Customers Bancorp(US:CUBI)2023-07-28 17:19Financial Data and Key Metrics Changes - The company reported a GAAP EPS of $1.39 and core EPS of $1.65, with core earnings of $52.2 million, reflecting a strong performance despite industry challenges [7][65] - Net interest margin improved by 19 basis points to 3.15%, contributing to a 10% increase in net interest income on a smaller loan base [4][7] - The common equity Tier 1 (CET1) ratio increased by 70 basis points to 10.3%, with a target of 11% to 11.5% by year-end [15][65] Business Line Data and Key Metrics Changes - Deposits increased by a net $227 million, with a significant $1 billion or 29% quarter-over-quarter rise in non-interest-bearing deposits [5][31] - Loan balances were tactically reduced by approximately $800 million, with a focus on exiting non-strategic credits to enhance balance sheet capacity [33][10] - The average yield on loans increased to 6.83%, while the loan-to-deposit ratio ended at 77%, which is 9 percentage points lower than regional bank peers [13][8] Market Data and Key Metrics Changes - The company maintained a robust liquidity position with over $11 billion in total liquidity and more than $9 billion in immediately available liquidity [14][62] - Non-performing assets (NPAs) decreased by 2 basis points to 13 basis points of total assets, indicating strong credit quality [8][63] - The commercial real estate exposure is only 15% of the loan portfolio, significantly lower than regional bank peers [63] Company Strategy and Development Direction - The company aims to strengthen its balance sheet by improving its deposit franchise and maintaining industry-leading liquidity levels [17][65] - A focus on risk management remains central to the company's strategy, with ongoing efforts to derisk the balance sheet and exit non-strategic relationships [6][25] - The acquisition of the FDIC portfolio is expected to enhance the deposit base and provide significant growth opportunities in the venture banking sector [9][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain macroeconomic environment, emphasizing the importance of credit quality and risk management [25][66] - The company anticipates continued growth in core deposits and aims to maintain a low-cost deposit strategy moving forward [17][84] - Management reiterated the commitment to achieving a tangible book value of at least $45 by year-end, reflecting strong capital generation [35][65] Other Important Information - Core non-interest expenses increased to $89 million, primarily due to higher insurance expenses and incentive accruals related to the new venture banking team [61][65] - The company successfully sold $550 million of consumer installment loans, validating its strategy to increase asset velocity and generate fee income [10][32] Q&A Session Summary Question: What is the expected loan portfolio mix for 2024 and beyond? - Management indicated a target mix of approximately 50% commercial and industrial (C&I), 5% to 10% commercial real estate (CRE), and the balance in multifamily and other loans [68] Question: How is the deposit pipeline characterized? - The deposit pipeline is expected to consist of 25% to 35% non-interest-bearing deposits, with the remainder being low-cost deposits [84] Question: What is the impact of the Venture Banking acquisition on competitive positioning? - The acquisition enhances the company's nationwide presence and capabilities, allowing for better deposit gathering and lending opportunities [91][106]