CUBI - Earnings call transcript Q2 2022

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Operator

Hello and welcome to Customers Bancorp Inc., Second Quarter 2022 Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. Thank you.

today's to hand Patti. now will call David over I Please go ahead.

David Patti

second and Tameka, Bancorp's Thank the webcast The has good Investor during you www.customersbank.com. on page will you, deck earnings of you presentation for for been Customer everyone. at today's the of morning, Thank the see website XXXX. for joining call the posted quarter Relations us Bank's

the to QX 'XX earnings on presentation. scroll click can You and results

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

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

Before risks make remind anticipated. you today and cause actual uncertainties we to to forward-looking that we considered like be subject statements These that materially currently forward-looking. may the begin, is we results from what may statements performance would of some differ number to are of a

these and of security except this these extent applicable no laws. obligation Please date the note required to speak update of statements of that only may refer future we by our events, be undertake information our as SEC Please of our or by our more that detailed Copies filings, forward-looking Form results. description visiting forward-looking to of in including Investor presentation, obtained factors the risk statements to new from XX-Q Relations section and may the XX-K SEC the the for or affect website. light

Chair, the Jay At this Jay, Bancorp pleasure time, Sidhu. Customers my is introduce yours. it's audience to

Jay Sidhu

for Okay. call. second investor and Thank quarter Thank gentlemen. you for you, Dave, this joining us good and ladies morning, XXXX

Bowman, as Chief in The Chief here well Credit Customers Sidhu, Reading, is our Bank. me Andy is Bancorp, our And Officer. our well Financial morning as Customers Carla Pennsylvania principal me from of this as as Joining York of subsidiary Sam Officer, New the with Leibold, CEO President

environment, we to challenging extremely focused half remain first with geopolitical continued Despite macro strategy, on results of changed. our this XXXX. the are second and which on pleased executing well quarter for and perform in not We our the laser has

this up PPP excluding share, per quarter earnings year-over-year. XX.X% core were, Our

asset Our on core our return was average core and return was on XX.X%. equity common X.XX%

deliver We credit sacrificing continued remarkable growth to without quality. organic loan responsibly

Our core target us quarter growth sensitivity. rate low-risk, million from and you. we this loans specialty shared XX.X% to and rate, quarter, first and $XXX as XXXX, second earlier the Nearly billion manage average floating all up verticals well asset above market $X.X mentioned I that that was increased in quarterly overall lending helped was predominately with in loans, our of

are pipelines model business from testament and of excited remains quality loan robust, and our strong. reserves supported momentum service our very and and technology. best-in-class the by performance We Continuing remained record for remain exceptional and the credit about our future. to a half Asset XXXX results deposit optimistic strong XXXX, first customer-centric

really as building As you banking businesses, Slide consumer community in community super we we as bank building strongly digital our with covers three, and digital-paced businesses can business. a transaction, thinking are banking, focus that now, businesses, are payment well specialty see banking, what forward banking service and is commercial a digital as on banking right and a

I'd you with strategic of discuss and to priorities it like hand accomplishments businesses. these and Sam to now our over Sam? all to

Sam Sidhu

Bancorp. half everyone. another morning, first Good Jay. year and you, the quarter to of Thank I'm through you Customers pleased solid walk at

which and is our two over and loan quarters diversifying Our responsible industry capitalized lending lending verticals, risk and on leading variable led by the the momentum strengthening low specialty last delivered team franchise. built growth rate

me summarize our Let results. briefly

of From million. $XX.X a EPS, an perspective, represents earnings GAAP earned we which $X.XX income and net

in benefit $X.XX growth-related we came the the at provision includes impact. interest stripping out significant were Moving quarter. of to Net income the core margin which PPP earned $X.XX and they for earnings, $X.XX,

we sheet, with year core balance $XX.X ago the excluding billion the up ended to assets, XX% quarter. moving in the over PPP, quarter Now

XX% $X.X billion from our an associated commercial loan team's bank success by amplified and in from grew Jay non-interest year-over-year, to is year-over-year digital monumental billion by heard It $XX.X CBIT Token or with by billion or XX% deposits. you Instant customers growth worth ex-PPP came our our gathering book, from driven total teams, at deposit as bearing emphasizing efforts Our impressive that deposits $X quarter reiterating grew launch. this Bank of end,

we core already to and an the base. peers superior and have low asset quality improvement off of our Strong saw in quality versus of credit continue at quarter is franchise the

year, effort to the Fed’s book of and the the a mix see start to pristine maintain underwriting shifted credit the to as loan action at wait growth discussed of we on continue economy. inflation we proactively and the tightened an As impact in credit

Bank Slide page XXXX. This what six, to on so to you update and me for Flipping helps line simplify business accomplishments customers strategic let our our strategy unique. explains priorities and makes visually

strengthening we community on presence our future expansion the foundation laying team our and in on banking focused recruitment. reputation in Firstly, growth geographies, quarter, for the and loan

teams to actively year recruit new progresses. as We the expect

team focused also in and relationship We've New team. Florida end managers existing York, growth. several to to executives We growing in to Boston added our are and added new market our leading existing strong our also on community-focused one lines. We added teams, business a

in largest From quarter-over-quarter. a X% Mid-Atlantic C&I perspective, community bank by loan the in grew Group our growth

We XX% to also the year-over-year. continued to our XX% targeted multifamily levels quarter-over-quarter SBA and grew grow production back and book

as ticket small bundle. promise Our pilot part show our product continues of SMB digital to XA digital

shift of our balance income gain we sheet. expect As at compression and of to and guaranteed government hold anticipation on the the forward, year sale model majority guided we beginning on going a business growth on in margin of

the announcement, are the our in you most have seen majority may Pennsylvania closure branches closed aligning network our announced during represented branches. about by with in three five will branches recent of were of moving XX% be the These to declining branches branch existing legacy we industry as we of digital pandemic. trends, total Finally, better and accounts other impacted of that expansion customer that our the strategies we on top and our these local

add for continue included recruit product sub-vertical top finance small enabled future lending our securities-based business our specialty teams lending to the we SMB, team we with launch, venture and teams from support to a Specialty specialty added bank, tech technology on-boarded financial quarter, team, institutions team, finally to a team finance five business. lead our a to another our lead which new size digital equipment coming and medium Lending, fund lending growth. In team, within Moving our healthcare and to launch to existing a

loan industry risk a variable-rate in the delivered growth. For leading third low quarter we've row,

team very referrals verticals balances billion supported by cross-sell well well full-year and and outstanding XXXX assets Our achieved significant with by already rich existing is across customer well fund over and our inception diversified lending deposit new surpassing have and our led new has $X are since finance -- secured basis. customer the This been goal, growth verticals.

as the technology and Moving innovation Banking, banking space. a in leader in we've to fintech Digital ourselves and established

with terms digital cross-sell business, continue customers. our consumer offerings relationships business of digital into our In multi-product we expanding to existing first by our progress consumer

learnings term the look equipment loan, card our pleased and a as digital launch bundle loans, and to into XA in quarter pilot finance revolving credit report digital and our We're success in space that offerings. to build will we of be credit rolled of off SMB this line

this greater talking more continue I'll In scale at terms far projected. a minute, but of, some CBIT, a time spend we what about our to had we business in pace than

quarter, our this customer is which We business add banking-as-a-service on to board are of growth XXXX. with on track first to significant income launch in our expected potential

banking will for that be our you banking helping future on off launching transaction seeking enabled transaction current more customers CBIT, announce cloud-based please to to just product platform build banking Finally, detail. I'm our Slide for a be where needs going, we a suite, are will not our enabled of pleased space we provide modern to formally customers and disrupt to their flip built the today. tech Building API treasury seven a by if

facing analytics, as we've payments wire, as into payments and instant enabling on ramps including off and and well library and best-in-class treasury and include and internal all enable software digital API-led commercial as to expand burn. API Our platform already API treasury connectivity documentation, and with payings to This ACH, will services, is payments, treasury Fedwire, to reporting simple as stablecoin addition real-time well on-boarding, in tech the partnerships, minting including with us FX, which CBIT capabilities account ERPs customer the crypto fintech management account platforms, our including services, robust infrastructure banking-as-a-service, discussed.

and enhance Our hope experience to with of dozens has brand. our from experience approach, continue approach and end-users platform with and we been customer input decision-makers tech build tremendous customer loyalty enabled will reinforcing -- service and built customer-centric which our interviews

looking most processes, to by transformation banks current needs. to and focused working are tailoring and rightfully tech customers’ digitizing are our leapfrog and digital forward package anticipated to internal While it on and productize we

another our spend we're innovation on for way, customers. our Said tech focusing

banking to opportunities corporate, finance by deposit, income venture. low large proposition as in FIG, led no transaction assets, cost well digital expect Customers significant and tech and the to customer We facilitate Bank and fund focused and enhance high-growth fee value as commercial verticals

at steady and billion on and our an funded XXX% least efforts. As expect tech be crossed finance supported state, be our supported business, fund to as these expected example, heard, by you tech over $X funded enablement. be XXX% our which we business self will to by a Similarly, venture

Moving to Slide eight. loan growth summary on

to XXXX in diversified led benefiting We’re verticals, from our to lending efforts quarter. new well the to pleased loan establish be a growth has which

$X.X XX% our are banking experienced with reduce And now of lending makes teams have to loans PPP, with coming we Our of which business of significantly than less goal will billion our from we some the $X.X loan historically. seasonality that posted specialty achieved total loans growth of XX% business, that of of billion our XX% mortgage at verticals.

led a fund and that has top secured led banks, the team from added in senior well quarter. very of million Our executives been with five well the by finance $XXX structured growth business

structured that a lender by $XXX million Our more has the more finance grew seven was loss than delinquency, years of quarter. started business than matured, in well also secured ago never experienced and

we declining on credit our previously improve low we guided risk focus as risk As verticals. and to to as remained further guided, profile our flat business quarter consumer we seek last

XX deposits instant the the on launched, of our providing Despite report nine industry-leading our blockchain the accelerated in the end to digital tokenizes customer by we asset Slide digital market off at testament on of through first the customers we quarter. rail XXX that the proud for to beating and the quick onboarding recognition instant XX/X/XXX. are once available is growth compliance an total the infrastructure platform commercial is internal incumbent on new volatility quarter, building again to growth of onboarding best-in-class first our process that customers platform, payment customer and which long which a of CBIT, institutions. basic target space is doubling banking innovation the significant technology to our in needed payments recap nearly a during significant Flipping a quarter, again forcing we and asset This

remains Our accounts, payments assets in, new than payments underlying deposits. robust $XXX more have customers trading. growth non-interest and about deposits customer up in no their to the quarter funding bank with customer our doubled and opened used being bearing just their fee exposure in million by increased be backlog added the of clear, operating All and dollar cryptocurrency accounts led deposits customers, to we for with

the in Our total billion CBIT-related $X.X quarter. deposits reached

relationships base coin to As issuers. the a and Customers several a by in to to banking these largest digital and is Bank months, asset progress few on OTC primary high touch customer exchanges categories. take Customers us, just experience speaks of institutional service diversified our banks reminder, In continue banking over and stable investors, moving and which high-tech, our desks already needs led of model. innovative their based

thus leading payment focus XXXX by more strengthening stable ecosystem. growing will and our into be network as coin in API and driving connectivity inflows more engagement on to for customer infrastructure growth, effect our rails, Our multiple as well

our as further deposits transform by We our giving opportunity grow year to deposit expect and customer CBIT-related to supported us an through remains strong, improve continue franchise. pipeline to the referrals

With hand to that, it Carla CFO, I'd to over our Leibold. like

Carla Leibold

focused comments Thanks, topics. Sam. my five And keep key good morning, everyone. I'll on

improvements first organic resulting growth strong loan and mix. The in deposit in

positioned rate sensitivity and well second future asset for The hikes. being

including bank. number growth core strong interest liquidity and generated taken position. The with to in diversified negative continued book portfolio, And capital Third, material further ample combined well investment AOCI the fourth five, net a by strong actions income value managed strategic impact. mitigate

in loan strong in improvements Slide Turning to organic and I'll XX. growth, deposit start mix. resulting with

remarkable increase see quarter XXXX, peers, the significantly to of billion most earlier, prior billion and core a XX% second we mentioned $X.X $X.X equates up Sam the As of to the as organic as than higher quarter loan continue our year-over-year. This growth from in well quarter-over-quarter, up industry.

specialty In over C&I $X.X year-over-year. impressive the the quarter lending and quarter total, billion, prior ended at an XX% our growth verticals XXX% growth

to our continue multifamily portfolio which relationship-based XX% quarter-over-quarter, also build billion. while our flat $X.X stayed installment consumer We increased business, at

our we as risk low lender full net the June, that credit increase income improve million fund interest as Overall, meaning verticals mix in over came benefit portfolio see to in loan percentage in growth will such loan $XXX third continues finance, point finance. I'll the also we out of quarter. lending of the our fed the

up prior billion, million quarter. XX%. billion or growth total had deposit We second $XXX XX% demand $X.X over was increased year-over-year. deposits. deposits of Notably, growth up in the $X.X to Year-over-year, the quarter, Moving XX%

remixing We percentage of of franchise from At back bearing, non-interest increases. to June, deposit of in a XX% XXXX. deposits in our as continue total bearing to total make significant XX% the improvement the with deposits of non-interest a deposits our progress end

deposit, significant to see deposit opportunity channels. In we as well our as financial base institution asset group, other core our digital our through addition to related grow

benefit of we the to Slide environment. with credit XX, our nature approximately moderately growth assets verticals as asset rate and earning are was in in earning earlier remain floating sensitive special repricing our characteristics from I interest Nearly shows and low the will risk, XX% and of continue manage of predominantly rate all market rising lending described a assets, sensitive. interest

year-over-year slide specialty our growth income lending interest income, past organic to quarter, XX%. shows the to trend interest from increased business. This bank PPP XX. the excluding in core net income interest largely C&I quarters, a XX%, increasing net Moving by Slide of net prior over Compared increased five strong our the our driven

points also see You the from increased ago our have year can we that quarter. XX spread basis

very remain on not we but pricing forward, and sacrificing of at margin, Going focused net quality. interest disciplined the expense preserving on credit

of approximately during half in far. added above point of and the year, And growth expecting second accordingly this be interest out are excluding yields the tighter X.XX%. $X.X margin, X% was lending second low to very For billion verticals. so I'll we our loan PPP between credit net with that spreads quarter

June, of leaving To-date, forgiven. been XXXX three two of deferred million approximately XXXX. of of recognized of had There million half and billion about fees, This XX% $X originated Slide we've end XX. round XXXX. of origination loans second half loans XX% recognition deferred at repayments recognized under originated rounds $XXX loans and approximately PPP quarter of first and PPP $X.X the in quarter. At to Turning resulted PPP in of the to approximately the $XX was totaled end million fee one the under recognized approximately June. was in of the forgiveness amount been second of approximately million, which into of $XX had about be forgiven throughout

previously, the to of be timing fees two-thirds year. we approximately predict As to but are remaining these it's of difficult fees, expecting the later recognized we've said this

to XX. Turning Slide

tremendous our see liquidity position, of XXXX in peaking $X.X can billion half in particularly at ultimately the You second quarter. of the at and last end growth

we portfolio. took liquidity quarter, investment impacting and second the two actions During strategic

to rate less earned This proceeds of available growth during can The three those specialty estimate fund of the risk which redeployed $X and quarter, resulted losses for first, in securities sold realized we back million than in sale $XXX very we months. in approximately low variable verticals. be loan organic million lending

vulnerable sale loss losses of securities We to unrealized essentially on million This reclassified with value million million fair prevent X. million available payoff. we to $XX after annually estimated or further from interest this of the the tax from until available million reversals the X.X AOCI portfolio as material $XX impacting book unrealized in MBS driven AOCI value. rate. losses value is by CMOs help $XX June purposely of fair losses, this rising duration years effective is approximately maturity book from longer AFS the XX% an reclassified to We duration locked securities second of floating investment with to investment rate of $XXX approximately reclass, net on were ratio maturity X.X%, the approximately TCE securities of rate. help $X most sale was and for for our yield they fixed the our did and our The the and Post

Moving to Slide XX.

estimated approximately strong based our at TCE capital. was X.X%. quarter to of capital second ratio ratio total levels The the risk and was of excluding maintain end XX.X% continue the PPP We

about ratio approximately $XXX the the by would quarter. in was tax end of of impacted our basis XX by X.X% negatively our of losses unrealized been ratio TCE negatively ratio at have deferred at TCE June. this the million This points. impact, AOCI impacted Our approximately Without after TCE end second

impact impact was of of negative similar a an more book earnings on are a securities was value, that saw first $X.XX than that permanent sheet. second We here impact GAAP about the to capital, AOCI down $X.XX. from fair is note offset value $X.XX the balance quarter as adjustment It's our the quarter about on which the AOCI accounting tangible has by held impact important if on no

over we to our forward XXXX, still book to tangible of the Looking $XX. are be expecting end value

We also to three over be TCE expect quarters. our to above four ratio next X.X% the

I'll to over asset that, about turn talk Andy Andy? to with And it quality.

Andrew Bowman

and morning, Carla, everyone. good Thank you,

performance to evidenced delinquencies decline loans, the basis day portfolio, a after points million assets. in XX, decrease strong points. XX total a XX to time the XX importantly stood represents as Slide only NPLs at of credit And XX just of total more assessment in real $XX to points it loan NPAs basis correlating as Moving basis by of remains quality XX or

of the loans in the million charge offs million of by offs in and to and cleanup charge loan XX in annualized for total loan offs to managed servicer consumer approximately charge offs, deposit points. a commercial net overdrawn $XX.X equating consumer after leases The adjusting quarter average charge comprised approximate million third-party accounts an for was $X million $X.X of basis $X.X

with below The off the over guidance remained increased just in importantly, average seasons. off Most offs, at years. as but loan X.XX% lifetime very X.X% weighted of rate the of loss naturally is $X.X increase presented an well and shared annualized remains quarters, line life short charge portfolio of consumer X.X rates the prior million charge charge prior rate

From charge noted. to annualized multifamily net equating have multifamily $X.X four a related commercial some loans not leases as commercial total loans of ongoing offs loan perspective, only delinquency The to I tied in the and the and been time, of sale previously is evidenced average were that portfolio, therefore charge were offs of offs the to million, for stats, basis just points. X performance indicative non-performing solid NPL all and the of status at NPA, charge by

The industries. quarters, a XX spending strong As geographically comprised score income by dependent of or and the $XXX,XXX or of DTI XXX. portfolio weighted XXX, of predominantly loan with XX% evidenced dispersed average with installment outlined than and of FICO within to and on incomes remains borrowers XX% Page scores evidence of weighted to borrowers with equal consumer borrower in of average equal all employed FICO portfolio XX% borrower the having all than characteristic XX.X% to non-discretionary than $XX,XXX. of DTI as of also credit The is prior the a weighted average in continues less appendix line greater greater with XX%

lifetime based than charge for that inevitably season, be more in although will portfolios based attributes million robust losses to the are confident stated portfolio XX more increased than Page on allowance continues there time. performance this rates, we portfolio the naturally installment on to-date the appendix, strong the reserves consumer at the outlined strong adequate credit off are as loss rate. remains on previously And X.XX% credit $XXX.X by Additionally, and

continued continue how remain and associated underwriting uncertainties performed reserve extremely given with and committed with Overall, current a we climates for political the strong all perform, to although our to pleased to position maintaining we're committed and portfolios economic of the our standards. social, well remain have adhering strong

coverage NPLs. we loan both post equates due QX, Following very did to this continued Sam in as to XXX.X% theme, reserve by growth predominantly coverage strong strong a and which ratio of resulting a Carla, mentioned X.XX%, build of in

to to compared build that the the important when through core XX.X%, credit growth evidences loan note clearly reserve growth that lower business. lines risk X.X%, is of It's came the of

morning. the this time like And your over Sidhu. back for presentation to Jay you to I'd now Thank turn

Jay Sidhu

Andy. are what local, our call we let Thanks, you with briefly open and operating me And Q&A, are we Okay. markets for regional before the we some in. seeing national share that in

the of rates and businesses consumers inflation them. felt our thay impact by can higher yet to Fed's policies far, remain about seems be and deal they concerned has So them. the with believe It like

mortgage The is their mortgage suffering in are and refis sales really of reduction less many market bankers today dramatic businesses. with for than X%

and We due have fiscal recession were inflation risks United to the you, very policy, call last fourth our XXXX the last third extremely year had believed quarters in accommodating back We of monetary that in policy States shared with at and year. including high. since and the actually

hoping our initiatives. QX our floating where Number rate have make those of loans that, hope the five that than rate loans. to-date XX% up following a loan one, now been floating be strategy. portfolios, have Since adopted more build low XXXX, not happen, cannot we would but risk We

rate have our greater and addition, fixed -- the no as loan five In well years in on duration. of books, strategy, are a portfolios we management than very loans our disciplined in pricing have as books which

bank the asset in maintaining we XXXX. to to focused expect margin are Fed at in rates increase because gradually on you’ve somewhat X% heard of continue to scenarios we X.XX% this will different a Carla. two, as from And sensitive, Number keep least

help continue single grow our specially, to to our deposits you consistently about build every lot and And low heard we initiatives upon us digital quarter. Number from us gathering a Sam. in this help believe to cost three, that capabilities and we continue deposit will

reallocating conducting but to resources review at four, beating And company, the operations not XXXX. resulting complete for XXXX safe commit again areas. or and technology we other reorganization and our consolidating last once digital we are meeting our in goals related to EPS and Number a least,

see tactics investment looking with the have Bancorp. Slide key you is for is, banking. Just XX. slide, by Andy. industry-leading strategic the loan we best-in-class hope we deposit of which growth above highlights digital our believe are alignment at We of our Number average Customers and last we initiatives as in believe can intend and and Number to terms it exceptional maintaining quality two, keep supported we one we from you heard

we believe demonstrated interest we we have and positioned for expecting come three, industry-leading proprietary till focused will until valuation rates inflation to to continue rates well fit higher Number very for investors. capabilities that a we down Number on numbers don't our the remain we while XXXX. all tech of attractive these, and happen are four, and believe raise to offering

please up you Tamika, it us? we'd open help Q&A. can for to So with like that,

Operator

[Operator Peter first with from Securities. Instructions] Our of Wedbush line question Winter comes the

Peter Winter

morning. Good I wanted with the start off margin outlook. to

The on the color to basis X.XX%. you is some a second the quarter you around year second just asset have sheet, sensitive but mentioned slightly was outlook guys half of Can you a $X.XX, core X% that? the in give balance

Sam Sidhu

Carla?

Carla Leibold

Yes.

over and of tighter those is finance fund very rate, yield in the variable part our that So prepared we're I Peter, increasing percentage portfolio remarks spreads risk, portfolios low lender so include of far. one business. the credit is things finance that which my our that adding of is

in So when and that, you is decrease consider X.XX%. margin to there X% that

Peter Winter

the I through outlook the if how Okay. you're could But deposit growth for half of guess talk deposit year? the And in thinking about of about then the the what betas you end year? second

Sam Sidhu

question. take Sure, can absolutely. I that

a was technology one gather commercial growth continue deposit digital perspective, broaden heard, deposit and we're help serving to to a that low cost all to from industry, clients. we work in on narrow step but -- you looking corporate no as asset initiatives CBIT So to to enabled us

potential our we of to to the continue look deposits a the servicing of beginning deposit one, so was look improve guided number at But up deposit as led transition. think improve non-operating towards to mix funding also larger then to make a that and we add have continue seeking sheet deposits various arrangement, about account may some of balance of growth, see you deposit commercial year XX/XX to gross overall we bringing our by us take sort the as So depositors. at mix, optimization for taking large

So long that, to look guidance. pivot at Having quarter you going delivering from XX, that June a deposit a sustainable range we is end at believe Carla, is and around you experienced betas, earnings we the right in our margin short-term of which if that's are low through on beta as XX%, heard benefits the Jay versus from said and and margins.

business account we'll in from rates higher over have the look rates. be you seeking if industry non-operating our commercial X% and So an Fed a and at funds this bank quarter, as We're had we've industry. higher depositors

have you such, the sensitive from our rates margin So to minimum goal we our up deposit of proactively in client some are and moved cases a range heard that and asset that cycle will base. anticipating But support remain as through have and Carla? retain

Peter Winter

thinking deposit betas And about just second year? up Would are the what in Sam, that the half you too? of go

Sam Sidhu

Yes, it's dependent this fully and some as very competitor actions, is of forecast difficult to well. upon

some specifically supporting and market be -- mentioned, for -- providing the some rates. will them retaining that clients them of of our -- will for we I We

of in or higher will the industry, likely has in resulted think a betas than increase rates that I deposit view be change the in commercial depositors So the rapid last cycle.

Peter Winter

If more one I just ask Okay. question. could

you you could growth actually came you that guidance It beat strong the above I can $X.X average loan impressive. just was talk that? $XXX pretty quarter that in given momentum. like billion with was that if update growth loan which seems about that in mid just million, maintained Just quarterly wondering June. of of But

Sam Sidhu

Sure.

You a think we quarters. evergreen loan started last had that know, from were of the in I couple perspective, growth some verticals

at fundraising quarter. large deployment say, relationships, deployment So quarter levels. our you three continue that it as it venture private mortgage benefiting, conversions there's through on focusing let's to bringing overall equity convergence, But if if over first relationship And and up for down, Fund the to five three warehouse a business well one reflects the banks. a an as second look stabilized line down as example, of we're a year, the from as to into example. the business from mid-year sort and Last slightly to equity XXXX to an is in -- was say someone banks, example, quarter-over-quarter that utilization led will while had teams actually trends has Finance

guidance, So us has balances, warehouse included despite our helped loan projected of business. mortgage our declines in which sort maintain that

trend upper business guidance, forward, continue. we're as year. We That second is Having purchase end maintaining of suffering the warehouse XX% of potential declining lines along less in the Jay, heard you the our will from the still were going that, through was purchase half in of we those and June. Going in something that than the said think of the XXXX. month market the XX% of to mortgage result likely year. in net the beginning That is a declines mortgage the approaching of

Peter Winter

Thanks. Great.

Operator

Riley line B. the Securities. with Your next question from of is Moss Steve

Steve Moss

Good morning.

Sam Sidhu

Good morning, Steve.

Steve Moss

loan -- of Maybe hey in growth on on Sam, -- about up up billion, just for I following think on I've seen the desk $X growth following just finance. maybe here. -- the looking

the I there? have of there? quantify specialty of thinking that on if Just kind What but warehouse the headwinds, on you I you you curious growth the side? just hear on are specialty more you other mean, mortgage for could kind verticals the

Sam Sidhu

Sure.

in specialty the ramping lending on up financial So verticals business. our institutions we're

balances so under or business. of total still somewhere that around we're in million think $XX million I $XXX

Our within the specialty modestly $XX from about million a perspective dollar finance by so business real or amount estate grew quarter.

you -- typically the will know, However, than as are projects construction these significantly are and fundings commitments larger the growth is. what the

still up So in here, drivers, commitments, XXXX. other see in which you more and are issued up growth in the and but as verticals, those increase cases experience projects the specialty mostly cases to have we'll in take and will main other time can ramp the ramping XXXX And outstandings. some

Steve Moss

in I of the the offs then loan the terms And helpful. Okay. appreciate consumer clarification That's on here. charge portfolio,

balance how of of we do terms going forward? think in portfolio that the about Just

Sam Sidhu

we as low so, we've of, flat forward, continue we’ve on bias third a business, XX-days in the of we that million in have, $XX-ish see end, end runoff that So to million in you like high And $XX we'd experienced the that know, past declining reiterate to so towards that the the go portfolio. to or sort quarter. in over or natural

ceiling at we've near I So for the the to dollar going medium reached forward, think term. a least on portfolio,

Steve Moss

how many And onboard CBIT, quarter? over curious Okay. up of you expect to pipeline the then this maybe just customers customers year? as remainder to size And the on of the

Sam Sidhu

Sure.

evaluation well greater So tremendous platform strategic that the I are compliance of as CBIT was customers. first of that folks it a -- in is last say pipeline can amount What the is of quarter. clients at because as of than our the in there's evaluation these the beginning number

backlog. into how working of, out translates we're However, pipeline sort still,

in seen past the join of say to as platform. important safe accelerate client And referrals, -- we've slowdown to don't up. it's client definitely the couple continues So expect one pick the things months counterparties that effect over the been to has of network growth, in especially bringing not

Steve Moss

for just one bank then quarter And helpful. That's expense Okay. for was the mobile What here? me. last

Carla Leibold

Yes, was million. it was it million. $XX $XX Yes,

Steve Moss

And for million, very all guys. thanks the $XX much okay. color Thanks, Carla.

Sam Sidhu

problem. No

Operator

the is question from with Michael Perito of next Your KBW. line

Unidentified Analyst

my This him. for is question. Andrew for Mike's filling associate Thank in you taking

approach everything the how ask for surrounding digital First as has in just the that crypto given here quarter? wanted appetite occurred second assets? off, lending the And I asset you that opportunity in about lending to digital ecosystem

Sam Sidhu

good absolutely, thanks the Andrew, and And Sure. for question. morning,

talked in early quarter. So second the launching had of as asset we lending, about digital terms

have the as Given in April, volatility market wanting June, occurred and other banks, through space the make sure in we which May engaged had our of deeper, that they that and sort as who well are continued of, customer conversations, all liquidations, diligence to no didn't. in

checks channel had that and quarter. So throughout the is with we that to hear we're very pleased that the consistent

our of strength look lead digital is very year, product the we platform. As for this the and important will further customers into asset still to support banking half CBIT of second the a the

we'll loan the have of a these if low on LTC we view much conservative probably So anything, products. nature approach more how

specifically customers we a reminder, low as a that have at just lending this secondary with is crypto, a collateral. However, already otherwise LTC, that we're way Bitcoin to the approaching would to lent

Unidentified Analyst

color, you growth a Great. be here, what said? being made that me, bit will are Thanks the as Sam. for a out do of if that And Or for assumptions kind that growth accelerates on pushed all that you quarters lastly think in buyback just target of X.X% get little and further? might TCE And to target next priority? four three

Sam Sidhu

Sure.

more step address just let So me and capital back take a broadly.

of we with organic a bit asset TCE X.X%, a impacted our little XX provide quarter sheet. in basis growth So points this about of bridge, balance was the ended to

about XX our impact points buybacks. points As of AOCI basis impact the Carla, cumulative you capital of and due and XX heard basis about to from deployment

to in for the organic could but the an we're sacrificing is these, top of growth, we growth quarter, capital adjusting see be So so not been have going you organic waterfall. X% at the

we'll future capital sheet quarters. the too, where we could deposits a next of but for we buybacks the wait service couple as the things appropriate notice the used the be to However, think quarters, if that balance over about tactical termination will about size provided we've settle see of have talked in next over excess couple be

Unidentified Analyst

Thanks Great. appreciate color you my taking all for the and questions.

Sam Sidhu

No problem.

Operator

line Hovde next of Bishop with Your from is question the David Group.

David Bishop

Sam. Hey morning, good -- Hey,

Sam Sidhu

morning, Good David.

David Bishop

moving and of expenses, XXXX? the for this for should into year the back didn’t of here outlook parts the half I obviously call. but lot looking a question, think moving into operating on But apologies First if that as about here, how we

Carla Leibold

Yes.

there. add some So color can I

ratio. look you think half in and expenses So the XXXX. we this flat change included our some Would our into in We at year to back level or better guidance that's XX% versus early plus minus of give guidance press quarter-over-quarter. a did release, change be efficiency way just to on that

David Bishop

the branch And captures closures, that correct?

Carla Leibold

$X was one-time in other there professional second about And quarter were branch numbers. activity. services of million forgiveness another EPP to related there. in $X.X included million There's our The closures charges that was there

David Bishop

the anticipated closures? The back the from Okay. that of half the saves captures expense branch XX%

Carla Leibold

right. That's

Excluding PPP well. and BMTX as

David Bishop

I think preamble some then growth it. there. multifamily heard segment, of I the obviously in the Got And

-- this keep more? of where good that about you curious range or want a want of to even keep to just percent at? sort grow grow sort a sort I the we that that that to XX% of too up that Or loans, a As it's or think at? Is of you so? Is

Sam Sidhu

may see growth a that say to XX% are range. as XX% about of and Plus good quality you reaching, existing the originations the guided interestingly minus, from relationships Yes, our a were but target, X% loan of And rate little high about book so targets sort leftovers seeing question. our we to that's bit borrowers of or we're continue we've does in increase, borrowers.

David Bishop

Great. Thank you.

Operator

the Stephens [Operator Instructions] Breese line Your Matthew next with question is of Inc. from

Matthew Breese

Good the of the you're back with million morning. I'm but I Speakers] driving with growth same quarterly growth. wanted of with discussion. struggling $XXX go bit I a little to sticking sticking time, to the level at And [Multiple you're incremental the high-end, guess, loan that the compression.

you the end exit just on just give the we bit for the provide into third quarter? banking launch year? head fund the what hoping for So the either loan of of maybe XX is a idea or throughout outlook growth the some of for this I could quarter was June to And June the as margin specific us more month be point

Sam Sidhu

Sure.

then to thinking start the address about to maybe the how you we're least June with directionally if it. or Carla I'll related want So XX banking at fund question and

So in the based of from from to half year. our second upon XX% the fund of we finance guidance we that do fund perspective, finance XX% a growth come the business should anticipate approximately the provided

Carla Leibold

with remain adding credit as on add spreads tighter disciplined that the risk, Yes. those And associated focused have sensitive understand NII And on by But moderately ways. top X% significant that won't we a so about will that asset think be business, achieving of there really lower business. that, volume from very are maintaining on target. we we it our I'll increases. just But changing we driven we're impact a that to

Matthew Breese

higher around increases. versus last? last cycle. the be up a betas deposit And to your mentioned commercial to early this a is in us than you turn discussion. the you you how for extent expectations commercial of could deposit I expected cost just had we were bit and we're much given betas this Could this more Maybe base deposit define seeing bit cycle Cost of rate expect the time Okay. deposits deposit that the than

Sam Sidhu

sure. Yes,

of millions, right? in we're that's sitting which base, are nature, little not have of we're we we I retail And deposit our do bit So that service us, or in billion are under some of plus think our branches, commercial billions. but commercial in based, deposits, nature. hundreds but So which $X a predominantly have a transitory consumer deposits

book. So basically gives commercial a you that of sense the overall

You know, profit yes, go ahead. focusing on the --

Matthew Breese

no, you, interrupted no, I No, I'm sorry.

You're going betas. talking commercial about to

Sam Sidhu

Yes.

well Fed some actions group, on in So in to the commercial large commercial to clients. tune an operating by funds our see financials in the started including and betas, relationships we some of the as accounts retain beginning quarter, competitors early as with very insitutions depositors the linking to had space asset aggressive to space digital effort

of, some I So that cycle. earlier back to strategically asset that goes cases very retain very to sensitive rates the focused deposit very is moving to while about, the moderately support made -- clients, while in being our and comment on proactively sort being

And sensitive one extremely things I long. the just reemphasize that it's nice way that of be sort of would going to is up the and on asset

of those and However, long-term are of how forward on opportunities curve have progresses. year about well we'll about in we've talked a things that the strategies, the impact depending evaluate those to margin And progresses preservation. on we types could as past types hedging the short-term continue think would as their how

Matthew Breese

just in us should Got listed give back? Customers through it, to loan sense our and the end, the just Last this filings, balance nature bankruptcy okay. the quarter. ability making be And ultimate was its one for you how way of ultimate thinking about loan paid guarantee me, some outcome? the we with first that be of could that and the sheet timeframe from bankruptcy

Andrew Bowman

I handle that. is Andy Sure. can Bowman, This

that the the completed undertaken protect time pursue which was for line process of loan actions sale the traditional and we've credit assessment, collateral have million and guarantee, bank's at our we about and to guarantee and we to facility. to already original commenced legal of the the portfolio, through continue continue full of $XX interests first all and gone mortgage liquidate underlying filing we've the Regarding with payment the the

this at And time, fully progressing and really QX this of end of addressed down time, valuations on is based timeframe upon is this upon completely based a any anticipate that at we've any time so relationship anticipation obtained and year. we up had anticipate status by everything at mortgage well. transition And this to to we The we've the wrapped warehouse this success in have this not $XX the nor far of the ratcheting do non-performing relationship do loss million exposure.

Matthew Breese

Got it.

me. for Thank my all you from That's Okay. questions. taking

Sam Sidhu

Thanks, Matt.

Operator

this audio our further there speakers. time, the back are over to At questions. no I'll hand call

Jay Sidhu

can if reach And have anytime. Okay. of questions, Well, any thank you very dialing you for in please us today. much other any

thank much good you And Customers your Have so for a so interest day. in Bancorp.

Operator

Thank you. call. today's This concludes

now lines. disconnect may your You

Customers Bancorp (CUBI) 28 Jul 222022 Q2 Earnings call transcript