Q1 2025 Customers Bancorp Inc Earnings Call

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Operator: I'll now turn the conference over to Dave. Please go ahead.

Dave: I'll now turn the conference over to Dave. Please go ahead.

Dave: Thank you, Sarah.

Dave: And good morning, everyone. Thank you for joining us for the Customer Bancorp's earnings webcast for Q1 2025. The presentation deck you will see during today's webcast has been posted on the Investors webpage of the bank's website at customersbank.com. You can scroll to Q1 2025 results and click Download Presentation. You can also download a PDF of the full press release. Our investor presentation includes important details that we will walk through on this morning's webcast. I encourage you to download and use the document.

Dave: Thank you Sarah and good morning, everyone. Thank you for joining us for the customer Bancorp's earnings webcast for Q1 2025.

Dave: The presentation deck, you will see during today's webcast has been posted on the investors web page of the bank's website at customers Bank Dot com.

Dave: You can scroll to Q1 2025 results and click download presentation.

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

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

Dave: 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.

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

Dave: 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.

Dave: 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.

Dave: Please refer to our SEC filings, including our Form 10-K, and 10-Q for a more detailed description of the risk factors that may affect our results copies may be obtained from the SEC or by visiting the Investor Relations section of our website.

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

Jay Sidhu: At this time, it's my pleasure to introduce Customers Bancorp chair, Jay Sidhu. Thank you, Dave. And good morning, ladies and gentlemen, and welcome to Customers Bancorp first quarter 2025 earnings call. Joining me this morning are President and CEO of the bank, Sam Sidhu, and Customers Bancorp CFO, Phil Watkins. We are pleased with the way the company started the year with strong core performance from across the franchise. We will walk through those results in more detail.

G: At this time, it's my pleasure to introduce customers Bancorp Chair G.

Speaker Change: <unk> J.

Speaker Change: Thank you, Dave and good morning, ladies and gentlemen.

Speaker Change: And welcome to customers Bancorp first quarter 2025 earnings call. Joining me. This morning are president and CEO of <unk> Bank, Sam to do and customers Bancorp CFO Phil Watkins.

Speaker Change: We are pleased with the way the company started the year with strong core performance from across the franchise, we will walk through those results in more detail.

Jay Sidhu: First, I'd like to take this chance to acknowledge the hard work by our incredible team members on four fronts that we have made an absolute priority at the company. First, the continued impressive transformation of our deposit franchise. Second, strong loan growth from well-diversified sources, all reflecting superior credit quality. Third, improve efficiency with execution of our operational excellence initiatives. And last but not the least, significantly above average net promoter scores, making us one of the top banks delivering superior service as viewed by our clients.

Speaker Change: First I'd like to take this dance.

Speaker Change: To acknowledge the hard work.

Speaker Change: Incredible team members on four fronts that we have made an absolute priority of the company.

Speaker Change: First the continued impressive transformation of our deposit franchise.

Speaker Change: Second strong loan growth from well diversified sources, all reflecting superior credit quality.

Speaker Change: Good.

Speaker Change: <unk> deficiency with execution of our operational excellence initiatives.

Speaker Change: And last but not the least.

Significantly above average net promoter scores, making us one of the top banks delivering superior service as viewed by our clients.

Jay Sidhu: The industry is currently facing, as you all know, complex and evolving macroeconomic landscape. Recent developments have led to increased market volatility and uncertainty. We believe that customers' differentiated business model positions us well to navigate these challenges while we maintain flexible and responsive and remain responsive to changes in this changing external environment. And importantly, our customer-centric mindset and commitment to service provided by our very experienced colleagues. We are very well positioned to serve our clients as the environment continues to evolve.

Speaker Change: The industry is currently facing as you all know complex and evolving macroeconomic landscape.

Speaker Change: Recent developments have led to increased market volatility and uncertainty.

Speaker Change: We believe that customers differentiated business model positions us well to navigate these challenges, while we maintain flexible and responsive and remain responsive to changes in this changing external environment and importantly, our customer centric mindset and commitment to service provided by our.

Speaker Change: Very experienced colleagues, we are very well positioned to serve our clients as the environment continues to evolve.

Jay Sidhu: As you can see on slide three, we have built an incredible franchise, combining the best of a large bank's technology and product offering with the nimbleness and service level of a smaller institution. That's a good segue for us to move to slide four, where I'll cover why we believe we are building a company that you can almost call being built to last. What does it mean by building a bank that's built to last and be able to deal with the complexities and opportunities available in this rapidly changing environment? For us, it comes down to maintaining an absolutely clear strategic direction.

Speaker Change: As you can see on slide three we have built an incredible franchise, combining the best of our large banks technology and product offering with the nimbleness and service level of a smaller institution.

Speaker Change: That's a good segue for us to move to slide four where I'll cover why we believe we are building a company that you can almost call being built to last.

Speaker Change: What does it mean by building a bank that's built to last.

Speaker Change: And be able to deal with the complexities and opportunities available in this rapidly changing environment.

For us it comes down to maintaining an absolutely clear strategic direction.

Jay Sidhu: Having a deep understanding of our key drivers of financial performance. and always maintaining strong risk management and excellence in client service. Our strategy is anchored by a single point of contact service model that drives organic growth one relationship at a time by developing deeper relationships with our clients. Our proven model is infused with our commitment to exceptional client service. That commitment is the cornerstone of our culture and the key to our success. One where our goal each day is to have our client say, wow. Our service model, driven by exceptional and knowledgeable service-oriented colleagues who are empowered to serve their clients' needs by delivering the entire bank to them.

Speaker Change: Having a deep understanding of our key drivers of financial performance.

Speaker Change: And all of this maintaining strong risk management and excellence in client service.

Speaker Change: Our strategy is anchored by a single point of contact service model that drives organic growth one relationship at a time by developing deeper relationships with our clients.

Speaker Change: Our proven model is infused with our commitment to exceptional client service.

Speaker Change: That commitment is the cornerstone of our culture and the key to our success, one where our goal each day is to have our client say wow.

Speaker Change: Our service model driven by exceptional and knowledgeable service oriented colleagues, who are empowered to solve their clients' needs by delivering the entire bank to them.

Jay Sidhu: These relationships compound driving growth through repeat businesses and referrals. This unique model is a very important key differentiator.

Speaker Change: These relationships compound driving growth through repeat businesses and referrals.

Speaker Change: This unique model is a very important creed key differentiator.

Jay Sidhu: Our culture is inspired by the entrepreneurs we serve. in this entrepreneurial mindset that allows bankers to develop innovative solutions to address some of our clients' most pressing challenges. In addition to fostering loyalty and generating referrals, our entrepreneurial culture draws top talent to our organization. In the past few years, we welcomed well over 100 client-facing team members, as well as leaders and team members in areas such as credit, risk management, marketing, technology, and operations.

Speaker Change: Our culture is inspired by the entrepreneurs reserve.

Speaker Change: And this entrepreneurial mindset that allows bankers to develop innovative solutions to address some of our clients most pressing challenges.

Speaker Change: In addition to fostering loyalty and generating referrals, our entrepreneurial culture draws top talent to our organization.

Speaker Change: Yeah.

Speaker Change: In the past few years, we welcomed well over 100 client facing team members as well as leaders and team members in areas such as credit risk management marketing technology and operations Sam will talk more about those later in the presentation.

Jay Sidhu: Sam will talk more about those later in the presentation. We remain focused on providing the sophisticated products and services of a larger bank with the attention and service level of a private bank. We believe our differentiated service model and our continuous monitoring of the key drivers of our financial performance continue to help us lead to success over the long term, as well as in the short term. We've said many times before that we believe a strong and sticky core deposit and loan base results in sustainable growth in revenues, in EPS, and intangible book value. We believe these are the key metrics for long-term performance in bank stocks.

We remain focused on providing the sophisticated products and services of a larger bank.

Speaker Change: Tension and service level of <unk>.

Speaker Change: <unk> Bank.

Speaker Change: We believe our differentiated service model and our continuous monitoring of the key drivers of our financial performance.

Speaker Change: Continue to help us lead to success over the long term as well as.

Speaker Change: In the short term.

Speaker Change: We've said many times before that we believe are strong and sticky core deposit and loan base results in sustainable growth in revenues and EPS and intangible book value.

Speaker Change: We believe these are the key metrics for long term performance and bank stocks.

Jay Sidhu: Over the last five years, we are proud to have delivered above average annual growth rate of 15% in revenue. 20% in core EPS. and 16% intangible book value.

Speaker Change: Over the last five years, we are proud to have delivered above average annual growth rate of 15% in revenue.

Speaker Change: 20% and core EPS.

Speaker Change: And 16% intangible book value.

Jay Sidhu: This performance made us the number one bank of all banks between $20 billion and $100 billion in assets in earnings per share and tangible book value compounding. We have made significant investments in our risk management infrastructure across people, processes and technology as we strive to meet and exceed our own and our shareholders' expectations. We believe risk management can be a strength and competitive advantage for us and with the investments we are making in risk management, this will give us the foundation and capabilities of a much larger complex organization.

This performance made us the number one bank of all banks between $20 billion and $100 billion in assets and earnings per share and tangible book value compounding.

Speaker Change: We have made significant investments in our risk management infrastructure across people processes and technology, as we strive to meet and exceed our own and our shareholders' expectations.

Speaker Change: We believe risk management can be a strength and competitive advantage for us and with the investments we are making in risk management. This will give us the foundation and capabilities of a much larger complex organizations.

Jay Sidhu: Hence, taken as a whole, our strengths are... We have a clear strategic direction. We have attracted above average experienced talent. We have a customer-centric culture that is very well viewed by our clients, and we will never take our eye off of this. Next, we have keen awareness of the external environment. Next, we are making our investments in new products and technology, and continuously improving upon that. And we have our absolute commitment to sound risk management and excellence in service.

Speaker Change: Hence taken as a whole our strengths are.

Speaker Change: We have a clear strategic direction.

Speaker Change: We have attracted above average experienced talent.

Speaker Change: We have a COO.

Speaker Change: Customer centric culture that is very well reviewed by our clients and we will never take our eye off of this.

Speaker Change: Next we have keen awareness of the external environment.

Speaker Change: Next we are making our investments in new products and technology and continuously.

Speaker Change: Improving upon that and we have our absolute commitment to sound risk management and excellence in service.

Samvir Sidhu: In our opinion, these trends have combined to enable us to deliver above-average results that Sam will now share with you for the first quarter 2025.

Speaker Change: In our opinion these trends have combined to enable us to deliver above average results.

Sam: Sam will now share with you for the first quarter 2025, Sam.

Samvir Sidhu: Sam? Thanks, Jay. And good morning, everyone. It's great to have an opportunity today to walk you through a very strong quarter for customers. Our business continued to perform well. Our core beat was driven by strong financial performance across the franchise.

Sam: Thanks, Jay and good morning, everyone. It's great to have an opportunity today to walk you through a very strong quarter for customers Bank.

Speaker Change: Our business continued to perform well our core beat was driven by strong financial performance across the franchise.

Samvir Sidhu: I'll walk you through some of the key accomplishments in the quarter, which provide an excellent start to the year. Our deposit transformation momentum continued as we once again saw significant, low-cost, granular deposit growth strengthen the quality of our deposit franchise. This is evident with another 25 basis point reduction in our average cost of deposit. Combined with a strong performance last quarter, our average cost of deposits are down 64 basis points from their high in Q3 of 2020. For the second quarter in a row, our commercial team's x-cubics had nine-figure non-interest-bearing deposits. with over $250 million in this quarter alone.

Speaker Change: I'll walk you through some of the key accomplishments in the quarter, which provided an excellent start to the year.

Speaker Change: Our deposit transformation momentum continued as we once again saw significant low cost granular deposit growth strengthened the quality of our deposit franchise.

Speaker Change: This is evident with another 25 basis point reduction in our average cost of deposits in the quarter.

Speaker Change: Combined with a strong performance last quarter, our average cost of deposits are down 64 basis points from their high in Q3 of 2024.

Speaker Change: For the second quarter in a row, our commercial teams ex cubic's had nine figure noninterest bearing deposit growth with over $250 million in this quarter alone.

Samvir Sidhu: We bucked the market trend, growing the loan portfolio at a 12% annualized. We were able to accomplish this while being selective on the credits we onboarded. This is because much of the growth came from our bankers bringing over their longstanding trusted relationships to Customers Bank. Our net interest margin increased by two basis points in the quarter, driven by interest expense reduction. We executed on our Operational Excellence Initiative, surpassing the targets that we first outlined last. These savings initiatives will provide us the headroom for the investments we are making in support of our future growth.

Speaker Change: We bought the market trend growing the loan portfolio at a 12% annualized pace.

Speaker Change: We were able to accomplish this while being selective on the credits we on boarded this is because much of the growth came from our bankers, bringing over their long standing trusted relationships to customers bank.

Speaker Change: Our net interest margin increased by two basis points in the quarter driven by interest expense reduction.

Speaker Change: We executed on our operational excellence initiatives, surpassing the targets that we first outlined last year.

Speaker Change: These savings initiatives will provide us the headroom for the investments we are making in support of our future growth.

Samvir Sidhu: We also decided to undertake an additional balance sheet optimization process by identifying a portfolio of corporate and asset-backed securities for This decision was driven by two main factors. One, our bankers achieved strong loan growth in a typically soft quarter. And we are reinvesting a majority of the cash generated from this sale. With this, we felt it was prudent to reduce the credit-sensitive nature of our AFS portfolio to fund this. We feel even better about the balance sheet optimization decisions we made based on market developments. And at this point, you should not expect any additional securities repositioning.

Speaker Change: We also decided to undertake an additional balance sheet optimization process by identifying a portfolio of corporate and asset backed securities for sale.

Speaker Change: This decision was driven by two main factors one our bankers achieved strong loan growth and a typically soft quarter and we are reinvesting a majority of the cash generated from the sale into loans.

Speaker Change: With this we felt it was prudent to reduce the credit sensitive nature of our Ams portfolio to fund this growth.

Speaker Change: We feel even better about the balance sheet optimization decisions, we made based on market developments recently and at this point you should not expect any additional securities repositioning transactions.

Samvir Sidhu: Last but not least, we continue to maintain extremely strong metrics across capital, liquidity, and credit quality. Capital remains strong with CET1 above our internal targets at 11.7%. and our TCO ratio increased to 7.1. Our coverage of immediately available liquidity to uninsured deposits is robust at $155,000. Our NPA ratio remains low at 26 basis points, well below peer averages, and reserves to NPLs are strong at 325.

Speaker Change: Last but not least we continue to maintain extremely strong metrics across capital liquidity and credit quality.

Speaker Change: Capital remained strong with CET, one above our internal targets at 11, 7%.

Speaker Change: And our TCE ratio increased to seven 7%.

Speaker Change: Our coverage of immediately available liquidity to uninsured deposits is robust at 155%.

Speaker Change: Our NPA ratio remains low at 26 basis points, well below peer averages and reserves to npls are strong at 324%.

Samvir Sidhu: Advancing to slide six, you'll see our gap financials and then moving to slide seven, I'll run you through the core financial highlights for the quarter and full year. As I mentioned, we had an incredibly strong performance across the board as we delivered core earnings per share of $1.54 in the quarter on net income of $50 million. This represented core ROCE and ROA of 11.7% and 97 basis points respectively. Credit metrics remain strong, and these results represent a great start to the year and provide excellent momentum for the balance of 2025.

Speaker Change: Advancing to slide six you'll see our GAAP financials, and then moving to slide seven I'll run you through the core financial highlights for the quarter and full year.

As I mentioned, we had an incredibly strong performance across the board as we delivered core earnings per share of $1 54 in the quarter on net income of $50 million.

Speaker Change: This represented core Aro CE and ROA of 11, 7% and 97 basis points respectively.

Speaker Change: Credit metrics remained strong and these results represent a great start to the year and provides excellent momentum for the balance of 2025.

Samvir Sidhu: Now on slide 8, I'll cover our deposit transformation, which remains our top financial priority. We are once again thrilled by the work by our team to improve our deposit franchise, which continued to shine in the To recap some of the impressive results, total deposits increased to just under $19 billion. The new teams brought on since mid-2023 continue to execute exceptionally and increase their deposit balances by about $400 million. The quality of these deposits help reduce our deposit costs as we remix these deposits at about a 200 basis point. The new teams manage relationships with over $2.1 billion of granular, low-cost, relationship-based deposits representing about 11% of our deposits.

Speaker Change: Now on slide eight I'll cover our deposit transformation, which remains our top financial priority.

Speaker Change: We are once again thrilled by the work our team by our team to improve our deposit franchise, which continued to shine in the quarter.

Speaker Change: To recap some of the impressive results total deposits increased to just under $19 billion.

Speaker Change: The new teams brought on since mid 2023 continue to execute exceptionally and increased our deposit balances by about $400 million in the quarter.

Speaker Change: The quality of these deposits help produce our deposit costs as we remix these deposits at about a 200 basis points interest expense benefit.

Speaker Change: The new teams manage relationships with over $2 $1 billion of granular low cost relationship based deposits representing about 11% Navarre deposit base, it's an incredible.

Samvir Sidhu: It's an incredible accomplishment in such a short time. The momentum on commercial deposit account opening is continuing with total commercial accounts up about 14% annualized in the quarter, and over 50% since the end of 2022. This highlights the franchise-enhancing and granular nature of... Our non-interest bearing deposits remained at a healthy $5.6 billion, or just under 30% of total deposits. As I mentioned earlier, our traditional commercial banking franchise brought in over $250 million of non-interest bearing deposits. Over the last two quarters, that is now nearly $400 million of non-interest bearing deposit growth from the traditional commercial banking franchise.

Speaker Change: <unk> accomplishment in such a short time.

Speaker Change: The momentum on commercial deposit account opening is continuing with total commercial accounts up about 14% annualized in the quarter and over 50% since the end of 2022.

Speaker Change: This highlights the franchise enhancing and granular nature of the growth.

Speaker Change: Our noninterest bearing deposits remained at a healthy five 6 billion.

Speaker Change: Or just under 30% of total deposits as.

Speaker Change: As I mentioned earlier, our traditional commercial banking franchise brought in over $250 million of noninterest bearing deposits over the last two quarters that is now nearly $400 million of noninterest bearing deposit growth from the traditional commercial banking franchise alone.

Samvir Sidhu: The power of the deposit remix was in full effect as evidenced by our ability to reduce our average cost of deposits by another 25 basis points. To date, this represents the 69% beta so far in the down cycle, in excess of the 60% deposit beta we have on the way up, demonstrating the power of the deposit remix tailwind. With our ability to continue to take market share, the pipeline continues to rebuild. Even with this quarter's strong deposit performance, our go-forward, low-cost, granular deposit pipeline has been replenished at, again, over $2 billion and growing, which I'll expand on in a moment.

Speaker Change: The power of the deposit remix was in full effect as evidenced by our ability to reduce our average cost of deposits by another 25 basis points this quarter.

Speaker Change: To date this represents a 69% beta so far in the down cycle in excess of 60% deposit beta we have in the way up demonstrating the power of the deposit remix tail winds.

Speaker Change: With our ability to continue to take market share that our pipeline continues to rebuild even with this quarter's strong deposit performance. Our go forward low cost granular deposit pipeline has been replenished it again over $2 billion in growing which I'll expand on in a minute.

Samvir Sidhu: With that, let's turn to slide nine for a bit of a deeper dive on the incredible success of our team recruitment. Core to our strategy is our ability to consistently attract top talent from across the industry. Our recruitment efforts over the last few years showcase this and have added tremendous value to our franchise. As a reminder, we entered the venture banking space about three years ago with a small team lift. Then in June of 23, just months after the banking crisis, we took that business to the next level, acquiring a loan portfolio from the FDIC and brought on 30 new bankers.

Speaker Change: With that let's turn to slide nine for a bit of a deeper dive on the incredible success of our team recruitment strategy.

Speaker Change: Yeah.

Speaker Change: Core to our strategy is our ability to consistently attract top talent from across the industry.

Speaker Change: Our recruitment efforts over the last few years showcase this and have added tremendous value to our franchise.

Speaker Change: As a reminder, we entered the venture banking space about three years ago with a small team lift out.

Speaker Change: Then in June of 'twenty, three just months after the banking crisis, we took that business to the next level acquiring a loan portfolio from the FDIC and brought on 30, new bankers today. The business now has over $850 million in deposits is essentially self funded and is a top five national competitor.

Samvir Sidhu: Today, the business now has over $850 million in deposits, is essentially self-funded, and is a top five national competitor. Over the past two years, we have significantly expanded our presence in the market, achieving more than a five-fold increase in our deposit accounts and growing deposits. ®MD-BO¯ Nearly a year later, we recruited 10 highly experienced commercial banking teams with deep industry expertise and strong regional marketing. These teams are fundamentally changing the profile of our commercial deposit base and enabling us to scale our existing relationship bank. In less than a year, these teams are now profitable and managing approximately $1.3 billion in deposits and have added 5,000 accounts to our franchise.

Speaker Change: Over the past two years, we've made significant we have significantly expanded our presence in the market achieving more than a fivefold increase in our deposit accounts and growing deposits by three quarters of $1 billion.

Speaker Change: Nearly a year later, we recruited 10 highly experienced commercial banking teams with deep industry expertise and strong regional market knowledge.

Speaker Change: These teams are fundamentally changing the profile of our commercial deposit base and enabling us to scale, our existing relationship banking franchise.

Speaker Change: In less than a year. These teams are now profitable in managing approximately $1.3 billion in deposits and have added 5000 accounts to our franchise. We've already demonstrated the power of our team based deposit acquisition strategy and now we're building on that foundation to enter the next phase of franchise expansion.

Samvir Sidhu: We've already demonstrated the power of our team-based deposit acquisition strategy, and now we're building on that foundation to enter the next phase of franchise expansion. One centered on growing what we've proven works, exceptional client service driven by the entrepreneurial colleagues who are empowered to serve their clients. The market for top-tier talent remains highly dynamic, and our reputation as a high-performance, tech-forward institution is making Customers Bank a destination for relationship-driven commercial banking. flywheel is turning. And our pipeline for deposit team recruitment is strong. We've already onboarded a new team this year. Two additional teams have accepted offers to join and more to come.

Speaker Change: One centered on growing what we've proven works exceptional client service driven by the launch by entrepreneurial colleagues, who are empowered to serve their clients needs.

Speaker Change: The market for top tier talent remains highly dynamic and our reputation as a high performance Tech forward institution is making customers bank a destination for our relationship driven commercial bankers.

Speaker Change: The flywheel is turning.

Speaker Change: And our pipeline for deposit team recruitment is strong we've already on boarded a new team. This year. Two additional teams have accepted offers to join and more to come.

Samvir Sidhu: Any new additions would add to the already significant $2 billion low-cost deposit pipeline.

Any new additions would add to the already significant $2 billion low cost deposit pipeline that I mentioned previously.

Samvir Sidhu: Ultimately, this next phase in our deposit transformation is about intelligent expansion, not just bigger, but better, driving long-term franchise value and delivering differentiated Now let's turn to slide 10 to discuss how these team-driven deposits are powering our strong loan. This was another exceptional quarter of loan growth for us. We again delivered over $600 million of HFI loan growth, which was well diversified across our platform. But what's more important is how that grows. It was diversified, strategic, and aligned with our franchise building model. Top commercial verticals included the new commercial banking teams, commercial real estate, and healthcare with contributions from multiple other groups.

Speaker Change: Ultimate Natus phase. This next phase in our deposit transformation is about intelligent expansion, not just bigger, but better driving long term franchise value and deliver and delivering differentiated results.

Speaker Change: Now, let's turn to slide 10 to discuss how this team driven how these team driven deposits are powering our strong loan growth results.

Speaker Change: This was another exceptional quarter of loan growth for us, we again delivered over $600 million of HFF loan growth, which was well diversified across our platform.

Speaker Change: But what's more important is how that growth was achieved it.

Speaker Change: It was diversified strategic and aligned with our franchise building model top commercial verticals included new commercial banking teams commercial real estate and healthcare with contributions from multiple other groups. Each vertical is focused on long term client engagement and brings with it fulsome deposit led relationships.

Samvir Sidhu: Each vertical is focused on long-term client engagement and brings with it fulsome deposit-led relations. As an example, over the last three quarters, we've had nearly $500 million of self-funded net loan growth in the commercial real estate industry. which, as you can appreciate, is typically unheard of. And this comes with more than a 4% net spread between loans and deposits. In a muted lending environment where many peers remain on the sidelines or retrenching, we are winning client relationships often from much larger While they may be new to Customers Bank, these clients are not new to our team members, who often have decades-long relationships.

Speaker Change: As an example over the last three quarters, we've had nearly $500 million of self funded net loan growth in these commercial real estate industry, which as you can appreciate is typically unheard of.

Speaker Change: And this comes with more than a 4% net spread between loans and deposits.

Speaker Change: In a muted lending environment, where many peers remain on the sidelines or retrenching, we're winning client relationships often from much larger institutions, while they may be new to customers Bank. These clients are not new to our team members, who often have decade long decades long relationships.

Samvir Sidhu: Our ability to move decisively, offer certainty of execution, and deliver relationship banking through a single point-of-contact model is resonating in the market. This growth is achieved with discipline, as a strong credit culture has always been a top priority for our As many of you know, we tend to focus on verticals with inherently low credit risk and where we have deep industry exploitation. This is why we've continued to have excellent credit performance through this.

Speaker Change: Our ability to move decisively offer certainty of execution and deliver relationship banking through a single point of contact model is resonating in the market.

Speaker Change: This growth was achieved with discipline as a strong credit culture has always been a top priority for our institution as.

Speaker Change: As many of you know we tend to focus on verticals with inherently low credit risk and where we have deep industry expertise. This is why we've continued to have excellent credit performance through the cycles.

Samvir Sidhu: Let me take this opportunity to build off of what Jay covered earlier. We've talked a lot about deposit remix. but I don't want to overlook the loan transformation that has occurred. Over the last five years, we've reduced our concentrations in mortgage finance from 25% to 10%, multifamily from 20% to 15%, and consumer installment from 13%. At the same time, we lean into lower-risk, relationship-based, specialized verticals like fund finance with the growth of our subscription line business, regional C&I, and venture banking. Our pipeline and backlog heading into Q2 remains robust, and we continue to prioritize capital-efficient, deposit-accretive lending that strengthens client engagement and enhances the overall franchise.

Speaker Change: Let me take this opportunity to build off of what Jay covered earlier, we've talked a lot about deposit remix recently.

Speaker Change: But I don't want to overlook the loan transformation that has occurred at our company over the last five years, we've reduced our concentrations in Morgan from mortgage finance from 25% to 10% multifamily from 20% to 15% and consumer installment from 13% to 6% at.

Speaker Change: At the same time, we leaned into lower risk relationship base specialized verticals like bond finance with the growth of our subscription line business regional C&I and venture banking.

Speaker Change: Our pipeline and backlog heading into Q2 remains robust and we continue to prioritize capital efficient deposit accretive lending that strengthens client engagement and enhances the overall franchise with that I'll turn the call over to Phil.

Phil Watkins: With that, I'll turn the call over to Thanks, Sam. And good morning, everyone. Turning to slide 11, I'd like to walk through our net interest income and margin performance, which continue to reflect the strength of our balance sheet strategy and disciplined In Q1, we delivered $167.4 million in net interest income, and our net interest margin expanded to $313 million, up two basis points. This marks our second consecutive quarter of margin. The primary driver of this improvement was a significant reduction in interest expense, which was lower by $14.6 million quarter of the year. This was achieved through deliberate and proactive deposit.

Phil Watkins: Thanks, Sam and good morning, everyone turning to slide 11, I'd like to walk through our net interest income and margin performance, which continue to reflect the strength of our balance sheet strategy and disciplined execution in.

Phil Watkins: In Q1, we delivered $167 4 million in net interest income and our net interest margin expanded to $3 13 up two basis points sequentially. This marks our second consecutive quarter of margin expansion.

Phil Watkins: Primary driver of this improvement was a significant reduction in interest expense, which was lower by $14 $6 million quarter over quarter. This was achieved through deliberate and proactive deposit remixing.

Phil Watkins: This helped offset a decline in loan yields from lower benchmark rates and demonstrates that the quality of our funding base is improving in ways that support earnings durability.

Phil Watkins: This helped to offset a decline in loan yields from lower benchmark rates and demonstrates that the quality of our funding basis, improving in ways that support earnings durability.

Phil Watkins: Though the rate trajectory remains uncertain, the value-added opportunities we have on both sides of the balance sheet provide the foundation for net interest income expansion across a range of For more information visit www.fema.gov On slide 12, we'll cover non-interest expenses. We are incredibly proud of our performance on efficiency. Q1, our core non-interest expense declined 5% sequentially to $103 million. That decline came even as we continued to invest in technology, talent, and our risk management. Our core efficiency ratio improved to 52.7 with non-interest expense to average assets of 1.87%, placing us at the top of Bank's Moving to slide 13, I'll recap the progress of our operational excellence initiatives, which is how we achieve those strong We previously outlined a target of $20 million of annual efficiency through a combination of fee income growth and expense savings to reinvest in our I'm pleased to say that we've outperformed that target.

Phil Watkins: They are the right trajectory remains uncertain the value added opportunities we have on both sides of the balance sheet provide the foundation for net interest income expansion across a range of rate scenarios.

Phil Watkins: On slide 12, we'll cover noninterest expenses, we are incredibly.

Phil Watkins: Proud of our performance on efficiency this quarter in Q1, our core noninterest expense declined 5% sequentially to $103 million that decline came even as we continue to invest in technology talent and our risk management infrastructure.

Phil Watkins: Our core efficiency ratio improved to 52, 7% with our with noninterest expense to average assets of 187%, placing us at the top of banks in our peer group.

Phil Watkins: Moving to slide 13, I'll recap the progress of our operational excellence initiatives, which is how we achieve those strong results.

Phil Watkins: We previously outlined a target of $20 million of annual efficiency through a combination of fee income growth and expense savings to reinvest in our business.

Phil Watkins: I'm pleased to say that we outperform that target as of Q1, we realized $30 million in annualized impact exceeding our original $20 million target.

Phil Watkins: As of Q1, we've realized $30 million in annualized impact exceeding our original $20 million. This includes approximately $22 million in cost savings and $8 million in new recurring fee income, primarily through treasury management fees enabled by our proprietary Cubix . I would note that this does not include future professional services expense reductions we've discussed. These results reflect structural, scalable improvements across the organization. We've consolidated technology platforms, rationalized vendor spend, and made strategic decisions around our operation. At the same time, we strengthen revenue generation through enhanced payments, treasury, and commercial deposits. As a result, we expect strong growth in core non-interest income this year compared Importantly, these savings give us tremendous headroom to reinvest in the franchise, targeting high-impact areas such as risk management and technology, in addition to the team recruitment opportunities SAM offers.

Phil Watkins: This includes approximately $22 million in cost savings and $8 million in new recurring fee income primarily through Treasury management fees enabled by our proprietary cubic's platform.

Phil Watkins: I would note that this is not include future professional services expense reductions we discussed previously.

Phil Watkins: These results reflect structural scalable improvements across the organization, we've consolidated technology platforms rationalized vendor spend and made strategic decisions around our operations at the same time, we strengthened revenue generation through enhanced payments treasury and commercial deposit capabilities as a result, we.

Phil Watkins: Strong growth in core noninterest income this year compared to last year.

Phil Watkins: Importantly, these savings give us tremendous headroom to reinvest in the franchise targeting high impact areas, such as risk management and technology. In addition to the team recruitment opportunities Sam outlined.

Phil Watkins: This ensures we continue building a platform that is not only efficient, but differentiated and future. Looking ahead, we continue to see opportunity to deepen this impact as we scale and drive operating Our commitment remains clear to grow responsibly, invest strategically, and deliver long-term value.

Phil Watkins: This ensures we continue building a platform that is not only efficient, but differentiated and future ready.

Looking ahead, we continue to see opportunity to deepen this impact as we scale and drive operating leverage.

Phil Watkins: Our commitment remains clear to grow responsibly invest strategically and deliver long term value to shareholders.

Phil Watkins: On slide 14, you can see the tangible bulk value per share ended the quarter at $54.74, up more than $5.50 year over year. This continues our track record of double-digit annual growth. For us, tangible book value growth is a key long-term performance. Over the last five years, we've more than doubled TBB per share, even while navigating a global pandemic, an inflationary rate shock, and a regional banking crisis. And we're committed to continuing that.

Phil Watkins: On Slide 14, you can see the tangible book value per share ended the quarter at $54 74 up more than $5.50 year over year. This continues our track record of double digit annual growth.

Phil Watkins: For us tangible book value growth is a key long term performance indicator over the last five years, we've more than doubled TBB per share, even while navigating a global pandemic and inflationary rate shock and our regional banking crisis, and we're committed to continuing that trajectory.

Phil Watkins: With that, I'll move the slide. Our capital ratios across the board remain robust and provide us with substantial flexibility for organic growth operations. Our TCE ratio increased by about 10 basis points in the quarter, even with growth in the size of our balance sheet and the impact of the securities portfolio repositioning.

Phil Watkins: With that I'll move to slide 15.

Phil Watkins: Our capital ratios across the board remain robust and provide us with substantial flexibility for organic growth opportunities. Our TCE ratio increased by about 10 basis points in the quarter, even with growth in the size of our balance sheet and the impact of the securities portfolio repositioning and.

Phil Watkins: At 11.7%, we remain in excess of our CET1 target while utilizing some risk-based capital for loan For more information visit www.FEMA.gov On slide 16, we continue to be pleased overall with our credit. Non-performing assets remained low at 26 basis points of total assets and reserves to NPL stayed strong at 325. Total net charge-offs were in line with the average over the previous four quarters, and our commercial and consumer portfolios are both performing.

Phil Watkins: At 11, 7%, we remain in excess of our CET, one target, while utilizing some risk based capital for loan growth in the quarter.

Phil Watkins: Okay.

Phil Watkins: On slide 16, we continue to be pleased overall with our credit performance nonperforming assets remained low at 26 basis points of total assets and reserves to Npls stayed strong at 324%.

Phil Watkins: Total net charge offs were in line with the average over the previous four quarters and our commercial and consumer portfolios are both performing well, while we continue to closely monitor any emerging risks we feel the portfolio is well positioned.

Samvir Sidhu: While we continue to closely monitor any emerging risks, we feel the portfolio is well With that, I'll pass the call back over to Sam before we open up the line for Q&A. Thanks for that, Phil. As we look ahead to the rest of 2025, though there is increased market volatility, we're excited about our and confident in our ability to navigate the cart. We're reaffirming our full-year loan growth guidance with a bias towards the higher end of the range given our outsized performance in the first. Again, because this is in large part to, we are on board in our bankers legacy relationship.

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

Sam: Thanks for that Phil.

Speaker Change: As we look ahead to the rest of 2025, though there is increased market volatility we're excited about our positioning and confident in our ability to navigate the current environment.

Speaker Change: We're reaffirming our full year loan growth guidance with a bias towards the higher end of the range given our outsized performance in the first quarter again, because this is in large part to where we are onboarding, our bankers legacy relationships.

Samvir Sidhu: We are able to achieve this while remaining disciplined in our credit selection and underwriting. On the funding side, our deposit growth is driven by the expansion of the commercial franchise led by the new commercial banking teams and deepening of relationships within our company. Net interest income is projected to grow between 3-7% year over year. And as a reminder, we had a larger accretion income 2024. And so this equates to six to 10% on a normalized basis. our deposit remixing efforts and strong loan growth position thus well to drive NII expansion regardless of the rate. On the back of the success and the outperformance of our Operational Excellence Initiatives, we are on track to achieve our core efficiency ratio target in the low to mid-fifths.

Speaker Change: We are able to achieve this while remaining disciplined in our credit selection and underwriting.

Speaker Change: On the funding side, our deposit growth is driven by the expansion of the commercial franchise led by the new commercial banking teams and deepening of relationships with our within our client base.

Speaker Change: Net interest income is projected to grow between 3% to 7% year over year and as a reminder, we had larger accretion income in 2024, and so this equates to 6% to 10% on a normalized basis.

Speaker Change: Our deposit Remixing efforts and strong loan growth position us well to drive NII expansion, regardless of the rate environment.

Speaker Change: On the back of the success and the outperformance of our operational excellence initiatives. We are on track to achieve our core efficiency ratio target in the low to mid fifties for the full year.

Samvir Sidhu: and we remain committed to operating with higher levels.

Speaker Change: And we remain committed to operating with higher levels of capital with the clarity of our strategy and strong execution. Our forward outlook reflects both optimism and discipline.

Samvir Sidhu: With the clarity of strategy and strong execution, our forward outlet reflects both optimism As we wrap up today's presentation on slide 18, I want to take a moment to recap what the first quarter demonstrated, not just in terms of financial results, but in terms of strategic clarity and equity. We delivered on a strong performance across the franchise. On funding, we had a 25 basis point reduction in deposit costs, driven by our successful remixing into lower cost. On the loan side, we had 12% annualized loan growth achieved through disciplined relationship-based lending across diversified verticals. Our net interest margin expanded for the second consecutive quarter, signaling improved funding dynamics and continued momentum on both sides of the balance sheet.

Speaker Change: As we wrap up today's presentation on slide 18.

Speaker Change: Want to take a moment to recap what the first quarter demonstrated not just in terms of financial results, but in terms of strategic clarity and execution.

Speaker Change: We delivered on our strong performance across the franchise on funding we had a 25 basis point reduction in deposit costs, driven by our successful remixing into lower cost deposits.

Speaker Change: On the loan side, we had 12% annualized loan growth achieved through disciplined relationship based lending across diversified verticals. Our net interest margin expanded for the second consecutive quarter signaling improved funding dynamics and continued momentum on both sides of the balance sheet.

Samvir Sidhu: and we maintain strong credit. What stands out is not what we accomplished, but how we did it. Our client-centric culture, disciplined risk framework, and high-performing teams continue to drive differentiation.

Speaker Change: And we maintain strong credit metrics what stands out is not what we have accomplished but how we did it or.

Speaker Change: Our client centric culture disciplined risk framework and high performing teams continue to drive differentiated results in closing were building on a strong foundation, one defined by disciplined execution strategic growth and a relentless focus on our clients with the right talent technology and operating model in place we're confident in our ability to sustain this woman.

Samvir Sidhu: In closing, we're building on a strong foundation, one defined by disciplined execution, strategic growth, and a relentless focus on our With the right talent, technology, and operating model in place, we're confident in our ability to sustain this business. Our strategy is clear, the team is aligned, and we remain committed to delivering long-term value for our clients, communities, and shareholders.

Speaker Change: Our strategy is clear the team is aligned and we remain committed to delivering long term value for our clients communities and shareholders with that we will open up the line for questions.

Operator: With that, we'll open up the line. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure you are not on speakerphone and that your phone is not on mute when called upon. Thank you.

Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question simply press Star One again please.

Speaker Change: Please ensure you are not on speaker phone and that your phone is not on mute when called upon thank you.

Frank Schiraldi: Your first question comes from Frank Schiraldi with Piper Sandler. Your line is open. Good morning. Just in terms of the new banking teams, the deposits coming over, Sam, it sounds like that's still 25% of that is non-interest bearing, and that's still kind of the expectation going forward. And just if that's the case, just curious, you know, the offset in the quarter in terms of non-interest bearing, is that just, you know, continued general pressure to move some and get some return overall?

Speaker Change: Your first question comes from Frank Schiraldi with Piper Sandler Your line is open.

Frank Schiraldi: Good morning.

Speaker Change: Yeah.

Speaker Change: Just in terms of the.

Speaker Change: The new banking teams the deposits coming over.

Speaker Change: And it sounds like Thats still 25% of that is noninterest bearing and that's still kind of the expectation going forward.

Speaker Change: If that's the case just curious.

Speaker Change: The offset in the quarter.

Speaker Change: Terms of noninterest bearing is that just continued general pressure to move some farms you can get some return overall.

Samvir Sidhu: Hey, good morning, Frank. Thanks so much, you know, for the question. So, you know, in terms of the, the new teams, you're right, it's at least 25%. It's actually generally closer to 30% compensating non interest bearing deposits. And yes, we saw a couple hundred million dollars of increase, you know, for commercial teams. We also had about $300 million in lower cubics balances. And that's sort of the netting out. And that's why it's slightly down for the quarter, but really from an operating perspective, if you look at our average non interest bearing deposit balances, they were up significantly.

Frank Schiraldi: Good morning, Frank Thanks, so much for the question so.

Frank Schiraldi: In terms of the new teams you're right. It's at least 25%, it's actually generally closer to 30%.

Speaker Change: Compensating noninterest bearing deposits.

And yes, we saw a couple of hundred million dollars of increase for our commercial teams. We also had.

Speaker Change: About $300 million and lower cubic's balance isn't that sort of that netting out and that's why it's so it's slightly down for the quarter, but really from an operating.

Speaker Change: Perspective, if you look at our average noninterest bearing deposit balances they were up significantly quarter over quarter.

Frank Schiraldi: Okay, and then just as a just switching gears as a follow up, just in terms of the restructuring in the quarter. You know, is there any, does this... kind of do it in terms of, and you might've mentioned, I know you talked a little bit about the fact that you don't expect any additional restructuring, but does this kind of do it for any sort of credit sensitive instrument within the investment securities book at this point?

Speaker Change: Okay.

Speaker Change: And then just as a.

Speaker Change: Switching gears as a follow up just in terms of the restructuring in the quarter.

Speaker Change:

Speaker Change: Is there any does this.

Speaker Change: Kind of do it in terms of and you might as you might imagine I know you talked a little bit about the fact that you don't expect any additional restructuring, but does this kind of do it for any sort of.

Speaker Change: Credit sensitive instrument within the investment securities.

Speaker Change: Book at this point.

Phil Watkins: Yeah, hey, hey, Frank, good morning. Yes, as Sam said, we don't, you know, we're, we don't see anything else that we would do on the restructuring front. And just a little bit more detail, we provided some some detail on the back. But, you know, as you saw, about 45%, were corporates, which takes that down in about half, with the remaining predominantly investment grade, 40% of it was ABS. And that was really CLO and non-agency CMBS. And so with that, essentially, all of our CLOs, that takes down essentially all of our CLOs, and all the remaining CMBS is agency backed.

Frank Schiraldi: Yeah, Hey, Hey, Frank Good morning, Yes.

Speaker Change: Yes, as Sam said, we don't.

Speaker Change: We don't see anything else that we would do on the restructuring front and just a little bit more detail. We provided some detail on the back but as you saw about 45% or corporates, which takes that down in about half.

Speaker Change: With the remaining predominantly investment grade.

Speaker Change: 40% of it was a b S and that was really CLO and non agency MBS and so with that essentially all of our Clo's that takes down essentially all of our clo's.

Speaker Change: And all of the remaining see MBS as agency backed.

Phil Watkins: And then the CMOs were unrated privates, and all the remaining is is AAA.

Speaker Change: And then the Cmo's were unrated privates and all of the remaining as is AAA.

Samvir Sidhu: Okay. And just trying to think about it from others' books, was there anything specific you would call out in the quarter in terms of credit impairment within that stuff, in terms of the loss you guys took to move that book? Yeah, Frank, it's as Phil mentioned, it was really sort of a de-risking exercise, you know, for to support our loan growth. And I think that's really the important thing. If you actually look at the, you know, last quarter, while we call these securities repositioning in Q4, we we use majority for loan growth. Same thing here.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: And just trying to think about it from others box was there any.

Speaker Change: Anything specific you would call out in the quarter in terms of.

Speaker Change: Credit impairment within that stuff in terms of the.

Speaker Change: The loss you guys talked to.

Speaker Change: To move that book.

Frank Schiraldi: Yes, Frank.

Speaker Change: Phil mentioned, it was really sort of it.

Speaker Change: <unk> de risking exercise for to support our loan growth and I think that's really the important thing if you actually look at the.

Speaker Change: Last quarter, while we call. These securities repositioning in Q4, we we use majority for loan growth.

Samvir Sidhu: So it's actually I think balance sheet optimization is a much better way, you know, to consider this. So, you know, we thought in this environment, especially with what we saw towards the end of the of the first quarter, we wanted to, you know, focus on our deposit and loan growth. And that's where we would want to, you know, have to focus on the asset side of the. Okay.

Speaker Change: Same thing here. So it's actually I think balance sheet optimization is a much better way to.

Speaker Change: Consider this.

Speaker Change: We thought in this environment, especially with what we saw towards the end of the first quarter.

Speaker Change: We wanted to.

Speaker Change: Focus on our deposit and loan growth and that's where we would want to.

Speaker Change: I have to focus on the asset side of the balance sheet.

Frank Schiraldi: All right. Fair enough. Thank you.

Speaker Change: Okay, Alright fair enough. Thank you.

David Bishop: The next question comes from David Bishop with HubD Group. Your line is open. Yeah, good morning, Jonah. Morning, Pat. Curious. and Sam, we've seen some good growth here lately, especially on the commercial real estate side. Remind us your capacity to grow commercial real estate lending, both on the non-owner-occupied and the multifamily space. You still have plenty of capital room, right? That's right, Dave. So, you know, I think we in our book last quarter and the quarter before we talked about being under 200%, 190%, plus or minus, and that quarter over quarter, despite our loan growth typically stays flattish.

Speaker Change: The next question comes from David Bishop with Hub Group. Your line is open.

David Bishop: Yes, good morning, Kevin.

David Bishop: Good morning, I'm curious.

Speaker Change: And we see some good growth here lately, especially on the commercial real estate side.

David Bishop: The capacity to grow.

David Bishop: Commercial real estate lending both on the non arc.

David Bishop: Owner occupied in the multifamily space, you still putting capital room alright.

Dave: That's right Dave so.

David Bishop: I think we in our.

David Bishop: Book last quarter, and the quarter before we talked about being under 200%, 190% plus or minus in that quarter over quarter. Despite our loan growth typically stays flattish. So a ton of capacity compared to peers that are in sort of the three to 500 per cent range.

David Bishop: So a ton of capacity compared to peers that are in sort of the three to 500% range in our in our home markets. And I think what's really interesting is, you know, touching on the fact that these are self funded with real estate deposits is really the interesting part. And I said, you know, over 4%, I think, you know, sitting where we are today, it's 4.4% is what we've been able to achieve over the Got it. And then maybe on the income statement, you noted the traction in some of the treasury management products. Is this a pretty good run rate for that?

David Bishop: In our in our home markets and I think what's really interesting is touching on.

David Bishop: The fact that these are self funded with real estate deposits is really the interesting part and I said over 4% I think sitting where we are today. It's four 4% is what we've been able to achieve over the past year.

David Bishop: Got it and then maybe on the income statement.

David Bishop: You noted that the traction in some of the Treasury management products.

David Bishop: Pretty good run rate for that.

David Bishop: I assume the treasury management fees are in that other income. Do you think you can grow that off this three million plus run rate?

David Bishop: I assume the charging management fees on that other income do you think you can grow that office, three 3 million plus run rate and from a tech perspective is this a good run rate for the technology expenses or whether it be more investment.

Samvir Sidhu: And from a tech spend perspective, is this a good run rate for the sort of technology expenses or will there be more investment? Yeah, hey Dave. So, you know, starting with the treasury fee income side, you know, we're up slightly from where we were on the new rollout, quarter over quarter, a couple of hundred thousand dollars. I think we feel like we're in a pretty good run, right, to answer your question. I think, you know, I'd caveat that by just saying, you know, these are, you know, the successes of what we laid out in the middle of 2022 and sort of building our treasury management platform, you know, building our Cubix platform and then rolling it out to our larger corporate clients and then seeing, you know, the results of that.

David Bishop: Yeah, Hey, Dave so on the on the starting with the Treasury fee income side.

David Bishop: Were up slightly from where we were on the new rollout quarter over quarter. A couple of hundred thousand dollars I think we feel like we're in a pretty good run rate to answer your question I think I would caveat that by just saying these are.

David Bishop: The successes of what we laid out in the middle of 2022 and sort of building our Treasury management platform building, our cubic's platform and rolling out to a larger corporate clients and seen the results of that.

Samvir Sidhu: You know, lending too, which actually speaks to the benefit the customers are achieving. So I think that we're sitting at a pretty good run rate, you know, today.

David Bishop: In lending to which actually speaks to the benefit to customers are are achieving so I think that we're sitting in a pretty good run rate today on the technology spend the technology spend associated with fees absolutely. It's a it's a it's pretty much behind us. So I think that's I.

David Bishop: On the technology spend, the technology spend associated with these fees, absolutely, it's pretty much behind us. So I think that's the nature of where your question was going from an ROI. Got it.

David Bishop: I think thats the nature of where your question was getting going from up from an ROI perspective.

Speaker Change: Got it and final question.

David Bishop: And final question. Curious, you know, saw the continued decline in the cost of deposits. It was 282. Do you have the spot cost at the end of the quarter? Thanks, and I'll have them back. Yep, it was at 282. So spot spots the same as the average.

David Bishop: Curious in the salt.

David Bishop: The continued decline in the cost of deposits.

Speaker Change: 282, do you have the spot.

David Bishop: Cost at the end of the quarter, Thanks, and I'll hop back in the queue.

Speaker Change: Yep.

Speaker Change: It was at 282, so spot spots are the same as the average.

Steve Moss: Great, thank The next question comes from Steve Moss with Raymond James. Your line is open. Good morning. Morning, Steve. Morning, Sam. I apologize. I hopped on late. So if you address this, I apologize. But in terms of the Cubix deposits here, it sounds like I think you said 300 million down quarter over quarter.

Speaker Change: Great. Thank you.

Steve Moss: The next question comes from Steve Moss with Raymond James Your line is open.

Steve Moss: Good morning.

Speaker Change: Good morning, Steve Yes.

Steve Moss: Maybe.

Steve Moss: Good morning, Sam I apologize I hopped on late so if you've addressed this I apologize, but in terms of the cubic's deposits here. It sounds like I think you said $300 million down quarter over quarter.

Samvir Sidhu: Sam, just kind of wondering, you know, what you're thinking for, you know, those balances, if you're, if you're going to grow them over time here, and just maybe just talk a little about, you know, where you see the opportunity going forward. Yeah, sure. So they were at 3.3. I think what's important is the average was also 3.3. And again, these are payments, deposits. And as a reminder, they're held entirely 100% in cash. So as we think about the, you know, the spot versus average, they typically, you know, have been oscillating between a 10%, you know, band plus or minus.

Steve Moss: Im just kind of wondering.

Steve Moss: What youre thinking for those.

Steve Moss: Those balances that youre going to grow them over time here and just maybe just talk a little about where you see opportunities going forward.

Steve Moss: Yeah sure. So they were at 33 I think what's important is the average was also three three and again these are payments deposits and as a reminder, there held entirely 100%.

Steve Moss: And cash.

Steve Moss: As we think about the the.

Steve Moss: The spot versus average they typically have been oscillating between a 10% band plus or minus.

Samvir Sidhu: And we continue to support our clients how they need us when they need us, we're not necessarily looking to directly expand these deposits, you know, we have the entire institutional, you know, network base of, of all of our digital asset customers, we have all the operating transactional accounts that the industry really operates on. So, you know, if our customers need additional deposit headroom, related to sort of their operating transactional accounts, you know, we will, we will support that. Having said that, you know, we are holding these all in cash and, and, you know, and sitting where we are today, it's not, it's not necessarily something we're looking to, you know, lean into, to increase deposits, because this is really payments float.

Steve Moss: And we continue to support our clients how they need us when they need us we're not necessarily looking to directly expand these deposits you know where you have the entire institutional.

Steve Moss: Network base of of all of our digital asset customers, we have all the operating and transactional accounts at the industry really operates on.

Steve Moss: So if our customers need additional deposit headroom that related to sort of their operating transactional accounts, we will we will support that.

Steve Moss: Having said that we are holding these all in cash and and.

Steve Moss: And sitting where we are today, it's not just it's not necessarily something were looking to.

Steve Moss: Lean into and to increase to increase deposits. Because this is really payments flow and I would just contextualize that by saying that one of the things that I think that is underappreciated number one is that we built this proprietary technology platform that debt.

Samvir Sidhu: And I would just contextualize that by saying that one of the things that I think that is underappreciated, number one is that, you know, we've built this proprietary technology platform that, that the industry relies on, you know, the second is really is that we hold about 1%, maybe slightly over 1%. of the liquidity in the digital asset industry. And I think that that's also something that's a really important call out, is that a lot of the deposits are actually held at the large banks and by asset managers. So we hold the operating transactional accounts. And as you can appreciate, there's yield that's being received, you know, on on those, you know, excess corporate or.

Steve Moss: The industry relies on.

Steve Moss: The second is really is that we hold about 1% maybe slightly over 1% of the liquidity.

Steve Moss: In the digital asset industry, and I think that that's also something that's a really important call out is that a lot of the deposits are actually held at the large banks and by asset managers. So we hold the operating transactional accounts and as you can appreciate there's yield thats being received.

Steve Moss: On on those.

Excess corporate or reserve accounts.

Steve Moss: Great, I appreciate all the color there. And then in terms of the loan growth front, I guess, you know, the guide strikes me as conservative here, given this quarter. You know, I'm assuming you just kind of a little bit of uncertainty, the outlook makes you reluctant to take it up. I'm just kind of curious as to how you think about the pipeline here and the pull through on that pipeline. Yep. Absolutely.

Steve Moss: Great appreciate all color there and then in terms of.

Steve Moss: The loan growth front.

Steve Moss: I guess the guide strikes me as conservative here given this quarter.

Steve Moss: <unk>.

Steve Moss: I'm, assuming you're just kind of a little bit of uncertainty of the outlook makes you reluctant to.

Steve Moss: To take it up I was just kind of curious as to how you're thinking about the pipeline here and the pull through on our pipeline.

Steve Moss: Yep.

Samvir Sidhu: Steve, I think if you had asked us on April 2nd, which is when we all sat down, it was a Wednesday, I believe. Monday was the 31st. We sat down on Wednesday, April 2nd. We talked a little bit about how the second quarter was looking and we had a soft close of the books. We had a very different outlook than we did just a couple hours later that afternoon. So yes, there is market volatility. Having said that, I think what's important is that backlog is what I would focus on as opposed to pipeline. Pipelines remain strong.

Speaker Change: Absolutely Steve I think if you had asked US on April 2nd which is when we all sat down it was a Wednesday I believe Monday was the 31st we sat down on Wednesday April 2nd we talked a little bit about how the quarter. The second quarter was a was.

Steve Moss: Looking and we have sort of a soft close.

Speaker Change: <unk> off the books.

Speaker Change: A very different outlook than we did just a couple of hours later that afternoon. So yes, there is.

Speaker Change: Volatility, having said that I think what's important is is that backlog that's what it what it would what I would focus on as opposed to in our pipeline pipelines remained strong that's I think generally consistent from the.

Samvir Sidhu: That's, I think, generally. the macro sentiment we've heard across the industry. But backlog is also, you know, strong and stronger than, you know, what we would have anticipated, especially on the heels of the first quarter. I think what's really important is we talked about sort of the diversification over the last couple of quarters, we've been sharing a much more granular breakout of the loan growth that's coming by vertical. And then also you sort of contextualize against that, against the portfolio remix that we've had over the last five years. I think we're really, really proud of the efforts that we've put together.

Speaker Change: The macro sentiment we've heard across the industry, but backlog is also.

Speaker Change: Strong.

Speaker Change: And stronger than what we would have anticipated, especially on the heels of the first quarter and I think what's really important is we talked about sort of the diversification over the last couple of quarters, we've been sharing a much more granular breakout of.

Speaker Change: Of the loan growth that's coming by vertical.

Speaker Change: And then you also you sort of contextualize against that against the portfolio remix that we've had over the last five years I think we're really really proud of the efforts that we've put together.

Samvir Sidhu: And it is a unique differentiated model to not just be bringing in organic, you know, commercial, low cost commercial deposits, but then also sort of, you know, complementing that, that side of the balance sheets, remix and growth with ability to also deliver franchise enhancing granular, you know, loan growth. We're talking single digit millions type loan growth per average borrower. Right. Okay.

Speaker Change: It is a unique differentiated model to not just be bringing inorganic.

Speaker Change: Commercial low cost commercial deposits, but then also sort of.

Speaker Change: Complementing that that side of the balance sheet remix and growth with the ability to also deliver franchise enhancing granular loan growth, we're talking single digit millions type loan growth per average borrower here.

Speaker Change: Right Okay.

Samvir Sidhu: Appreciate that color. And then maybe just One last one for me, I assume you probably said this in your prepared remarks and I missed it, but just where's the deposit pipeline for the new new recent hires and you know just kind of where's the blended rate these days? Yep. So the pipeline is still over $2 billion, despite the, you know, I think we called out the, you know, the $400 million just from the new teams, you know, that came in approximately in the first quarter. It's again, at about two and a half percent. It's in the sort of high 20s around, you know, to up to 30% non-interest bearing.

Speaker Change: Great that color and then maybe just.

Speaker Change: One last one for me I assume you probably said this in your prepared remarks, and I missed it but just where is the deposit pipeline for the new new.

Speaker Change: <unk> hires and just kind of where is the blended rate these days.

Speaker Change: Yep. So the pipeline is still over 2 billion. Despite the I think we called out the four.

Speaker Change: 400 million just from the new teams that.

Speaker Change: It came in approximately in the first quarter.

Speaker Change: Again at about two 5% that's in the sort of high twenty's around to up to 30% noninterest bearing.

Speaker Change: And it's granular we continue to be opening up more accounts waiting for those to fund so we sort of have a.

Samvir Sidhu: And it's granular, we continue to be opening up more accounts, waiting for those to fund. So we sort of have, you know, continue to have a parking lot of open accounts waiting to be funded, a number of accounts for applications are out.

Speaker Change: Continue to have in a parking lot of of opened accounts waiting to be funded a number of accounts where applications are are out.

Samvir Sidhu: And then finally, I think also importantly, which you may have missed, but just to put a little bit of a bow on it is that, you know, we have a couple of teams already, you know, either onboarded or signed up and advanced negotiations with about, you know, half a dozen or so, you know, other deposit focused, low cost deposit focused commercial banking teams, either in expanding into our existing, you know, footprint and in some cases also thinking about sort of unique specialty, you know, verticals as well, that would be interesting and adjacent products for. All right, great.

Speaker Change: And then finally I think also importantly, which which you may have missed but just to put a little bit of a bow on it is that we have a couple of teams already.

Speaker Change: Either onboard or signed up in.

Speaker Change: In advanced negotiations with about half a dozen or so other deposit focused low cost deposit focused commercial banking teams either in expanding into our existing.

Speaker Change: Our footprint and in some cases also thinking about sort of unique specialty.

Speaker Change: Verticals as well that would be.

Speaker Change: Interesting and adjacent products for customers Bank.

Speaker Change: Alright, great really appreciate all color I'll step back thanks, Sam.

Steve Moss: Really appreciate it. I'll call her. I'll step back. Thanks.

Kelly Motta: The next question comes from Kelly Motta with KBW, your line is open. Hey, good morning. Thanks for the question. I would love to follow up again on the deposit pipeline here. Obviously, the core deposit growth has been really strong and a testament to your new teams. And you just continue to replenish the pipeline in a way that almost has made it look easy. So I'm wondering, is there a certain point, you know, being a year with the ten teams having brought in where the overall pipeline and so-called low hanging fruit might start to diminish? I'm sure it's hand-to-hand combat regardless, but just wondering how we should start thinking about that.

Speaker Change: The next question comes from Kelly Motta with VW. Your line is open.

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

Kelly Motta: I would love to follow up again on the deposit pipeline here.

Kelly Motta: Do you see that core deposit growth has been really strong and that's helpful.

Kelly Motta: Cool.

Kelly Motta: Cool.

Kelly Motta: And you just continue to replenish the pipeline.

Kelly Motta: Help me that look.

Kelly Motta: Is there a certain point.

Being a year with that at home cool.

Kelly Motta: And where.

Kelly Motta: The overall pipeline, so called low hanging fruit might start kicking in Asia for example, and combat regardless, but just wondering how we should start thinking about that.

Kelly Motta: in terms of the outlook here. Yeah, thanks. Thanks, Kelly. You know, I wish I could say it was easy. And for those, you know, 152 members that have joined us in the last year or two, and the additional 150 or so in our sales teams that have been in hand to hand combat for the past couple of years, we commend your efforts such that, you know, our external stakeholders feel that way. I think, you know, on the I'll start first on the new teams, you know, the newest teams, we talked about venture banking, that we expect that to be a two to one, you know, deposit.

Kelly Motta: In terms of the outlook here.

Kelly Motta: Yep. Thanks, Thanks Kelly.

Speaker Change: Wish I could say it was easy and for those.

Speaker Change: 152 million members that have joined us in the last year or two and the additional 150 or so and our sales teams that have been in hand to hand combat for the past couple of years are we commend your efforts such that our external stakeholders feel that way I think on the I'll start first on the new teams you know the newest teams we've talked about venture banking that we.

Speaker Change: Expect that to be a two to one and a deposit to loan.

Speaker Change: Franchise overtime, so I think that speaks a little bit to just the nature of the of continuing to build and harvest first deposit only customers than credit customers that are typically net depositors and then finally, a little bit in the later stage sort of net borrowers in that sort of how we think about the diversification of that business. We also talked about the new commercial teams.

Speaker Change: We are on boarded last year and the size of their books today is less than 20%.

Speaker Change: Of of where they were when they were on boarded and even if all of those direct customers don't come back on they will replenish those books given the high performance nature of.

Samvir Sidhu: when they were on boarded. And even if all of those direct customers don't come back on, they will replenish those books, you know, given the high performance nature of these teams, the markets in which they serve. And we expect that to happen, call it over about a three-year period, you know, plus or minus. So that hopefully gives you some color there. And then, like I mentioned, we've established ourselves as a top recruiter of talent. You know, I think our and team members that join us that find a platform and a franchise that has a single point of contact service model, it has a ton of products and services to support some of your small customers, your medium-sized customers, your large customer needs.

Speaker Change: These teams the markets in which they serve.

Speaker Change: And we expect it to expect that to happen call. It over about a three year period, plus or minus so that hopefully gives you. Some color there and then like I mentioned, where we have established ourselves as a top recruiter of talent and I. Thank our employees and team members that join us that.

Speaker Change: Find a platform and a franchise that has a single point of contact service model. It has a ton of products and services to support some of your small customers medium sized customers to your large customer need.

Samvir Sidhu: And then you complement that with an incentive compensation model that is unique in the industry. And you look at sort of banks of the scale that we are at, you know, we're really the, you know, the largest, most successful, you know, regional bank and sort of recruiting these team members in the markets that we serve. So I think that at the end of the day, we've had an opportunity for many teams that have joined other institutions to have, you know, a first look or a last look.

Speaker Change: Needs.

Speaker Change: And then you complement that with an incentive compensation model that is unique in the industry and you look at sort of banks of the scale that we're at.

Speaker Change: No we're really.

Speaker Change: Just most successful regional bank and sort of recruiting these team members in the markets that we serve so I think that at the end of the day. We've we've had an opportunity for many teams that have joined other institutions to have a first look at our last look and we're really focused on the folks that are going to be the most accretive to adjacency in terms of products and.

Samvir Sidhu: And we're really focused on the folks that are going to be the most accretive to adjacency in terms of products and services, adjacency in terms of geographies, and continuing to focus on that is complementary to what we already have and continue to build these, you know, build these pipelines and continue to transform and remix and also grow, you know, our overall That's helpful.

Speaker Change: Services adjacency in terms of geographies.

Speaker Change: And continuing to focus on something that is complementary to what we already have and continue to build these.

Speaker Change: Build these pipelines and continue to transform and remix and also grow our overall deposit franchise.

Speaker Change: Okay, that's helpful and maybe maybe booking.

Samvir Sidhu: And maybe flipping to the other side of the balance sheet. With loans, you've grown at a double digit pace now for the past four quarters. I'm hoping to get a refresh as to, you know, the average size of a loan. I know you have good diversification. So I'm hoping to get a refresh on kind of where that stands as well as where C&I utilization rates are. Thank you. are currently and how that compares to recent history. Thank you. Sure, absolutely. So I'll give you some ranges. I don't have it for sort of every vertical, but I think predominantly the vast majority of our, you know, loan growth has been coming from, you know, team members who are new to customers bank, but relationships that are longstanding and decade, in some cases, decades long.

Speaker Change: The other side of the balance sheet with loans growing at a double digit wholesale for the past four quarters.

Speaker Change: Hoping to get a refresh.

Speaker Change: The operating side.

Speaker Change: Alone.

Speaker Change: Have a good diverse of a wholesale I'm, hoping to get a refresh on.

Speaker Change: Kind of where that fans as well as.

Speaker Change: Where C&I utilization rate.

Speaker Change: Our current all have that comparison.

Speaker Change: Thank you.

Sure absolutely. So I'll give you some ranges I don't have it for sort of every vertical but I think predominantly the vast majority of our.

Speaker Change: Loan growth has been coming from.

Speaker Change: Uh huh.

Speaker Change: Team members, who are new to customers bank, but relationships that are long standing and decades in some cases decades long.

Samvir Sidhu: So sort of our new commercial banking teams have an average loan size of about $6 million. You know, our venture team is also sort of in that, you know, CRE side, we've actually, you know, closer to about $7.5 million, you know, on the CRE side. So extremely, you know, granular, you know, across the board.

Sort of a new commercial banking teams have an average loan size of about $6 million.

Speaker Change: Our venture team is also sort of in that.

Speaker Change: $6 million to $10 million range, the CRE side, we've actually closer to about $7 5 million.

Speaker Change: On the CRE side, so extremely granular you know across the board and again. These are the major loan categories that we've had especially over the last two quarters.

Phil Watkins: And again, these are the major loan categories that we've had, especially over the last Yeah, and Kelly, I can, good morning, I can jump in on the utilization. Yeah, I would say, again, it obviously varies a bit by business line, as Sam was saying. So, you know, as an example, I would say in our traditional C&I, we're not seeing anything sort of unusual from a line perspective. Certain of the verticals actually, like in our fund finance business, sort of lender finance and capital calls, probably seeing lower than normal utilization. And also with the strong CLO market, we actually saw We saw in the material some increased payoffs, and so that's just a sign, because our typical take out there is often...

I don't know that.

Speaker Change: Yes, Kelly I can good morning, I can jump in on the utilization, yes, I would say again it.

Speaker Change: It varies a bit by business line as Sam was saying so as an example, I would say in our traditional C&I, we're not seeing anything sort of unusual from a wider perspective.

Speaker Change: Certain of the verticals actually like in our.

Speaker Change: Fund finance business sort of lender financing capital calls, probably seeing lower than normal utilization and also with the.

Speaker Change: The strong CLO market, we actually saw I think as you saw in the materials some increased payoffs and so that's just a sign because our our typical take out there as is often when they would move to cielo. So it varies a bit by by vertical but nothing out of the ordinary there.

Kelly Motta: https://www.customersbancorp.com Great last question for me if I can just flip it in is on the cubits deposits you framed it more as like a payment a payment play. So I'm hoping to get an update as to the fee income contribution there and if that's fully realized or if there's other tweaks you're making that could. drive drive those those revenues higher. Thanks. Thanks a lot. Yep, absolutely. You know, Kelly, so we had I think the fourth quarter we'd mentioned 1.9 million dollars. Great, thank you so much.

Speaker Change: Great last question for me if I can just slip it in is.

Speaker Change: Thank you Mr <unk>.

Speaker Change: You framed it more as like a piano.

Speaker Change: Hum.

Speaker Change: Opinions price I'm, hoping to get an update as to the concert the long haul contribution Marin.

Speaker Change: Is that fully realized or if there's other tweaks youre, making that good.

Speaker Change: Brian.

Speaker Change: Does revenue higher thanks.

Kelly Motta: Yep, absolutely Kelly. So we had I think the fourth quarter that we'd mentioned $1 $9 million on a sort of a full quarter basis in the first quarter. It was $2 1 million.

Kelly Motta: Sort of that couple of hundred thousand of increase that I was sort of referring to earlier. So we feel we're at a pretty good plus or minus $8 million run rate, we'd sort of guided to a little bit lower last quarter.

Kelly Motta: A bit of conservatism.

Kelly Motta: It's sort of five plus.

Kelly Motta: But I think we feel pretty good about the ramp up there again, where we are we are charging traditional commercial banking.

Kelly Motta: Fees here nothing.

Kelly Motta: That is out of the ordinary and our customers have been very receptive.

Kelly Motta: Great. Thank you for my follow step back.

Matthew Breese: I will step back.

Matthew Breese: The next question comes from Matthew Breese with Stevens Inc. Your line is open. Good morning. I was hoping to stay on Cubix, you know, how much of those deposits reside within non-interest bearing? And do you think there's any risk to that, just particularly given the openness of the regulators and inviting banks back into the industry? Do you see any risk of transition of QBIC into, you know, interest bearing deposits? You know, we also know that from other banks in the industry, they tended to command higher betas at some houses. Thanks.

Matthew Breese: The next question comes from Matthew Breese with Stephens, Inc. Your line is open.

Speaker Change: Good morning.

Speaker Change: I was hoping to stay on cubic how long some of those deposits.

Speaker Change: Reside within noninterest bearing and do you think there's any risk to that.

Speaker Change: Particularly given the openness of the regulators and inviting bank back into the industry do you see any risk.

Speaker Change: Cubic thank you.

Speaker Change: Interest bearing deposit we also know that from other banks in the industry.

Tenant demand higher beta than some houses.

Speaker Change: Yes.

Matthew Breese: Sure, absolutely, Matt. So the answer again, just to be very consistent, is 100% of these deposits are non-interest bearing. And that's really that, you know, speaks to the differentiation, you know, I, you know, I would sort of venture that we have the vast majority of all non- you know, industry. So, you know, to your point about regulatory clarity, and, you know, etc. I mean, this certainty is really going to bring consistency. https://www.customersbancorp.com Banks are expected to enter, and we think it very much legitimizes the industry and further strengthens the controls around the industry. And with that comes greater interest, with that comes a bigger pie, and so we will expect to have and actually welcome more banks in the industry.

Speaker Change: Sure.

Matt: Absolutely Matt So the answer again just to be very consistent as 100% of these deposits are noninterest bearing.

Matt: And that's really that speaks to the differentiation.

Speaker Change: You know I would sort of venture that we have.

Speaker Change: Asked majority of on all non yielding deposits that exist in the U S banking industry. So to your point about regulatory clarity.

Et cetera, I mean, there's certainty is really going to bring consistency to the space that's going to bring in new institutional investors, that's going to increase interest in the asset class more banks will be interested in having said that the banks don't have sort of the network the technology the industry knowledge and know how.

The connectivity the customer service to support the risk management framework the transaction monitoring.

Speaker Change: The debt that we have so you know.

Speaker Change: Banks are expected to enter and we think we're very much legitimizes the industry and further strengthens the controls around the industry.

Speaker Change: And with that comes with that comes greater interest with that comes a bigger pie and so we will.

Speaker Change: Expect it to have an actually we welcome more banks the industry, having said that we're going to continue to be the primary transactional operating account and as the as they enter the pie will also be growing and again like I said earlier I think the really important thing is we have about 1% of the liquidity.

Samvir Sidhu: Having said that, we're going to continue to be the primary transactional operating account, and as they enter, the pie will also be growing. And again, like I said earlier, I think the really important thing is we have about 1%. Got it.

Speaker Change: Okay.

Samvir Sidhu: And are there any updates? You know, historically, you've had about a 15% cap. Has that been updated in any way? Is there a cap in place or does it still remain in flux? Yep. Good, good question. You know, Matt, so $3.3 billion, you know, sitting where we are at $3.31 is about 17%, so above the old cap. When we set that initial cap back in February of 2023, we, you know, we didn't have a policy to hold all these deposits in cash. But, you know, since we have since that time been holding all of these deposits in cash, you know, we thought it was prudent to make sure we're there to support our customers and no longer have that liquidity risk at that point in time to open that concentration cap.

Speaker Change: Got it and are there any update historically, you've had about a 15% cap.

Speaker Change: Has that been updated in any way or is there a cap in place or is it still remaining.

Speaker Change: Yep good.

Matt: Good question, Matt So $3 3 billion.

Matt: Sitting where we are at 331 is about 17% so above there at the old cap when we set that initial cap back in February of 'twenty. Three we didn't have a policy to hold all these deposits in cash, but since we have since that time and holding all of these deposits and cash we thought it was prudent to make sure. We're there to support our customers and no longer have that.

Speaker Change: Liquidity risk concentration camp.

Speaker Change: Okay.

Phil Watkins: And then on the security repositioning. Did any of what was sold, because we've talked a little bit about the credit risk here, did any of what was sold include the consumer installment loans that were securitized, I believe, back in 2023? And if not, could you just remind us how much of the securities books are the securitized installment loans? I know they had a shorter life and duration. Yep. So the they do not exist. This has nothing to do with anything on the on the consumer side. Those are actually sitting in our HTM portfolio. It was over a billion plus or minus at the various stages, and it's down to a couple hundred billion, I think less.

Speaker Change: And then on the securities repositioning.

Speaker Change: Yes.

Speaker Change: You know any of what was sold because we've talked a little bit about that.

Speaker Change: Credit risk here did any of what was sold include the consumer installment loans. There were securitized I believe back in 2023 and.

Speaker Change: And if not can you just remind us how much in the securities book or the securitize installment loans I know they had a shorter license duration.

Speaker Change: Yep.

Speaker Change: So they do not exit that this has nothing to do with anything on the consumer side those are actually sitting in our HTM portfolio. It was over 1 billion plus or minus at the various stages and its down to a couple hundred million I think less than 400 million today, and performing incredibly well with credit enhancement and no issues.

Phil Watkins: and performing incredibly well with. Understood.

Phil Watkins: So what was the, I think you had mentioned TLOs, what was the underlying nature? of the collateral that was sold. Yeah, hey, Matt. As outlined, you know, about 45% of it was corporates. 40% of it, the ABS was CLOs and non-agency CMBS. And then there was a about a 15% Trump. Unrated Privates. And again, as I mentioned, on that tranche, everything remaining is AAA, essentially takes down the CLOs, and the remaining CMBSs. Got it. But underneath the non-agency CMBS was the office. multifamily was, you know, what was it that It was driving the credit. Well, you know, Matt, to be clear, these are AOCI marks, which include interest rate raise marks.

Speaker Change: Understood. So what was the I think you had mentioned CLO as well as the underlying nature.

Speaker Change: Of the collateral that was sold.

Matt: Yeah, Hey, Matt.

Matt: As outlined about 45% of it was corporate 40% of it the ABS was CLO and non agency see MBS and then there was at about.

Matt: About a 15% tranche that was unrated privates and again as I mentioned.

Matt: On that tranche, all everything remaining as AAA essentially takes down the CLO and the remaining <unk> agency back.

Matt: Got it but underneath that the non agency MBS, where the office.

Matt: Multifamily was what.

Matt: Was it at that.

Matt: And what's driving the credit Mark.

Matt: Well, Matt to be clear. These are these are <unk>, which include interest rate Grace Sparks. They include.

Phil Watkins: You know, credit spreads and credit marks. So it's it's a broad base. You know, I don't have the specific, you know, breakout in front of me. I don't know if you do, Phil. No, Phil. But really, I think the important here is what's what's remaining in corporates is predominantly investment grade, no, no more real CLOs, essentially all sold. And on the CMBS side, what we have is now all agency backed. And on the CMO side, what we exited was unrated privates, and what's remaining is... Okay, understood.

Matt: Credit spreads and credit Mark So I'd say, it's a broad base.

Matt: I don't have the specific breakout in front of me I don't know if you felt that Phil also says he doesn't have the specifics on that but but really I think the important here is what's what's remaining in corporates as predominant investment grade.

Matt: No no more reals cielo is essentially all sold.

Matt: And on the <unk> side, what we have is now all agency backed Ginnie Mae.

Matt: And what and on the CMO side.

Matt: What we what we exited was unrated privates and what's remaining is AAA.

Matthew Breese: I'll leave that there.

Speaker Change: Okay understood I'll leave that there. The last question I had is just.

Samvir Sidhu: The last question I had is just, you know, we're now just tripping over the two-year... you know, mile marker post-March Madness of 23. Does that mile marker represent any sort of significant, you know, milestone in terms of expiration of employee lockup agreements that'll provide additional hiring opportunities? You know, is anything kind of broken loose just because of timing? Thank you. Yeah, Matt, so the short answer is yes, the long answer is, you know, is actually interesting for customers banks. So yes, they're about two years sort of, you know, agreements for some of the majorly impacted, you know, in March, which is sometime in this quarter or early Having said that, I think that the opportunity we had last year to really pick off what we felt were the top 10 teams. available to us.

Matt: We're now just tripping over the two year.

Matt: Mile-marker post March madness of 'twenty three.

Matt: Does that mile market represent any sort of significant.

Matt: Milestone in terms of exploration of employee lockup agreements that will provide additional hiring opportunities or is there anything kind of broken loose just because of timing.

Matt: Yes.

Matt: GAAP net so the short answer is yes, the Langer long answer is.

Matt: It's actually interesting for customers bank. So so yes, thereabout two years sort of agreements for some of the institutions that were majorly impacted.

Matt: In March which is sometime in this quarter early next quarter, having said that I think that the opportunity. We had last year to really pick off what we felt were the top 10 teams that were avail.

Samvir Sidhu: We had an opportunity, as you can probably appreciate, to evaluate significantly more at that time and since then. And like I said, we really do have an opportunity to have sort of a first look and last look. So yes, we may have additional team or two that is incredibly high quality that hasn't necessarily moved around because moving around creates disruption in the client experience and service of a different logo every year. But what's really important about the bank is that the vast majority of the teams that we're talking are not from the types of banks that you're referring to that had backups.

Matt: Available to US we had an opportunity as you can probably appreciate to evaluate significantly more at that time and since then and.

Matt: And like I said, we really do have an opportunity to have sort of a first look elastic. So yes, we may have additional team or two.

Matt: That is incredibly high quality that that hasnt necessarily moved around because moving around creates disruption in the client experience and service of different logo every year.

Matt: But what's really important about the bank is that the.

Matt: The vast majority of the teams that we're talking to are not from the types of banks that youre, referring to that had backups are actually coming from folks the high quality teams market President's state or geographic leaders are reaching out to myself, our chief banking officer, and many of our senior executives.

Hal Goetsch: They're actually coming from folks, high quality teams, market presidents, state or geographic leaders are reaching out to myself, our chief banking officer, and many of our senior executives and wanting to join customer bank, want to join a high performing team, want to, you know, sort of the depth of the products and services, the technology and the incentive compensation. Got it. I appreciate all that clarity. I'll leave it there. Thank you.

Matt: And at wanting to join customers Bank wanted to join a high performing team want to you know sort of the depths of the products and services the technology and the incentive compensation model that we offer.

Matt: Got it I appreciate all that clarity I'll leave it there. Thank you.

Hal Goetsch: The next question comes from Hal Goetsch with B. Reilly Securities. Your line is open. Hey, thank you. My question is on on the teams and maybe the pipeline of new professionals. Obviously, when you hire experienced teams, they're going to bring over existing clients, and that's an immediate impact, maybe in the first 12 to 18 months. But, like, could you share with us your expectations on what those teams that are highly competent, you know, kind of bring in years 2, 3, and 4? Are they still building their book of business, and is that an expectation of their agreement to come over?

Howard: The next question comes from Howard <unk> with B Riley Securities. Your line is open.

Speaker Change: Thank you my question is on the teams and maybe the pipeline of new capacities.

Speaker Change: Obviously, when you hire experienced team theyre going to bring over existing clients and that has an immediate impact.

Speaker Change: First of all to 18 months like could you could you share your expectations on what those teams are highly confident.

Speaker Change: You kind of bring in years, two three and four.

Speaker Change: Are they still building their book of business.

Speaker Change: And is that an expectation there.

Hal Goetsch: Tell us a little bit more about how this works and the runway it gives you when you hire a team, not just in year 1, but beyond that. Sure, absolutely. Thanks for the question, Hal. So, you know, we, because of some of the market, you know, volatility and disruption and, you know, bringing on teams on mass. A little bit spoiled by our success in a short period of time just because customers were a lot more receptive to moving. Breaking even in less than a year is really quite an incredible accomplishment, especially given the scale of the investment that we made last year.

Speaker Change: The agreement to come over and tell us more about how this how this works.

Speaker Change: The runway. It gives you when you hire a team not just in year, one but beyond thanks.

Speaker Change: Sure absolutely. Thanks for the question how so.

Speaker Change: Because of some of the market.

Speaker Change: Volatility and disruption in bringing on teams on masks I think we are.

Speaker Change: Little bit.

Speaker Change: The spoiled by our success in a short period of time, just because customers were lot more receptive to moving breaking even in less than a year.

Speaker Change: Is really quite an incredible accomplishment.

Speaker Change: Especially given us.

Speaker Change: The scale of the investment that we made last year. So as I mentioned earlier, we expect these teams will continue at a similar type place are at about $100 million plus or minus on a on an average months over the course of the year. There are obviously some typical months at a little slower like a January or in April as an example, but at least at that type of level. Then we have sort of venture banking continuing to contribute.

Samvir Sidhu: As I mentioned earlier, we expect these teams will continue at a similar type pace. They're at about 100 million plus or minus on an average month over the course of the year. There are obviously some typical months that are a little slower, like a January or an April, as an example. But at least at that type of level, then we have Venture Bank continuing to contribute over time. We expect maturity to happen over a three to five year period. And then that becomes more sort of maintaining and servicing your overall client base.

Speaker Change: Overtime, we expect sort of maturity to happen over a three to five year period.

Speaker Change: And then that sort of becomes more sort of maintaining and servicing your overall.

Samvir Sidhu: And then pivoting to as we look at new teams, having said sort of that related to the success that we had over the last year, we're still looking at about a year or less break even on the teams that we're looking to bring in. And while you may not have sort of the big pops that we've had over the past year, you'll continue to have about that three year plus or minus of rebuilding a portfolio of about the size that you as a team leader and you as a team member used to sort of maintain and service at your prior institution.

Speaker Change: Client base.

Speaker Change: And then pivoting to as we look at new teams.

Speaker Change: Having said, having said sort of that related to the success that we had you know over the last year, we're still looking at about a year or less breakage.

Speaker Change: Breakeven.

Speaker Change: On the teams that we're looking to bring in.

Speaker Change: And while you may not have sort of this are the big Pops that we.

Speaker Change: We've had over the past year Youll continue to have about that three year plus or minus.

Speaker Change: Of rebuilding a portfolio of about the size that.

Speaker Change: You as a team leader and you as a team member used to sort of maintain and service at your prior institution, even if the constitution of that portfolio may be only 60, 70% the same as it used to be.

Samvir Sidhu: Even if the constitution of that portfolio may be only 60, 70 percent the same.

Hal Goetsch: If I could ask one follow-up, I wouldn't have to bring up the T word, but like every conference call I'm on in payments and FinTech and banking is, how are tariffs impacting you? I'm pleased to see that the word wasn't even really mentioned. And then look at your business lines in commercial, in venture banking, fund demands, healthcare. Would you rate your exposure to tariffs as basically mostly just broad economically or secondary or tertiary, or you really don't have the, I don't know, manufacturing clients or might be tied up and locked down and uncertain about production schedules that might require lending right now?

Speaker Change: If I could ask one follow up.

Speaker Change: But like every conference call them on in payments and Fintech and banking is.

Speaker Change: How are tariffs impacting you.

Speaker Change: It wasn't really mentioned and as I look at your business lines in commercial venture banking Fund Finance health care.

Speaker Change: Would you rate your exposure to.

Speaker Change: Yeah.

Speaker Change: <unk> is basically mostly just broad economically or a secondary or tertiary you really don't have.

Speaker Change: I don't know manufacturing clients or it.

Speaker Change: It might be tied up in.

Speaker Change: Lockdown in uncertain about production scheduled acquired lending right now could you give us your thoughts on.

Samvir Sidhu: Could you give us your thoughts on that? on your direct exposure then and then maybe your thoughts on indirect exposure to tariffs. Yeah, Hal, absolutely. I think that the short answer is absolutely what you described, is this de minimis direct exposure to tariffs. And we have very low, thankfully, sort of balances and verticals that would have exposure in a very short-term basis. But as you rightfully said, sort of on a medium to longer-term basis, there are credit-sensitive portions of any bank's portfolio that could have potential sort of de minimis exposure in a mild-type recession. And I really think that while the R-word is continuing to be used at the end of the day, this is sort of a policy-driven macroeconomic-type effort that volatility can be created in a number of weeks.

On your direct exposure, then and then maybe your thoughts on indirect exposure to.

Speaker Change: Tariffs.

Speaker Change: Yes.

Speaker Change: Absolutely I think the short answer is absolutely. What you described is de Minimis.

Speaker Change: Direct exposure to tariffs and we have very.

Speaker Change: Low <unk>.

Speaker Change: Lee sort of balances in verticals that that would have.

Speaker Change: Exposure in a in a very short term basis, but as you rightfully said sort of in a medium to longer term basis. There are credit sensitive portions of any banks portfolio that could have potential sort of de minimis exposure in a mild type recession, and I really think that while the R. Word is continuing to be used.

Speaker Change: At the end of the day this is sort of a policy driven.

Speaker Change: Commercially, it's very politically sort of policy driven economic macroeconomic type.

Speaker Change: Effort.

Speaker Change: That volatility can be created in a number of weeks. It can also be rolled back in a number of weeks and it would be a shame.

Samvir Sidhu: It can also be rolled back in a number of weeks. And it would be a shame for anything beyond a perception of a mild to even be on the table. But our hope is that our administration and policymakers have the things under control. And we expect there'll be some stability with clarity. At the end of the day, market volatility comes from a lack of clarity. And we are seeing the beginning. of at least confidence in clarity and hopefully clarity. I appreciate you for that.

Or anything.

Speaker Change: Beyond.

Speaker Change: Perception of a mile to even be on the table, but our hope is that.

Speaker Change: Our administration policymakers.

Speaker Change: Have.

Speaker Change: Things are.

Speaker Change: Under control and we expect there'll be some stability with clarity at the end of the day market volatility comes from a lack of clarity.

Speaker Change: And we are seeing the beginnings of of at least confidence and clarity and hopefully clarity will come soon.

Speaker Change: I appreciate it thank you.

Operator: Thank you.

Samvir Sidhu: This concludes the question and answer session.

Speaker Change: This concludes the question and answer session I will turn the call to President and CEO, Sam Sudan for closing remarks.

Operator: I'll turn the call to President and CEO Sam Sidhu for closing remarks. Thank you, everyone, for your continued interest in and support of Customers Bancorp. We appreciate you being a part of the incredible franchise we're building, and we look forward to speaking to you next quarter. Thank you, and have a great day.

Sam Sudan: Thank you everyone for your continued interest in and support of customers Bancorp. We appreciate you being a part of the incredible franchise. We're building and we look forward to speaking to you next quarter. Thank you and have a great day and weekend.

Operator: This concludes today's conference call. Thank you for joining.

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

Operator: You may now disconnect.