Customers Bancorp(US:CUBI)2021-10-28 19:57Financial Data and Key Metrics Changes - The company reported a record core EPS of $3.36, representing a net income of $113.9 million, up 178% year-over-year [12] - Net interest income increased by approximately 100% year-over-year, reaching $108 million for Q3 2021 [9][36] - Tangible book value per share increased by 35% year-over-year, reaching over $35 [39] Business Line Data and Key Metrics Changes - Total loans outstanding, excluding PPP and mortgage warehouse, grew by 10% year-to-date annualized, with C&I loans up 19% year-over-year and consumer installment loans up 32% year-over-year [9][32] - The digital direct personal loan portfolio crossed $1 billion in originations, with a total portfolio of $1.3 billion, 70% of which was sourced directly [19] - The SBA team reported traditional 7A loan originations in Q3 doubled compared to the first half of 2021 [17] Market Data and Key Metrics Changes - Total deposits grew by $6.1 billion, a 57% increase year-over-year, with $3.1 billion of that growth occurring in Q3 [9][34] - Non-interest bearing demand deposits accounted for the majority of deposit growth, increasing by 115% year-over-year [34] - The average cost of deposits decreased by 25 basis points year-over-year, with spot costs dropping to 32 basis points [35] Company Strategy and Development Direction - The company aims to expand its footprint to become a nationwide bank over the next few years, leveraging technology for community and specialty banking [11] - New business lines include fund finance, technology and venture capital banking, and digital asset banking, which are expected to drive future growth [10][15] - The company is focused on maintaining strong credit quality, with NPAs at just 27 basis points and a coverage ratio of 1.65% [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong performance and a robust loan pipeline, expecting continued growth into 2022 [12][13] - The company highlighted the importance of its partnership with the SBA for PPP loan forgiveness, which has accelerated forgiveness rates significantly [25] - Management noted that they are well-positioned for capital allocation and revenue growth, with a focus on maintaining a fortress balance sheet [74] Other Important Information - The company completed the redemption of $82.5 million in preferred stock, which is expected to enhance annual DPS run rate by approximately $13 million [45] - The company is actively pursuing share buybacks but remains opportunistic due to market volatility [65][74] - The company has engaged a global digital consultancy to rebrand and relaunch its online presence, expected to be completed by the end of the year [24] Q&A Session Summary Question: Can you provide details on the CBIT deposits and customer composition? - Management indicated that the soft launch included around 2,000 customers, with ongoing funding and transaction testing [47] Question: What are the expectations for customer growth during the soft launch? - Management anticipates remaining in soft launch mode through the quarter, with onboarding of new customers likely in the first quarter [49] Question: What is the outlook for digital asset lending? - Management is optimistic about capturing a share of payments transactions and is exploring lending opportunities in the digital asset space [51] Question: Can you elaborate on the gain on sale strategy for SBA loans? - Management aims to maintain a recurring revenue stream from gain on sale, currently originating at a pace of about $10 million a month [54] Question: What is the rationale behind the recent increase in reserves? - The increase in reserves was due to changes in the consumer installment portfolio mix, with guidance remaining within $10 million to $15 million per quarter [68]