Customers Bancorp, Inc. Q1 FY2025 earnings call

• Deposit Transformation: Continued granular deposit growth, with average cost of deposits decreasing. Commercial teams had significant noninterest bearing deposit growth. - Loan Growth: Diversified loan growth at 12% annualized, driven by relationship-based lending across verticals such as commercial real estate and healthcare. - Operational Excellence: Exceeded efficiency targets, with realized savings and increased fee income providing headroom for franchise reinvestment. - Team Recruitment: Successful recruitment of commercial banking teams, adding $1.3 billion in deposits and 5,000 accounts in less than a year, with a strong pipeline for further team expansion.

Deposits: Total deposits reached just under $19 billion. Noninterest bearing deposits were $5.6 billion (near 30% of total deposits). Average cost of deposits decreased by 25 basis points in the quarter, with a 64 basis point reduction from Q3 2024. Commercial teams had over $250 million in noninterest bearing deposit growth in the quarter. Loans: Loan portfolio grew at a 12% annualized pace, with over $600 million of HFI loan growth, diversified across verticals like commercial real estate, healthcare. Net Interest Income: Q1 net interest income was $167.4 million, net interest margin expanded to 3.13% due to interest expense reduction. Noninterest Expenses: Core noninterest expense declined 5% to $103 million in Q1, core efficiency ratio improved to 52.7%. Operational Excellence: Realized $30 million in annualized impact, exceeding the original $20 million target, including $22 million in cost savings and $8 million in new recurring fee income from treasury management fees.

• Loan growth guidance reaffirmed with a bias towards the higher end of the range. - Net interest income projected to grow 3%-7% year over year, normalized basis 6%-10%. - Core efficiency ratio target in the low to mid-fifties for the full year. - Commitment to operating with higher levels of capital.

• Macroeconomic landscape with increased market volatility and uncertainty. - Regulatory and compliance risks related to industry changes. - Potential impact of tariff-related economic volatility on the portfolio.

Q: Frank Schiraldi inquired about new banking teams' noninterest bearing deposits and restructuring.

A: Sam Sidhu stated noninterest bearing deposits from commercial teams were significant, and no additional restructuring is expected.

Q: David Bishop asked about treasury management fees and technology spend.

A: Sam Sidhu said treasury fee income is at a good run rate and technology spend ROI is favorable.

Q: Steve Moss questioned Cubix deposits and deposit pipeline.

A: Sam Sidhu explained Cubix deposits as a payment place and the deposit pipeline remains over $2 billion.

Q: Kelly Motta followed up on deposit pipeline and loan average size.

A: Sam Sidhu mentioned the deposit pipeline is over $2 billion and loan average sizes vary by vertical.

Q: Matthew Breese asked about security repositioning and employee lockup agreements.

A: Sam Sidhu provided details on security repositioning and noted potential hiring opportunities due to employee lockup agreements.

Q: Hal Goetsch asked about teams and tariffs.

A: Sam Sidhu stated minimal direct exposure to tariffs, with market volatility driven by lack of clarity.