Customers Bancorp Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 25, 2025
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Operator

Hello, and welcome to the Customers Bancorp twenty twenty five First Quarter Earnings Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I'll now turn the conference over to Dave. Please go ahead.

David Patti
David Patti
Director of Communications at Customers Bancorp

Thank you, Sarah, and good morning, everyone. Thank you for joining us for the Customer Bancorp's earnings webcast for Q1 twenty twenty five. 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 q one twenty twenty five results and click download presentation. You can also download a PDF of the full press release at the spot.

David Patti
David Patti
Director of Communications at Customers Bancorp

Our investor presentation includes important details that we will walk through on this morning's webcast. I encourage you to download and use the document. Before we begin, we would like to remind you that some of the statements we make today may be considered forward looking. These forward looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated. Please note that these forward looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward looking statements in light of new information or future events, except to the extent required by applicable securities laws.

David Patti
David Patti
Director of Communications at Customers Bancorp

Please refer to our SEC filings, including our Form 10 k and 10 Q, for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of our website. At this time, it's my pleasure to introduce Customers Bancorp Chair, Jay Sidhu. Jay?

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

Thank you, Dave, and good morning, ladies and gentlemen, and welcome to Customers Bancorp first quarter twenty twenty five 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. 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.

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

First, the continued impressive transformation of our deposit franchise. Second, strong loan growth from well diversified sources, all reflecting superior credit quality. Third, improved 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. The industry is currently facing as you all know complex and evolving macroeconomic landscape.

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

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 they 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. 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.

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

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, 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.

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

One where our goal each day is to have our clients 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. These relationships compound driving growth through repeat businesses and referrals. This unique model is a very important key differentiator. Our culture is inspired by the entrepreneurs we serve.

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

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. 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.

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

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. 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% in tangible book value. This performance made us the number one bank of all banks between $20,000,000,000 and $100,000,000,000 in assets in earnings per share and tangible book value compounding.

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

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. 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.

Jay Sidhu
Jay Sidhu
Chairman & CEO at Customers Bancorp

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. 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 twenty twenty five. Sam?

Sam Sidhu
VC, President & CEO at Customers Bank

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. Our business continued to perform well. Our core beat was driven by strong financial performance across the franchise. I'll walk you through some of the key accomplishments in the quarter, which provide an excellent start to the year.

Sam Sidhu
VC, President & CEO at Customers Bank

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 deposits in the quarter. Combined with a strong performance last quarter, our average cost of deposits are down 64 basis points from their high in Q3 of twenty twenty four. For the second quarter in a row, our commercial teams ex Cubix had nine figure noninterest bearing deposit growth with over $250,000,000 in this quarter alone. We bucked the market trend, growing the loan portfolio at a 12% annualized pace.

Sam Sidhu
VC, President & CEO at Customers Bank

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 initiatives, surpassing the targets that we first outlined last year. These savings initiatives will provide us the headroom for the investments we are making in support of our future growth.

Sam Sidhu
VC, President & CEO at Customers Bank

We also decided to undertake an additional balance sheet optimization process by identifying a portfolio of corporate and asset backed securities for sale. 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 into loans. With this, we felt it was prudent to reduce the credit sensitive nature of our AFS portfolio to fund this growth. 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.

Sam Sidhu
VC, President & CEO at Customers Bank

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 7.7%. Our coverage of immediately available liquidity to uninsured deposits is robust at 155%. Our NPA ratio remains low at 26 basis points, well below peer averages, and reserves to NPLs are strong at 324%. Advancing to slide six, you'll see our GAAP financials.

Sam Sidhu
VC, President & CEO at Customers Bank

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 $50,000,000 This represented core ROCE and ROA of eleven point seven percent and ninety seven 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. Now on Slide eight, 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 quarter.

Sam Sidhu
VC, President & CEO at Customers Bank

To recap some of the impressive results, total deposits increased to just under 19,000,000,000. The new teams brought on since mid twenty twenty three continue to execute exceptionally and increase their deposit balances by about $400,000,000 in the quarter. The quality of these deposits help reduce our deposit costs as we remix these deposits at about a 200 basis point interest expense benefit. The new teams manage relationships with over $2,100,000,000 of granular, low cost relationship based deposits representing about 11% of our deposit base. It's an incredible accomplishment in such a short time.

Sam Sidhu
VC, President & CEO at Customers Bank

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 twenty twenty two. This highlights the franchise enhancing and granular nature of the growth. Our noninterest bearing deposits remained at a healthy $5,600,000,000 or just under 30% of total deposits. As I mentioned earlier, our traditional commercial banking franchise brought in over $250,000,000 of noninterest bearing deposits. Over the last two quarters, that is now nearly $400,000,000 of noninterest bearing deposit growth from the traditional commercial banking franchise alone.

Sam Sidhu
VC, President & CEO at Customers Bank

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. To date, this represents a 69% beta so far in the down cycle, in excess of the 60% deposit beta we had on the way up, demonstrating the power of the deposit remix tailwinds. 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 $2,000,000,000 and growing, which I'll expand on in a minute. With that, let's turn to slide nine for a bit of a deeper dive on the incredible success of our team recruitment strategy.

Sam Sidhu
VC, President & CEO at Customers Bank

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 out. 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 $850,000,000 in deposits, is essentially self funded, and is a top five national competitor.

Sam Sidhu
VC, President & CEO at Customers Bank

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 3 quarters of a billion dollars. Nearly a year later, we recruited 10 highly experienced commercial banking teams with deep industry expertise and strong regional market knowledge. These teams are fundamentally changing the profile of our commercial deposit base and enabling us to scale our existing relationship banking franchise. In less than a year, these teams are now profitable and managing approximately $1,300,000,000 in deposits and have added 5,000 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.

Sam Sidhu
VC, President & CEO at Customers Bank

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

Sam Sidhu
VC, President & CEO at Customers Bank

Any new additions would add to the already significant $2,000,000,000 low cost deposit pipeline that mentioned previously. Ultimately, this phase this next phase in our deposit transformation is about intelligent expansion, not just bigger, but better driving long term franchise value and delivering delivering differentiated results. 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. This was another exceptional quarter of loan growth for us. We again delivered over $600,000,000 of HFI loan growth, which was well diversified across our platform.

Sam Sidhu
VC, President & CEO at Customers Bank

But what's more important is how that growth was achieved. It was diversified, strategic, and aligned with our franchise building model. Top commercial verticals included the new commercial banking teams, commercial real estate, and health care with contributions from multiple other groups. Each vertical is focused on long term client engagement and brings with it fulsome deposit led relationships. As an example, over the last three quarters, we've had nearly $500,000,000 of self funded net loan growth in this commercial real estate industry, which as you can appreciate is typically unheard of.

Sam Sidhu
VC, President & CEO at Customers Bank

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 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. 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 institution.

Sam Sidhu
VC, President & CEO at Customers Bank

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. Let me take this opportunity to build off of what Jay covered earlier. We've talked a lot about deposit remix recently, but I don't wanna overlook the loan transformation that has occurred at our company. Over the last five years, we reduced our concentrations in mortgage finance from 25% to 10%, multifamily from 20% to 15%, and consumer installment from 13% to 6%.

Sam Sidhu
VC, President & CEO at Customers Bank

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 and 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. With that, I'll turn the call over to Phil.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

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 q one, we delivered $167,400,000 in net interest income, and our net interest margin expanded to three thirteen, up two basis points sequentially. This marks our second consecutive quarter of margin expansion. The primary driver of this improvement was a significant reduction in interest expense, which was lower by $14,600,000 quarter over quarter.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

This was achieved through deliberate and proactive deposit remixing. 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. 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 rate scenarios. On slide 12, we'll cover noninterest expenses. We are incredibly proud of our performance on efficiency this quarter.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

In q one, our core noninterest expense declined 5% sequentially to a hundred and $3,000,000. That decline came even as we continue to invest in technology, talent, and our risk management infrastructure. Our core efficiency ratio improved to 52.7 with our with noninterest expense to average assets of 1.87%, placing us at the top of banks in our peer group. Moving to slide 13, I'll recap the progress of our operational excellence initiatives, which is how we achieve those strong results. We previously outlined a target of $20,000,000 of annual efficiency through a combination of fee income growth and expense savings to reinvest in our business.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

I'm pleased to say that we've outperformed that target. As of q one, we've realized $30,000,000 in annualized impact exceeding our original $20,000,000 target. This includes approximately 22,000,000 in cost savings and 8,000,000 in new recurring fee income primarily through treasury management fees enabled by our proprietary Cubic's platform. I would note that this does not include future professional services expense reductions we've discussed previously. These results reflect structural, scalable improvements across the organization.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

We've consolidated technology platforms, rationalized vendor spend, and made strategic decisions around our operations. At the same time, we've strengthened revenue generation through enhanced payments, treasury, and commercial deposit capabilities. As a result, we expect strong growth in core noninterest income this year compared to last year. 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. This ensures we continue building a platform that is not only efficient, but differentiated and future ready.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

Looking ahead, we continue to see opportunity to deepen this impact as we scale and drive operating leverage. Our commitment remains clear to grow responsibly, invest strategically, and deliver long term value to shareholders. 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. For us, tangible book value growth is a key long term performance indicator.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

Over the last five years, we've more than doubled TBB per share even while navigating a global pandemic and inflationary rate shock and a regional banking crisis, and we're committed to continuing that trajectory. With that, I'll move to slide 15. 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. At eleven point seven percent, we remain in excess of our CET one target while utilizing some risk based capital for loan growth in the quarter.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

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%. 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. With that, I'll pass the call back over to Sam before we open up the line for q and a.

Sam Sidhu
VC, President & CEO at Customers Bank

Thanks for that, Phil. 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. 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 we are onboarding our bankers' legacy relationships, 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 client base.

Sam Sidhu
VC, President & CEO at Customers Bank

Net interest income is projected to grow between 3% to 7% year over year. And as a reminder, we had a larger accretion income in 2024, and so this equates to 6% to 10% on a normalized basis. Our deposit remixing efforts and strong loan growth position us well to drive NII expansion regardless of the rate environment. 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-50s for the full year. And we remain committed to operating with higher levels of capital.

Sam Sidhu
VC, President & CEO at Customers Bank

With the clarity of strategy and strong execution, our forward outlook reflects both optimism and discipline. 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 strategic clarity and execution. 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 deposits. On the loan side, we had 12% annualized loan growth achieved through disciplined relationship based lending across diversified verticals.

Sam Sidhu
VC, President & CEO at Customers Bank

Our net interest margin expanded for the second consecutive quarter, signaling improved funding dynamics and continued momentum on both sides of the balance sheet, and we maintained strong credit metrics. 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 differentiated results. In closing, we're 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 momentum.

Sam Sidhu
VC, President & CEO at Customers Bank

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'll open up the line for questions.

Operator

Thank you. Your first question comes from Frank Schiraldi with Piper Sandler. Your line is open.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

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, the offset in the quarter in terms of non interest bearing, is that just continued general pressure to move some funds and get some returns overall?

Sam Sidhu
VC, President & CEO at Customers Bank

Hey. Good morning, Frank. Thanks so much for the question. So in terms of the new teams, you're right. It's at least 25%.

Sam Sidhu
VC, President & CEO at Customers Bank

It's actually generally closer to to 30% compensating non interest bearing deposits. And, yes, we saw a couple hundred million dollars of increase, you know, from our commercial teams. We also had about $300,000,000 in lower Cubex 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, you know, perspective, if you look at our average non interest bearing deposit balances, they were up significantly quarter over quarter.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. And then just as a just switching gears as a follow-up, in terms of the restructuring in the quarter, is there any does this kind of do it in terms of and you might have 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?

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

Yeah. Hey. Hey, Frank. Good morning. Yeah.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

As 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 and just a little bit more detail, you know, 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 nonagency 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.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

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

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. And and and just trying to to think about it from others' books, was there any 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?

Sam Sidhu
VC, President & CEO at Customers Bank

Yeah. Frank, it's as Phil mentioned, it was really sort of a a a de risk derisking exercise, you know, for to support our 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 q four, we we use majority for loan growth. Same thing here. So it's actually, I think, balance sheet optimization is a much better way, you know, to consider this.

Sam Sidhu
VC, President & CEO at Customers Bank

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 our deposit and loan growth, and that's where we would want to, you know, have to focus on the asset side of the balance sheet.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. Alright. Fair enough. Thank you.

Operator

The next question comes from David Bishop with Hovde Group. Your line is open.

David Bishop
Director at Hovde Group

Yes. Good morning, gentlemen.

Sam Sidhu
VC, President & CEO at Customers Bank

Good morning, David.

David Bishop
Director at Hovde Group

I'm curious Sam, we've seen some good growth here lately, especially on the commercial real estate side. Remind us the capacity to grow commercial real estate lending, both on the non owner occupied and the multifamily space. You still have plenty of capital room, all right?

Sam Sidhu
VC, President & CEO at Customers Bank

That that's right, Dave. So, you know, I think we we in in our book last quarter and the quarter before, we talked about being under 200%, one hundred and ninety % 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% range in our in our home markets. And I think what's really interesting is, you know, touching on the the fact that these are self funded with real estate deposits is is really the interesting part. And I said, you know, over 4%, I think, know, sitting where we are today, it's 4.4% is what we've been able to achieve over the past year.

David Bishop
Director at Hovde Group

Got it. And then maybe on the income statement, noted the traction in some of the treasury management products. Is this a pretty good run rate for that, I assume the treasury management fees are in that other income? Do you think you can grow that off this $3,000,000 plus run rate? And from a tech spend perspective, is this a good run rate for the sort of technology expenses?

David Bishop
Director at Hovde Group

Or will there be more investment?

Sam Sidhu
VC, President & CEO at Customers Bank

Yeah. Hey, Dave. So, you know, on the on the starting with the treasury fee income side, you know, we're up slightly from where we were on the new rollout quarter over quarter, couple hundred thousand dollars. I think we feel like we're in a pretty good run rate to answer your question. I think, you know, I'd caveat that by just saying, you know, these are, you know, the the successes of what we laid out in the middle of twenty twenty two and sort of building our treasury management platform, you know, building our Cubic's platform, and then rolling it out to our larger corporate clients than seeing, you know, the results of of that, you know, lending to, which actually speaks to the the benefit the customers are are achieving.

Sam Sidhu
VC, President & CEO at Customers Bank

So I think that we're we're sitting in a pretty good run rate, you know, today. On the technology spend, the technology spend associated with these fees, absolutely, it's it's pretty much behind us. So I think that's the nature of where your question was going from an ROI perspective.

David Bishop
Director at Hovde Group

Got it. And final question. Curious, saw the continued decline in the cost of deposits. It was $2.82. Do you have the spot cost at the end of the quarter?

David Bishop
Director at Hovde Group

Thanks, and I'll hop back into the queue.

Sam Sidhu
VC, President & CEO at Customers Bank

Yep. It was at $2.82. So spot's the the same as the average.

David Bishop
Director at Hovde Group

Great. Thank you.

Operator

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

Steve Moss
Steve Moss
Director at Raymond James Financial

Good morning.

Sam Sidhu
VC, President & CEO at Customers Bank

Good morning, Steve.

Steve Moss
Steve Moss
Director at Raymond James Financial

I guess maybe just good morning, Sam. I apologize, I hopped on late. So if you address this, I apologize. But in terms of the Cubic's deposits here, it sounds like I think you said $300,000,000 down quarter over quarter, Sam. Just kind of wondering what you're thinking for those balances, 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.

Sam Sidhu
VC, President & CEO at Customers Bank

Yep. Sure. So they were at $3.03. I think what's important is the average was also $3.03. And, again, these are payments deposits.

Sam Sidhu
VC, President & CEO at Customers Bank

And as a reminder, they're held entirely a % in cash. So as we think about the, you know, the the spot versus average, they typically, you know, have been oscillating between a a 10%, you know, band plus or minus. 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're we have the entire institutional, you know, network base of of all of our digital asset customers.

Sam Sidhu
VC, President & CEO at Customers Bank

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 and to increase deposits because this is really payments float. 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 that the industry relies on. You know?

Sam Sidhu
VC, President & CEO at Customers Bank

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, you know, or reserve accounts.

Steve Moss
Steve Moss
Director at Raymond James Financial

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

Sam Sidhu
VC, President & CEO at Customers Bank

Yep. Absolutely. You know, Steve, I think if you had asked us on April 2, which is when we all sat down, it was a Wednesday, I believe. Monday was the the thirty first. We sat down on Wednesday, April 2.

Sam Sidhu
VC, President & CEO at Customers Bank

We talked a little bit about how the quarter the second quarter was was, you know, looking, and we had sort of a soft close of of the books. You know, we had a very different outlook than we did, you know, just a couple hours later that afternoon. So, yes, there is market volatility. Having said that, I think what's important is is that backlog is what I would I would focus on, you know, as opposed to, you know, pipeline. Pipelines remain strong.

Sam Sidhu
VC, President & CEO at Customers Bank

That's, I think, generally consistent from the the 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 of the loan growth that's coming by vertical. And then you also you sort of contextualize against that against the portfolio remix that we've had over the last five years.

Sam Sidhu
VC, President & CEO at Customers Bank

I think we're really, really proud of the efforts that we've put together. 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 comp 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 here.

Steve Moss
Steve Moss
Director at Raymond James Financial

Right. Okay. 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 is the deposit pipeline for the new new the recent hires?

Steve Moss
Steve Moss
Director at Raymond James Financial

And, you know, just kind of where is the blended rate these days?

Sam Sidhu
VC, President & CEO at Customers Bank

Yep. So the the pipeline is still over 2,000,000,000 despite the you know, I think we we called out the, you know, the 400,000,000 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 twenties around, you know, to up to 30% non interest bearing. And it's granular.

Sam Sidhu
VC, President & CEO at Customers Bank

We continue to to be opening up more accounts, waiting for those to fund. So we sort of have, you know, continue to have an a parking lot of of opened accounts with to be funded. A number of accounts for applications are are out. And 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, you know, we have a couple teams already, you know, either onboarded or 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, in some cases, thinking about sort of unique specialty, you know, verticals as well that would be interesting and adjacent products for Customers Bank.

Steve Moss
Steve Moss
Director at Raymond James Financial

Alright. Great. Really appreciate all the color.

Steve Moss
Steve Moss
Director at Raymond James Financial

I'll step back. Thanks, Sam.

Operator

The next question comes from Kelly Moda with KBW. Your line is open.

Kelly Motta
Managing Director at Keefe, Bruyette & Woods (KBW)

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.

Kelly Motta
Managing Director at Keefe, Bruyette & Woods (KBW)

So I'm wondering, is there a certain point being a year with the 10 teams having brought in where the overall pipeline and so called low hanging fruit might start to diminish? I'm sure it's hand combat regardless. But just wondering how we should start thinking about that in terms of the outlook here.

Sam Sidhu
VC, President & CEO at Customers Bank

Yep. Thanks. Thanks, Kelly. You know, I I wish I could say it was easy. And for those, you know, hundred and 52 members that have joined us in the last year or two and the additional 50 or so on our sales teams that have been in hand to hand combat for the past couple of years.

Sam Sidhu
VC, President & CEO at Customers Bank

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 the 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 to loan franchise over time. So I think that speaks a little bit to just the nature of the the the of continuing to build and harvest first deposit only customers, then, you know, credit customers that are typically net depositors, and then, you know, finally, a little bit in the later stage sort of net borrowers. And that's sort of how we think about the diversification, you know, of that business.

Sam Sidhu
VC, President & CEO at Customers Bank

We also talked about the new commercial teams that were onboarded last year, and the the size of their books, you know, today is less than 20%, you know, of of where they were when they were onboarded. 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 of these teams, the markets in which they serve. And we expected the you know, 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're we we've established ourselves as a top recruiter of talent.

Sam Sidhu
VC, President & CEO at Customers Bank

You know, I think our employees and team members that join us that find a a platform and a franchise that has a single point of contact service model. It has a a ton of products and services to support some of your small customers, your medium sized customers, your large customer needs. 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 in 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, you know, first look or a 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 services, adjacency in terms of geographies, and continuing to focus on something that is complementary into what we already have and continue to to to build these, you know, build these pipelines and continue to transform and remix and also grow, you know, our overall deposit franchise.

Kelly Motta
Managing Director at Keefe, Bruyette & Woods (KBW)

Great. That's helpful. And maybe 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. Hoping to get a refresh as to, the average size of a loan. I know you have good diversification.

Kelly Motta
Managing Director at Keefe, Bruyette & Woods (KBW)

So I'm hoping to get a refresh on kind of where that stands as well as where C and I utilization rates are currently and how that compares to recent history? Thank you.

Sam Sidhu
VC, President & CEO at Customers Bank

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 loan growth has been coming from you know, team members who are new to customers bank, but relationships that are long standing in decade in some cases, decades long. So sort of our new commercial banking teams have an average loan size of about $6,000,000.

Sam Sidhu
VC, President & CEO at Customers Bank

You know, our venture team is also sort of in that, you know, 6 to $10,000,000 range. The CRE side, we've actually, you know, closer to about 7 and a half million, you know, on the CRE side. So extremely, you know, granular, you know, across the board. And, again, these are the the the major loan categories that we've had, especially over the last two quarters. And on the

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

Yeah. And, Kelly, I I can good morning. I can jump in on the utilization. Yeah. I would say, again, it it it obviously varies a bit by business line as Sam was saying.

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

So, you know, as an example, I would say in our traditional c and 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 financing capital calls, probably seeing lower than than normal utilization. And, also, with the the strong CLO market, we actually saw, I think as you you saw in the material, some increased payoffs. And so that's a, you know, just a sign because our our, typical takeout there is is often when they would move to a CLO. So it varies a bit by by, vertical, but nothing, out of the ordinary there.

Kelly Motta
Managing Director at Keefe, Bruyette & Woods (KBW)

Great. Last question for me, if I can just flip it in, is, on the Cubix deposits, you've you've framed it more as, a payments

Kelly Motta
Managing Director at Keefe, Bruyette & Woods (KBW)

place. I'm hoping to get

Kelly Motta
Managing Director at Keefe, Bruyette & Woods (KBW)

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.

Sam Sidhu
VC, President & CEO at Customers Bank

Yep. Absolutely. You know, Kelly, so we had a I think in the fourth quarter, we'd mentioned $1,900,000 on a sort of a full quarter basis. In the first quarter, it was 2,100,000.0. That's sort of that couple hundred thousand of increase that I was sort of referring to earlier.

Sam Sidhu
VC, President & CEO at Customers Bank

So we feel we're at a pretty good plus or minus, you know, $8,000,000 run rate. We'd sort of guided to a little bit lower last quarter with a bit of conservatism, you know, at sort of five plus. But I think we feel pretty good about the the ramp up there. Again, we're we are we are charging traditional commercial banking, you know, you know, fees here, nothing that is out of the ordinary, and our customers have been very receptive.

Kelly Motta
Managing Director at Keefe, Bruyette & Woods (KBW)

Great. Thank you so much. I will step back.

Operator

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

Matthew Breese
Managing Director at Stephens Inc

Good morning. I was hoping to stay on Cubic. Much of

Matthew Breese
Managing Director at Stephens Inc

those

Matthew Breese
Managing Director at Stephens Inc

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 Cubic into interest bearing deposits? We also know that from other banks in the industry, they tended to command higher betas at some houses. Thanks.

Sam Sidhu
VC, President & CEO at Customers Bank

Sure. Absolutely, Matt. So the answer, again, just to be very consistent, is 100% of these deposits are non interest bearing. And and that's really the you know, speaks to the differentiation. You know, I, you know, I would sort of venture that we have the vast majority of on all nonyielding deposits, you know, that exist in in sort of The US banking, you know, industry.

Sam Sidhu
VC, President & CEO at Customers Bank

So, you know, to your point about regulatory clarity and, you know, etcetera, I mean, this certainty is really gonna bring consistency to the space. It's gonna bring in new institutional investors. It's gonna increase interest in the asset class. More banks, you know, will be interested. Having said that, the banks don't have sort of the network, the technology, the industry knowledge, the know how, the connectivity, the customer service, the support, the risk management framework, the transaction monitoring that that we have.

Sam Sidhu
VC, President & CEO at Customers Bank

So, you know, 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, you know, comes with that comes greater interest. With that comes a bigger pie, and so we will, you know, expect to have and actually welcome, you know, more banks in the industry. Having said that, you know, we're gonna continue to be the primary transactional operating account. And as the as they enter the pie, we'll also be growing.

Sam Sidhu
VC, President & CEO at Customers Bank

And, like I said earlier, I think the really important thing is we have about 1% of the liquidity.

Matthew Breese
Managing Director at Stephens Inc

Got it. And are there any updates 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?

Sam Sidhu
VC, President & CEO at Customers Bank

Yes. Good good question, you know, Matt. So 3,300,000,000.0, you know, sitting where we are at $3.31 is about 17%, so above the the old cap. When we set that initial cap back in in February of twenty three, 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 and no longer have that liquidity risk concentration cap.

Matthew Breese
Managing Director at Stephens Inc

Okay. And then on the securities 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 book are the securitized installment loans? I know they had a shorter life and duration.

Sam Sidhu
VC, President & CEO at Customers Bank

Yep. So the they do not exit. 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.

Sam Sidhu
VC, President & CEO at Customers Bank

I think less than 400,000,000 today and performing incredibly well with credit enhancement and no issues.

Matthew Breese
Managing Director at Stephens Inc

Understood. So what was the I think you had mentioned TLOs. What was the underlying nature of the collateral that was sold?

Phil Watkins
Phil Watkins
EVP & CFO at Customers Bancorp

Yeah. Hey, Matt. As outlined, you know, about 45% of it was corporates. 40% of it, the ABS was CLOs and nonagency CMBS, and then there was a about a 15% tranche that was unrated privates. And, as I mentioned, the, on that tranche, all everything remaining is triple a, essentially takes down the CLOs, and the remaining CMBS is agency backed.

Matthew Breese
Managing Director at Stephens Inc

Got it. But underneath the the non agency CMBS, was it office or multifamily? Was you know, what what was it that that, you know, was driving the the the credit mark?

Sam Sidhu
VC, President & CEO at Customers Bank

Well, you know, Matt, to be clear, these are these are AOCI marks, which include interest rate risk marks. They include, you know, credit spreads and credit marks. So it's a 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.

Sam Sidhu
VC, President & CEO at Customers Bank

Phil also says he doesn't have the But but, really, I think the important here is what's what's remaining in corporate is predominantly investment grade. No no more real, you know, CLOs essentially all sold. And and on the CMBS side, what we have is now all agency backed Ginnie Mae. And what and on the CMO side, what's you know, what we what we could what we exited was was unrated privates, and what's remaining is AAA.

Matthew Breese
Managing Director at Stephens Inc

Okay. Understood. I'll leave that there. The the last question I had is just, we're now just tripping over the two year mile marker post March Madness of twenty twenty three. Does that mile marker represent any sort of significant milestone in terms of expiration of employee lockup agreements that will provide additional hiring opportunities?

Matthew Breese
Managing Director at Stephens Inc

Is anything kind of broken loose just because of timing? Thank you.

Sam Sidhu
VC, President & CEO at Customers Bank

Yes, Matt. So the short answer is yes. The long answer is actually interesting for customers' banks. So so, yes, they're about two years sort of, you know, agreements for, you know, some of the institutions that were majorly impacted, you know, in March, which is sometime in this quarter or 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, you know, available to us, we had an opportunity, as you can probably appreciate, to evaluate significantly more at that time and since then.

Sam Sidhu
VC, President & CEO at Customers Bank

And like I said, we've we we really do have an opportunity to have sort of a first look and last look. So, yes, we may have additional, you know, team or two that is incredibly high quality that that hasn't necessarily moved around because moving around creates disruption in the client experience and service of of a different logo every year. So what's but what's really important about the bank is that the the vast majority of the teams that we're talking to are not from the types of banks that you're referring to that had backups. They're actually coming from folks the 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 and wanting to join customer bank, wanna join a high performing team, want, you know, sort of the the the depths of the products and services, the technology, and the incentive compensation model that we offer.

Matthew Breese
Managing Director at Stephens Inc

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

Operator

The next question comes from Hal Goch with B. Riley Securities. Your line is open.

Hal Goetsch
Managing Director at B Riley Financial

Hey, thank you. My question is on the teams and maybe the pipeline of new professionals you can add. Obviously, when you hire experienced teams, they're going to bring over existing clients and that's an immediate impact maybe in the first twelve to eighteen months. Like, could you show us your expectations on what those teams that are highly confident kind of bringing years two, three, and four? Are they still building their book of business?

Hal Goetsch
Managing Director at B Riley Financial

And is that an expectation of their agreement to come over? Just tell us a little bit more about how this how this works and and and the runway it gives you when you hire a team, not just in year one, but beyond. Thanks.

Sam Sidhu
VC, President & CEO at Customers Bank

Sure. Absolutely. Yeah. Thanks for the question, Hal. So, you know, we've because of some of the market, you know, volatility and disruption and and, you know, bringing on teams on mass, I think we're a little bit spoiled by our, you know, success in a short period of time just because customers were a lot more receptive to, you know, to moving.

Sam Sidhu
VC, President & CEO at Customers Bank

You know, breaking even in in in less than a year is is really quite incredible accomplishment, you know, especially given the the 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 pace. They're at about a, you know, hundred million plus or minus on a 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, you know, at least at that type of level, then we have sort of venture banking continuing to contribute, you know, over time.

Sam Sidhu
VC, President & CEO at Customers Bank

We expect sort of maturity to happen over a three to five year period. And then that sort of becomes more sort of maintaining, you know, and servicing your your overall, you know, client base. You know? And then pivoting to as we look at new teams, having said having said sort of the that related to the success that we had, you know, over the last year, we're still looking at about a year or less, you know, breakeven, you know, on the teams that we're looking to bring in. And while you may not have sort of this the big pops, you know, that we've had over the past year, you'll continue to have about that three year plus or minus, you know, of rebuilding a portfolio of about the size that, you know, you as a team leader and you as a team member used to sort of maintain and service at your your prior institution even if the constitution of that portfolio may be only 70% the same as it used to be.

Hal Goetsch
Managing Director at B Riley Financial

If I could ask one follow-up, didn't even 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. Then I look at your business lines in venture banking, fund finance, healthcare, would you raise 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. Could you give us your thoughts on your direct exposure then and then maybe your thoughts on indirect exposure to tariffs?

Sam Sidhu
VC, President & CEO at Customers Bank

Yeah, Hal. You know, absolutely. You know, I think that the the short answer is absolutely what you described as just de minimis, you know, direct exposure, you know, to tariffs. And and, you know, we have very, you know, low, you know, thankfully, you know, sort of balances and verticals that that would have, you know, exposure in a in a very short term basis. But as you rightfully said, sort of on a medium to long term basis, there are, you know, credit sensitive portions of any bank's portfolio that could have, you know, potential sort of de minimis, you know, exposure in a mild, you know, type recession.

Sam Sidhu
VC, President & CEO at Customers Bank

And I really think that while the the r word is continuing, you know, to be used at the end of the day, this is sort of a policy driven, you know, commercially sorry, politically, you know, sort of policy driven economic macroeconomic type, you know, effort, 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 for anything, you know, beyond a perception of a mile to even be on the table. But our hope is that, you know, our administration and policymakers, you know, have the, you know, things, you know, in under control, and 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 beginnings of of at least confidence in clarity, and, hopefully, clarity will come soon.

Hal Goetsch
Managing Director at B Riley Financial

Appreciate you for that. Thank you.

Operator

This concludes the question and answer session. I'll turn the call to President and CEO, Sam Sidhu, for closing remarks.

Sam Sidhu
VC, President & CEO at Customers Bank

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. You may now disconnect.

Executives
    • David Patti
      David Patti
      Director of Communications
    • Jay Sidhu
      Jay Sidhu
      Chairman & CEO
    • Phil Watkins
      Phil Watkins
      EVP & CFO
Analysts
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Key Takeaways

  • Deposit transformation drove a 25 bps reduction in deposit costs, with average funding costs down 64 bps from Q3 2024 as low-cost granular balances and $400 million of new team-sourced deposits bolstered the franchise.
  • Loan growth accelerated at a 12% annualized pace, including over $600 million of HFI originations in Q1 and nearly $500 million of self-funded CRE loans at more than a 4% net spread.
  • Operational excellence initiatives exceeded targets by delivering a $30 million annualized benefit—comprising $22 million in expense savings and $8 million in recurring fee income—helping cut core noninterest expense 5% sequentially and improve the efficiency ratio to 52.7.
  • Net interest income reached $167.4 million and net interest margin expanded 2 bps to 3.13%, marking the second consecutive quarter of margin improvement as funding costs declined.
  • Capital and credit metrics remained strong with CET1 at 11.7%, a low NPA ratio of 26 bps, reserves covering NPLs at 324%, and liquidity coverage at 155% of uninsured deposits.
A.I. generated. May contain errors.
Earnings Conference Call
Customers Bancorp Q1 2025
00:00 / 00:00

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