Customers Bancorp(US:CUBI)2024-07-26 19:22Financial Data and Key Metrics Changes - The company reported a GAAP EPS of $1.66 and a core EPS of $1.49, with net income of $54.3 million and $48.6 million respectively [76] - The net interest margin expanded by 19 basis points to 3.29%, which is a positive trend compared to the broader industry [81][116] - Tangible book value per share grew by 20% year-over-year, exceeding $50, and the company achieved a 7.5% tangible common equity to tangible asset target in just two quarters of 2024 [6][89] Business Line Data and Key Metrics Changes - The company generated $358 million in held for investment net loan growth, reflecting an 11% annualized growth rate, primarily driven by corporate and specialized banking verticals [78] - The average cost of deposits declined by 5 basis points to 3.4%, bucking industry trends [84] - The company reported a modest uptick in non-performing assets (NPAs) as a percentage of total assets, ending the quarter at 23 basis points, which remains below regional bank peers [7] Market Data and Key Metrics Changes - The company noted that its level of criticized and classified loans decreased by about $35 million or 7%, indicating improved credit quality [7] - The company has a strong liquidity position, with a coverage of immediately available liquidity to uninsured deposits at 193% [119] Company Strategy and Development Direction - The company aims to be a top 3 to 5 national competitor in niche verticals, focusing on broad-based and diversified growth to ensure consistent returns for shareholders [4] - The next phase of deposit transformation involves replacing higher-cost deposits with higher-quality deposits, with a focus on relationship depth and cost [25] - The company is optimistic about taking market share, with strong loan and deposit pipelines and plans for selective, franchise-enhancing loan growth [81][115] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a mid-40s efficiency ratio over the medium term, despite temporary increases in expenses due to new team investments [28][123] - The company anticipates continued expansion of net interest margin and expects to maintain robust levels of liquidity while managing deposit costs [116][119] Other Important Information - The company has authorized a share repurchase plan for approximately 500,000 shares, indicating a commitment to returning value to shareholders [29] - The company has seen significant deposit generation from newly hired banking teams, contributing to a strong pipeline of low-cost relationship-based deposits [25][114] Q&A Session All Questions and Answers Question: Can you talk about the loan composition and drivers to loan growth going forward? - Management noted that new relationships associated with new teams contributed about $30 million in the second quarter, with expectations for continued growth [31] Question: Do you still think you can get to near a 50% efficiency ratio by year-end? - Management confirmed that they are making good progress towards achieving this target, although timing may vary [122] Question: Can you provide an update on crypto exposure and plans regarding venture capital deposits? - Management stated that they maintain self-imposed limits on digital asset customers and are focused on diversifying their deposit base [61] Question: What type of deposit growth do you need to achieve breakeven for the new teams? - Management indicated that they are seeing significant account growth and expect the new teams to break even by the end of the first quarter of 2025 [122] Question: How are you thinking about capital from here, especially regarding the buyback program? - Management emphasized a balanced approach to capital deployment, focusing on organic growth opportunities while being opportunistic with buybacks [48]