding Federal home loan bank advances.

Importantly, our deposit gathering was granular and diverse across our franchise and our non interest bearing deposits increased to 26% of our total deposits.

Sure.

We significantly increased our capital levels for second quarter in a row.

Caroline can we will provide much more details, but I wanted to mention.

That was a control balance sheet, we were able to increase our TCE ratio by 50 basis points this quarter.

Jay Sidhu: We continue to create franchise value across the bank. We saw the market disruption as an opportunity to create and deepen client relationships. As an example, we are so proud of our team members in the Tech Inventure Banking Group that have not only met but exceeded our expectations. As a result of strong deposit growth from our borrowers, the acquired Tech Inventure Banking portfolio is already self-punished and funded one quarter ahead of our schedule.

CET one ratio went up by 100 basis points this quarter to 11, 3% and our risk based capital ratio.

Also went up by slightly over 100 basis points to 14, 3% at the end.

End of this quarter.

We are committed to maintaining our further improving these ratios.

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Credit quality, which is always a key focus and part of our DNA at customers Bank remains incredibly strong.

Jay Sidhu: And there is excellent momentum to build our client base, our brand and generate attractive deposit and loan opportunities going forward. We would also like to once again welcome these fantastic new clients to our forum who are driving innovation and progress in our economy. We generated 1.3 billion of core deposit growth in the quarter. As promised, we used these deposits to improve the overall quality of our funding base by paying down high cost wholesale deposits and redeeming some of our high cost outstanding federal home loan bank advances. Importantly, our deposit gathering was granular and diverse across our franchise and our non-interest bearing deposits increased to 26% of our total deposit. Third, we significantly increased our capital levels for second quarter in a row.

Recent areas of focus in August as well as retail commercial real estate are absolutely immaterial components of our balance sheet.

NPA ratio has remained stable and we are confident in the future performance of our loan portfolio.

Finally, we remain very optimistic about our future performance. We are pleased with the quarter's results and expect to significantly exceed our 2023 full year core EPS guidance of $6, a share and report stronger quarter results and 2024 and beyond.

Now turning to slide four.

Let me briefly reiterate our priorities which remain unchanged.

We have and will continue to moderate growth and ensure we are capturing franchise enhancing full banking relationships.

We will continue to fortify our balance sheet and improve our capital ratios because that is the prudent thing to do in this uncertain environment.

Jay Sidhu: Carla and Sam will provide much more details. What I wanted to mention is that with the controlled balance sheets, we were able to increase our TCE ratio by 50 basis points this quarter. Our CET-1 ratio went up by 100 basis points this quarter to 11.3% and our risk-based capital ratio also went up by slightly over 100 basis points to 14.3% at the end of this quarter. We are committed to maintaining or further improving these ratios.

As always risk management remains at the core of our bank DNA and we are unchanged and our commitment to our critical success factors.

These critical success factors have been in place since the day, we started the bank.

They are first managing credit and interest rate risk.

Secondly, maintaining robust liquidity and capital levels with strong asset liability management principles.

We're always making decisions that drive positive operating leverage.

Jay Sidhu: Fourth, credit quality which is always a key focus and part of our DNA at customer's bank remains incredibly strong. Recent areas of focus in office as well as retail commercial real estate are absolutely immaterial components of our balance sheet. Our NPA ratio has the main stable and we are confident in the future performance of our loan portfolio. Finally, we remain very optimistic about our future performance.

We believe our unique mix of size and sophistication creates a competitive advantage.

Many of our regional bank peers.

We are seeing attractive new loan and deposit growth opportunities.

We believe we should be able to show high single digit to low double digit loan growth next year, assuming stable economic environment, we have ample liquidity and strong capital to support moderate growth.

Jay Sidhu: We are pleased with the court's results and expect to significantly exceed our 2023 full year CORIPS guidance of $6 a share and report stronger court results in 2024 and beyond.

Asset quality remains exceptional like I stated earlier with our NPA ratio remaining roughly flat at just 14 basis points.

Office and retail commercial real estate, each represent less than 1% of our total loans.

Jay Sidhu: Now, turning to slide four, let me briefly reiterate our priorities which remain unchanged. We have and will continue to moderate growth and ensure we are capturing franchise enhancing full banking relations.

Before I pass on the call to Sam I want to welcome to the call Steve Moss.

New research analyst from Raymond James.

Steve joined and already extremely talented group of research analysts who follow customers Bancorp story. We are excited for the insights that Steve will add to the discussions each quarter and to his regular reports.

Jay Sidhu: Chips. We will continue to fortify our balance sheet and improve our capital ratios because that is the prudent thing to do in this uncertain environment. As always, risk management remains that the core of our banks DNA and we are unchanged in our commitment to our critical success factors. These critical success factors have been in place since the day we started the bank. They are first managing credit and interest rates. Secondly, maintaining robust liquidity and capital levels with strong asset liability management principles.

With that I'd like to turn it over to Sam to cover the key activities and results of the quarter in more detail.

Thanks, Jay and good morning, everyone. We're pleased to report that our team again delivered one of our best quarters, yet, especially in an uncertain macroeconomic and geopolitical environment in.

In the third quarter of 2023, we produced extremely strong GAAP results across all profitability metrics, earning $2 58.

And GAAP EPS on net income of $83 million, our ROA was 157% and ROE was 24%.

Jay Sidhu: Third, always making decisions that drive positive operating leverage. We believe our unique mix of size and sophistication creates a competitive advantage to many of our regional bank peers. We are seeing attractive new loan and deposit growth opportunities. We believe we should be able to show high single digits to low double digit loan growth next year, assuming stable economic environment. We have ample liquidity and strong capital to support moderate growth. As the quality remains exceptional, as I stated earlier, with our NPA ratios remaining roughly flat at just 14 basis points, offers and retail commercial real estate each represent less than 1% of our total loans.

We continued to Buck the industry trends and increased our net interest margins significantly in the quarter to three 7%.

From a balance sheet perspective, we maintained a disciplined roughly flat balance sheet.

Total deposits were up 1% in the quarter as we continue to transform the quality of our deposit franchise, which I'll provide more detail on shortly.

Credit quality remained benign as.

As evidenced by the NPA ratio Jay walked us through reserve levels remained robust at 466% of Npls, we do not see any signs of weakness in our book, but remain hyper focused on portfolio management.

Before we dive into more detail wanted to take a moment to put our quarterly performance into context, we grew our core earnings by 60% in the quarter, we expanded margins significantly and reported net interest income well above expectations and.

Jay Sidhu: Before I pass on the call to Sam, I want to welcome to the call Steve Moss, our new research analyst from Raymond James. Steve joined an already extremely talented group of research analysts who follow customer's bank or story. We are excited for the insights that Steve will add to the discussions each quarter and to his regular reports.

And significantly above industry trends.

We earned more than 20% return on common equity and we achieved all of this while building our capital base by 100 basis points. We're extremely proud of what the team was able to accomplish and appreciative of all of their hard work in producing these extraordinary results.

Samvir Sidhu: With that, I'd like to turn it over to Sam to cover the key activities and results of the quarter in more detail. Thanks, Jay. Good morning, everyone. We're pleased to report that our team again delivered one of our best quarters yet, especially in an uncertain macroeconomic and geopolitical environment. In the third quarter of 2023, we produced extremely strong gap results across all profitability metrics, earning $2.58 in gap EPS on net income of $83 million.

Moving to slide six and a challenging deposit environment for the industry, we were able to grow our deposits by a net $200 million, even after significant wholesale deposit paydowns.

From a core deposit perspective, we had $1 $3 billion of growth.

I'll say that again, one $3 billion of growth. This represents over $100 million of deposit generation per week throughout the quarter.

When combined with last quarter's growth. This is over $2 1 billion and core deposit growth, which is significant growth in our core deposit franchise.

Samvir Sidhu: Our ROA was 1.57%, and ROE was 24%. We continued to buck the industry trends and increased our net interest margins significantly in the quarter to 3.7%. From a balance sheet perspective, we maintained a disciplined, roughly flat balance sheet. Total deposits were up 1% in the quarter as we continued to transform the quality of our deposit franchise, which I'll provide more detail on shortly. Credit quality remained benign as evidenced by the percent of NPLs. We do not see any signs of weakness in our book, but remain hyper focused on portfolio management.

I want to highlight not just the quantity, but also the quality of this growth.

The deposit growth, we have achieved was a team effort across the franchise for additional context about two dozen of our deposit channels saw solid growth in the quarter with most of them up $25 million or more demonstrating the broad based nature and quality of our deposit transformation.

This growth was also very granular as we added over 1000, new high quality commercial client relationships in the quarter.

This caliber of deposit growth represents true franchise value creation and continues to strengthen our deposit base.

Samvir Sidhu: Before we dive into more detail, I wanted to take a moment to put our quarterly performance into context. We grew our core earnings by 60% in the quarter. We expanded margin significantly and reported net interest income well above expectations. Communications, and significantly above industry trends. We earned more than 20% return on common equity, and we achieved all of this while building our capital base by 100 basis points.

Our core deposit growth in the quarter was once again used to pay down higher cost as well as wholesale funding with a reduction of over $900 million in wholesale CD balances.

Which totals over $1 $5 billion of pay down over the last two quarters.

While the industry has been steadily losing noninterest bearing deposit balances.

Year to date, we've increased our noninterest bearing deposits by $2 9 billion.

Samvir Sidhu: We're extremely proud of what the team was able to accomplish and appreciative of all their hard work in producing these extra ordinary results. Moving to slide six, in a challenging deposit environment for the industry, we were able to grow our deposits by a net $200 million even after significant wholesale deposit paydowns. From a core deposit perspective, we had $1.3 billion of growth. I'll say that again, $1.3 billion of growth. This represents over $100 million of deposit generation per week throughout the quarter.

Noninterest bearing deposits now comprised 26% of our total deposits. This is the third consecutive quarter of increasing noninterest bearing deposits, which we believe is a testament to the strengthening of our deposit franchise.

As a result of these efforts in spite of the fed again, increasing rates our average cost of deposits increased by only 13 basis points in the quarter, which we believe is one of the lowest it increases in the entire industry.

Since the first quarter, our average cost of deposits declined eight basis points. This year.

This is in the most challenging deposit environment that the industry has seen in recent history.

Samvir Sidhu: When combined with last quarter's growth, this is over $2.1 billion in core deposit growth, which is a significant growth in our core deposit franchise. I want to highlight not just the quantity, but also the quality of this growth. The deposit growth we have achieved was a team effort across the franchise. For additional context, about two dozen of our deposit channels saw solid growth in the quarter with most of them up $25 million or more demonstrating the broad base nature and quality of our deposit transformation.

We can say certainly with certainty we are the only bank in the industry to accomplish this decline.

Samvir Sidhu: This growth was also very granular as we added over a thousand new high quality commercial client relationships in the quarter. This caliber of deposit growth represents true franchise value creation and continues to strengthen our deposit base. Our core deposit growth in the quarter was once again used to pay down higher cost as well as wholesale funding with the reduction of over $900 million in wholesale CD balances, which totals over $1.5 billion of pay down over the last two quarters.

We remain deeply focused on the quality and stability of our deposits and at the end of the quarter, 78% of our deposits were either insured or collateralized.

This metric keeps us in a very strong position relative to regional bank peers.

Our core deposit pipeline remains robust with at over $1 5 billion, which we anticipate onboarding over the next three quarters or so.

We would note that we expect the student portion of the deposits managed by PMT acts of over 500 million plus to move to their new partner bank likely sometime in the month of December.

We are one of the biggest beneficiaries in the industry.

Of the significant customer and deposit disruption earlier. This year 2023 will be a transformative year for our deposit franchise and one marked by increasing the diversification granularity and overall strength of the franchise.

Moving to slide seven.

Samvir Sidhu: While the industry has been steadily losing non-interest bearing deposit balances, year to date we've increased our non-interest bearing deposits by $2.9 billion. Non-interest bearing deposits now comprise 26% of our total deposits. This is the third consecutive quarter of increasing non-interest bearing deposits, which we believe is a testament to the strengthening of our deposit franchise. As a result of these efforts in spite of the Fed, again increasing rates, our average cost of deposits increased by only 13 basis points in the quarter, which we believe is one of the lowest increases in the entire industry.

$200 million of net interest income in the quarter represents.

Second quarter ever in a row of record net interest income ex PPP.

The more than 20% increase in net interest income had roughly $27 million of outsized discount accretion from the acquired venture banking loan portfolio.

Even after adjusting for the outside discount accretion this would be a record quarterly NII ex PPP and we continue to have positive momentum for for expansion off of this normalized base.

While much of the industry continues to face headwinds our net interest margin expanded to three 7% in the quarter benefiting from our deposit transformation the floating rate composition of our interest earning assets and was enhanced by the outsized accretion.

Samvir Sidhu: Since the first quarter, our average cost of deposits declined eight basis points this year. This is in the most challenging deposit environment that the industry has seen in recent history. We can say certainly, with certainty, we are the only bank in the industry to accomplish this decline. We remain deeply focused on the quality and stability of our deposits, and at the end of the quarter, 78% of our deposits were either insured or collateralized. This metric keeps us in a very strong position relative to regional bank peers. Our core deposit pipeline remains robust at over $1.5 billion, which we anticipate onboarding over the next three quarters or so.

Normalizing for the accretion our NIM would have been about three 2% versus 315% last quarter.

And we expect this upward trajectory to continue in the fourth quarter and into 2024.

Similar to the story on deposits. This is the second quarter, where we had one off if not the best performances in the industry with sequential continued improvement.

With that I'd like to turn it over the call over to Carla to discuss additional highlights from the quarter.

Thank you Sam and good morning, everyone I'll begin on slide eight.

Samvir Sidhu: We would note that we expect the student portion of the deposits managed by BMTX of over 500 million plus to move to their new partner bank, likely sometime in the month of December. We are one of the biggest beneficiaries in the industry of the significant customer and deposit disruption earlier this year.

We continued our strategy of improving the overall quality of our loan portfolio during the third quarter. As we've stated previously our focus remains on building holistic client relationships loans held for investment declined modestly by about $250 million in the third quarter with decreases.

Samvir Sidhu: 2023 will be a transformative year for deposit franchise and one marked by increasing the diversification granularity and overall strength, of the franchise. Moving to slide 7, $200 million of net interest income in the quarter represents a second quarter of an arrow of record net interest income, XPPP. The more than 20% increase in net interest income had roughly $27 million of outsized discount accretion from the acquired venture banking loan portfolio. Even after adjusting for the outside discount accretion, this would be a record quarterly NII XPPP.

In our mortgage warehouse consumer commercial real estate and multifamily portfolios from clients, where we did not have meaningful deposit relationships, while we continuously evaluate our loan portfolio to ensure capital is generating the best possible risk adjusted returns.

I am pleased to say that we don't see the need for additional remixing in the loan portfolio.

We also continue to maintain strong liquidity as our loan to deposit ratio improved by two percentage points to end the third quarter at 75% putting us in the top quartile of our regional bank peers as a result of core deposit growth and selective loan originations are 75 person.

Samvir Sidhu: And we continue to have positive momentum for expansion off of this normalized base. While much of the industry continues to face headwinds, our net interest margin expanded to 3.7% in the quarter, benefiting from our deposit transformation, the floating rate composition of our interest earning assets and was enhanced by the outsized accretion. Normalizing for the accretion, our NIM would have been about 3.2% versus 3.15% last quarter. And we expect this upward trajectory to continue in the fourth quarter and into 2024. Similar to the story on deposits, this is the second quarter where we had one of, if not the best performances in the industry, with sequential continued improvement.

<unk> loan to deposit ratio provides us significant flexibility heading into 'twenty 'twenty four.

Turning to slide nine.

Core noninterest expenses were roughly flat in the third quarter at $89 million consistent with our guidance. We believe we have significant opportunities to generate positive operating leverage with the current expense base. We are proud of our ability to operate the bank at one of the lowest levels of core.

Non interest expenses to average assets among our regional bank peers and we are in the top decile of all publicly traded U S banks for the efficiency metric.

Carla Leibold: With that, I'd like to turn the call over to Carla to discuss additional highlights from the quarter.

Carla Leibold: Thank you, Sam, and good morning, everyone. I'll begin on slide 8. We continued our strategy of improving the overall quality of our loan portfolio during the third quarter. As we've stated previously, our focus remains on building holistic client relationships. Loans help for investment to climb modestly by about 250 million in the third quarter, with decreases in our mortgage warehouse, consumer, commercial real estate and multi-family portfolios from clients where we did not have meaningful deposit relationships.

As we've discussed with you in the past we are confident in our ability to operate the bank at a mid forty's efficiency ratio over the medium term.

We remain committed to our business model of providing high touch client service with tech enabled capabilities and a limited physical branch network. This is the true differentiator of the customer's bank franchise.

Moving to slide 10.

As many of you may remember, we purposely took action throughout 2022 to proactively reposition our securities portfolio. During a time when most of the industry had become complacent about securities portfolio management that forward looking strategy continues.

Carla Leibold: While we continuously evaluate our loan portfolio to ensure capital is generating the best possible risk-adjusted returns, I am pleased to say that we don't see the need for additional remixing in the loan portfolio. We also continue to maintain strong liquidity as our loan to deposit ratio, improved by two percentage points to end the third quarter at 75%, putting us in the top quartile of our regional bank peers. As a result of core deposit growth and selective loan originations, our 75% loan to deposit ratio provides a significant flexibility heading into 2024.

Pay dividend to our bank today.

Without taking undue credit risk, we continue to generate approximately two times the yield on securities relative to regional bank peers. We accomplished this while taking only one third of the duration risk that those peers have exposed themselves to.

As a result of the strong interest rate risk management. Despite the increase in rates during the third quarter, our LCI as it pretends to percent of TCE actually declined by about 225 basis points during the quarter.

Carla Leibold: Turning to slide 9. Core non-interest expenses were roughly flat in the third quarter at 89 million, consistent with our guidance. We believe we have significant opportunities to generate positive operating leverage with the current expense base. We are proud of our ability to operate the bank at one of the lowest levels of core non-interest expenses to average assets among our regional bank peers. And we are in the top death style of all publicly traded US banks for the efficiency metric.

And the low level of unrealized losses in our NSS in HTM portfolios relative to tangible common equity is top quartile among our regional bank peers.

Over on slide 11.

Our liquidity position remains robust and best in class with 11 $7 billion in total liquidity nine $7 billion in immediately available liquidity, including $3 4 billion of cash on balance sheet.

Carla Leibold: As we've discussed with you in the past, we are confident in our ability to operate the bank at a mid-40s efficiency ratio over the medium, term. We remain committed to our business model of providing high touch client service with tech enabled capabilities and a limited physical branch network. This is the true differentiator of the customer's bank franchise.

As a restaurant as a result of strong core deposit growth and excess liquidity, we repaid $510 million of callable Federal home loan bank advances at the end of the third quarter. This helps reduce interest expense going forward, while also freeing up incremental off balance sheet liquidity.

Carla Leibold: Moving to slide 10. As many of you may remember, we purposely took action throughout 2022 to proactively reposition our securities portfolio during a time when most of the industry had become complacent about securities portfolio management. That forward-looking strategy continues to pay dividends to our bank today. Without taking undue credit risk, we continue to generate approximately two times the yield on securities relative to regional bank peers. We accomplish this while taking only one third of the duration risk that those peers have exposed themselves to.

Immediately available liquidity as a percentage of uninsured deposits grew over 15% during the third quarter and is now almost 240% putting us at the very high end of our regional bank peers, we will continue to monitor market conditions to determine the appropriate level.

Balance sheet cash. However, we continue to believe it is prudent from a risk management perspective to operate with higher levels of cash turning to slide 12.

We added more than $3 per share to our tangible book value in the third quarter, which benefited from strong organic capital generation and a positive impact to a OCI from our available for sale Securities portfolio, which is in Stark contrast to the industry.

Carla Leibold: As a result of the strong interest rate risk management, despite the increase in rates during the third quarter, our AOCI as a percent percent of TCE actually declined by about 225 basis points during the quarter and the low level of unrealized losses in our AFS and HTM portfolios relative to changeable common equity is top quartile among our regional bank peers.

We are very pleased to report that we already achieved our tangible book value target of $45 with one quarter remaining in 2023.

While a higher for longer rate environment may continue to cause industry headwinds, we do not expect to be meaningfully impacted by such a rate outlook because of the short duration on our securities portfolio.

Carla Leibold: Over on slide 11, our liquidity position remains robust in best-in-class with 11.7 billion in total liquidity, 9.7 billion in immediately available liquidity, including 3.4 billion of cash on balance sheet. As a result of strong core deposit growth and excess liquidity, we repaid 510 million of callable federal home loan bank advances at the end of the third quarter. This helps reduce interest expense going forward while also freeing up incremental off balance sheet liquidity.

Over the last five years, we have increased our tangible book value per share by 15% on an annualized basis, we have already exceeded that 15% growth during 2023 with one more quarter to go we are on track to grow our tangible book value by more than 20% this year.

Subject only to external market impacts.

Moving on to slide 13.

Our TCE ratio ended the third quarter at six 5%, which was an increase of 50 basis points in a single quarter on a relatively flat balance sheet. This is a testament to our strong earnings power and balance sheet discipline LCI continues to negatively impact this way.

Carla Leibold: Immediately available liquidity as a percentage of uninsured deposits grew over 15% during the third quarter and is now almost 240% putting us at the very high end of our regional bank peers. We will continue to monitor market conditions to determine the appropriate level of balance sheet cash. However, we continue to believe it is prudent from a risk management perspective to operate with higher levels of cash.

Shale by about 70 basis points I'll also point out that $3 4 billion of balance sheet cash has a material impact on this ratio.

Our estimated CET one ratio ended the third quarter at 11, 3%. This is the second consecutive quarter that we've been able to materially increase our CET one ratio we've grown our CET one ratio by 170 basis points. This year.

Carla Leibold: Turning the slide 12, we added more than $3 per share to our tangible book value in the third quarter, which benefited from strong organic capital generation and a positive impact to AOCI from our available for sale securities portfolio, which is in stark contrast to the industry. We are very pleased to report that we already achieved our tangible book value target of $45 with one quarter remaining in 2023. While a higher for longer rate environment may continue to cause industry headwinds, we do not expect to be meaningfully impacted by such a rate outlook because of the short duration on our securities portfolio.

And with one more quarter to go in 2023, we have already achieved our previously guided range I will also highlight that our LCI. Adjusted CET. One ratio is 10, 2%, which is top quartile of all banks from $10 billion to $100 billion in assets.

Turning to slide 14.

Credit quality in our portfolio have remained strong across all metrics.

Nonperforming loans ended the third quarter at $30 million and our nonperforming asset ratio was low at just 14 basis points. Both metrics are in line with the levels, we have experienced over the past four quarter.

Carla Leibold: Over the last five years, we have increased our tangible book value per share by 15% on an annualized basis. We have already exceeded that 15% growth during 2023 with one more quarter to go. We are on track to grow our tangible book value by more than 20% this year, subject only to external market impacts.

Consumer charge offs declined by about $1.1 million in the third quarter, while the consumer charge off ratio appears higher the decline is skewed by the $550 million consumer loan sale, we executed at the very end of the second quarter. This sale led to roughly 25% lower.

Carla Leibold: Moving on to slide 13, our TCE ratio ended the third quarter at six and a half percent, which was an increase of 50 basis points in a single quarter on a relatively flat balance. This is a testament to our strong earnings power and balance sheet discipline. AOCI continues to negatively impact this ratio by about 70 basis points. I'll also point out that 3.4 billion of balance sheet cash has a material impact on this ratio.

Your average consumer balances quarter over quarter.

We remain extremely well positioned for the potential challenges ahead for the commercial real estate market commercial real estate, excluding multifamily comprises only 14% of our loan portfolio, while our regional bank peers have about 30% exposure. Furthermore, as Jay noted.

Carla Leibold: Our estimated CET-1 ratio ended the third quarter at 11.3 percent. This is the second consecutive quarter that we've been in the third quarter. We've been able to materially increase our CET-1 ratio. We've grown our CET-1 ratio by 170 basis points this year. And with one more quarter to go in 2023, we have already achieved our previously guided range. I will also highlight that our AOCI adjusted CET-1 ratio is 10.2 percent, which is top quartile of all banks from 10 to 100 billion in assets.

The office and retail sectors of commercial real estate, each only account for approximately 1% of our total loan portfolio.

I'll highlight that our provision expense of $18 million came in at the very low end of our guidance of 18% to 22 million per quarter. Our reserve level was roughly flat quarter over quarter, and we feel we are well reserved at 110 basis points of total loans held for investment.

Superior credit quality is in the DNA of customers Bank. We are firm believers that management must remain highly focused on credit risks during strong economic times, which is why we feel we are very well positioned despite the uncertain macroeconomic environment today with that.

Carla Leibold: Turning the slide 14, credit quality in our portfolio remains strong across all metrics. Non-performing loans ended the third quarter at 30 million, and our non-performing asset ratio was low at just 14 basis points. Both metrics are in line with the levels we've experienced over the past four quarter. Consumer charge also declined by about 1.1 million in the third quarter, while the consumer charge ratio appears higher, the decline is skewed by the 550 million consumer loan sale.

I'll pass the call back to Sam to address our outlook and provide some complete some concluding thoughts Sam.

Thank you Carla I would like to wrap up with a brief update on our expectations for the remainder of 2023.

Before going through the details I want to reiterate that our top focus areas remain strengthening our balance sheet, improving our deposit franchise as well as maintaining industry leading levels of liquidity.

Carla Leibold: We executed at the very end of the second quarter. This sale led to roughly 25 percent lower average consumer balances quarter over quarter. We remain extremely well positioned for the potential challenges ahead for the commercial real estate market. Commercial real estate, excluding multifamily comprises only 14 percent of our loan portfolio, while our regional bank peers have about 30 percent exposure. Furthermore, as Jay noted, the office and retail sectors of commercial real estate each only account for approximately 1 percent of our total loan portfolio.

With a strong and growing capital base, we continue to perform against our previous loan and deposit guidance as Carla mentioned already the remixing of our loan portfolio is complete the transformation of our deposit franchise through taking market share due to market disruption as I described earlier is well underway and has a fantastic runway ahead for net interest margin.

Normalized <unk> was approximately three 2% in the third quarter and we expect continued expansion from there.

We set an ambitious goal of $6 in EPS at the beginning of this year and I'm pleased to report that we anticipate significantly exceeding that target.

Finally, we are very proud that we have already achieved our CET one intangible book value per share targets. We look forward to providing you our financial outlook for 2020 for the new year, but as you can imagine with the results. We've achieved so far this year, we are very optimistic about our prospects in 2024.

Carla Leibold: I'll also highlight that our provision expense of 18 million came in at the very low end of our guidance of 18 to 22 million per quarter. Our reserve level was roughly flat quarter over quarter, and we feel we are well reserved at 110 basis points of total loans held for investment. Superior credit quality is in the DNA of customer's bank. We are firm believers that management must remain highly focused on credit risk during strong economic times, which is why we feel we are very well positioned despite the uncertain macro economic environment.

To conclude to wrap up this was clearly an incredibly strong quarter here.

Here are some takeaways number one as we've said numerous times in this call and throughout the course of the year. The years risk management is and will always be our top priority number two.

Despite industry headwinds, we continue to materially improve the quality of our deposit franchise over the last two quarters, we've grown core deposits by $2 1 billion and reduced our wholesale funding by $2 1 billion.

Samvir Sidhu: With that, I'll pass the call back to Sam to address our outlook and provide some concluding thoughts. Thank you, Carla. I would like to wrap up with a brief update on our expectations for the remainder of 2023.

Our deposit growth was broad based and granular.

We continued to grow our noninterest bearing deposits, demonstrating primacy and importance of relationships.

The pipeline remains strong at approximately 10% of core deposits and we're just getting started.

Samvir Sidhu: Before going through the details, I want to reiterate that our top focus areas remain strengthening our balance sheet, improving our deposit franchise, as well as maintaining industry leading levels of liquidity with a strong and growing capital base. We continue to perform against our previous loan and deposit guidance. As Carla mentioned already, the remixing of our loan portfolio is complete. The transformation of our deposit franchise through taking market share due to market disruption, as I described earlier, is well underway and has a fantastic runway ahead.

Number three our in our current recurring net interest margin improvement this year, a significant and sustainable.

Number four.

We achieved tremendous improvement in our capital ratios, our TCE to Ta ratio increased by 50 basis points in a single quarter on a relatively flat balance sheet and our CET one increased by 100 basis points and as you heard Carla say adjusted for OCI customers Bank is in the top quartile of all banks between 10 and 100 billion.

On this metric.

And lastly, as we look towards 2024, despite the challenges in the banking industry today. The future is very bright for customers Bank. Our loan portfolio remix is complete and we're well positioned for growth over the next year we.

Samvir Sidhu: For that interest margin, normalized them was approximately 3.2% in the third quarter, and we expect continued expansion from there. We set an ambitious goal of $6.00 in EPS at the beginning of this year, and I'm pleased to report that we anticipate significantly exceeding that target. And finally, we are very proud that we have already achieved our CET-1 intangible book value per share targets. We look forward to providing you our financial outlook for 2024, the new year, but as you can imagine, with the results we've achieved so far this year, we are very optimistic about our prospects in 2024.

We have strong opportunities to further strengthen our deposit franchise. Our platform is extremely efficient and at current levels is able to drive positive operating leverage and profitability.

And we have capital and liquidity to support our clients' needs. Thank you very much and with that we'll now be happen to open up the line for questions.

At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.

Samvir Sidhu: To conclude, to wrap up, this was clearly an incredibly strong quarter. Here are some takeaways. Number one, as we've said numerous times in this call and throughout the course of the years, risk management is and will always be our top priority. Number two, despite industry headwinds, we continue to materially improve the quality of our deposit franchise over the last two quarters. We've grown core deposits by 2.1 billion and reduced our whole so funding by 2.1 billion.

Our first question comes from Steve Moss with Raymond James Your line is open.

Good morning, and thank you Jay for your kind comments.

Maybe just starting on the deposit side here.

Just curious.

How much in the quarter came from the venture team and the FDIC transaction.

Samvir Sidhu: Our deposit growth was broad-based and granular. We continue to grow our non-interest bearing deposits demonstrating primacy and importance of relationships. The pipeline remains strong at approximately 10% of core deposits, and we're just getting started. Number three, our recurring net interest margin improvement this year is significant and sustainable. Number four, we achieved tremendous improvement in our capital ratios. Our TCE to TA ratio increased by 50 basis points in a single quarter on a relatively flat balance sheet and our CET1 increased by 100 basis points. And as you heard Carla say, adjusted for AOCI customer's bank is that in the top quartile of all banks between 10 and 100 billion on this metric.

Hey, good morning, Steve.

About less than half of our $1 3 billion.

Okay.

And then in terms of the pipeline going forward, how much how much is there as well.

As we stated the.

The venture banking team was expected to get to one to one by the end of the year in the medium to longer term two to one we continue to reiterate that trajectory in the near term, we're past all of the servicing and onboard and client transition efforts.

The team has been working feverishly on we also had a number of them.

Credit requests as you can imagine hence the outsized accretion that was from the pent up.

Demand from customers, who were looking to make some of those decisions while under FDIC receivership.

Samvir Sidhu: And lastly, as we look towards 2024, despite the challenges in the banking industry today, the future is very bright for customers bank. Our loan portfolio remix is complete and we're well positioned for growth over the next year. We have strong opportunities to further strengthen our deposit franchise. Our platform is extremely efficient and at current levels is able to drive positive operating leverage and profitability. And we have capital and liquidity to support our clients needs.

Forward basis, we are out we have national events in San Francisco.

All around the country, where we're meeting perspective.

And existing customers as well as their investors and as you can imagine.

Management team is very excited and we are personally supporting those efforts.

Unknown Executive: Thank you very much and with that will now be happened to open up the line for questions.

Got you.

I realize it's still early three four months in San but just kind of curious.

Unknown Executive: At this time, I would like to remind everyone in order to ask a question, please press star followed by the number one on your telephone keypad.

What's the underlying business mix youre seeing between kind of capital call lines and the Tech adventure.

Just how we think about that on both the lending side and the deposit side.

Stephen Moss: Our first question comes from Steve Moss with Raymond James. Your line is open. Good morning and thank you Jay for your kind comments. You know, maybe just starting on the deposit side here, just curious, you know, how much in the quarter came from the venture team and the FDIC transaction? Good morning, Steve. About less than half of our 1.3 billion. Okay, and then in terms of the pipeline going forward, you know, how much, how much is there as well?

Sure.

So historically our.

Fund finance business, which was more focused on the private equity.

Side of the capital call line business, we did inherit.

A good number of.

Venture capital focused clients that we've actually moved over to our fund Finance group.

The fund Finance group to address your question specific on deposits has seen a tremendous amount of.

Slow but steady.

And granular as well as noninterest bearing bearing growth.

That's coming not just from.

Stephen Moss: You know, as we stated, the venture banking team was expected to get to 1 to 1 by the end of the year in the medium to longer term, 2 to 1. We continue to reiterate that trajectory, you know, in the near term, we're past all of the servicing and onboarding and client transition efforts that the team has been working feverishly on. We also had a number of credit request, as you can imagine, hence the outsized accretion that was from the pent up demand from customers.

The new venture banking team and their associated relationships, but also from just the dislocation in the banks that have been impacted that used to cover these customers.

And on the venture banking side.

<unk> seen we've seen a couple of banks look to add.

Add teams to there.

Existing franchise as a reminder, we had a half a billion dollar portfolio prior to the acquisition of this of this team and this franchise we have about 40 team members that's.

Stephen Moss: We're looking to make some of those decisions while under FDIC receivership, go forward basis, we are out, we have national events in San Francisco all around the country, where we're meeting perspective and and existing customers, as well as their investors, and as you can imagine the, you know, the management team is very excited, and we are personally supporting those efforts. Got you and I realize it's still early three, four months in San, but just kind of curious, you know, what's the underlying business mixture seen between kind of capital call lines and the tech and venture and just, you know, how we think about about that on, you know, both the lending side and the deposit side.

Thats fully integrated including credit portfolio management and Treasury services. So we have a significant.

Up and really look to continue to grow this franchise in the near to medium term.

Okay I appreciate the color there and then.

On the margin here with the $323 25 guide just curious how much are you assuming for purchase accounting accretion.

So the guidance.

I'll jump in Stephen Karla, Let me know if I missed anything the guidance here. We provide is for normalized NIM. The outsized impact that we had in the third quarter is really just six months of catch up and when your diligence in a data room and you don't necessarily get all of those customer contacts and conversations.

Stephen Moss: Sure, you know, so historically, our fund finance business was more focused on the private equity side of the capital call line business. We did inherit a good number of venture capital focused clients that we've actually moved over to our fund finance group. The fund finance group to address your question specific on deposit is seen a tremendous amount of slow but steady and granular, as well as non interest bearing growth. That's that's coming not just from, you know, sort of the new venture banking team and their associated relationships, but also from just the dislocation and the banks that have been impacted that used to cover these customers.

So.

The 320 to 325 is sort of a normalized guide going forward.

Okay. So then.

You guys had about let's call it 90 $495 million Mark.

There is going to be accretion over and above that 323 25 range.

No Steve Happy to walk you through some of the accounting that we can do that in a little bit offline that the loans are booked at the discounted impact on our on our books.

So.

It's already flowing through our normalized earnings.

Okay got it.

Okay.

That's everything for me at the moment I'll step back. Thanks. Thank you. Thanks, Steve.

Stephen Moss: And on the venture banking side, you know, we're seeing, you know, we've seen a couple of banks look to add teams to their existing franchise as a reminder, we had a, you know, half a billion dollar portfolio prior to the acquisition of this of this team in this franchise, we have about 40 team members that's fully integrated, including credit portfolio management and treasury services. So we have a significant, you know, like up and really look to continue to grow this franchise in the near to medium term.

Yeah.

Our next question comes from Casey Haire with Jefferies. Your line is open.

Yes, thanks, good morning, everyone.

So follow up question on <unk>.

NIM.

Specifically around the cash position.

What is what is the NIM guide presume.

That cash position, where the cash position.

Trends in the fourth quarter as well as the borrowings.

Yes, so on the cash position as we stated in our remarks that it should stay about the same level that we have it in in the third quarter and will continue to maintain those love it levels for risk management perspective on the borrowings I would say the borrowings there are some opportunities to remix.

Stephen Moss: Okay, appreciate the color there. And then on the margin here with the 320 325 guide just curious how much are you assuming for purchase accounting creation. So the guidance, you know, I'll jump in Steven Carla. Let me know if I missed anything. The guidance here we provide us is for normalized them, you know, the outsized impact that we had in the third quarter is really just six months of catch up and, you know, when your diligence in the data room, you don't necessarily get all of those customer contacts and conversations.

The borrowings will continue to evaluate that looks like but third quarter levels. There will be some benefit based on the fact that we did call.

$510 million advances late in the third quarter, so there'll be some benefit coming into the fourth quarter. All of that is factored into the guided range of $3 20 to 325 in the fourth quarter.

Stephen Moss: So the 320 to 325 is sort of unnormalized. Guide going forward. Okay, so then you guys had about a, we call it $94, $95 million mark, and so there's going to be a accretion over and above that 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 3, 2, 3, 2, 3, 2,[inaudible] I would just add that, as Sam mentioned, we are preparing and have been preparing for the outflow of, you know, a portion of the bank mobile service deposits, so those student deposits are leaving in the fourth quarter, late in the fourth quarter, so we want to make sure we have ample cash on hand to fund that outflow.

Okay, and just just following up on that I mean why.

I understand that it's prudent.

To run with a lot of cash, but with your cash position at 15% of the balance sheet.

There is definitely there is some flexibility for you to lean into that and further optimize your NIM I mean, it's it's it's almost.

At the end of period is almost two times the borrowings so just.

I'm, just curious why why not lean into that more.

Yes for that I would just add that as Sam mentioned, we are preparing and had been preparing for the outflow of a portion of the bank mobile service deposits. So the student deposits.

All are leaving in the fourth quarter late in the fourth quarter. So we wanted to make sure we have ample cash on hand to fund that outflow.

And I'd also add Casey we continue to have.

Wholesale CD maturities in the fourth quarter and then finally as we've discussed.

We have and will continue to maintain our CP balances in cash.

Okay.

On the student deposit outflow is that around around that $900 million, where it was during the summer.

Okay.

No there are some seasonally elevated balance so the student deposit businesses have some seasonality associated them with the school year. So.

Well, we've been saying is it's roughly half of the balances that we reported at June 30 P. M T X hasn't.

Released their earnings yet so you know, we're pointing back to the second quarter numbers, but it was roughly half of last quarters with some seasonality associated with the student deposits.

Okay very good and just last one for me switching to capital.

You guys well above your above 11% CET, one and a sub tangible book stock price just I'm just wondering what's what's holding you back from me a little bit more aggressive on the buyback.

We will always be pick on that.

But for right now we see like I said, we see opportunities for some loan growth.

Next year and be well.

We're done with our remix we are seeing continued growth in our deposits. So I think buying back common.

The deeming our preferred are all the things on the table, but we will update you on a regular basis, but for right now we would like to see our TCE ratio go up even higher and target of 7% for that.

Stephen Moss: And I'd also add that, you know, Casey, you know, we continue to have wholesale CD maturities in the fourth quarter. And then finally, as we've discussed, you know, we have and will continue to maintain our seed balances and cash. Okay, and on the student deposit outflow, is that around, around that 900 million, where it was in the summer? No. No, there's some seasonally elevated balance, so the student deposit businesses have some seasonality associated them with the school year.

Understood. Thank you.

Our next question comes from Peter Winter with D. A Davidson your line is open.

Good morning.

So it was nice to hear about the outlook for loan growth next year high single digit low double digit.

Where do you expect the growth to come from beside the specialty lending businesses and then secondly.

I heard you say that Theres no additional remixing of the loan portfolio, but would you expect some certain other portfolios just.

Stephen Moss: So, it's what we've been saying is it's roughly half of the balances that we reported at June 30, BMTX hasn't released their earnings yet, so, you know, we're pointing back to those second quarter numbers, but was roughly half of last quarters with some seasonality associated with the student, in the past. Okay, very good.

Natural naturally run down.

Hey, Peter good morning.

Go ahead, Sam Yep, So I think that.

On the loan opportunities, we continue to see a number of attractive opportunities we've been very focused on integrating.

The venture banking acquisition as well as really increasing our capital ratios.

Unknown Executive: And just last one for me, switching to capital. You know, you guys well above your above 11% TT one and a sub tangible book stock price.

That's evidenced in the CET one is almost 200 basis points up over just a six month period.

So now that we've sort of as you heard Carlos say, we've finished that remix we're going to be very focused on growing.

Unknown Executive: Just just wondering what's what's holding you back from being a little bit more aggressive on the buyback. Okay, we will always be on that. And but for right now, we see, like I said, we see opportunities for some loan growth next year and we are well, we are done with our remix. We are seeing continued growth and our deposits. So I think buying back common or the deeming that preferred are all the things on the cable. But we will update you on a regular basis. But for right now, we would like to see you to show go up even higher and target is 7% for that. Understood. Thank you.

Across verticals that our focus on strategic relationships, we're continuing to see opportunities in.

Fund finance and lender finance and real estate specialty finance health care.

Equipment finance at at floating rate spreads of 300 to 350 basis points venture banking as a prime plus up to a 100 basis points.

Obviously, the venture banking portfolio it comes with.

The extra added benefit of significant deposits relative to commitments and definitely relative to outstandings.

And are there any other portfolios that.

Continue to kind of migrate lower.

And is that slowing yes, we've discussed historically multifamily in our multifamily portfolio is just under 4% book yield you can get about at least 150 to 200 basis points higher today, but having said that it's still there.

Peter Winter: Our next question comes from Peter Winter with DA Davidson. Your line is open. Good morning. So it was nice to hear about the outlook for long growth mixture, high single digit, low double digit.

Accretive to margin and not accretive to some of the other strategic opportunities that we have when we think about capital allocation for next year. So that's an example of a portfolio that is being de emphasized as a reminder, there is about $250 million plus or minus over the next four to six quarters of of maturities in that portfolio.

Peter Winter: Where do you expect the growth to come from beside the specialty blending businesses and then secondly, you know, I heard you say that there's no additional remixing the loan portfolio, but would you expect some certain other portfolios just to natural naturally run down. Hey, Peter. Good morning. Yeah, I'm okay. So, you know, I think that, you know, on the loan opportunities, you know, we continue to see a number of attractive opportunities.

Okay.

And then.

How much can you just talk about how much is left in terms of our or rather how much in brokerage Cds.

Mature in the fourth quarter.

Ongoing opportunities to reduce C deals in general.

Peter Winter: You know, we've been very focused on integrating the venture banking acquisition as well as really increasing our capital ratios. And that's evidence on the CET one, you know, almost 200 basis points up over in just a six month period. So now that we've sort of, as you heard Carla say, we've finished that remix. We're going to be very focused on growing across verticals that are focused on strategic relationships. We're continuing to see opportunities and in fund finance and lender finance and real estate specialty finance healthcare equipment finance at floating rate spreads of 300 to 350 basis points venture banking is at prime plus up to 100 basis points.

Our home loan bank borrowings going forward.

Yeah, So Peter it's a similar amount in the fourth quarter as we had in the third quarter. The third quarter I believe it was 900 950 million plus or minus.

And on.

On the <unk> side.

Have somewhere around 300 million plus or minus of additional expense of callable. So we always had the intention of redeeming hence why they were.

The advances were taken as carnivals.

What should we expect to also sort of reduce in the next couple of quarters.

Okay.

Just my last question Jay.

Peter Winter: And obviously the venture banking portfolio comes with the, you know, the extra added benefit of significant deposits relative to commitments and definitely relative to outstanding. And are there any other portfolios, you know, that continue to kind of migrate lower. And is that slowing? Yeah, we've discussed historically, you know, multifamily, you know, our multifamily portfolio is just under 4% you know, book yield. You can, you know, get about at least 150 to 200 basis points higher today, but having said that it's still, you know, not a creative to margin and not a creative to some of the other strategic opportunities that we have when we think about capital allocation, you know, for next year. So that's an example of a portfolio that is being deemphasized as a reminder there's, you know, about 250 million plus or minus over the next four to six quarters of maturity, and that portfolio.

Your 72 years young.

Just wondering what the future plans are I think you once said if things got above $6 you consider.

Tiring and Theres still plenty of the golf course.

Peter Winter: Okay.

Played.

Yes, thanks for asking that I also said that you know.

At that time, you were expecting.

2025, 26 to reach $6 I'm, so pleased that.

Shareholders will benefit from the fact that we are running three years ahead of plan. So we will update you, but we are.

So many exciting opportunities I am the largest shareholder.

Individual shareholder in the company and I'm very excited about the opportunities for us.

And so.

We just look out but at least for the next two years and so our intent to remain active.

Peter Winter: And then, Sam, how much can we just talk about how much is left in turn, or rather, how much in broker to these mature in the fourth quarter and just, you know, the ongoing opportunity to reduce CDs and federal home loan bank borrowings going forward? Yes, but Peter, it's a similar amount in the in the fourth quarter as we had in the third quarter. Third quarter, I believe it was 900. 950 million plus or minus.

Okay.

Congratulations on a really solid quarter.

Down the line.

Thank you.

Our next question comes from Michael Perito with <unk>. Your line is open.

Juliet.

Hey, good morning, guys. Thanks for taking my questions.

Okay.

I wanted to just start.

Peter Winter: And on the FHLB side, we have somewhere around 300 million plus or minus of additional expensive collabels that we always had the intention of redeeming hence why they were, you know, the advances were taken as collabels, which should we expect to also sort of reduce in the next couple quarters.

Apologize if I missed this has jumped around a little bit. This morning, but are you guys.

Expecting a similar kind of bumping capital in the fourth quarter that we saw in the third quarter and I guess asked differently.

What kind of the expectation to get to 7% by yearend and then kind of as a follow up to that.

I know youre, not providing 24 guide yet, but any initial thoughts on kind of overall balance sheet growth for next year is it fair for us to think that.

Jay Sidhu: Okay, just the last question, Jay, you're 72 years young, just wondering what's the future plans are. You know, I think you once said, if it earnings got above $6, you consider retiring and there's still plenty of golf courses for you to be played. Yeah, thanks for asking that. I also had said that, you know, at that time, you were expecting 20, 25, 20, 26 to reach $6. I'm so pleased that our shareholders will benefit from the fact that we are running three years ahead of plan.

There's probably some room for growth, but top of mind is still making sure those capital ratios continue to build in and kind of reached that more seven and a half a percent level is that fair or should we be thinking about it differently.

Hey, Mike Thanks, Thanks for the question.

So firstly on CET, one we'd given the target of 11 to 11 and a half we've reached a range that feels like a good operating range for us we're not looking you won't necessarily see the same type of jump as we've been optimizing throughout the course of the year plus we had the extra benefit of that.

Jay Sidhu: So we will update you, but, you know, we are, I see so many exciting opportunities. I'm the largest shareholder, you know, individual shareholder in the company and I'm very excited about the opportunities for us. And so, you know, we just look out, but at least for the next two years or so, I intend to remain active.

Tailwind of the of the accretion.

So that's sort of how we're thinking about the range, obviously organic capital creation just in the fourth quarter is going to bump that up.

The high end of the range, if not if not higher and that gives us a very strong jumping off point for for next year. When you sort of think about the organic capital creation, maintaining that range and that discipline and.

Unknown Executive: Congratulations on a really small quarter down the line. Thank you.

And thinking about what that means for loan growth relative to our 75% plus or minus loan to deposit ratio.

And also sort of the deposit pipeline that can can help fund future growth, including.

Michael Perito: Our next question comes from Michael Pareto with KBW. Your line is open. Yeah, good morning guys. Thanks for taking my questions. I wanted to just start a positive.

Liquidity created by Securities cash flows et cetera on TCE, We've always said, 7% is a stretch.

And the.

The best way to continue to.

The bump up keep TCE significantly with with retained earnings by maintaining a flat balance sheet and that's what we're committed to for the foreseeable future because theres a tremendous amount of remix that can happen.

Michael Perito: I missed this jump around a little bit this morning, but are you guys expecting a similar kind of bumping capital in the fourth quarter that we saw in the third quarter. And I guess it's differently still kind of the expectation to get to 7% by year and then kind of as a follow up to that. But I know you're not providing 24 guide yet, but any initial thoughts on kind of overall balance you growth for next year is a fair for us to think that, you know, there's probably some room for growth, but, but, you know, top of mind is still making sure those capital ratios continue to build and, and kind of reach the more 7.5% level, is that fair or should we really think about it differently?

Within that the interest earning assets, especially on the Securities book side as a short duration continues to cash flow provides an opportunity to maintain and increase the loan deposit ratio.

Closer to industry medians as opposed to.

One of the lower lower than industry.

Yes.

Okay.

Got it. Thank you and then just.

Another follow up I heard you mentioned in a prior response about that I think the excess cash you guys are holding that.

Michael Perito: Hey, Mike. Thanks. Thanks for the question. So, you know, firstly on CET one, you know, we've given the target of 11 to 11 and a half. We've reached the range that feels like a good operating range for us. We're not looking, you know, you won't necessarily see the same type of jump as we've been, you know, optimizing throughout the course of the year, plus we had the extra benefit of the, of the tailwind of the accretion.

You hold cash against the seabed deposit balances I apologize I missed it but did you.

Michael Perito: So that's sort of how we're thinking about the range, obviously organic capital creation, just in the fourth quarter, is going to bump that up, you know, to the high end of the range, if not higher. And that gives us a very strong jumping off point, you know, for next year, when you sort of think about the organic capital creation, maintaining that range and that discipline and thinking about what that means for loan growth relative to our 75% plus or minus loan deposit ratio, and also sort of the deposit pipeline that can help fund future growth, including liquidity created by securities cash flows, etc.

Did you mention what those balances were at the end of the third quarter and then just more broadly speaking as we think about kind of some of the niches in different verticals that you guys are in or have gone into over the recent.

Past couple of quarters.

How should we be thinking about kind of.

The fee contribution on this business model going forward more of a kind of a high level question, but obviously I think it's about eight or 9% of revenues now, but I would imagine there's kind of opportunities to grow and optimize that as you get a little bit more of a strong foundation and some of these new business, but just curious how you guys are thinking about that.

As we move into 'twenty four.

Yeah. Thanks, Mike So so firstly on <unk>.

Steve at the.

The balances were below our obviously, our our 15% self imposed cap average balances were essentially flat quarter over quarter around $2 2 billion plus or minus.

Michael Perito: On TCE, we've always said 7% as a stretch, and the best way to continue to bump up TPC significantly with retained earnings is by maintaining the flat balance sheet, and that's what we're committed to for the foreseeable future, because there's a tremendous amount of remix that can happen, you know, within the interest earning assets, especially on the securities book side, as that short duration continues to cash flow, provides an opportunity to maintain an increase, you know, the loan deposit ratio, you know, closer to industry median, as opposed to, you know, one of the lower and the industry. Got it. Thank you.

So it's right, where we want it to be but I think it's also important just to sort of reemphasize here that.

We've essentially on boarded any customer that we wanted to onboard.

That is integral to the industry. We have also been able to manage our quote unquote alcohol instead of St large customers I'd say, most institutional central customers.

Two really stabilized.

Deposit balances that allow us to maintain that noninterest bearing.

Float.

Because a large customer.

Operating between that.

5% to 10% of total associated deposit so theres not a lot of a tremendous concentration.

Michael Perito: And then just another follow-up, I heard you mentioned in a prior response about the, I think the excess cash you guys are holding that, you know, you hold cash against the C-bit deposit balances, apologies if I missed it, but did you, did you mention what those balances were at the end of the third quarter? And then just more broadly speaking, as we think about kind of some of the niches and different verticals that you guys are in or have gone into over the recent, you know, past couple quarters, I'm sure you're thinking about kind of fee contribution on this business model going forward.

Within this portfolio, even though it may fluctuate little bit fee income across the franchise.

Is going to be incredibly important we spent a good amount of time talking about.

Our MPL program in the held for sale strategy on a consumer portfolio.

Building off of.

Peter's question on on low remit and loan remix or you know, what we've really brought down our consumer portfolio to about 7% of held for investment today.

That's down a 1 billion and a half and.

Imbalances over the last year dramatically reduced.

Michael Perito: More of kind of a high level question, but obviously I think it's about kind of eight or nine percent of revenues now, but I would imagine there's kind of opportunities to grow and optimize that as you get a little bit more of a strong foundation in some of these businesses, but just curious how you guys are thinking about that as we move into 24. Yeah, thanks, Mike. So firstly on, you know, on C-bit, the balances were below are obviously, you know, our 15% self-imposed cap.

The.

The credit risk.

Received credit risk relative to underwriting of our.

Of our entire franchise, which we think is incredibly important and we'll continue to focus on that type of remixing, but really look to to generate a high quality revenue from those customers that we've worked so hard on building strong relationships over the past five to seven years, we talked about a $10 million.

Run rate.

Michael Perito: Average balances were essentially flat quarter over quarter, around 2.2 billion, you know, plus or minus. So it's right where we want it to be, but I think it's also important just to sort of re-emphasize here that we've essentially onboarded any customer that we wanted to onboard that is integral to the industry. We've also been able to manage our quote unquote, I'll call instead of saying large customers, I'd say most institutional central customers to really stabilize, you know, deposit balances that allow us to maintain that non-interest bearing, you know, float, you know, typical large customer is operating between that five to 10 percent of total associated deposits.

In that business.

By the end of the year, and we are well on target to achieve that.

Great. Thank you guys for taking my questions.

Thanks, Michael.

Our next question comes from Frank Schiraldi with Piper Sandler Your line is open.

Good morning.

You mentioned.

A lot of the play opportunities out there I'm just curious given you're talking about multifamily rolling off to a degree.

You guys have been pretty negative on Korea, overall, which has certainly been the right call.

But just thinking about <unk>.

Lenny a run there on that side. If you were interested in imagine with other shrinking their books there is opportunity to pick up good business. Just wondering if that's a business you guys are looking at.

Michael Perito: So there's not a lot of tremendous concentration within this portfolio, even though it may fluctuate a little bit. You know, fee income across the franchise, is going to be incredibly important. We spent a good amount of time talking about our MPL program and the health for sale strategy on a consumer portfolio, building off of Peter's question on low remix or we really brought down our consumer portfolio to about 7% of health for investment today.

At all just the <unk>.

<unk> either.

Either permanent or sort of a bridge loan businesses.

Hey, Brian.

Great.

So go ahead Sam.

Yep.

Would agree Frankino, where we're not very focused on Korea, but at the end of the day. When you have very high quality sponsors that otherwise diversify their business across a number of banks are willing to consolidate all of their business with one bank.

Michael Perito: That's down a billion and a half in balances over the last year dramatically reduced the credit risk or perceived credit risk relative to underwriting of our entire franchise which we think is incredibly important and will continue to focus on that type of remixing but really look to generate high quality revenue from those customers that we've worked so hard on building strong relationships over the past five to seven years. We talked about a $10 million run rate in that business by the end of the year and we are well on target to achieve that.

And to have incredible net worth and liquidity those are the types of opportunities that we're evaluating to your question. They are not going to be major needle drivers, but they will be the major franchise enhancement drivers.

Okay and then just.

Obviously the.

The loan book that you guys acquired through the FDIC was a great win.

And.

Maybe I'm kind of lost track of what's left there at the FDIC, but is there anything you.

You guys are interested in.

That is coming up.

<unk> being bid out I guess by the FDIC currently.

Yes, so Frank I think that what what was left of the portfolio was non core non strategic to us mostly CRE.

Michael Perito: Great. Thank you guys for taking my questions. Thanks, Mike.

Frank Schiraldi: Our next question comes from Frank Schiraldi with Piper Sampler. Your line is open.

Okay.

Okay fair enough.

Frank Schiraldi: Good morning. Jay, you mentioned a lot of the opportunities out there. I'm just curious given you talked about multi-family roll-in-off to a degree, you guys have been pretty negative on Creole Rawl which has certainly been the right call but just thinking about plenty of room there on that side if you were interested and I imagine with others shrinking their books there's opportunity to pick up their business just wondering if that's a business you guys are looking at at all just the, you know, Creole either permanent or sort of bridge loan businesses.

And then.

Just thinking about the.

The.

The loans that you did bring over and obviously you spoke to the outsized discount accretion.

Yes, I assume that other than that outside discount accretion. It sounds like there is another portion that was kind of more run rate in the quarter. So I'm. Just wondering if you can share what the remaining discount accretion is and then the duration of the book So we can kind of model.

How that progresses or the run rate over time.

Yes, Frank So I think that we're not going to be breaking out the disc and as I mentioned these books, it's different than a whole bank acquisition. When you have a bargain purchase gain and Theres equity created it.

Frank Schiraldi: Hey Frank. We are not folks. Yeah, so go ahead Sam. Yep, I would agree Frank, you know, we're not very focused on on Creole but at the end of the day when you have very high quality sponsors that otherwise diversify their business across a number of banks who are willing to consolidate all of their business with one bank and have incredible net worth and liquidity. Those are the types of opportunities that we're evaluating to your question.

This case this is.

These loans are booked in our.

On our balance sheet at a discounted rate so.

<unk>.

They essentially to sort of think about this to your question about duration, it's about a one and a half year duration.

So.

You say a third was outsized in.

The $95 million this quarter. It kind of gives you a sense of how to think about it over a six quarter type period.

Frank Schiraldi: They're not going to be major needle drivers but they will be major franchise enhancement drivers. Okay, and then just obviously the long book that you guys acquired through the FDIC was a great win and you know maybe I've kind of lost track of what's left there at the FDIC but is there anything you guys are interested in you know that is coming up or is being bit out I guess by the FDIC currently. Yeah, so Frank, you know, I think that what was left of the portfolio was non-coron on strategic to us mostly CRE.

Yeah, Okay, great. Thanks for that.

And.

Just lastly, I guess.

On the noninterest bearing growth I just wanted to so you've mentioned this EBIT I assume that's all noninterest bearing and I assume over time. The idea is still I mean, you're getting a great return on that right now just in <unk>.

NII, but I assume over time, there is the idea or the expectation is that.

The fee side of things.

Just curious if that's something you think you could ramp up in 2024 is that sort of further down the line or how you're thinking about that.

Hey, Frank So it's a great question, obviously are higher for longer.

Frank Schiraldi: Okay, fair enough. And then just thinking about the the the loans that you did bring over and obviously you spoke to the outside discount accretion. You know, I assume other than that outside discount accretion it sounds like there's another portion that was kind of more run rate in the quarter. So just wondering if you can share what the remaining discount accretion is and then the duration of the book so we can kind of model up, of how that progresses or the run rate over time.

Scenario, we don't anticipate this being a need in 2024, we're working collaboratively with customers in their technology.

Needs. So eventually as you can imagine a low rate environment. This does need to be a fee based business. But then it also doesn't need to take up so much of your balance sheet. So that'll be an evolution over time, but I don't anticipate that being a 2024 event.

Got you okay, great. Thanks for all the color guys.

Our next question comes from Matthew Breese with Stephens. Your line is open.

Frank Schiraldi: Yeah, Frank. So I think that we're not going to be breaking out the disk. And as I mentioned, these books are different than a whole bank acquisition when you have a part in purchase gain, and there's equity created. In this case, these loans are booked on our balance sheet at the discounted rate. So the essentially to think about this tier question about duration, it's about a one and a half year duration. So, you know, if you say a third was outsized and of the 95 million, this quarter kind of gives you a sense of how to think about it over a six quarter type period.

Hey, good morning.

I know you had referenced.

And kind of driving a portion of the noninterest bearing deposit growth, but I was hoping purchased.

Some better color as to what the components were that drove the quarterly increase.

Yes, So I think Matt we talked last quarter about our $2 billion pipeline, despite the $1 $3 billion.

Of growth, we still have one 5 billion and sort of replenishing our pipeline. We also talked about about a quarter of that pipeline being noninterest bearing across.

Frank Schiraldi: Yeah, okay, great. Thanks for that. And, you know, just lastly, I guess, on the non-intersparing growth, I just wanted to, so you mentioned the seed bit, I assume that's all non-intersparing. And I assume over time, the idea is still, I mean, you're getting a great return on that right now, just in NII, but I assume over time there's the idea or the expectation is the feed side of things. Just curious if that's something you think you could ramp up in 2024, is that, you know, sort of further down the line or how you think it about that.

Verticals and that was reasonably consistent across the debenture banking team.

Okay and like you mentioned this but what is the near term.

And in 2004, if you Havent bolt kind of overall deposit growth outlook, and then outlook for non interest bearing deposits.

Sure So $1 5 billion about three quarters.

About a quarter of that would be noninterest bearing.

So that kind of gets you to $500 million.

Sort of a quarter.

And with a quarter of that would be noninterest bearing but just a reminder, you know we will have in the fourth quarter.

Frank Schiraldi: Hey, Frank. So it's a great question. You know, obviously in a higher for longer type scenario, we don't anticipate the speed and need in 2024. You know, we're working collaboratively with customers and their technology needs. So, you know, eventually, as you can imagine, our low-rate environment does need to be a fee-based business, but then it also doesn't need to take up so much of your balance sheet.

Frank Schiraldi: So that'll be an evolution, you know, over time, but I don't anticipate that being a 2024 event. Josh, okay, great.

You do have the transition out of the non core non strategic.

BMT student deposits, so the fourth quarter will be flattish to potentially a slight decline in deposit balances, but again when taken in totality about sort of the go forward Foundation of the of the franchisee, we'll continue growing off of that base and early next year and hopefully continue to replenish the pipeline as we have done incredibly.

Frank Schiraldi: Thanks for all the color, guys.

<unk> successfully over the last two quarters.

And where does <unk> student deposits currently reside.

Matthew Breeze: Our next question comes from Matthew Breeze with Stevens. Your line is open. Hey, good morning. I know you had referenced the VC kind of driving a portion of the knowledge is varying deposits, but I was hoping for just some better colors to what the components were that drove the quarterly increase. Yeah, so I think, you know, Matt, we talked last quarter about our $2 billion pipeline, despite the $1.3 billion of growth.

Yes, so I can get some interest bearing non interest bearing I can give you some color on that so it's split so the student deposits are currently in noninterest spot.

Deposits and then the T mobile related deposits or in interest bearing.

Matthew Breeze: We still have one and a half billion in sort of replenish in our pipeline. We also talked about about a quarter of that pipeline being non-interest bearing across, you know, verticals, and that was reasonably consistent across the venture banking team. Okay, and I don't know if you're mentioning this, but what is the near term, and in 2024, if you have it, both kind of overall the positive growth outlook, and then outlook for knowledge is varying deposits.

And what are they split 50, 50, or what's kind of the breakdown. It's roughly 50 50 with some seasonality around the student deposits tied to the school year.

Okay.

And then this quarter there were some legal expense tied to a third party PPP lender. There is still some PPP left on the books. So I guess, what I was looking for some better clarity as to what happened that caused.

Four of $5 million in legal costs, and then what is the outlook for resolving the remaining stub piece of PPP loans it feels like it's.

This is ben on for its been ongoing for longer than most of your peers.

Matthew Breeze: Sure, so one and a half billion about three quarters, you know, about a quarter of that, you know, would be non-interest bearing. So that kind of gets you to, you know, 500 million, you know, sort of a quarter, and with a quarter of that being non-interest bearing, but just a reminder, you know, we will have in the fourth quarter, you do have the transition out of the non-core non-strategic, you know, BMT student deposits.

Yeah, Hey, Matt So obviously on PPP just as a reminder, it may be ongoing it's 1% of our balances of origination or we originated $10 billion, we made $500 million of revenue $8 of book value creation, we had guided to about this number a couple of quarters ago of our balances we expect it to stay on our balance sheet.

We also guided last quarter that that would be our last quarter of needing to do some of the pro forma metrics. That's now put into tables in the back of our franchise to answer. Your question. Specifically. This was also in an effort to make sure that we just cleaned up any issues as you can imagine there were no PPP servicers prior to March of 2020.

Matthew Breeze: So the fourth quarter will be flatish to, you know, potentially a slight decline, you know, in deposit balances, but again, when taken in totality about sort of the go-forward foundation of the franchise, you know, will continue growing off of that base in early next year, and hopefully continue to replenish the pipeline as we have done incredibly successfully, with the last two quarters. And where did the VMTF student deposits currently reside? Yes, I can give you some color on that.

So PPP servicers.

Who had technology capabilities et cetera, and also didn't necessarily plan to be in this business for three to five years. So we had to take on some of those servicing efforts and we cleaned things up there are no disputes on outgoing we talked about this particular.

Arbitration a.

A year ago I think it was in the fourth quarter of last year. So we've disclosed it there's nothing no minor no major dispute Pvp.

Matthew Breeze: So it's split. So the student deposits are currently in non-interest deposits and then the team mobile related deposits are in interest sparing. And what are they split 50 50 or what's kind of the breakdown? It's roughly 50 50 with some seasonality around the student deposits tied to the school year. Okay. And then, you know, this quarter, there was some legal expense tied to a third party, PPP, lender, there's still some PPP left on the book.

Essentially cleaned up and behind Us and these balances we don't know when theyre going to term out, but just assume that theyre part of our franchise going forward not great from the 1% interest rate given our cost of funds, but very de minimis in the Grand scheme of things and Pvp was an incredible program for us and transformed us to where we are today.

Matthew Breeze: So I guess one I was looking for some better clarity is to what happened that caused, you know, four or five million dollars on legal cost. And then what is the alloc for resolving the remaining stub piece of PPP loans? It feels like it's been on for, you know, it's been ongoing for longer than most of your peers. Hey, hey, Matt. So, you know, obviously on PPP, just as a reminder, it may be ongoing.

Where we can make as much in the quarter as we made in the in an entire year prior to PPP.

Understood, Okay, and now that you do have a servicing one backroom servicing should we expect a.

And may be expedited resolution.

Balances is that the way to think about it.

Remember stop balances essentially are termed out balances for the most part Madden.

Alright. So these are folks that have two or five year PPP loan and the banks have to use on their balance sheets as well.

Matthew Breeze: It's 1% of our balances of origination. We originated $10 billion. We made $500 million of revenue, $8 of book value creation. We had guided to about this number a couple of quarters ago of balances we expected to stay in our balance sheet. We also guided last quarter that that would be our last quarter of needing to do some of the pro form of metrics. It's now put into tables in the back of our franchise to answer your questions specifically.

Okay.

I was hoping to turn to <unk>.

Charge offs.

One theres quite a bit that's coming from the installment book. So so maybe just give us a sense for the outlook.

On charge offs from here, if we should expect something consistent with this quarter and then secondarily what are the early stage delinquencies what does that look like for the installment book today versus last quarter.

Matthew Breeze: This was also an effort to make sure that we just cleaned up any issues. As you can imagine, there were no PPP servicers prior to March of 2020. So PPP servicers, you know, who had technology capabilities, et cetera, and also didn't necessarily plan to be in this business for three to five years. So we had to take on some of those service in efforts and we cleaned things up. There are no disputes on outgoing.

Yeah, Hey, Matt Good morning. This spill Watkins. So I think you saw on the consumer side on an aggregate basis those charge offs actually came down by $1 $1 million in the quarter and we did say is that the consumer HSI portfolio continues.

Matthew Breeze: We talked about this particular arbitration a year ago. I think it was in the fourth quarter of last year. So we've disclosed that there's nothing, no minor, no major dispute. PPP is essentially cleaned up and behind us in these balances. We don't know when they're going to term out, but just assume that they're part of our franchise going forward. Not great, you know, from the 1% interest rate given our cost of funds, but very diminishing the grand scheme of things.

To mature and decline.

That youll see those kind of continue to come down on.

On that trajectory over time, so it's not going to happen overnight in the quarter, but that is where we would think things are going and as far as the early look into those portfolios. We obviously continue to monitor it very closely but.

As a reminder, our portfolios is very differentiated from the consumer overall, so super Prime and Super Prime 730, FICO, 19% DTI over 100000 $105000 of income so we're.

Matthew Breeze: And PPP was an incredible program for us and transformed us to where we are today, where we can make as much in a quarter as we made in an entire year prior to PPP. Understood. Okay. And now that you do have the servicing you one back or servicing, should we expect a full and maybe expedited resolution of the stuff balances? Is that the way to think about it? Remember stop balances essentially are termed out balances for the most part, Matt.

Sure.

Not seeing any.

Any material changes, obviously, there was credit normalization from the from the unsustainably low levels, but we continue to feel the book's performing as expected.

Okay I'll leave it there thank you.

Matthew Breeze: Right. So these are folks that have two or five year PPP loan and and banks have these on their balance sheets as well. Okay. I was hoping to turn to charge us, you know, one there's there's quite a bit that's coming from installment book. So so maybe just give us a sense for the outlook on charge us from here if we should expect something consistent with this quarter. And then secondarily, what are the early stage in Lincoln sees?

Our last question comes from Bill does Allen with Teton Capital Management. Your line is open.

Thank you relative to the loan growth that you were referencing that you anticipate in 2024.

Could you talk to the categories, where you see the most opportunity and to what degree is that opportunity a function of competitors.

Matthew Breeze: What does that look like for the installment book today versus last quarter? Yeah, hey, Matt, good morning, this is Bill Watkins, so I think you saw on the consumer side on an aggregate basis, those charges actually came down by $1.1 million in the quarter. And we did say is that the consumer HFI portfolio continues to mature and decline, that you'll see those kind of continue to come down on that trajectory over time.

Pulling back from those market segments as they are trying to do.

Navigate the environment.

Hey, Bill.

Good morning, good question.

To sort of recap some of the then bring together some of the conversations we had on the call today. So we expect venture banking to be a major sort of commitment driver.

You can imagine these are on average $8 million $10 million loans, there's not a huge amount of.

Balanced growth that can actually happen in a short period of time responsibly.

Matthew Breeze: So it's not going to happen overnight in a quarter, but that is where we would think things are going. And as far as the early look into those portfolios, we obviously continue to monitor it very closely, but as a reminder, our portfolio is very differentiated from the consumer overall. So prime and super prime, 730 FICO 19% DTI over $100,000 of income. So we're not seeing any material changes. Obviously there was credit normalization from the unsustainably low levels, but we continue to feel the books performing as expected. Okay, I'll leave it there. Thank you.

But we are taking market share and we have a tremendous amount of deposit only customers and also a tremendous amount of net deposit customers that will be onboard onboard it went into the market disruption also on the fund finance space in the capital call line.

Aside of.

We sold all of our non bilateral loans last quarter.

And we're starting to build a great pipeline of 100 basis points of extra spread plus deferred plus fed funds increases from where we were originated at the beginning of this year end of last year.

In that business and those that also comes with associated.

Noninterest bearing balance.

Deposit growth as well not only from credit customers, but also from from bank and those types of customers. So those are two examples of the most dislocated from a competitive environment remember, we have an existing franchise as well and we have existing teams that have.

Bill DeZellum: Our last question comes from Bill DeZellum with Titan Capital Management. Your line is open. Thank you. Relative to the long growth that you are referencing that you anticipate in 2024. What would you talk to the categories where you see the most opportunity? And to what degree is that opportunity, a function of competitors pulling back from those market segments is they're trying to navigate the environment? Hey, Bill. Good morning. Good question. You know, to sort of recap some of the then bring together some of the conversations we have on the call today.

Built incredible franchises across the board our community banking.

Team that has expanded over the past couple of years has.

Great existing and new relationships.

Our health care business has great opportunities.

That with a good pipeline building as does our commercial finance businesses.

Colloquially known as our equipment finance business.

Okay.

And so if I am hearing you correctly you do have some growth next year will be a function of the.

Bill DeZellum: So we expect venture banking to be a major sort of commitment driver. As you can imagine, these are on average $8 million, $10 million, $10 million loans. There's not a huge amount of balance growth that can actually happen in a short period of time responsibly. But we are taking market share and we have a tremendous amount of deposit only customers and also tremendous amount of net deposit customers that will be on board onboarded lending to the market disruption.

Sure.

Some of these segments, but others will simply be a function of the.

Areas of strength that you have for lending.

Irrespective of the competitive environment.

That's right Bill.

Great. Thank you.

And great quarter.

This concludes our question and answer session I will now turn the call back to Sam Sidhu, President and CEO for closing remarks.

Bill DeZellum: Also, the fund finance space in the capital call line, you know, side of we we sold all of our non bilateral loan class quarter. And we're starting to build a great pipeline of 100 basis points of extra spread plus the Fed plus Fed funds increases from where we were originating at the beginning of this year end of last year. And that business and those that also comes with associated, you know, non interest bearing bounce deposit growth as well, not only from credit customers, but also from from banking those types of customers.

Thanks Breanna.

Everyone, we'd really like to thank you for your continued interest and support of customers Bancorp and really look forward to speaking to you again soon thank you.

Yeah.

This concludes today's conference you may now disconnect.

Customers Bancorp and really look forward to speaking to you again soon thank you.

Okay.

This concludes today's conference you may now.

Bill DeZellum: So those are two, you know, examples of the most dislocated from a competitive environment. Remember, we have an existing franchise, you know, as well, and we have existing teams that have, you know, built incredible franchises across the board, our community banking, you know, a team that has, you know, expanded over the past couple of years has a great existing and new relationships, you know, our healthcare business, you know, has great opportunities that with a good, a good pipeline building as does our commercial finance business, you know, locally known as our equipment, and Ants Business.

Bill DeZellum: And so if I am hearing you correctly, you do have some of the growth next year will be a function of the dislocation of some of these segments, but others will simply be a function of the areas of strength that you have for lending your respective of the competitive environment. That's right, Bill. Great. Thank you. In great order.

Unknown Executive: This concludes our question and answer session.

Samvir Sidhu: I will now turn the call back to Sam Sidhu, President and CEO for closing remarks. Thanks, Brianna. Everyone would really like to thank you for your continued interest and support of Customers Bancorp and really look forward to speaking to you again soon.

Unknown Executive: Thank you. This concludes today's conference.

Unknown Executive: You may now disconnect. Customers Bancorp and really look forward to speaking to you again soon.

Unknown Executive: Thank you. This concludes today's conference.

Unknown Executive: You may now.