Q3 2024 Customers Bancorp Inc Earnings Call

Operator: Thank you for standing by.

Thank you for standing by my name is Brianna and I will be your conference operator today.

Brianna: My name is Brianna, and I will be your conference operator today.

Brianna: At this time, I'd like to welcome everyone to the Customers Bancorp third quarter 2024 earnings call-in webcast. Please note that this call is being recorded. At this time, all participants are in a listen-only mode.

At this time I'd like to welcome everyone to the customers Bancorp third quarter 2024 earnings call and webcast.

Please note that this call is being recorded.

At this time all participants are in a listen only mode.

Brianna: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question during that time. Please press star followed by the number one on your telephone keypad.

Withdraw your question Press Star one again.

David Patti: I will now turn the conference over to Mr. David Patti with Customers Bancorp. Please go ahead, sir.

Speaker Change: I will now turn the conference over to Mr. David Patty with customers Bancorp. Please go ahead Sir.

David Patti: Thank you, Brianna, and good morning, everyone. Thank you for joining us for the Customer Bancorp Earnings webcast for Q3 2024. The presentation deck you will see during today's webcast has been posted on the investors webpage of the bank's website at www.customersbank.com. You can scroll to Q3 24 results and click download presentation. You can also download a PDF of the full press release at this 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 documentation.

David Patty: Thank you Briana and good morning, everyone. Thank you for joining us for the customer Bancorp's earnings webcast for Q3 2020 for.

David Patty: The presentation deck, you will see during today's webcast has been posted on the investors web page of the bank's website at Www Dot customers Bank Dot Com you can scroll to Q3, 'twenty four results and click download presentation.

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

David Patty: Our investor presentation includes important details that we will walk through on this mornings webcast I encourage you to download and use the document.

David Patti: 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, 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.

David Patty: 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.

David Patty: 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.

David Patty: 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.

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

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

Jay Sidhu: At this time, it is my pleasure to introduce Customers Bancorp Chair, Jay Sidhu. Thank you, Dave. And good morning, ladies and gentlemen, and welcome to the Customers Bancorp 2024 third quarter earnings call. Joining me this morning, our President and CEO of the bank, Sam Sidhu, and Customers Bancorp CFO, Phil Watkins. I will first provide a brief description about where the company stands at this time, followed by a detailed discussion by Sam and Phil.

Speaker Change: At this time it is my pleasure to introduce customers Bancorp chair Jay So do.

Okay.

Speaker Change: Thank you, Dave and good morning, ladies and gentlemen, and welcome to the customers Bancorp's 2024 third quarter earnings call.

Joining me this morning are president and CEO of the bank FEMSA do and customers Bancorp CFO Bill Watkins.

Speaker Change: We'll first provide a brief description about where the company stands at this time, followed by a detailed discussion by Sam and Phil.

Jay Sidhu: Customers Bancorp is a future-focused bank, and we are well-positioned to evolve from a regional community bank to a high-performing specialized commercial and business bank with a national presence in selected markets. Our deposit and loan generation model is very customer centric and not dependent on a traditional branch network. At the same time, we have developed technology solutions for our clients that resemble what clients would normally find at the largest banks in the nation, differentiating customers from traditional community banks.

Speaker Change: Customers Bancorp as a future focused bank and we are well positioned to evolve from with each node community Bank.

Speaker Change: Our high performing specialized commercial and business bank with a national presence in selected markets.

Speaker Change: And loan generation model is very customer centric.

Speaker Change: And not dependent on a traditional branch networks at the same time, we have developed technology solutions for our clients that resembled what clients would normally find at the largest banks in the nation.

Speaker Change: <unk> customers from traditional community banks.

Jay Sidhu: By the middle to end of 2025, we will have completed the base transformation of this bank into what we are calling a forward-thinking bank model with an ability to also show above average levels of profitability. We are confident in our ability to manage through these uncertain times that we are experiencing right now, and remain highly focused on executing our unique strategy. On the financial front, over the past year, we have reduced our asset sensitivity, significantly increased our capital level, maintained robust liquidity and always remained laser focused on the credit quality, which is a strength of this organization.

Speaker Change: By the middle to end of 2025, we will have completed the base transformation of this bank into what we are calling a forward thinking bank model within the ability to also show above average levels of profitability.

Speaker Change: We are confident in our ability to manage through this uncertain.

Speaker Change: Times that we're experiencing right now and remain highly focused on executing our unique strategy.

Speaker Change: On the financial front over the past year, we have reduced our asset sensitivity.

Speaker Change: Significantly increased our capital levels.

Speaker Change: Maintained robust liquidity.

Speaker Change: And always remain laser focused on the credit quality.

Speaker Change: Which is a strength of this organization.

Jay Sidhu: 2024 has been a transitional year for Customers Bank as we made investments in our future. first in hiring a A-plus deposit focused team. our various teams early in the year and more recently with a significant investment in technology in product improvement and our risk management infrastructure. We expect these investments to pay off in the coming quarters, giving us optimism about a strong trajectory in 2025 and beyond, supported by revenue growth and NIM expansion tailoring.

Speaker Change: 2024 has been a transitional year for customers bank as we've made investments in our future.

Speaker Change: And hiring E plus deposit focused.

Speaker Change: <unk>.

Speaker Change: Oh values teams early in the year and more recently with a significant investment in technology and product improvement and our risk management infrastructure.

We expect these investments to pay off in the coming quarters, giving us optimism about a strong trajectory in 2020 five and beyond.

Speaker Change: Boarded by revenue growth and NIM expansion tailwind.

Sam Sidhu: With that, I'll pass the call over to Sam on slide three, where he will start by providing some key highlights of the quarter. Thank you, Jay. And good morning, everyone. We continue to distinguish ourselves in the financial services Our unique and differentiated business model, particularly our dedication to customer success through a single point of contact approach, is contributing to our increase in holistic and strategic relationships. These relationships, combined with our entrepreneurial mindset, are fueling strong deposit and loan pipelines, contributing to our optimistic outlook for the remainder of this year and into next. The company's deposit transformation remains our top financial priority.

Speaker Change: With that I'll pass the call over to Sam on Slide three where he will start by providing some key highlights of the quarter.

Speaker Change: Yes.

Sam: Thank you Jay and good morning, everyone. We continue to distinguish ourselves in the financial services industry, our unique and differentiated business model, particularly our dedication to customer success through a single point of contact approach is contributing to our increase in holistic and strategic relationships. These relationships combined.

Sam: Find with our entrepreneurial mindset are fueling strong deposit and loan pipelines contributing to our optimistic outlook for the remainder of this year and into next.

Sam: The company's deposit transformation remains our top financial priority healthy high quality commercial deposit growth in the quarter enabled us to runoff less strategic commercial and consumer deposits. These deposit inflows demonstrate the positive momentum we have in fully transforming our deposit franchise.

Sam Sidhu: Healthy, high quality commercial deposit growth in the quarter enabled us to run off less strategic commercial and consumer deposits. These deposit inflows demonstrate the positive momentum we have in fully transforming our deposit franchise. Against the trends that most banks are experiencing right now, we once again generated strong, high-quality, diversified loan growth at a 16% annualized pace. While our reported net interest margin declined in the quarter, which Phil will walk through with a bridge later in the presentation, it's important to note that our base NIM was mostly stable, and we remain well positioned for net interest margin expansion over the medium term as a result of our strong net interest income growth expected next year.

Sam: Against the trends that most banks are experiencing right now we once again generated strong high quality diversified loan growth at a 16% annualized pace.

Sam: While our reported net interest margin declined in the quarter, which Phil will walk through with a bridge later in the presentation. It's important to note that our base NIM was mostly stable and we remain well positioned for net interest margin expansion over the medium term as a result of our strong net interest income growth expected next year.

Sam Sidhu: Our deposit transformation will be a key driver of this expansion. From an operational excellence perspective, while our core non-interest expense remains among the top quartile of our regional bank's peers, we did experience an increase in the quarter. The increase was driven by our continued investment in our people and talent, as well as costs associated with further improving our risk and compliance platform. But, as we always have, we remain highly focused on operating efficiently. Moving to tangible book value, we reached nearly $53 per share after generating 18% annualized growth in the quarter, which continues to be one of the best in the industry.

Sam: Our deposit transformation will be a key driver of this expansion.

Sam: From an operational excellence perspective, while our core noninterest expense remains among the top quartile of our regional bank peers, we did experience an increase in the quarter.

Sam: The increase was driven by our continued investment in our people and talent as well as costs associated with further improving our risk and compliance platform.

Sam: But as we always have we remain highly focused on operating efficiency.

Sam: Moving to tangible book value, we reached nearly $53 per share after generated an 18% annualized growth in the quarter, which continues to be one of the best in the industry over.

Sam Sidhu: over the past several years. Our capital levels have grown and remain robust as we opportunistically utilized a portion of our share repurchase authorization in the quarter at times when our share price was trading below tangible book value, and you should expect us to continue to do so if this persists. We also deployed capital into organic growth. Our liquidity metrics continue to be very strong. Credit quality remained a strong point for Customers Bank. We saw improvements across most credit metrics, including our NPA ratio improving to just 22 basis points, and special mention and substandard loans declined once again.

Sam: Over the past several years.

Sam: Our capital levels have grown and remain robust as we opportunistically utilized a portion of our share repurchase authorization in the quarter at times in our share price was trading below tangible book value and you should expect us to continue to do so if this persists.

We also deployed capital into organic growth, our liquidity metrics continued to be very strong.

Sam: Credit quality remained a strong point for customers bank.

We saw improvements across most credit metrics included in our NPA ratio improving to just 22 basis points and special mention and substandard loans declined once again.

Sam Sidhu: Finally, we remain very optimistic about our future with strong deposit and loan pipelines. We're in a unique position to continue to take commercial market share on a national scale. Our new banking teams are off to an excellent start and will serve to further accelerate and enhance these prospects.

Sam: Finally, we remain very optimistic about our future with strong deposit and loan pipelines were in a unique position to continue to take commercial market share on a national scale. Our new banking teams are off to an excellent start and will serve to further accelerate and enhance these prospects.

Sam Sidhu: Now let's turn to slide five, where I'll recap what makes Customers Bank a unique franchise. Here, I'd like to reemphasize the importance of having a unique and differentiated business model. in a highly competitive and at times commoditized Exceptional client service is the cornerstone of our culture and the key to our success. where our goal every day is to make our clients say wow. Our service model is driven by exceptional colleagues who are empowered to serve their clients. The current environment has allowed us to attract top talent across the organization. In addition to the new client facing team members we've invested in, we've also attracted new leaders and team members in such areas as credit, risk management, marketing, technology and operations to name a Our focus is on providing a sophisticated product offering delivered by exceptional bankers with deep industry expertise.

Sam: Now, let's turn to slide five where I'll recap what makes customers bank a unique franchise here.

Sam: Here I'd like to reemphasize, the importance of having a unique and differentiated business model.

Sam: In a highly competitive and at times Commoditized industry.

Sam: Exceptional client service is the cornerstone of our culture and the key to our success.

Sam: Where our goal every day is to make our clients say well our service model is driven by exceptional colleagues, who are empowered to serve their clients needs.

Sam: The current environment has allowed us to attract top talent across the organization.

Sam: In addition to the new client facing team members. We've invested in we've also attracted new leaders and team members in such areas as credit risk management marketing technology and operations to name a few.

Sam: Our focus is on providing a sophisticated product offering delivered by exceptional bankers with deep industry expertise. This focus allows us to provide our clients with the products and services typical of a larger bank, but with the service level of our private bank. We firmly believe this focus will allow us to be a top five competitor across all of our <unk>.

Sam Sidhu: This focus allows us to provide our clients with the products and services typical of a larger bank, but with the service level of a private bank. We firmly believe this focus will allow us to be a top five competitor across all of our verticals. I'll give you an example of this later in the presentation when we walk through the amazing progress we've made in our venture banking business in a very short period of time. Our strategy is anchored by a single point of contact service delivery model which drives organic growth, one relationship at a time.

Sam: Nichols I'll give you. An example of this later in the presentation when we walk through the amazing progress we've made in our venture banking business in a very short period of time.

Sam: Our strategy is anchored by a single point of contact service delivery model, which drives organic growth one relationship at a time, our strong relationships drive growth through a flywheel of repeat business and referrals.

Sam Sidhu: Our strong relationships drive growth through a flywheel of repeat business and referral. We have the scale required to meet the needs of our clients, but the entrepreneurial culture to adapt for them and deliver customized. Additionally, our branch light model allows us to invest in the people and technology necessary to meet our clients where they are both now and in the We remain focused on executing these areas which differentiate us from our peers, and we believe providing a truly exceptional service, sophisticated product offerings through a single point of contact delivery model will drive strategic organic.

We have the scale required to meet the needs of our clients, but the entrepreneurial culture to adapt for them and deliver customized solutions.

Sam: Additionally, our branch light model allows us to invest in the people and technology necessary to meet our clients, where they are both now and in the future.

Sam: We remain focused on executing in these areas, which differentiate us from our peers and we believe providing a truly exceptional service sophisticated product offerings through a single point of contact delivery model will drive strategic organic growth.

Sam Sidhu: Let's turn to slide six on financial highlights. Here you can see we delivered core earnings per share of $1.34 in the quarter on net income of $43.8 million. Our ROCE and ROAA were 10.7% and 89 basis points respectively. We generated strong growth in both loans and deposits. As I mentioned, 16% on loans and deposits increased by 9% annually. Most importantly, the credit quality remains stable as evidenced by our NPA, NPL and reserve levels as you can see here. While many other banks are experiencing some credit challenges, our strong credit culture and business model is shining through in the quarter.

Sam: Let's turn to slide six on financial highlights.

Sam: Here you can see we delivered core earnings per share of $1 34 in the quarter on net income of $43 8 million.

Sam: R. R O C E N R. O a were 10, 7% and 89 basis points, respectively. We generated.

Sam: Strong growth in both loans and deposits.

Sam: As I mentioned, 16% on loans and deposits increased by 9% annualized.

Sam: Most importantly, the credit quality remains stable as evidenced by our M. P. A N P L and reserve levels as you can see here.

Sam: While many other banks are experiencing some credit challenges our strong credit culture and business model is shining through in the quarter.

Sam Sidhu: These results also represent a transition period for us. While we face some headwinds in the quarter in terms of reported net interest margin and temporary elevated non-interest expenses, these are transitory and we have a strong fundamental base and improved trajectory and profitability moving forward. Additionally, you will notice in our press release that our pre-tax pre-provision income was impacted by transactions in our equipment finance vertical with corresponding dollar for dollar beneficial tax attributes that we closed on in the We are highly focused on and confident in returning to our ROE and ROA into the mid-teens and north of 1% respectively.

Sam: These results also represent a transition period for us.

Sam: While we faced some headwinds in the quarter in terms of reported net interest margin and temporary elevated noninterest expenses. These are transitory and we have a strong fundamental base and improved trajectory and profitability moving forward.

Sam: Additionally, you will notice in our press release that our pre tax pre provision income was impacted by transactions in our equipment finance vertical with corresponding dollar for dollar beneficial tax attributes that we closed on in the quarter.

Sam: We are highly focused on and confident in returning to our ROE and ROA into the mid teens and north of 1%, respectively. As our new banking teams breakeven and become profitable early next year, and we taper our elevated risk management investments achieving this would have the benefit of generate an EPS growth of 30% or more.

Sam Sidhu: As our new banking teams break even and become profitable early next year, and we taper our elevated risk management investment. Achieving this would have the benefit of generating EPS growth of 30% or more in 2025 off of a low base this year burdened by these investments. We are not short sighted and we know that long term investments may at times put pressure on short term reported results. We have and will continue to mitigate these and we're focused on long-term value creation for our shareholders.

Sam: In 2025 off of a low base. This year burdened by these investments we are not short sighted and we know that long term investments may at times put pressure on short term reported results.

Sam: We have and will continue to mitigate these and work and we're focused on long term value creation for our shareholders.

Sam Sidhu: Moving to slide seven. As I mentioned, our top financial priority remains to continue to execute on the next leg of our deposit transformation. This involves replacing less strategic and higher cost deposits with higher quality deposits. By quality, we mean a focus on a combination of primacy of relationship, cost, and granularity. We are thrilled with our deposit gathering performance in the quarter. We had gross deposit inflows of $1.1 billion, almost exclusively from our commercial client franchise. We utilize these deposits to pay down approximately $700 million in higher costs, less strategic deposits, mostly in our commercial franchise.

Moving to slide seven.

Sam: As I mentioned, our top financial priority remains to continue to execute on the next lever leg of our deposit transformation. This involves replacing less strategic and higher cost deposits with higher quality deposits.

Sam: By quality, we mean, a focus on a combination of primacy roke relationship cost and granularity.

Sam: We are thrilled with our deposit gathering performance in the quarter.

Sam: We had gross deposit inflows of $1.1 billion almost exclusively from our commercial client franchise. We utilize these deposits to pay down approximately $700 million and higher costs less strategic deposits, mostly in our commercial franchise.

Sam Sidhu: A large driver, about half of these inflows came from our new bank. These inflows were once again broad based with more than 25 deposit channels producing growth in the quarter. More than 70% of these channels experience growth of $25 million or more. Since the first quarter of 2023, newly hired banking teams have generated approximately $1.3 billion in granular, low-cost, holistic relationship-based deposits. This is approaching a 10% remix of our deposit base just from these new teams alone.

Sam: A large driver about half of these inflows came from our new banking teams.

Sam: These inflows were once again broad based with more than 25 deposit channels producing growth in the quarter.

Sam: More than 70% of these channels experienced growth of $25 million or more.

Sam: Since the first quarter of 2023 newly hired banking teams have generated approximately $1.3 billion and granular low cost holistic relationship based deposits.

Sam: This is approaching a 10% remix of our deposit base just from these new teams alone.

Sam Sidhu: Importantly, going forward. We anticipate these teams will hit their stride and we will continue to generate approximately $500 million or more of deposit growth per quarter providing tremendous lift to our franchise. The quality of the transformation we are experiencing can also really be seen in the number of commercial accounts at our bank. In the last year, we've added close to 4000 net new commercial net new accounts, which is more than a 25% increase in the deposit. All within a Flattish boundary. This is truly remarkable and really contextualizes the improvements in our franchise value I highlighted before.

Sam: Importantly, going forward.

Sam: We anticipate these teams will hit their stride and we will continue to generate approximately $500 million or more of deposit growth per quarter, providing tremendous lift to our franchise the.

The quality of the transformation. We are experiencing can also really be seen in a number of commercial accounts at our back in the last year. We've added close to 4000 net new commercial net new accounts, which is more than a 25% increase in the deposit base.

All within a flattish balance sheet.

Sam: This is truly remarkable and really contextualize the improvements in our franchise value I highlight before.

Sam Sidhu: It is understandable that this franchise value creation is not yet reflected in our share price, but as the investment fully pays off in the coming quarters, we expect a significant uptick in our profitability in the first half of 2025. The deposit remix we are undertaking is substantial, and as such, there are often timing differences between when new deposits enter the bank and when existing deposits exit. Since the regional banking crisis, we've averaged about a billion dollars in deposit inflows per quarter. Let me repeat that. Over six quarters, we've averaged about a billion dollars of deposit inflows per quarter.

Sam: It is understandable that this franchise value creation is not yet reflected in our share price, but as the investment fully pays off in the coming quarters, we expect a significant uptick in our profitability in the first half of 2025.

Sam: The deposit remix we are undertaking is substantial and as such they're often timing differences between when new deposits enter the bank and when existing deposits exit the bank.

Since the regional banking crisis, we've averaged about $1 billion in deposit inflows per quarter.

Sam: Let me repeat that over six quarters, we've averaged about a $1 billion of deposit inflows per quarter.

Sam Sidhu: The result of this transformation is a remix of our deposit base by more than 30%. We believe this high-quality, granular, organic deposit growth is number one in the industry. Finally, we continue to focus on the stability of the deposit franchise as insured collateralized and affiliate deposits end of the quarter at 75% of total deposits. This remains at the high end of the index.

Sam: The results of this transformation is a remix of our deposit base by more than 30%. We believe this high quality granular organic deposit growth is number one in the industry.

Sam: Finally, we continue to focus on the stability of the deposit franchise as insured collateralized and affiliate deposits ended the quarter at 75% of total deposits. This remains at the high end of the industry.

Sam Sidhu: Moving to slide eight, I want to take a minute to show the incredible success we've had in our venture banking vertical, which demonstrates the power of our team lift out capabilities and adds to our success story. We entered the venture banking space close to three years ago with a local team left out in Boston. The team was quickly successful in achieving deposit growth of nearly 100 million and loan growth of about 500 million by the first quarter of 2023. In June of last year, we took the business to the next level when we acquired a loan portfolio from the FDIC and brought in 30 new bankers to add to our existing team.

Sam: Moving to slide eight.

I want to take a minute to show the incredible success, we've had in our venture banking vertical which demonstrates the power of our team lift out capabilities and adds to our success stories.

Sam: We entered the venture banking space close to three years ago with a local team lift out in Boston. The team was quickly successful in achieving deposit growth of nearly 100 million and loan growth of about $500 million by the first quarter of 2023.

Sam: In June of last year, we took the business to the next level when we acquired a loan portfolio from the FDIC and brought in 30, new bankers to add to our existing team.

Sam Sidhu: We turned that local franchise mostly focused on late stage and growth companies into a national player with a presence in San Francisco, Los Angeles, Austin, Denver, Chicago, Raleigh, Washington, D.C., New York, and Boston, and importantly, from early stage to late stage with a top five market position already today. This vertical is now nearly a billion dollar business for us, which gives us the scale to compete, invest and deliver attractive returns for our shareholders. As of this quarter, the platform is essentially self funded and is working towards a two to one deposit to loan ratio over time.

Sam: We turned that local franchise, mostly focus on late stage in growth companies into a national player with a presence in San Francisco, Los Angeles, Austin, Denver, Chicago, Raleigh, Washington, D C, New York, and Boston and importantly from early stage to late stage with a top five market position already today.

Sam: This vertical is now nearly a 1 billion dollar business for us, which gives us the scale to compete invest and deliver attractive returns for our shareholders.

Sam: As of this quarter. The platform is essentially self funded and is working towards a two to one deposit to loan ratio overtime. We will we believe we will soon become a top three national competitor with this incredible team. We've assembled led by Ken few gate keep in mind Ken's team had more than $2 billion in deposits at their prior institution.

Sam Sidhu: We will we believe we will soon become a top three national competitor with this incredible team we've assembled led by Ken Fugate. Keep in mind, Ken's team had more than $2 billion in deposits at their prior we are confident that they'll be able to replicate that model at our bank.

Sam: We are confident that they'll be able to replicate that model at our back.

Sam Sidhu: This mirrors the track record we've had with teams that have joined customers bank over the last decade, and we are similarly confident we will continue the success with the new commercial banking teams that joined us just six months ago, which I'll cover on the next slide. Our new commercial banking teams have demonstrated impressive results in a very short period of time. They've generated about $370 million of relationship-based deposits growth in the quarter alone, bringing total deposits gathered to about $535 million at around a 2.9% blended deposit cost, importantly, with about 30% of these being non-interested.

Sam: This mirrors the track record we've had with teams that have joined customers bank over the last decade, and we are similarly confident we will continue the success with the new commercial banking teams that joined US just six months ago, which I'll cover on the next slide.

Sam: Our new commercial banking teams have demonstrated impressive results in a very short period of time, they have generated about $370 million of relationship based deposits growth in the quarter alone, bringing total deposits gathered to about $535 million at around a 2.9% blended deposit cost importantly, with about 30% of.

Sam: He's been noninterest bearing.

Sam Sidhu: In the quarter, an additional 2,000 new accounts were opened by these Similar to last quarter, only 20% of these accounts are materially funded. Because of the operational nature of these accounts, we are often experiencing at least a 30 to 90 day period between the account opening and when they are meaningfully funded and operational. The pace of account openings is now approximately 150 accounts per week, and we believe this will continue for the foreseeable future. I'm proud to update you that as of this week, the teams crossed $750 million in deposits managed while maintaining a similar rate and mix, which is really exciting and shows the strength of the deposit franchise we've built.

Sam: In the quarter and additional 2000, new accounts were opened by these teams similar to last quarter only 20% of these accounts are materially fund today.

Sam: Cause of the operational nature of these accounts, we are often experiencing at least a 30 to 90 day period between the account opening and when they are meaningfully funded and operational.

Sam: The pace of account openings is now approximately 150 accounts per week and we believe this will continue for the foreseeable future I'm.

Sam: I am proud to update you that as of this week the teams cross $750 million in deposits managed while maintaining a similar rate and mix, which is really exciting and shows the strength of the deposit franchise we've assembled.

Sam Sidhu: Despite tremendous growth, the deposit pipeline for our commercial banking teams has now grown as well and stands in excess of $2 billion. We will look to convert our pipeline as we have consistently done so over the past few quarters. Over the last six quarters, as you know, we have always been able to convert over a two to three quarter period our deposit pipeline and replenish it as well. Further, we have the confidence that we will continue to achieve about $500 million per quarter or more next year from these new deposits.

Sam: Despite tremendous growth to deposit pipeline for our commercial banking teams has now grown as well and stands in excess of $2 billion.

Sam: We will look to convert our pipeline as we have consistently done so over the past few quarters.

Sam: Over the last six quarters as you know we have always been able to convert over a two to three quarter period, our deposit pipeline and replenish it as well.

Sam: Further we have the confidence that.

That we will continue to achieve about $500 million per quarter or more next year from these new deposit teams.

Sam Sidhu: Finally, we remain on track for these banking teams to break even by the end of the first quarter of 2025 and expect to grow into their full deposit base from their prior institution over the next three years.

Sam: Finally, we remain on track for these banking teams to breakeven by the end of the first quarter of 2025 and expect to grow into their full deposit based on their prior institution over the next three years.

Sam Sidhu: On slide 10, you can see that we had about $520 million of high-quality, held-for-investment loan growth in the quarter. That's an additional $160 million increase from the $360 million of growth we had in the second Annualized loan growth, as I mentioned, was 16%. The loan growth in the quarter was granular and demonstrated by over 175 new lending relationships we established.

Sam: On Slide 10, you can see that we had about $520 million of high quality held for investment loan growth in the quarter. That's.

Sam: That's an additional $160 million increase from the $360 million of growth we had in the second quarter.

Sam: Annualized loan growth as I mentioned was 16% the loan growth in the quarter was granular and demonstrated by over 175, new lending relationships, we established to put that in perspective going back to franchise value. That's about a 4% increase across the franchise in just one quarter.

Sam Sidhu: To put that in perspective, going back to franchise value, that's about a 4% increase across the franchise in just one quarter. In addition to the 175 new relationships, about 40 existing relationships originated and funded loans in the Production was broad based. Our largest contributors were mortgage finance, geographic C&I, led by our new commercial banking teams, commercial real estate and equipment finance. Mortgage finance is experiencing green shoots from the market expectations of lower rates, and the MBA is expecting to see about a 30% increased activity in 2025. Customers Bank has a well oiled machine with deep long standing relationships in this vertical that will look to take advantage of this opportunity if it arises.

Sam: In addition to the 175, new relationships about 40 existing relationships originated in funded loans in the quarter.

Production was broad based our largest contributors were mortgage finance geographic C&I are led by our commit new commercial banking teams commercial real estate and equipment finance.

Sam: Mortgage finance is experiencing green shoots from the market expectations of lower rates and the MBA is expecting to see about a 30% increased activity in 2025.

Sam: Customers Bank has a well oiled machine with deep long standing relationships in this vertical that we'll look to take advantage of this opportunity if it arises.

Sam Sidhu: Given the high CRE concentration of our competitors in the industry, our relative low CRE concentration below 190% is proving to be a significant competitive advantage. With the pullback of competitors, we've had an opportunity to be very selective in growing our book with strong, long-term owners, and in many cases, multi-generational family businesses with significant expertise in commercial real estate. We are reserving this commercial real estate capacity where it drives value to the franchise and supports deposit growth. And we're seeing incredible results for the franchise. The loans themselves are also being executed at attractive terms given the lower competitive environment.

Sam: Given the high CRE concentration of our competitors in the industry are relative low CRE concentration below a 190% is proving to be a significant competitive advantage with the pullback of competitors. We've had an opportunity to be very selective in growing our book with strong long term owners and in many cases multi generational family.

Sam: <unk> businesses with significant expertise in commercial real estate.

Sam: We are reserving this commercial real estate capacity, where it drives value to the franchise and supports deposit growth and we're seeing incredible results for the franchise.

Sam: The loans themselves are also being executed at attractive terms, given the lower competitive environment.

Sam Sidhu: The new commercial real estate production this quarter is highly granular with an average loan size of approximately $7 million. Importantly, deposits gathered thus far from the investment pre-vertical exceeded the collective loan growth of about $180 million in the quarter. This is very atypical for CRE and a testament to the relationship-based market share we are acquiring and bucking industry trade.

Sam: The new commercial real estate production. This quarter is highly granular with an average loan size of approximately $7 million importantly deposits gathered thus far from the investment Cree vertical exceeded the collective loan growth of about $180 million in the quarter. This is very atypical for for CRE and a testament to the relay.

Sam: <unk> chip based market share, we are acquiring and bucking industry trends.

Sam Sidhu: You should expect similar deposit and loan growth in the vertical in the fourth quarter, given which given the typical fixed rate nature of this vertical will also have the added benefit of further reducing our assets.

Sam: You should expect similar deposit and loan growth in the vertical in the fourth quarter, given a gift which given the typical fixed rate nature of this vertical will also have the added benefit of further reducing our asset sensitivity.

Sam Sidhu: Our corporate and specialized verticals continue to deliver highly attractive risk adjusted yields targeting about SOFR plus 275 to 300 basis points all in. Our loan pipelines remain strong, with expected contributions for many of our lending verticals in the fourth quarter of 24 and into 2025. We are on track to achieve our full year loan growth of 10 to 15%, which translates to approximately $400 to $500 million of loan growth in the fourth quarter. That said, importantly, we continue to be very disciplined and focus on franchise enhancing safe organic loan. While our loan pipelines have only been enhanced by our new banking teams, they also provide highly granular credit facilities with average balances of roughly just $2 to $3 million per relationship.

Sam: Our corporate and specialized verticals continued to deliver a highly attractive risk adjusted yields targeting about sofa, plus 275 to 300 basis points all in.

Sam: Our loan pipelines remained strong with expected contributions from many of our lending verticals in the fourth quarter of 'twenty four and into 2025.

Sam: We are on track to achieve our full year loan growth of 10% to 15%, which translates to approximately $400 million to $500 million of loan growth in the fourth quarter.

Sam: That said importantly, we continue to be very disciplined and focus on franchise enhancing safe organic loan growth.

Sam: While our loan pipelines have only been enhanced by our new banking teams. They also provide highly granular credit facilities with average balances of roughly just $2 million to $3 million per relationship.

Phil Watkins: With that, I'd like to return the call over to Phil to provide some additional And good morning, everyone. On slide 11, we have provided the components of our net interest income, which was $159 million in the quarter, and our net interest margin, which was 3.0. While the reduction in net interest margin may appear larger, it was primarily driven by two key First, approximately 12 basis points was related to lower discount accretion from our acquired loan portfolio and lower prepayment income in the quarter compared to Q2 levels. While the accretion income has always been lumpy and a bit difficult to predict, we saw a notable slowdown in the accelerated accretion in Q3 and now expect that trend will continue going forward.

Speaker Change: With that I'd like to return the call over to bill to provide some additional detail.

Speaker Change: And good morning, everyone on slide 11, we have provided the components of our net interest income, which was $159 million in the quarter and our net interest margin, which was 3.6, while the reduction in net interest margin may appear larger was primarily driven by two key components.

Speaker Change: First approximately 12 basis points was related to lower discount accretion from our acquired loan portfolio and lower prepayment income in the quarter compared to Q2 levels while.

Speaker Change: While the accretion income has always been lumpy and a bit difficult to predict we saw a notable slowdown in the accelerated accretion in Q3 and now expect that trend will continue going forward.

Phil Watkins: Therefore, a majority of the remaining increase will likely come in 2025. Second, approximately seven basis points was due to proactive measures we took on the balance sheet including a consumer loan sale resulting in lower average loan balances and the securities portfolio repositioning we completed in Q2, which reduced asset sensitivity and increased high-quality liquid assets. These two components accounted for more than 80% of the net interest margin impact in the quarter. Further, our interest expense and cost of deposits increase as a result of strong deposit growth, specifically in the interest-bearing category. Having said that, with the timing impacts we have with the remixing of deposits and a declining rate environment, we should have more flexibility on interest-bearing funding costs in the future.

Speaker Change: Therefore, a majority of them remaining accretion will likely come in 'twenty five and beyond.

Speaker Change: Second approximately seven basis points was due to proactive measures, we took on the balance sheet and consume including our consumer loan sale, resulting in lower average loan balances and the securities portfolio repositioning, we completed in Q2, which reduced asset sensitivity and increased high quality liquid assets.

Speaker Change: These two components accounted for more than 80% of the net interest margin impact in the quarter.

Speaker Change: Further our interest expense and in cost of deposits increase as a result of strong deposit growth specifically in the interest bearing category, having said that with the timing impacts we have with the remixing of deposits and a declining rate environment, we should have more flexibility on interest bearing funding costs in the future.

Phil Watkins: It's also worth noting that in a downrate environment, like other banks, our loan yields will likely reprice faster than deposits. So there will be a slight lag in our ability to recapture net interest margin on the liability side. In Q4, we're looking for margin to be roughly flattish and then would look for expansion in 2025 as the as the effects of the continued deposit remix take hold and with the benefit of higher loan balance.

Speaker Change: It's also worth noting that in a down rate environment like other banks, our loan yields will likely re fast.

Speaker Change: Price faster than deposits. So there will be a slight lag in our ability to recapture net interest margin on the liability side of the balance sheet.

Speaker Change: In Q4, we're looking for margin to be roughly flattish and then we'd look for expansion in 'twenty five as the as the effects of the continued deposit remix take hold and with the benefit of higher loan balances.

Phil Watkins: Importantly, these efforts will add to our franchise value given the relationship based activity on both the loan and deposit front.

Speaker Change: Fortunately these efforts will add to our franchise value given the relationship based activity on both the loan and deposit front.

Phil Watkins: Moving to slide 12, we have provided perspectives on some of the unique positive drivers for NII and them going forward.

Speaker Change: Moving to slide 12, we have provided perspectives on some of the unique positive drivers for NII and NIM going forward.

Phil Watkins: Over the last 12 months, we have taken a number of actions to meaningfully reduce our asset sensitivity position, bringing us closer to neutral, though we do remain modestly asset sensitive, which is a headwind in the current environment. We continue to believe the majority of the opportunity for us will come from the liability side of our balance sheet, but we also see opportunities on the assets.

Speaker Change: Over the last 12 months, we have taken a number of actions to meaningfully reduce our asset sensitivity position, bringing us closer to neutral that we do remain modestly asset sensitive which is a headwind in the current environment.

Speaker Change: We continue to believe the majority of the opportunity for us will come from the liability side of our balance sheet, but we also see opportunities on the asset side.

Phil Watkins: The easiest way to drive margin growth in high rate environment is through reduction in deposit costs. We'll look to accomplish this as our deposit remix gains momentum as we bring in lower cost granular deposits to replace higher cost and more concentrated balance. Second is the opportunity to reprice time deposits lower with $680 million maturing in 2025 and another $500 million opportunity in 2020. Third is the proactive hedging strategy we implemented starting in Q2 that will begin to benefit us as we likely enter a lower rate in volume. And finally, we have the opportunity to reprice maturing fixed rate loans and originate the new high quality loan growth that Sam mentioned.

Speaker Change: The easiest way to drive margin growth and high rate environment is through reduction in deposit costs will look to accomplish this as our deposit remix gains momentum as we bring in lower cost granular deposits to replace higher cost and more concentrated balances.

Speaker Change: Second is the opportunity to re priced time deposits lower with $680 million maturing in 2025, and another $500 million opportunity in 'twenty six third.

Speaker Change: Third is the proactive hedging strategy, we implemented starting in Q2 that will begin to benefit us as we likely enter a lower rate environment.

Speaker Change: And finally, we have the opportunity to reprice maturing fixed rate loans and originate the new high quality loan growth.

Speaker Change: That Sam mentioned generally we target about a 275 to 300 basis point spread on new originations.

Phil Watkins: Generally, we target about a 275 to 300 basis point spread on new origin.

Phil Watkins: Let's turn to slide 13 to discuss non-interest expenses. Core non-interest expense increased by about $3 million in the Compensation and outside services were the main drivers of the The compensation increases were primarily related to new hires, including a full quarter for some of the newest team members we onboarded in Q2.

Speaker Change: Let's turn to slide 13 to discuss noninterest expenses.

Speaker Change: Core noninterest expense increased by about $3 million in the quarter compensation and outside services were the main drivers of the increase the.

Speaker Change: The compensation increases were primarily related to new hires including a full quarter for some of the newest team members we on boarded in Q2.

Phil Watkins: Our annual mid-year salary increases and some higher. As Sam mentioned, we are operating with about $8 to $10 million of expenses associated with our new team. However, the rent of the new benefits are only starting to impact our incomes.

Our annual midyear salary increases and some higher incentives.

Speaker Change: Sam mentioned, we are operating with about $8 million to $10 million of expenses associated with our new teams.

Speaker Change: Or the ramp of the new benefits are only starting to impact our income statement with the excellent progress we have seen from these teams in just the past few months, we are confident in their ability to breakeven within a year and then drive improved profitability in 'twenty five.

Phil Watkins: With the excellent progress we have seen from these teams in just the past few months, we are confident in their ability to break even within a year and then drive improved profitability in 25. Even with these higher levels of non-interest expenses, our core non-interest expense as a percent of average assets is still top quartile among our regional banks. Going forward, we expect some increase in Q4 driven in large part from the additional outside services we mentioned, as we work to expeditiously enhance our risk management infrastructure.

Speaker Change: Even with these higher levels of noninterest expenses, our core non interest expense as a percent of average assets is still top quartile among our regional bank peers.

Speaker Change: Going forward, we expect some increase in Q4 driven in large part from the additional outside services, we mentioned as we work to expeditiously enhance our risk management infrastructure.

Phil Watkins: These expenses will remain somewhat elevated for the next two quarters and then would be expected to normalize.

Speaker Change: These expenses will remain somewhat elevated for the next two quarters and that would be expected to normalize.

Phil Watkins: Moving on to slide 14. We do have numerous revenue and expense levers at our disposal that we will target to ensure we continue to deliver for our shareholders and allow us to, importantly, reinvest in our business. First, we see real opportunities to generate additional fee income, including from clients using our instant payments platform, as well as other products across the bank.

Speaker Change: Moving onto slide 14.

Speaker Change: We do have numerous revenue and expense levers at our disposal that we will target to ensure we continue to deliver for our shareholders and allow us to importantly, reinvest in our business first we see real opportunities to generate additional fee income, including from clients using our instant payments platform as well as other products across.

Speaker Change: The bank.

Phil Watkins: We also see opportunities to create expense savings across areas like consolidation in our tech stack, some application rationalization, and through some strategic realignment we're evaluating across the organization. Finally, at the end of this year, expenses associated with the new teams we mentioned, will transition to a performance based model with expenses tied to revenue generation as the business continues to mature.

Speaker Change: We also see opportunities to create expense savings across areas like consolidation in our tech stack, some application rationalization and through some strategic realignment, we're evaluating across the organization.

Speaker Change: Finally at the end of this year expenses associated with the new teams, we mentioned will transition to a performance based model with expenses tied to revenue generation as the business continues to mature.

Phil Watkins: In total, we will look for these revenue enhancements and expense savings to provide the resources to make these important investments in our future and position us for success, not just in the near term, but over the long term.

Speaker Change: In total we will look for these revenue enhancements and expense savings to provide the resources to make these important investments in our future and position us for success not just in the near term, but over the long term.

Phil Watkins: With that, I'll move on to slide 15. Our tangible book value increased to about $53 per share this quarter. This is up more than $2.25 per share, reflecting the nearly 18% annualized growth rate Sam mentioned. This is the sixth consecutive quarter since the beginning of 2023 of a double digit.

Speaker Change: With that I'll move on to slide 15.

Speaker Change: Our tangible book value increased to about $53 per share. This quarter. This is up more than $2 25 per share, reflecting the nearly 18% annualized growth rate. Sam mentioned this is the sixth consecutive quarter since the beginning of 2023 of a double digit increase.

Phil Watkins: Moving to slide 16, our capital ratios across the board remain robust and provide us with substantial flexibility for organic growth opportunities. At 12.5%, we remain in excess of our 11.5% CET1 target, and at 7.7% above our 7.5% TCE-TH. Our TCE ratio is relatively flat in the quarter and increased by approximately 120 basis points over the last year.

Speaker Change: Moving to slide 16, our capital ratios across the board remain robust and provide us with substantial flexibility for organic growth opportunities at.

Speaker Change: At 12, 5%, we remain in excess of our 11, 5% CET, one target and at seven 7% above our seven 5% TCE to Ta target.

Speaker Change: Our TCE ratio was relatively flat in the quarter and increased by approximately 120 basis points over the last year. We maintain this ratio while spending approximately $18 million of our organically generated capital to repurchase shares below tangible book value and with an increase in the size of our balance sheet.

Phil Watkins: We maintain this ratio while spending approximately $18 million of our organically generated capital to repurchase shares below tangible book value and with an increase in the size of our balance sheet. As planned, we deployed about 30 basis points of risk-based capital into strategic franchise-enhancing loan growth. We continue to believe this is the most valuable form of capital deployment for the bank.

Speaker Change: As planned we deployed about 30 basis points of risk based capital into strategic franchise enhancing loan growth. We continue to believe this is the most valuable form of capital deployment for the bank.

Phil Watkins: However, we will not hesitate to utilize the remaining share repurchase authorization, especially if it results in tangible book value and EPS accretion, which we view as two critical performance.

Speaker Change: We will not hesitate to utilize the remaining share repurchase authorization, especially if it results in tangible book value and EPS accretion, which we view as two critical performance metrics.

Phil Watkins: Moving on to slide 17. We remain focused on maintaining robust levels of liquidity as the environment remains Our coverage of immediately available liquidity to uninsured deposits remains extremely strong at 183%. Our HFI loan to deposit ratio continues to provide us with funding flexibility at only 76% compared to peers at 80%.

Speaker Change: Moving on to Slide 17, we will remain focused on maintaining robust levels of liquidity as the environment remains uncertain. Our coverage of immediately available liquidity to uninsured deposits remains extremely strong at 183%.

Speaker Change: Our <unk> loan to deposit ratio continues to provide us with funding flexibility at only 76% compared to peers at 88%.

Phil Watkins: Moving on to slide 18. I'll cover the credit trends in the quarter. As most of you know, a strong credit culture has always been a hallmark of our organization. The net result of the focus and concentrated efforts by the team, both at initial underwriting and through active portfolio management, really comes through in our credit performance. As Sam mentioned, our NPA ratio declined to just 22 basis points in the quarter. Net charge-offs also declined. To break that down a little further, total net charge-offs declined by about $1.7 million, or 9% in the aggregate, which was about six basis points.

Speaker Change: Moving on to slide 18, I'll cover the credit trends in the quarter.

Speaker Change: As most of you know a strong credit culture has always been a hallmark of our organization. The net result of the focused and concentrated efforts by the team both at initial underwriting and through active portfolio management really comes through in our credit performance statistics as Sam mentioned, our NPA ratio declined just 22.

Speaker Change: Two basis points in the quarter.

Speaker Change: Net charge offs also declined to break that down a little further total net charge offs declined by about $1.7 million or 9% in the aggregate.

Speaker Change: Which was about six basis points.

Phil Watkins: Our commercial net charge off rate declined to 24 basis points in the quarter, and consumer net charge-offs also decreased, bringing the consumer NCO ratio down to 2.51%. This is the second consecutive quarter that consumer NCOs have declined, which gives us additional confidence in the trend for the portfolio. The forward looking trends were also positive in the Special mention and substandard loans decreased by about 10%. This is the third consecutive quarterly decline in this level despite our growing commercial loan portfolio. We also saw improvements in 30 to 89 day delay.

Speaker Change: Our commercial net charge off rate declined to 24 basis points in the quarter and.

Speaker Change: And consumer net charge offs also decreased bringing the total bringing the consumer NCO ratio down to 2.51%. This is the second consecutive quarter that consumer NCS have declined which gives us additional confidence in the trend for the portfolio.

Speaker Change: The forward looking trends were also positive in the quarter special mention and substandard loans to crack decreased by about 10%. This is the third consecutive quarterly decline in this level. Despite our growing commercial loan portfolio. We also saw improvements in 30 to 89 day delinquencies and with that.

Sam Sidhu: And with that, I'll pass the call back over to Sam before we open up the line. Thanks, Phil.

Speaker Change: I'll pass the call back over to Sam before we open up the line for Q&A.

Sam: Thanks, Phil Thanks.

Sam Sidhu: Now to wrap up on slide nine. First, we remain committed to the transformation of our deposit franchise in terms of funding cost and quality of deposits and are pleased with this quarter's deposit gathering activity. The $1.1 billion in deposit inflows have allowed us to remix $700 million of less strategic deposits, providing future profitability lift. Our new banking teams and verticals across the franchise are driving steady momentum and deposit generation, and we anticipate similar amounts of remixing in the future. In fact, in the fourth quarter, we've already scheduled our remix opportunity.

Sam: Thanks, Phil not a wrap up on slide 19.

Sam: We remain committed to the transformation of our deposit franchise in terms of funding cost and quality of deposits and are pleased with this quarter's deposit gathering activity.

Sam: The $1.1 billion in deposit inflows have allowed us to remix $700 million of less strategic deposits, providing future profitability left.

Sam: Our new banking teams and verticals across the franchise are driving steady momentum in deposit generation and we anticipate similar amounts of remixing in the future in fact in the fourth quarter, we've already scheduled our remix opportunity pipelines from our new banking teams as has exceeded $2 billion and those are rebuilding steadily despite.

Sam Sidhu: pipelines from our new banking teams has exceeded $2 billion and those are rebuilding steadily despite deposits being on Fourth quarter 24 and beyond will be a tremendous period for customers bank as we enhance our commercial banking franchise.

Sam: <unk> been on board.

Sam: Fourth quarter, 'twenty, four and beyond will be a tremendous period for customers bank as we enhance our commercial banking franchise.

Sam Sidhu: Second, we delivered industry-leading loan growth in the quarter, outpacing other banks that are struggling to deliver at this pace in the current environment. Our focused corporate and specialized banking verticals offer multiple avenues for loan growth, allowing us to capitalize on the most robust opportunities with the most attractive prices. As highlighted earlier, our new commercial banking teams, mortgage finance, commercial real estate, and equipment finance divisions were key drivers of our success in the quarter.

Second we.

We delivered industry, leading loan growth in the quarter outpacing other banks that are struggling to deliver at this pace in the current environment.

Sam: Our focused corporate and specialized banking verticals offer multiple avenues for loan growth, allowing us to capitalize on the most robust opportunities with the most attractive pricing.

Sam: As highlighted earlier, our new commercial banking teams mortgage finance commercial real estate and equipment finance divisions were key drivers of our success in the quarter.

Sam Sidhu: Next, Phil discuss some of the specific drivers expecting NIM in the quarter and more importantly walk through the positive net interest income and NIM drivers and tailwinds we have in 2025. We are uniquely positioned as we have opportunities to enhance margin both through continued deposit remix and robust loan pipelines which will drive NII growth.

Speaker Change: Next bill discussed some of the specific drivers expecting NIM in the quarter and more importantly walk through the positive net interest income and NIM drivers and tailwind. We have in 2025, we are uniquely positioned as we have opportunities to enhance margin. Both through continued deposit remix and robust loan pipelines, which will drive NII growth next year.

Sam Sidhu: Finally, as previously stated, we believe tangible book value growth is a metric that is well aligned with creating long term shareholder value. We generated 18% book value growth in the quarter and strive to continue generating similar returns over time. To put this in perspective, our 15%... compounded annual book value growth rate over the past five years is about double the performance of top quartile banks with 10 to $100 billion. While we continue to be investment mode, it will taper and we expect to realize the payoffs in 2025 and beyond.

Speaker Change: Finally, as previously stated we believe tangible book value growth is a metric that is well aligned with creating long term shareholder value.

Speaker Change: We generated 18% book value growth in the quarter and strive to continue generating similar returns overtime.

Speaker Change: To put this in perspective, our 15%.

Speaker Change: Compounded annual book value growth rate over the past five years is about double the performance of top quartile banks with $10 billion to $100 billion in assets.

While we continue to be investment mode. It will taper and we expect to realize the payoffs in 2025 and beyond we look forward to providing you with our full management outlook for 2025 on our next earnings call in January and remain very optimistic about the future prospects of our company.

Brianna: We look forward to providing you with our full management outlook for 2025 on our next earnings call in January and remain very optimistic about the future prospects of our With that, we'd be happy to take your questions. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad to raise your hand and join the queue. To withdraw your question, please press star one again.

Speaker Change: With that we'd be happy to take your questions.

Speaker Change: If you have dialed in and would like to ask a question. Please press star followed by the number one on your telephone keypad to raise your hand and join the queue.

Speaker Change: To withdraw your question. Please press star one again.

Brianna: If you have dialed in and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

If you have dialed in and listening via loudspeakers on your device. Please pickup your handset and ensure that your phone is not on mute when asking a question.

Steve Moss: Our first question comes from the line of Steve Moss with Raymond James. Please go ahead.

Speaker Change: Our first question comes from the line of Steve Moss with Raymond James. Please go ahead.

Steve Moss: Have a good morning. of maybe just starting with the balance sheet remix here. You guys talked about the, you know, reducing asset sensitivity here. And just kind of curious, you know, kind of, was some of that done through swaps? Or, you know, was there a remix of the purchase of securities and sales securities, just kind of everything about your variable rate assets? And then, in relation to that, just kind of what are the early trends you guys are seeing for deposit price?

Steve Moss: Hi, good morning.

Steve Moss: Maybe just starting with the balance sheet remix here.

You guys talked about the reducing asset sensitivity here I'm just kind of curious.

Steve Moss: Well some of that done through swaps or was there a remix of the purchases of securities and sale of Securities just kind of.

We think about your variable rate assets and then in relation to that just kind of what are the early trends you guys are seeing for deposit pricing.

Sam Sidhu: Sure.

Speaker Change: Sure Hey, good morning, Steve So I'd say, there's there's two components to it some is on the organic side of the balance sheet, you've seen us increase fixed rate lending a bit here, but the major driver was going back in Q2, we highlighted that we put out in some forward.

Sam Sidhu: Hey, good morning, Steve. So, you know, I'd say there's two components to it. Some is on the organic side of the balance sheet. You've seen us in increased fixed rate lending a bit here, but the major driver was going back in Q2, we highlighted that we put on some forward starting swap hedges that are taking effect here in Q4 on the liability side, converting fixed to floating.

Steve Moss: Forward starting.

Swap hedges that were taking effect here in Q4.

Steve Moss: On the liability side converting fixed to floating and then I was we also mentioned that the securities portfolio repositioning was really trading out some.

Phil Watkins: And then I was, we also mentioned that the securities portfolio repositioning was really trading out some floating rate securities there for longer duration, fixed rate, high quality liquid assets, which both had the effect of increasing liquidity value, but also reducing asset sensitivity.

Steve Moss: Some floating rate floating rate securities there for longer duration fixed rate high quality liquid assets, which which both had the effective of increasing liquidity value, but also reducing asset sensitivity there.

Sam Sidhu: And, and Steve, I'll just jump in.

Speaker Change: And Steve I'll, just jump in firstly, sorry about Halloween yesterday with your young kids as a fellow father, I empathize that unfortunate where the last Thursday.

Sam Sidhu: Firstly, sorry about Halloween yesterday, with your young kids as a fellow father, I empathize that the unfortunate where the last Thursday fell, fell this year. But just to add, you also touched on the deposit pricing. You know, I think that, you know, to kind of give you a little bit of color of the remixing, and I'm sure we're happy to touch on this a little bit later, as we sort of just talk about sort of the trajectory, what's important is, is that, you know, the 1.1 billion came in at sort of the low threes on a blended basis, we talked about the team component of that the new team component of that was below three, and also had sort of the non interest bearing component component as well.

Speaker Change: Fell this year, but just add you also touched on the on deposit pricing.

I think that to kind of give you a little bit of color of the remixing.

Speaker Change: We're happy to touch on this a little bit later as we sort of just talk about sort of the trajectory. What's important is is that you know the 1.1 billion came in at sort of the low threes on a blended basis, we talked about the team component of that the new team component of that was below three.

Speaker Change: And also had sort of the noninterest bearing component component as well.

Speaker Change: The 700 million that we remix to put us in perspective.

Sam Sidhu: The 700 million that we remixed, to put this in perspective, was at 5.25%. I also talked about, you know, that we've scheduled in the Q4, it's at least 500 million that we've scheduled with, with, you know, with larger, higher cost, and in some cases, brokered customers, to be able to, to remix, that is at today's rates, about 4.7%. So to kind of put this in perspective, it really gives some context to this tremendous remix that's going on.

Speaker Change: Was at 5.25%.

Speaker Change: I also talked about.

Speaker Change: Note that we have scheduled in the Q for us it's at least 500 million that we've scheduled with the.

Speaker Change: With larger higher cost.

Speaker Change: And in some cases brokered customers.

Speaker Change: To be able to to remix that is at todays rates about four 7% so to kind of put us in perspective, it really give some context to this tremendous remix that's going on the timing is not perfect like I said, we're scheduling the fourth quarter based on three third quarter.

Sam Sidhu: The timing is not perfect. Like I said, we're scheduling the fourth quarter based on three, third quarter, you know, deposit generation.

Deposit generation.

Steve Moss: Okay, appreciate that, that color, Sam, and at least Halloween was a success.

Speaker Change: Okay appreciate that that color salmon at least Halloween was a success.

Steve Moss: In terms of just the in terms of the deposit gathering here, you know, you guys highlight the 3000 accounts that you've opened, just kind of curious, maybe give us a little color as to like the average size, you know, do these tend to be the larger accounts in the early going? Is there or is there more granularity? Just kind of curious how, if there's anything you can really give us there. Yeah, sure, Steve, I'm happy to, you know, provide a little bit of color. I don't have the exact average size, but you can kind of get a sense of how many accounts have been funded relative to the, you know, 300 and I believe it was 360 million plus or minus that was added in the quarter that was on an earlier slide.

Speaker Change: In terms of just the.

Speaker Change: In terms of the deposit gathering here.

You guys highlight the 3000 accounts.

Speaker Change: That you've opened just kind of curious maybe give us a little color as to like the average size.

Speaker Change: Do these tend to be the larger accounts in the early going is there or is there more granularity just kind of curious how if there's anything incremental you can give us there.

Yeah sure Steve I'm happy to provide a little bit of color I don't have the exact average size, but you can kind of get a sense of how many accounts have been funded relative to the 300 and I believe it was $360 million plus or minus that was added in the quarter that was on an earlier slide so you get a sense of of of what the average size of.

Steve Moss: So you get a sense of what the average size is through that. And we're happy to sort of give a little bit of a follow up, but it's extremely granular and continues to remain at that 30%, you know, non interest bearing ratio. And what's interesting about this is, is that, you know, a lot of these smaller accounts, which is the average is, you know, somewhere in that sort of couple hundred thousand ish type range, we do have some, you know, customers that have, you know, five to $10 million of DDA, typically folks that have expenses or payroll kind of in that, you know, $40 million range a year, sort of sort of thinking about one to two months of operating accounts that sit with us.

Through that and we're happy to sort of give a little bit of a follow up but it's extremely granular and continues to remain at that 30%.

Speaker Change: Noninterest bearing.

Speaker Change: Ratio and what's interesting about this is is that you know a lot of these smaller accounts, which as you know if the average is somewhere in that sort of couple of hundred thousand ish type range, we do have some <unk>.

Speaker Change: Customers that have <unk>.

Speaker Change: $5 million to $10 million of DDA typically folks that have expenses are payroll kind of in that.

Speaker Change: $40 million range a year, so we're sort of thinking about one to two months of <unk> of operating accounts that sit with us but these are highly granular there typically geographically focused in sort of the top tier what markets that we're focused on especially with his team recruiting so think of it as sort of New York City Metro as.

Steve Moss: But these are highly granular. They're typically geographically focused in sort of the top tier markets that we're focused on, especially with this team recruiting. So think of it as sort of New York City Metro, as well as our West Coast teams. And, you know, we were thrilled about the commercial real estate opportunities that we're seeing here as well.

Speaker Change: As well as our our west coast teams.

Speaker Change: We were thrilled about the commercial real estate opportunities that we're seeing here as well.

Steve Moss: Okay, great.

Speaker Change: Okay, Great appreciate all the color and I'll step back in the queue.

Steve Moss: Appreciate all the color and all a step back in the queue.

Kelly Motta: Our next question comes from the line of Kelly Motta with KBW. Please go ahead.

Speaker Change: Our next question comes from the line of Kelly Motta with <unk>. Please go ahead.

Kelly Motta: Hi, good morning. Thanks for the questions. You know, maybe piggybacking off of the deposit remix story, I appreciate the color around what the new teams brought in versus what came off, but I'm surprised to see that deposit costs all in didn't actually change that much. Can you help just Reconcile the dynamic there as to why, why we're not seeing that fall to the bottom line at this point. And what gives you confidence that that's clearly a driver ahead of the NII growth you're seeing.

Kelly Motta: Hi, good morning, Thanks for the question.

Kelly Motta: Maybe piggybacking off of that.

Speaker Change: The deposit remix story.

Any color around.

Speaker Change: What about the new team brought in versus what came on.

Speaker Change: I'm surprised to see that deposit costs, all lingo actually it all that much.

Can you help just.

Speaker Change: Reconcile the dynamic there as to why why we're not seeing that fall to the bottom line at this point and what gives you confidence that.

Speaker Change: That's clearly a driver ahead of the NII growth you're seeing thank you.

Phil Watkins: So just kind of the dynamics there and when we should start seeing that really start to pull through.

Speaker Change: The dynamics bearing word artful.

Really start to pull through.

Phil Watkins: Sure. Hey, good, good morning, Kelly. And thanks for the question.

Speaker Change: Sure Hey, good morning, Kelly and thanks for the question.

Phil Watkins: Yeah, I think there's, there's a couple of components there. So one, definitely the Sam, you know, highlighted some of the timing of the the remix. So if you look, we, we actually had about a, you know, over $400 million increase in our average interest bearing deposit accounts. And so obviously, that's, you know, overall helping while while creating great long term value, you know, doesn't immediately, doesn't immediately sort of drag down the interest expense there.

Speaker Change: Yes, I think there's a couple of components there. So one definitely the Sam highlighted some of the timing of the remix. So if you look we we actually had about a <unk>.

Speaker Change: Over $400 million increase in our average interest bearing deposit accounts and so obviously, that's you know overall, helping wow, while creating great long term value.

Speaker Change: Immediately.

Speaker Change: That doesn't immediately sort of drive down that the interest expense there and then I think there is an element as well some of these new accounts that are on boarded you can imagine that in a.

Phil Watkins: And then, you know, I think there, there is an element as well, some of these new accounts that are onboarded, you can imagine that in a, if they're very, very recently onboarded, makes it a bit more difficult to, you know, immediately drop them with a rate cut, but gives us more of that opportunity, you know, opportunity going forward. And then, you know, there, there are some of these that are coming from, you know, an organization's organizations that are are paying higher rates. And so while we don't pay to that rate, you know, sometimes there's a bit of a customer acquisition cost associated, but drives incredible long term franchise value.

Speaker Change: They're very very recently on boarded makes it a bit more difficult to.

Speaker Change: Immediately dropped them with a rate cut but gives us more of that opportunity.

Speaker Change: You know opportunity going forward and then there are some of these that are coming from and organizations organizations that are are paying higher rates and so while we don't pay to that rate sometime.

Speaker Change: Sometimes there's a bit of a customer acquisition cost associated but drives incredible long term franchise value.

Speaker Change: Okay.

Phil Watkins: I would, I would just add to that, Kelly, you know, just to sort of to really just simplify, you also, you know, I think you touched on funding costs to kind of complete the picture, you know, from a margin perspective, I think, well, our loan, our loans were significantly higher, you know, on a spot basis, you know, if you actually look at our average loan balances, you can probably see that given sort of Q3, August being slow, a lot of these loans came in in the month of September, from a growth perspective. In fact, we were actually lower in the month of July, on an average loan basis with some payoffs that were, you know, unexpected, and sort of we caught up.

Speaker Change: And I would I would just.

Speaker Change: Add to that Kelly just to sort of to really just simplify you also I think you touched on funding cost to kind of complete the picture from a margin perspective, I think what our loan or loans were significantly higher.

On a spot basis, you know if you actually look at our average loan balances you can probably see that given sort of Q3 August being slow a lot of these loans came in in the month of September from a growth perspective.

Speaker Change: In fact, we were actually lower in the month of July on an average loan basis with some payoffs that were.

Speaker Change: Unexpected and so it's sort of we caught up so that's the other side of the story, that's important to contextualize as well.

Phil Watkins: So that's the other side of the story that's important, you know, to contextualize. Got it.

Got it.

Kelly Motta: That's helpful.

Kelly Motta: And then, can you also help reconcile, you know, I appreciate there's a lot of dynamics moving around, and the slides are helpful. But it sounds like margin, at least near term, is flat. And I think we were looking at sort of the mid-330s before.

Speaker Change: That's helpful.

Speaker Change: And then.

Speaker Change: Can you help reconcile.

Speaker Change: Appreciate there's a lot of dynamics moving around and that the slides are helpful.

Speaker Change: But it sounds like margins.

Speaker Change: Herman is flat and I think we're looking at sort of the mid <unk>.

Speaker Change: <unk> journey before can.

Phil Watkins: Can you walk us through kind of what changed, one, and what gives you confidence that, you know, we can see some expansion off that. you know, underlying that 45 to 90 million of NII growth that you guys pointed out in your slides.

Speaker Change: Can you walk us through kind of what <unk>, one and market confidence.

Speaker Change: Yeah.

Speaker Change: You can see that on.

Speaker Change: Underlying that 45 to 90 million of NII growth that you guys pointed out in the slides.

Phil Watkins: Sure, yeah. So Kelly, I think, you know, there is a component of it, which we highlighted there, which we highlighted regarding the accelerated discount accretion. So you did see our, you know, loan yields, you know, come down meaningfully. And what we have been experiencing that portfolio, just given the the high touch nature of these types of credits was more recent, sort of more consistent sort of activity where it would need either refinance or some type of capital event that caused that to accelerate. You know, we really saw that and we were expecting more of that to continue into Q3 and Q4.

Speaker Change: Sure Yes.

So Kelly I think.

Speaker Change: There is a component of it which we highlighted there which we highlighted regarding the.

Speaker Change: Accelerated discount accretion so you did see our loan yields.

Speaker Change: Come down meaningfully and what we have been experiencing that portfolio just given the.

Speaker Change: The high touch nature of these types of credits.

Speaker Change: Was more recent sort of more.

Consistent sort of activity, where it would need either refinance or or.

Speaker Change: Some type of a capital event that caused that to accelerate and we really saw that and we were expecting more of that to continue into Q3 and Q4, but we've seen it now settle into a to a much more.

Phil Watkins: But we've seen it now, you know, settle into a, you know, to a much more you know, much more normalized level.

Much more normalized level and then obviously, we mentioned some of the proactive actions that we decided to take that we think are the right rate for the business long term, but do come with some of the expense on the short term side.

Phil Watkins: And then obviously, we, you know, mentioned some of the proactive actions that that we decided to take that we think are the right, you know, right for the business long term, but do come with some of the expense on the short term side, you know, and I guess what I would say, kind of looking, you know, looking forward Um, you know, as you said, there's a number of levers on on both sides of the balance sheet, so a lot of moving pieces. But I think it's really, again, going to continue to be driven by the what we're seeing on on the deposit side and the opportunity, you know, the opportunities there that that including what Sam already walked.

Speaker Change: Guess, what I would say kind of looking.

Speaker Change: Looking forward.

Speaker Change: Yeah, as you said Theres a number of levers on on both sides of the balance sheet. So a lot of moving pieces, but I think it's really again going to continue to be driven by what.

Speaker Change: What we're seeing on the deposit side and the opportunity the opportunities there.

Speaker Change: Net debt, including what Sam already walked through.

Sam Sidhu: If I could also jump in, you know, Kelly, I think that just as a reminder to go back, you know, over the past less than two years in a rising rate environment, we've increased our NIM from a low point of 2.8 plus or minus, you know, to north of 3, with more tailwinds to go. And I think that's really what the purpose of the slide is. Obviously, it's a little bit early in our strategic planning process. We're giving a little bit of a preview. I think it was important. As Phil mentioned, we had expected the bridge on the accretion to continue through the remainder of this year.

Speaker Change: If I could also jump in you know Kelly I think that just as a reminder to go back over the past less than two years in a in a rising rate environment. We we've increased our NIM from a low point of two eight plus or minus to north of three with more tailwind to go and I think that's really what the purpose of the slide is obviously, it's a little bit earlier.

Speaker Change: Strategic planning process, we are giving a little bit of a preview I think it was important.

Speaker Change: Phil mentioned, we had expected the bridge on the accretion to continue through the remainder of this year as those as that NII had left really started to ramp up.

Sam Sidhu: As that NII lift really, you know, started to ramp up in 2025.

Speaker Change: In 2025.

Yeah.

Kelly Motta: Thanks so much. I'll step back.

Speaker Change: Thanks, so much I'll step back.

Frank Schiraldi: Our next question comes from the line of Frank Schiraldi with Piper Fandler. Please go ahead.

Our next question comes from the line of Frank Schiraldi with Piper Sandler. Please go ahead.

Frank Schiraldi: Morning. I'm just curious if you can, I hate to beat a dead horse on the deposits, but obviously an interesting part of the story here. And just if we think about that 500 million, I think you guys spoke about as being onboarded, maybe quarterly. If that's coming from the, thinking that's coming from the new deposit teams, and you guys talk about an average cost of 2.9%, I think on what's come over already. I believe that's how we should look at it.

Speaker Change: Good morning.

Speaker Change: I'm just.

Frank Schiraldi: Just curious if you can I hate to beat a dead horse on the deposit, but obviously are interesting part of the story here and.

Speaker Change: Just if we think about that $500 million I think you guys spoke about us being on boarded maybe quarterly.

Speaker Change: If that's coming from the thinking that is coming from the new deposit teams and you guys talk about an average cost of two 9% I think on what's come over already.

Believe that how we should look at it but just if that's right are those.

Frank Schiraldi: But just if that's right, are those, you know, the stuff you expect to come over in 4Q and beyond, is kind of the pricing at the current time at least comparable? And how do you expect that steps down with additional rate cuts? I guess what's the implied beta there? Sure, absolutely.

Speaker Change: The stuff you expect to come over into <unk> and beyond is kind of the pricing at the current.

Time at least comparable and how do you expect that steps down with additional rate cuts I guess, what's the.

Speaker Change: <unk> data there.

Speaker Change: Sure absolutely good morning, Frank I'd be happy to take that so.

Frank Schiraldi: Good morning, Frank. I'd be happy to take that. So first part of your question, you know, sort of addressing sort of what we're seeing today and continue to see. It's at the same levels relative to Fed Funds. So we were, you know, around three and now we're sort of, you know, below three on a blended basis.

Speaker Change: So first part of your question sort of addressing sort of what we're seeing today and continue to see.

Speaker Change: It's at the same levels relative to to fed funds. So we were around three and now we're sort of below.

Below three on a blended basis, we are seeing a little bit of customer acquisition cost or as an example, we're not reducing costs on folks that entered the bank in September <unk> September 15th within weeks of one two or three weeks or even 123 months necessarily immediately because we are in some cases made some very short term commitments and at the end of.

Sam Sidhu: We are seeing a little bit of customer acquisition cost or, you know, as an example, we're not reducing costs on folks that entered the bank on September 1, September 15, you know, within weeks of, you know, one, two, three weeks, or even one, two, three months necessarily, immediately, because we've, in some cases, made some very short-term And at the end of the day, those will sort of help us with a higher beta from a catch-up perspective as the quarter, you know, progresses and we get into, as we get into next year. You know, I think that what's also important about these, you know, these relationships is that that non-interest bearing component continues to remain at those levels.

Speaker Change: Today, those will sort of help us with a higher beta from a catch up perspective, as the quarter progresses, and we get into as we get into next year.

Speaker Change: I think that what's also important about these are these.

Speaker Change: These relationships is that that noninterest bearing component continues to remain at.

Sam Sidhu: And I think what, you know, as you sort of think about that, as it picks up pace at this $500 million per quarter, you know, sort of guidance that we're providing, which is going to sort of be, you know, beginning this quarter and into next, you know, is really going to help us actually, you know, provide a tailwind on if there is, as other banks are seeing, continued negative non-interest bearing makeshift. We actually have positive non-interest bearing sort of makeshift, you know, headwinds as we are replacing 100% interest bearing deposits, you know, with these new deposits that are coming on.

Speaker Change: At those levels and I think what as you sort of think about that as it picks up pace at this $500 million per quarter.

Sort of guidance that we're providing which is going to sort of be beginning this quarter and into next.

Speaker Change: It's really going to help us actually provide a tailwind on.

Speaker Change: On if there is as high as other banks are seeing continued negative noninterest bearing mix shift we actually have positive noninterest bearing sort of mix shift headwinds as we are replacing 100% interest bearing deposits.

Frank Schiraldi: So hopefully I covered everything that you'd asked, but let me know if I missed anything.

With these new deposits that are coming on so hopefully I covered everything that you asked but let me know if I missed anything.

Frank Schiraldi: I think that's, I mean, just in terms of the beta, you think it's, is this mostly priced off of Fed Fund stuff that's coming on and you see a pretty good gap down as rates are cut? Yep, that's right. So kind of looking at the interest bearing component, which is 70% of that, you can sort of gross it up, it shows that we're sort of in the mid to high threes on an interest bearing component, those deposits, that sort of relative spread to Fed funds is what you should expect on the on the way down.

Speaker Change: I think that's just in terms of the beta you think.

It's mostly priced off of fed pumped stuff, that's coming on and you see a pretty good gap down.

Speaker Change: Great.

Speaker Change: Yeah, that's right so.

Speaker Change: So kind of looking at the interest bearing component, which is 70% of that you can sort of gross it up it shows that we're sort of in the mid to high threes on an interest bearing component of those deposits that sort of relative spread to fed funds is what you should expect.

Speaker Change: On the way down and these are these customers expect that over time at the end of the day. If you remember the noninterest bearing component and just the general relationship component of these deposits is.

Frank Schiraldi: And these, these customers, you know, expect that over time, at the end of the day, you have to remember the non interest bearing component, and just the general relationship component, these deposits is high service, primary, holistic relationship deposits. And it's because of the service that we're providing, because the breadth of our products and services that we're providing, because of the technology that we're providing, that earns us those non interest bearing deposits, and the interest bearing deposits are, are quote, unquote, our, you know, whatever we determined from a competitive market standpoint, as but as these customers continue to stay at the bank longer, they blend to the rest of our platforms, interest bearing deposit costs.

Speaker Change: Hi service primary holistic relationship deposits and.

Speaker Change: It's because of the service that we're providing because the breadth of our products and services that we're providing because of the technology that we're providing that earns us those noninterest bearing deposits and interest bearing deposits are our quote unquote hour.

Speaker Change: Whatever we determined from a competitive market standpoint, as but as these customers continue to stay at the bank longer.

Speaker Change: Blend to the rest of our platforms.

Speaker Change: Platforms are interest bearing core deposit costs.

Frank Schiraldi: Okay, and then just recognizing that you're going to provide, you know, 2025 guidance down the road here, just curious, you know, you talked about the stuff coming off and deposits coming off in the fourth quarter at much higher prices. If we still expect maybe, you know, sort of 500 million in deposit growth quarterly from the new teams, the new commercial teams from venture, is that a decent bogey for total balance sheet growth next year? Or is there still plenty of remixing to this? Thanks, Frank. So good question. And what I would say is it's the latter.

Speaker Change: Okay, and then just recognizing that youre going to provide 2025 guidance.

Speaker Change: Down the road here just curious you know you talked about the.

The stuff coming off in deposits coming off in the fourth quarter at much higher prices.

We still expect maybe sort of $500 million in deposit growth quarter in the new.

Speaker Change: And then from the new teams the new commercial teams.

Speaker Change: From venture.

Speaker Change: Is that a decent bogey for total balance sheet growth next year or is there still plenty of remixing to them.

Speaker Change: Thanks, Frank So good question and what I would say is if it's the latter so I'll start with attitude to where we're going to continue to remix for a couple of quarters that gives you a sense of the gross inflows on.

Sam Sidhu: So I'll start with that. It's what we're going to continue to remix for a couple of quarters. That gives you a sense of the gross inflows, you know, on slide 12 or 13, whichever that sort of NII slide was, it gives you perspective on the on the remix lift that we're getting as those deposits come in.

On slide 12, or 13, whichever that sort of NII slide was it gives you a perspective on the on.

Speaker Change: The remix lift that we're getting as those deposits come in and.

Sam Sidhu: And then eventually, you're absolutely right, you're going to see, you know, balance sheet increase once we're complete with our deposit remix, we'll be able to give you a little bit more color in January as to how we're thinking about that for 2025. But just for a moment, take a look at the the absolute numbers, you know, billion dollars of deposit growth in the quarter, $500 million, roughly, of loan growth in the quarter, that is the power of this franchise as we continue on going forward as our deposits are growing at a faster pace than even best in class industry, you know, loan growth.

Speaker Change: And then eventually you're absolutely right youre going to see balance sheet increase once we're complete with our deposit remix will be able to give you a little bit more color in January as to how we're thinking about that for 2025, but just for a moment take a look at the absolute numbers of $1 billion of of deposit growth in the quarter 500 million on a rough.

Speaker Change: <unk> of loan growth in the quarter that is the power of this franchise as we continue on going forward as our deposits are growing at a faster pace than even best in class industry.

Speaker Change: Loan growth.

Sam Sidhu: Great.

Frank Schiraldi: And if I could just sneak one last one in just in terms of the growth in outside services, this quarter, you talked about the compliance investments, you mentioned the elevated levels over the next couple of quarters, just any sort of guardrails you can put around that? Should we expect sort of similar levels for the next two and then a step down?

Great and if I could just sneak one last one in just in terms of the growth in outside services. This quarter, you talked about the compliance investments.

Speaker Change: You mentioned the elevated level over the next couple of quarters, just any sort of guardrails you can put around that should we expect sort of similar levels for the next two and then a step down.

Phil Watkins: Yeah, hey, Frank. So yeah, I think we we'd expect it, you know, obviously, you can sort of in some ways, think of it a little bit like a bell curve. So a little bit lighter early on, we'd expect it to, you know, step up this quarter, and then in into next quarter before we look for it to sort of normalize, come back, you know, start to come back down the other side of the bell.

Speaker Change: Yeah, Hey, Frank So, yes, I think we would expect it obviously in sort of in some ways to think of it a little bit like a bell curve. So a little bit lighter early on we'd expect it to step up this quarter.

Speaker Change: And then in into next quarter before we look for to sort of normalize come back start to come back down the other side of the bell curve.

Sam Sidhu: And if I could just, you know, add to that, you know, Frank, you know, I think that these are, as you heard me say, I want to reemphasize this, these are, you know, franchise enhancing investments, you know, that we're making across the board, whether it's the new teams, whether it's the investment in sort of risk and compliance and technology. And, you know, from Phil's comments, you're going to see slightly elevated in the fourth quarter, taper off in the in the first quarter, given that sort of bell curve. And then you're going to see our knowledge expenses drop in the second quarter, we'll provide more color on this.

Speaker Change: And if I could just add to that Frank and I think that these are as you heard me say I want to reemphasize that these are.

Speaker Change: Franchise enhancing investments that we're making across the board whether it's the new teams, whether it's the investment in sort of risk and compliance and technology and from Phil's comments youre going to see slightly elevated in the fourth quarter taper off in the in the first quarter given that sort of bell curve.

Speaker Change: And then youre going to see our noninterest expenses drop in the second quarter, we will provide more color on this.

Sam Sidhu: You know, in January as to how to think about this as but, you know, it's important to think about sort of the our efficiency ratio targets that we provided. Yes, this has slowed us down, you know, these, these investments, but we're committed to the to those targets of first getting to, you know, 50% or below. And then, you know, the mid 40s type efficiency ratio and being a branch light bank, and being in businesses with high operating leverage and, and deposit focused teams, you know, really helps us achieve those goals. Great. Okay.

Speaker Change: In January as to how to think about there says, but it's important to think about sort of the our efficiency ratio targets that we provided yes. This has slowed us down.

Speaker Change: These are these investments, but we're committed to the to those targets of first getting to.

Speaker Change: 50% or below and then the mid Forty's type efficiency ratio and being a branch light bank and being in businesses with high operating leverage in <unk>.

And deposit focused teams really helps us achieve those goals.

Speaker Change: Right. Okay. Thank you for the color.

David Bishop: Thank you for the call.

David Bishop: Our next question comes from the line of David Bishop with Hovde Group.

Speaker Change: Our next question comes from the line of David Bishop with Husky Cup. Please go ahead.

David Bishop: Please go ahead. Hey, good morning, gentlemen.

Speaker Change: Hey, good morning, gentlemen.

David Bishop: Hey, just curious, staying on that topic on expenses, notice the uptick in salary and benefits.

David Bishop: Just curious then on that topic on.

The uptick in salary and benefits.

Phil Watkins: Does this look like a pretty good run rate into the fourth quarter in 2025? sort of fully reflective of the team you had hired in the second quarter of the year.

David Bishop: It looks like a pretty good run rate into the fourth quarter in 2025.

Speaker Change: So on a fully reflective of the team.

David Bishop: <unk>.

David Bishop: You had hired in the second quarter of the year.

Phil Watkins: Hey, hey, Dave, good morning. Yeah, I think, you know, it's, it's now, you know, now does sort of fully, fully capture that, I guess, the only thing I'd, I'd mentioned kind of going into next year, we did, you know, mentioned the shift, then eventually towards the the shift towards the profit based plan from, you know, from an incentive standpoint. So, you know, obviously, those, you know, those have impacts as well. But, but, but yeah, reasonable starting point.

Speaker Change: Hey, Hey, Dave Good morning.

Dave: Yes, I think it's now now does sort of fully fully capture that I guess, the only thing I'd I'd mentioned kind of going into next year. We did mention that the shift then eventually towards the.

The shift towards the <unk>.

Dave: Profit base plan for them from an incentive standpoint. So you know obviously are there.

Dave: Those have impacts as well, but but but.

Dave: But yeah reasonable starting point for now.

Sam Sidhu: And if I could just add, you know, in the, you know, I don't want to, I want to underscore actually, the slide that Phil ran through an operational excellence.

Speaker Change: And if I could just add.

Speaker Change: I don't want to.

Speaker Change: I want to underscore actually the slide that fill ran through an operational excellence I think that's really important and that's what should give you comfort. In addition to the guidance that we're providing in the outside services that should give you the comfort and some of the things that we've guided towards in the past about sort of moving to signing bonuses really sunsetting, but most importantly the.

Sam Sidhu: I think that's really important. That's what should give you comfort.

Sam Sidhu: In addition to the guidance that we're providing on the outside services, that should give you the comfort and some of the things that we've guided towards in the past about sort of moving to signing bonuses, really sun setting, but most importantly, the discipline to operational excellence and as well as sort of the expense initiatives, as well as some of the fee income opportunities that we've added that are really ensure that you have ring fenced and mitigated future expense headwinds from a operating perspective.

The discipline to operational excellence and as.

Speaker Change: As well as sort of the expense initiatives as well as some of the fee income opportunities.

Speaker Change: That we've added that are really in.

Speaker Change: Sure that you have ring fenced and mitigated.

Speaker Change: Future.

Speaker Change: Expense headwinds from a.

Speaker Change: Operating.

Speaker Change: Perspective, and more importantly, it's actually going to be the opposite we expect those to be tailwind beginning in the second quarter of next year.

Sam Sidhu: And more importantly, it's actually going to be the opposite. We expect those to be tailwinds beginning the second quarter. Got it.

Speaker Change: Okay.

Speaker Change: Got it and then Sam.

David Bishop: And Sam, I know it's maybe a little bit early to look into 2025, but maybe not. You know, this year has been sort of the story sort of balance sheet stability. Do you think next year it's more of a story of growing the balance sheet where, you know, the balance sheet grows maybe in lockstep with what you're expecting on the loan growth side. Just curious how you're thinking about overall balance sheet growth next year. So yes, Dave, I think that that is that is absolutely correct. I would just sort of highlight the comment I made to Frank earlier.

So maybe a little bit early to look into 2025, but maybe not.

Speaker Change: This year has been sort of the stories on our balance sheet.

Speaker Change: <unk> did you think next year, it's more of a story of growing the balance sheet, where.

Speaker Change: The balance sheet growth, maybe in lock step with what youre expecting on the loan growth side, just curious how you're thinking about overall balance sheet growth next year.

Speaker Change: So yes, Dave So I think that that is that is absolutely correct I would just sort of highlight the comment I made to Frank earlier first focusing on deposit remix.

Sam Sidhu: First, you know, focusing on deposit remix, you know, but as you can see, sort of, we're reaching levels of our loan book, getting back to really where it was two years ago. So to your point last year, in addition to the deposit, and this year, in addition to the deposit remix last year, we actually were focused on deposit remix, capital building, and also reduction, part of the capital buildings, reduction, risk weighted assets and selling of non-core loans, right enough, you know, non-core loans, exiting participations, all of that really strong strategic work that we did to focus on holistic, you know, franchise enhancing relationships.

Speaker Change: But as you can see sort of we're reaching levels of our our loan book.

Speaker Change: Getting back to really where it was two years ago. So to your point last year. In addition to the deposit and this year inhibition to deposit remix last year, we actually where we're focused on deposit remix capital building and also reduction part of the capital billings reduction risk weighted assets and selling of noncore loans runoff.

Speaker Change: Oncor bones exiting participations all of that really strong strategic work that we did to focus on holistic franchise enhancing relationships. So you know.

Sam Sidhu: So, you know, we'll provide more color in January. But, you know, like I said, we feel, you know, excellent and, you know, feel very grateful that we've assembled a platform, a bank that has sort of the safety and soundness, which customers are looking for after March of last year. It has the financial performance. It has the teams. It has a single point of contact model. It has more teams that are looking, you know, to join us. And it also has the incentive compensation model, all which drive behavior and are allowing us to grow our deposits at the moment significantly faster than even, you know, we would want to grow our loans.

Speaker Change: We will provide more color in January but like I said, we feel.

Speaker Change: Excellent and feel very grateful that we've assembled.

Speaker Change: Our platform a bank that has sort of the safety and soundness, which customers are looking for after March of last year. It has the financial performance. It has the teams that has a single point of contact model. It has more teams that are looking.

Speaker Change: To join US and it also has the incentive compensation model, all of which drive behavior and are allowing us to grow our deposits.

Speaker Change: At the moment significantly faster than than even we would want to grow our loan book.

Phil Watkins: Got it. And maybe one final question, Phil, you talked about the repositioning the securities book, I think you've added some next rate assets to that. Just curious how the The securities book in terms of the yield books, the sensitivity to lower rates, does that have you sort of taken some of that asset sensitivity off the books here over the shorter term?

Speaker Change: Got it and then maybe one final question, Phil you talked about that.

Speaker Change: The repositioning the Securities book, I think you've added some fixed rate assets to that just curious how the.

Speaker Change: The Securities book in terms of the yield what's the sensitivity to lower rates does that have you sort of taken some of that.

Speaker Change: The books here.

Speaker Change: Over the shorter term.

Phil Watkins: Yeah, hey, Dave, thanks for thanks for the question. That's that's exactly right. So we basically have reduced the sensitivity, reduced the floating rate portion of the the AFS book now down to about 30%. And if you kind of remember back to the actions we took in 2022, you know, really, again, getting ahead, we think many of many of our peers where we did multiple securities, portfolio repositioning, you know, two of them across 2022, which positioned us, you know, much more floating rate on the way up. And then, you know, really kind of well timed as we, you know, as we started to see those opportunities, you know, as we started to see the curve flatten in Q2, to go in the other direction.

Yeah, Hey, Dave Thanks for thanks for the question. That's that's exactly right. So we basically have reduced the <unk>.

Sensitivity reduced the floating rate portion of the F. S book now down to about 30% and if you kind of remember back to the actions. We took in in 2022 really are again getting ahead, we think many of many of our peers, where we did multiple securities.

Speaker Change: Portfolio repositioning two of them across 2022, which positioned us much more floating rate on the way up.

And then really kind of well timed.

Speaker Change: We you know as we started to see those opportunity as we started to see the curve flattened.

Speaker Change: In Q2 to go in the other direction and so that was again comes with with a.

Phil Watkins: And so that was, again, comes with with a bit of the effect of an impact on short term margin, but to your point, really reduces the asset sensitivity, and really came with other, you know, benefits as well in terms of, as I mentioned, increasing the HQLA portion of the book.

Speaker Change: A bit of the effective of an impact on short term margin, but to your point really reduces the asset sensitivity and really came with other benefits as well in terms of.

Speaker Change: As I mentioned increasingly HQ L. A portion of the book.

Speaker Change: Yeah.

Phil Watkins: Great, appreciate the color.

Speaker Change: Alright, I appreciate the color.

Brianna: Again, if you would like to ask a question, please press star then one.

Again, if you would like to ask a question. Please press Star then one.

Kelly Motta: Our next question comes from the line of Kelly Motta with KBW. Please go ahead.

Speaker Change: Our next question comes from the line of Kelly Motta with <unk>. Please go ahead.

Kelly Motta: Hey, thanks for letting me jump back in. I was I was hoping, you know, the news of the regulatory order came out after the earnings call last quarter. So I was just wondering if you could provide an update on your view of the digital asset business. And, you know, it's, I know, it's relatively asset sensitive, just how you're viewing that in terms of the longevity and value it offers.

Kelly Motta: Hey, Thanks for letting me jump back when I was I was hoping.

Speaker Change: Yeah.

Kelly Motta: Is that the regulatory order came out after that.

Kelly Motta: Our earnings call last quarter. So I was just wondering if you could provide an update on your view of the digital asset business and.

Kelly Motta: Oh.

Kelly Motta: I know, it's relatively asset sensitive just how you're viewing that in terms of the longevity and value. It offers.

Sam Sidhu: As you look ahead, is this something you're fully dedicated to? Or how should we be thinking about that?

Kelly Motta: Look ahead is there something more fully dedicated to or.

Kelly Motta: How should we be thinking about that.

Sam Sidhu: Yep, absolutely, Kelly. Happy, happy to answer that. So, you know, I think that, importantly, you know, as it relates to digital asset business and CBIT, as we've, as we've coined it, it's really a payments business. And, you know, generally, you know, folks think of banks being in the deposit lending business, but we're also sort of in the transaction business and the payments business. But most importantly, all of this is done, you know, as sort of our business model is inherently anchored on being in the risk management business. So we are, you know, continuing to serve these customers in an exceptional way.

Speaker Change: Yep, absolutely Kelly.

Happy to answer that so you know I think that.

Speaker Change: Importantly, as it relates to digital asset business and see but as we've as we've pointed out it's really a payments business and generally.

Speaker Change: Folks think of banks being in the deposit lending business, but we're also sort of in the transaction business in the payments business.

Most importantly, all of this is done.

Speaker Change: As sort of our business model is inherently anchored on being in the risk management business.

Speaker Change: So we are continuing to serve these customers in an exceptional way we've talked about this before.

Sam Sidhu: You know, we've talked about this before, we beginning last summer, or so we began building a proprietary payments platform, this is going to have a tremendous sort of risk and compliance benefits to us as we go into next year. And, you know, from a business perspective, we're going to be able to, you know, consolidate a number of technology solutions into our treasury management platform, as well as instant payments, which is going to help customers outside of the digital asset space as well. You know, right now, we've also instituted, as you may have seen on the page, and we've worked with our customer base here to begin adding some fee income to the business, you should expect that to be about a couple hundred thousand or so a month, you know, which I think is going to be a nice, a nice lift.

Speaker Change: Beginning last summer or so we began building a proprietary payments.

Speaker Change: Payments platform. This is going to have a tremendous sort of risk and compliance benefits to us as we go into next year.

And from a business perspective, we're going to be able to consolidate.

Speaker Change: Consolidated a number of technology solutions into our Treasury management platform as well as instant payments, which is going to help customers outside of the digital asset space as well right. Now. We've also instituted as you may have seen on the page and we worked with our customer base here to begin.

Adding.

Speaker Change: Some fee income to the business you should expect that to be about a couple of hundred thousand or so.

A month, which I think is going to be a nice a nice lift and it really shows the two way partnership with our customer base.

Sam Sidhu: And it really shows the the two way partnership with our customer base.

Sam Sidhu: But importantly, you know, we want to make sure that we are investing in the risk and risk management compliance platform. Once we do that, it is our belief and hope that we actually can provide a regulatory moat around this business, which is going to help us in the medium to long term.

Speaker Change: But importantly, we want to make sure that we are investing in the risk and risk management and compliance platform. Once we do that it is our belief and hope that we actually can provide a regulatory moat around this business, which is going to help us in the medium to long term.

Sam Sidhu: Okay, got it. And I know it's really early in the process of, you know, I think the first couple of months, one of the main things that the regulatory order has asked you to do that you weren't doing was the look back periods, any early insight that you can share with us with regards to any findings that you guys are doing. Yep, sure, absolutely.

Speaker Change: Okay got it and I know, it's really early in the process of.

Speaker Change: You know I think the first couple of months.

Speaker Change: One of that.

All of that that regulatory order is asking to do that you weren't doing was the look back period.

Speaker Change: Oh, Okay that he will share with us with regards to <unk>.

Speaker Change: Final.

Speaker Change: Hi, Darryl.

Speaker Change: Yeah sure absolutely. So there's obviously the benefit of the agreement that's out there is out there.

Sam Sidhu: So, you know, as there's obviously the benefit of the agreements out there, it's out there, you know, publicly, you know, having said that, we can't speak to specifics. But what I would say what's important is, is that it's not that we weren't doing, we need to enhance, and we will enhance. And what's important to think about that is our bar, you know, is needs to be higher than our regulatory partners bar. And sometimes that that bar evolves over time, but will also adapt and evolve over time. So, you know, I think that what's important is, is we are super committed to complying, you know, with timelines, we're super committed to improving the risk management infrastructure, and we will, and we're going to get there.

Speaker Change: <unk>, having said that we can't speak to specifics, but what I would say what's important is is that it's not that we werent doing well.

Speaker Change: Need to enhance and we will enhance and what's important to think about that as our bar.

Speaker Change: You know is needs to be higher than our regulatory partners bar and sometimes so that that bar evolves over time, but will also adapt and evolve overtime. So you know.

Speaker Change: I think that what's important is we're super committed to complying with timelines where supercomputer.

Speaker Change: Emitted two improving the risk management infrastructure, and we will and we're going to get there and we.

Sam Sidhu: And, you know, we once we do so, we think we're going to be a much stronger organization that and this specifically in this vertical that has a motor on. Got it.

Speaker Change: Once we do so we think we're going to be a much stronger organization that and in the specifically in this vertical that has a mode around the business.

Speaker Change: Yeah.

Speaker Change: Got it that's helpful and then maybe.

Kelly Motta: That's helpful.

Kelly Motta: And then maybe last question for me.

Speaker Change: Maybe last question for me I apologize if this was.

Kelly Motta: I apologize if this was answered here in some of the prior remarks, but as you mentioned, your CET1 ratio is about 100 basis points above target, TCs above target. This year has really been a year of sowing the balance sheet growth overall in order to build those capital ratios.

Speaker Change: Oh for hearing one from the prior remarks, but.

Speaker Change: As you mentioned your CET one ratio is about 100 basis points above target T fees about <unk>.

Speaker Change: Our debt this year has really been a year of.

And the balance sheet growth overall in order to build those capital ratios.

Kelly Motta: I realize it's a little early, you know, talking about 2025 with the budget not finalized, but is the right way to think about, you know, allowing some asset growth from here now that you've built up those ratios in addition to, you know, the buyback that you already mentioned? That's right, Kelly. Organic growth is always going to be our top priority at Customers Bank. But as you saw in this quarter, buybacks below book value are accretive and we should and always should consider those if we ever do continue to stay at a level below that. So I think that the important thing, as I mentioned before, is our deposit growth is exceeding, our gross deposit growth is exceeding our loan growth opportunities.

Speaker Change: Right. It's a little early you know talking about 2025 with a bunch of not finalized but.

Speaker Change: Right way to think about allowing.

Speaker Change: Allowing.

Speaker Change: Asset growth from here now that you've built up the those ratios. In addition to the buyback that you already mentioned.

Speaker Change: No. That's right Kelly you know organic growth is always going to be our top priority at customers Bank.

But as you saw in this quarter buybacks below book value or accretive and you know we showed an always should consider those.

If we if we ever do continue to stay at a at a level below that so I think that the important thing as I mentioned before is our deposit growth is exceeding our gross deposit growth is exceeding our our loan growth opportunities and I think that's really what's going to help drive that high quality balance sheet growth once were.

Kelly Motta: And I think that's really what's going to help drive that high quality balance sheet growth once we're complete with the remix.

Speaker Change: Complete with the remix.

Kelly Motta: Appreciate it. Thanks so much.

Speaker Change: I appreciate that thanks, so much.

Speaker Change: Yeah.

David Chiaverini: Our next question comes from the line of David Chiaverini with Wedbush. Please go ahead.

Our next question comes from the line of David <unk> with Wedbush. Please go ahead.

David Chiaverini: Hi, thanks for taking the question. So I had a follow up on on the written agreement. Can you talk about any material limitations imposed upon you by the agreement, whether it's specific just to the digital asset business, I didn't see anything in the agreement around, you know, an asset cap, but can you talk about any material limitations? Yeah, Dave, I think it's public. And as you rightfully said, there aren't limitations on anything outside the digital asset strategy, there are typical notifications. But what's important is, is that if you have a, you know, good, communicative regulatory partnership, those things are done informally, as well as, you know, can be done formally.

Speaker Change: Hi, Thanks for taking the question. So I had a follow up on on the written agreement can you talk about any material limitations imposed upon you by the agreement whether it's specific just to the digital asset business I didn't see anything in the agreement around.

Speaker Change: Asset cap, but can you talk about any material limitations.

Speaker Change: Yes, Dave I think it's public and as you rightfully said there there arent limitations on anything outside of the digital asset strategy. There are typical notifications, but what's important is is that.

Speaker Change: If you have a good.

Speaker Change: Communicative regulatory partnership.

Speaker Change: Things are done informally as well as can be done formally.

Speaker Change: Okay.

David Chiaverini: And any what's your expected timeframe of of having the written agreement lifted?

Speaker Change: And any what's your expected time frame of of having the written agreement lifted.

David Chiaverini: So, you know, I think that the typical way to think about this is that, you know, we have a tremendous amount of work to do over the next couple of months, which I've said we've really committed to. It crests down and then you kind of have to move into sustainability. And then typically these orders, I think we've run a run a screen typically, you know, are at least in that two year type time frame until until they're lifted.

Speaker Change: So I think that the typical way to think about this is that we have a tremendous amount of work to do over the next couple of months, which I've said, we are really committed to it cuts down and then you kind of have to move into a sustainability.

Speaker Change: Sustainability and then typically these orders I think we've run a radar screen typically.

Speaker Change: Or at least in that two year type timeframe until until they are lifted.

David Chiaverini: But the important thing is, is that we expect that most of the work would be, you know, completed within. Got it.

Speaker Change: But the important thing is is that we expect that most of the work would be completed within the first year.

Speaker Change: Got it and any bogeys for four progress being made.

David Chiaverini: And any bogeys for for progress being made with with the written agreement? I saw you made some key hires, which is probably a key component of it. But any other kind of bogeys that we can kind of judge that the progress being made? People, processes, technology, you know, so from a people perspective, like you said, we hired, you know, a couple of really, you know, senior, seasoned, high quality executives, they're helping to sort of lead and up and upgrade our, our, our platform, you know, from a process perspective, that's a lot of the outside services, you know, just to make sure that the T's are crossed and the I's are dotted.

Speaker Change: With the written agreement and I say you made some key hires which is probably a key component of it but any other kind of bogeys that we can kind of judge that the progress being made.

Speaker Change: People processes technology.

Speaker Change: So from a people perspective like you said, we hired a couple of <unk>.

Speaker Change: Senior.

Speaker Change: Seasoned high quality executives, they're helping to sort of lead in and upgrade our our our platform from a process perspective, that's a lot of the outside services just to make sure that the Ts are crossed and I's are dotted and we also gave you a sense of how that's gonna crest, which should hopefully give you a sense of how we view that type of work.

David Chiaverini: And we also give you a sense of how that's going to crest, which should hopefully give you a sense of how we view, you know, that type of work.

David Chiaverini: And the last is technology. And I think we talked about the technology initiatives that we had, you know, begun to build internally, you know, last year, and, and that we should expect that that handoff to happen this quarter.

Speaker Change: And then lots of technology and I think we talked about the technology initiatives that we had begun to build internally.

Speaker Change: Last year.

Speaker Change: And.

Speaker Change: And that we you should expect that that handoff to happen this quarter.

Sam Sidhu: Great, thanks very much. We have no further questions at this time.

Speaker Change: Great. Thanks very much.

Speaker Change: We have no further questions at this time I will now turn the call back to Sam for closing remarks.

Sam Sidhu: I'll now turn the call back to Sam Sidhu for closing remarks. Thank you again to everyone for your continued interest in and importantly support of Customers Bancorp and the incredible franchise that we're building. We really look forward to speaking with you next quarter and talking about our strategic plan.

Sam: Thank you again to everyone for your continued interest in and importantly support of customers Bancorp and the incredible franchise that we're building and we really look forward to speaking with you next quarter and talking about our strategic plan. Thank you and have a great day and a great weekend.

Sam Sidhu: Thank you and have a great day and a great week.

Brianna: This concludes today's conference call. Thank you all for your participation.

Speaker Change: This concludes today's conference call. Thank you all for your participation you may now disconnect.

Brianna: You may now disconnect.

Sam Sidhu: Turn the call back to Sam Sidhu for closing remarks. Thank you again to everyone for your...

Turn the call back to Sam Steele for closing remarks.

Speaker Change: Thank you again to everyone for your car.