Customers Bancorp (CUBI) 28 Jul 232023 Q2 Earnings call transcript

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Customers Bancorp Second Quarter 2023 Earnings Conference 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. Instructions] [Operator

Patti, David of Director you Communications. Thank

begin may your conference. You

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

QX scroll to XXXX can click Presentation. results You Download and

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

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

to description obligation applicable these our except Before we and required XX-K visiting forward-looking including obtained more risk a uncertainties begin, may some or to detailed as number of undertake may website. date are and we Relations make section considered actual from note no affect Investor Form the may the statements XX-Q the extent materially that Please be SEC a remind and information anticipated. results. presentation, for statements to factors be refer may you the light performance future by in what to of by our Copies today would risk we of of the forward-looking laws. our from SEC only or these events that Please of our currently that forward-looking speak to we filings, update securities that subject new statements like These results forward-looking. to differ of the this statements is of cause

Chair, Jay introduce to pleasure you, Sidhu. my Bancorp it's Customers time, this At to

Customer and quarter ladies Bancorp's second earnings Thank you, XXXX Dave, and morning, gentlemen. call. Welcome good to

our CFO, Sam CFO of and of and are Development, this me Customers Credit Corporate Chief Head Andy Officer, Bancorp's Leibold; President morning Joining Bowman; Phil our Carla Watkins. bank CEO bank, and Sidhu;

strongest clients quarters that are second challenges on facing and with of all our one who to to pleased not parts opportunities Please the of long-term very our year, are every across strategic only priorities finding to date. in we the team all join well banks our quarter pleased delivered we on executing of we these continue times. as members seamlessly in single our as me but to work delivering thanking our as superbly bank, Despite our the are our challenging on will promises results day on priorities. tirelessly are short-term We executed and our this investors,

Slide on Beginning X.

once strong see, we again can forward-thinking are capabilities. believe bank you a As we demonstrate our today will why presentation truly we with believe risk management

my I in will with six will We more the you them today. highlights cover key detail. and colleagues provide topics will cover

are, performance, First, we comfortably core beating in terms again, of our basis. on estimates street quarterly

our loan margin, is to interest the X.XX% ability demonstrated a net on during headwinds, industry expand smaller was quarter XX which up our by expanded we while during improve income quarter. XX% our the margin interest base. net facing – While to basis points Hence,

margin full achieve We we are year provided well you. to net to previously interest the positioned guidance

in exit each Banking continue detail transactions sale and these team non-strategic will continue followed a accelerate and serve The loan non-core on executing the on to we provide our relationships commitment balance from deposit priorities. strategic by strategic and you during the to sheet derisk another the portfolio last later on will on of the several communicated the more transactions through quarter. to in on quarter as recruit phenomenal Venture We to improve quarter presentation. transactions Sam two represented executed FDIC we Second, avenue to opportunity the to franchise. our to once-in-a-cycle acquisition financial to

continued success XXXX XX% in we on deposit are quarter-over-quarter continuing XX position in Fourth, deposit in improve efforts of to of or liquidity our be the laser-focused and the our base cost and customer average base of our experienced quarter the remained can the increase entire rates have billion reduced high-quality, a Third, the beyond. by significant pressures and diversified seen loyal $X capital We basis our non-interest-bearing by increase best-in-class. and points deposits. industry. in deposits in despite interest an Evidence

We to remain of uninsured of of maintain continue times in industry. available liquidity that XXX% immediately more the recognition uncertain deposits, for our than the

quarter equity and we stated towards improved XX% Tier XX clear last significantly path during points you also X our ratio to the common plus have We by target basis a the quarter.

at balance areas credit and sheet industry you focus Customers This call. a real we is growth, Bank. components going perhaps is well of was always most quality. retail of on were forward. discussed which in minimis our absolutely are credit We key loan ahead the QX Lastly, XXXX portfolio. and estate our focus commercial This important intentional of and tempering office in Recent earnings will dividends obviously pay with de

even with but pleased excited can do are forward. more we quarter, accomplished this what we've what going We about

Turning to Slide X.

briefly our share again you me Let which unchanged. remain with priorities,

stronger growth assure this will we are continuing that and have and holistic build to ourselves to We continue time balance uncertain period banking to during and relationships environment because sheet build our a moderate of actually the franchise. capturing

then balance levels. ratios and ratios capital our capital fortify then to continue bring those our and and sheet bring will maintain peer above We –

remains to core factors. are management we bank's the call risk critical of we and always, what at success DNA our As in our unchanged the commitment

off credit we our that are never will take the eye risk. These

interest rate We focus superior will on risk always management.

to and maintain continue liquidity daily will monitor under scenarios. liquidity robust stress We

will our we We will have ensure growth capital leverage. ratios, will above average operating and initiatives generate positive peer always

key like and to quarter cover much activity to for Sam the in the over detail. more to Sam? it turn results I'd that, With

morning, everyone. want I Jay, Jay's echo and you, good Thank sentiment. to

quarters industry. income challenging and our million. were $X.XX second of delivering of especially the we We in are core for proud our under in $XX.X On $X.XX such GAAP a EPS net we EPS on of earnings overall basis, XXXX, the of so a yet, $XX earned team's in one our million. backdrop In best quarter efforts earned core

ROA and XX.X%. was over our X% core Our core was ROE

best-in-industry function rates. deposit you by interest-earning to are of Our repricing net was know, largely as X.XX% supported our floating improved improvement in which, assets, of interest costs a margin the

$XX sheet up improvement further this the deposits a $XXX non-strategic our remained points XXX% credits robust free portfolio given quality not to a few up assets franchise-enhancing XX% deposit From backdrop. mix Loan closely in total uncertain balance in the the discuss were but monitor and fully of points were for we actively basis balance reflect cost, a at I'll in Reserve deposit-led capacity we perspective, Credit quarter remained lending continue does to weakness sheet the benign and NPAs million. NPLs, net opportunities. levels any XX signs balances nearly of declining as declined of by significant basis million, macroeconomic to and by X exited minutes. with tactically reduced for to NPLs which

more the Turning the quarter. X. provide I'll Venture on to Slide transaction detail completed some here in Banking FDIC

are to I businesses space that which start Banking comes This let to XX-year get to saying and team that Venture track in members is be new do addition the the support and team an to our regarded a our The we working team off so Firstly, welcome exceptional doing existing in thrilled teams their clients industry. respective extremely we're forward. me excited to best, perfect vertical. them. the they Bank. happy acquisition and the recruited able widely the together, are driving top-performing as by clients with is know was back record And one what of Customers to to

from Bank early Customers as to being leading is for now IPO. all serving stage the way partner immediately bank companies recognized customers a venture-backed

Our technology best-in-class technology for nationwide presence will customized service provide experience truly and and innovation those platform and companies. unique

recruitment the and portfolio medium team will the the deposits and of acquisition term our near bring franchise. of parallel Our FDIC to significant

that year. these reminder the will We be Xx clients deposit their this balances. a historically generally self-funded expect that balances have portfolio loan And new are that

expect this gathering provide already We momentum. deposit to will tailwinds that our robust

Finally, lending and be meaningful to million it value and accretive share, tangible we $XX the X% to per least to approximately earnings both earnings book the immediately is XXXX, in expect transaction to at discount. accretive

target two at successfully to the shareholders, up free Slide XX to an capacity late X. and the deposit sales maintain the sheet and In the to end in to of on quarter. stakeholders, we balance remix FDIC deal on capital commitment goals for quarter Moving June executed loan effort our our announced

this added First, we already being capital bilateral account have call non-interest-bearing not fully our onboarded we capital event. is in of pipeline call operating seeing meaningful to portfolio opportunities any are about reminder, bring vertical is very the are excited and with non-bilateral over worth few direct in exited and noting add These to million with credits. fund vertical portion the deposit one-time We and highly committed a and months fund we are managers did incredible operating relationships very lending the the that line large deposit big have remain speak. a that to relationships. It past $XXX accounts the as granular clients full finance

lending of and continuing to goals that credit consumer our to The and of a capacity and provide strategic million balance digital strategy support of with transaction combination risk. our partnership relationships clients sold fee-like of business capital of fee sheet with banking transactions This meet the about assets installment $XXX no at bank, our funding targeted generate our will and all premium we in loans with levels. grow to the to these plan. Additionally, liquidity slight limited income in while ahead two us primary velocity increase increase validates the our

for by the deposits, but wins to product environment we're true are This X. to testament supported delivering our Bank of a was of solutions customers. best-in-class relationship-based alone an to the low-cost In strength successes. now negative Moving a struggling where deposits. experienced. of banks as total Slide both reasons, attract over are as XXXX core deposits $X deposit while fantastic level for to in most This $XXX billion, technology many whole and up many the already banking XX% mix onboarded are total the Bank and quarter Customers late let of proud net quarter, clearly we These that of the we non-interest-bearing shift the deposit that million mix to a bringing for of Customers deposit industry another by makes the increasing today gathering, our

spot deposits X deposits our cost points, declined increase and ability remix to deposits and our basis non-interest-bearing pleased report that point. add of rate deposits. also average declined despite unique our were by low-cost the XX of wholesale extremely These to importantly basis and that to used declines by cost I'm highlights our high-cost

this keeps competitive deposits and our We deposit the deeply to of the gathering most focused one We us the deposits able year history. a position quality in were our modern environments achieve XX% insured of peers. in end remain bank collateralized. have very and metric strong of in regional banking challenging the quarter, our – at been and on of This to either or relative the

in customer granular franchise-enhancing We are significant and high-quality, we frustration back of and look beneficiary low-cost, a as base to disruption a diversifying year the deposit hope and sticky growing, industry, on of a our with XXXX transforming deposits. and

X. Slide to Moving

As lowering of being quarter-over-quarter drove we our ex-PPP. quarter I discussed earlier, income the in strength driver. NII interest And record interest net $XXX expense million main franchise the repeat the record the of of deposit with

our best-in-class mentioned, margin in the to facing X.XX%. strength significantly franchise perform improvement us headwinds of our asset The net our positions the interest-earning and As to interest continued industry. increased the despite deposit

the turn I'd quarter. from to With to the over Carla call like highlights discuss to that, additional

Beginning on Thank everyone. you, Sam, good and XX. Slide morning,

from continued of installment $XXX quarter. of for roughly portfolio. balance the Total $XXX We during loan million loans the quality declined overall second portfolio quarter-over-quarter, investment our our the and approximately held our million with coming sheet by of consumer reduction strategy improving

Banking $XXX mainly impact from corporate credit acquired specialized Another line FDIC $XXX million the coming banking banking portfolio coming million call the net and from the sale, of of remaining and our community Venture syndicated from portfolio, portfolio. the capital our of from the

with free deposits. up were These strategic capacity sheet reductions balance relationships tactical corresponding come to for that more

opportunities focus for across our positioning in opportunities relationships credit treasury deposits the finance us will be be management business our pursue create on and continue new banking as holistic that going about facilities. forward. We and business as will well to But fund excited

on basis quarter loan yield which approximately second yield nature interest in our net reflecting increasing cost the XX floating floating our our to in interest-earning rate funds. margin average basis the including XX% assets, rate reduction Our loans The benefited X is from and a of portfolio, total increased X.XX%. point points of assets, on our the

five around is Our XX% is operated an ratio at quarters. X quarter loan-to-deposit liquidity the We XX%, at environment these the than the bank in lower scarce. percentage becoming especially loan-to-deposit increasingly where ended our banking over at believe industry points last levels bank ratio peers. the regional prudent, in We've operating

Turning increased two the second expenses to Slide increase primarily in was million related to XX. quarter. to Core non-interest $XX The items.

component The first insurance resulted from and of expenses. increase higher largest the

accruals Second, recorded tied higher our were and quarter team performance Venture Banking during the new of to incentive the onboarding members.

While bank peers. elevated average This high-touch or We while branch expenses the is Customers regional our differentiator efficient. were of because capabilities. non-interest our to slightly for two, able our limited efficiency assets to be relative true evidenced model network business highly client managing by This expense the Bank to of deliver the service our franchise. non-interest and physical tech-enabled is of a may ratio quarter is level

XX. Moving to Slide

to taking moving third pieces generate duration yield risk, Without undue peers. for of regional available this continue Xx the almost The the peers proactively is We XX% generate portfolio yield exposed interest to continue our to on interest securities monitor themselves securities our too. that that return environment. risk the floating importantly, relative bank more risk able book Even rate credit given to only sale the have portfolio of our nearly our all we spot rate in bank regional dynamic with one increased that been we've to on taking by position rate. X.XX%,

peers. As risk our regional is rate a the the securities common lower our relative significantly result portfolio to strong tangible of unrealized management, in than bank equity our losses interest

Turning to Slide XX.

total with with even liquidity we billion Our results cash when recognized. We are net you over $X remains shared in over billion margin best-in-class earlier over and position quarter impressive liquidity. the in robust The billion and balance $XX available immediately $X interest liquidity with of finished sheet. on you the more

prudent monitor cash. to of pledging a cash. capacity continue highest perspective to risk balance in market believe the in loan regional from or will and There sales continue the at modest end sheet were levels conditions of is determine XXX%, those a quarter, committed to operate putting available primarily capacity from percentage resulting liquidity deposits uninsured our the said, associated value of appropriate We we available to our That peers. relative remains higher management bank Immediately with reductions excess very level us it during with our collateral of as the loans. to

the policies our Moving per one-time and of another Venture We acquisition capital added book of AOCI quarter non-strategic headwinds, credit. to the tangible with of the with lines continued the Slide despite early $X the short-term onboarding syndicated of the the XX. Banking to share portfolio, onetime loss BOLI the call value associated and in exit loan expense associated surrender

value regional pace share we significantly per Over book our increased annualized the have than X.X tangible of by years, on XX% peers. book last value basis. That tangible accretion an our is more bank

improvement Despite especially consistently tangible a XX%. value least PE to the of roughly Importantly, very quarter, on franchise year. that end significant for this price during at trade at the returns track we we attractive the to by our capital in multiples, continue a achieve of generating is $XX on remain book of stock

XX. Turning to Slide

generation estimated and was & CETX ratio portfolio sales XX through the quarter an organic That acquisition XX.X%. Tech Our the basis this million up previously compared $XXX the strong despite accomplished to Venture of discussed. at last capital ended a quarter. points loan We loan impressive

the cash impacted negatively billion TCE points balance AOCI, end more approximately was this than the the ratio of of This basis ratio ratio. at quarter. also Our by XX impacted negatively X% was sheet of second $X

been of track to the XX% We year-end of achieved XX% cash, remain disclosed on XX.X% nearly that we our in having Excluding to last quarter, ratio quarter. target would this X.X%. sheet TCE CETX a that around increase achieve have increased balance single

and continuing be through exit alternatives non-strategic organic amount the sheet can are optimization generation largely opportunities assets relationships. of this additional accomplished evaluate we modest incremental to capital While we alone, to balance extent a to see

on points metrics. X and across $XX charge-offs strong at fell quality portfolio all remained of minimis to bank quarter. Moving in consumer XX. Non-performing Credit basis total and to loans estate million to Slide Commercial the net expectations. the charge-offs de just attention were total incredibly in capture in to our XXth. remains to leading non-performing our to continues at real points decreased executives indicator just and with June line of X assets quarter basis XX assets exposure the The points investors. basis Commercial

estate loan XX% We excluding market. are CRE of XX% peers extremely commercial potential well real regional the only have exposure. the positioned challenges our ahead portfolio, compared multifamily, bank that to about our for comprises for

approximately credit loan each We the monitor More Credits million. very and that X% of estate, of an and specifically, coverage $X total minimal of under have are in these X.X only for with times. with office size debt real service we our two XX% granular X.X an loan-to-value both sector, have retail loan do account are pleased portfolios average commercial our They exposures to of and portfolio. sectors performance. ratios closely than average our less

mentioned in a has quality will Jay management that principle superior bank. we remarks, As risk be and credit his always operate dictates the core how opening

We we times, remain are we risk must is environment uncertain are about today. during economic management the well diligent the positioned are very good confident that despite firm why which that credit believers

Turning to Slide XX.

sheet the consumer for touched in As reduction we installment the on we continued earlier, derisked through investment. held further loans our second balance the quarter in

of FICO scores duration. to very is score approximately below X.X is credit average the balances. high by XXX. X% extended and accounts XX% in now to total continue portfolio is installment we held the with quality with XXX just The duration reduced The for loan The our FICO the portfolio years. for and portfolio hold have year consumers balances over We short investment last consumer our of no

the opportunity continue space. we in consumer forward, to Going see

developed robust have capabilities like we income, fee differentiated of origination partners. interest risk in our are In income have to able significant generate identified and limited portfolio, forward. the very and held-for-sale going credit fee We network potential to take a opportunities currently we addition

and our back like pass the call I'd address remarks. that, outlook provide to Sam? Sam With to concluding to some

you, Thank Carla.

I liquidity Before the strengthening a expectations we focus reiterate, year by the led sheet deposit are wrap significantly base. our full balance our industry-leading to capital building levels want maintaining for top areas of XXXX. on for our prepared To year brief franchise, update and our provide improving our remarks, our

pay our to further remixing will our cost base and the It's and improving to mentioning of the deposit on high $XXX We down growth and continue worth of quarter, core despite deposits. be billion are core significant loan at or million in wholesale our deposit maintaining pipeline growth focused with strategy remains that used guidance today. $X quality deposit above our deposit plus the

We We're interest year the XXXX. full EPS $X are bias And our the top guidance reaffirming margin our we're guidance discussed. range. maintaining higher level of the revising non-interest guidance per for of end have now Venture our about share Carla net as towards Group, our inclusive Banking expenses to reflect core expense of but a of

as to shared book tangible on Carla way $XX more Finally, position with year-end. you, by of in we're or well our achieve value

takeaways we with want up on open X, to Slide quarter. to Q&A, the Lastly, I before it from the conclude

the the non-interest-bearing improvement. to improving quarter a relatively pipeline our deposit our our deposit improved mix increasing generation plus with low low-cost quality deposit trend materially cost, the of billion mix lowering we and continued $X base, cost in and bucked deposit the led for we deposit industry by Firstly,

improved industry our capacity capital XX% across acquisition, deliver finally, the emphasize guidance us on And management an XXXX. Our differentiated by our rest are our three, in exceed opportunities full deviating despite by to of for versus net meaningfully basis we remixed sheet loan franchises. expansion quarter strategic deposit-led and to to our number we CETX beat points from year and we our discipline the positions track to relationships of portfolio provide margin, relationship never base principles. our or while year-end. core risk all lending Fourth, was this lending industry-leading XX meet all of accomplished multiproduct the promise two, the to balance well for Number and the interest

risk weather be liquidity portfolio our Our positioned and is interest ahead. macroeconomic rate remain may whatever loan to positions environment best-in-class and

Thank you.

questions. Let's open up now it to

line Instructions] of your comes [Operator the Michael first And Perito KBW. question from from

open. line Your is

morning to how right, clarity. on set a to for start guys. kind is just kind and expect beyond. Good this wanted questions. this level maybe a business in of Hi. the XXXX and of wanted Thanks quarter, look my lot to couple And year. happened taking happening you Obviously, a I lot I

questions couple And that on of so I a questioning. line have of

on might XX% there that period guys we C&I, about to multifamily. So of start given like CRE, balance warehouse, Or how loan portfolio still But is mix you at forward? XX% actions I Is I end the moving of the to you're what of where think maybe some XX% want kind should Carla, feel now? and to guess, take. does you mortgage mentioned X% that the mix, side. be X% kind think CRE you about – going indicative forward, right that the of

Mike, I right. that's think Yes,

to One of this things end we our is really of last the anchored reiterate the to is back beginning the at year. guidance loan year, of wanted

year-over-year, mix like to to forward. that declining we what think focusing talking currently we're a the balance it but on to sheet, really looks think about when is I good going So flat have

next no-cost deposits. do mix and side, on as guess kind be to you're able look to this, side. portfolio And I though, billion of of that end that's I a to mean I the $X.X you then at imagine four deposit by targeted targeted that range then the on over that next I guys come of over to change perfect. mix deposit imagine right? you still least guys switching but be you year? still blend achieve and kind a there's alluded to – Venture And kind of have the that of should on will ahead side a the quarters, you just have the low hoping of bit –

Yes.

a great billion pipeline plus come press we second I as the a down. $XXX core those year. In would at if we this firstly, additional release, the that or So reminder, quarter. brokered and were low-cost the of deposits an paid of question. say, Mike, obviously CDs There's million minus the just sort this had about it's wholesale And talked to down pace the deposit used is, it's also be brokers. almost in off continues coming of cost And to in $X would in high our that approximately the to half anticipation that continue pay and pay is today

So by actually the that not but be the of this next accelerate would continue remix and significant really just would we're the year, pace end year at in.

in And second for a just kind also of high-cost deposits, couple our to go we to second growth, of of deposits back billion had declined. consumer-related quarter digital that $XXX a the

deposit plus actual was over minus, the of half June. billion week to on of that pace announcement approximately core approximately $XXX well. a about after our or average. July growth acceleration low-cost new customer or of million second in generation huge And continued has as was $XXX growth said so so, that a that, the deal core of $X.X And million Having in FDIC there deposit

maybe the forward. of obviously would if Sam, verticals indication DDA that to just you a And layer an and like How know I out? are to that just growth have on this? driving kind growth. There wasn't probably love driving but that you could deposit really are like we incremental key just would rough deeper of going guess, dramatic had drove had you the release we us idea a You from. what break color a came give businesses where in that try that about of low-cost

Good course. of sure, Yes, question.

also and there across quarter, a kind importantly, and reasonably second and for organization, the was the foremost, but in bit of is of it third guide obviously the I little a but beyond. couple verticals So quarter the pipeline first broad-based, is broad-based can then

of a last million So of the quarter, Venture over so. & second Tech in we quarter $XXX couple & Fund Finance or had the

balances XX% it's perspective, in noninterest-bearing. that But will know, contributing. minus concentration $XXX a more plus vertical discipline, growth a you also any of deposit you or were were from quarter CBIT last million to our vertical, our any with as at from or couple we We that I had about now discipline whether think with see not cap deposits XX% end-of-period

that the came by over XXth begin XXth. And credits as couple $XXX portfolio. and of the have were of – in pipeline right then the discuss imagine, June seeing really with those took I But kind loans Tech you XXX, XXX Those – look the the it in & being earnest deposits by to forward on June of the you the weeks deposit came move Venture and and in like can servicing a now. we million ACH of we're of, mentioned, account some at growth pipeline, as Group across. customers, low-cost if to those openings. was And None of loan it opened from now mentioned you broad-based accounts the our several right of

in are Fund million you they're is now. at vertical stages noninterest-bearing $X over low-cost various XXX in low accounts have also million. true And And another high-end; to Finance big small be account where are that I sticky, if $X accounts. operating million it's you to the average mentioned, look $XX forward I million, talking $XX billion plus $X.X to these in typically these deposit and our end, We're million $XX about nature, pipeline on Finance know, we the what's it's granular, to interesting million sizes granular. a ticket right $X that going Fund $X is as at about think million opening of to of the

Sam. color. good really Thanks That's

of quick couple for a me. more follow-ups Just

you correctly, I Just forward. you on if the XX% that XX% the I or? range like going think heard loan-to-deposit right that ratio, a Carla, operating said in Is to

XX%. around Yes,

in on that take And mentioned Venture of around good the are – think be there. like balance we the mean, sounds low Okay, two the if think of on But going near assume normalized, I we dollar businesses that still sounds be XX-ish forward. slides, are release like to it every just the of term. for these so I guys to in loan It to terms should say, like what to ratio, get those that in deposits micro percent guys going is – I the XX%. loans that mix, just time ballpark amount remixing of Sam, the right there's be flattish or guess, some contribute as what here happen? deposit deposit going in improving and a mix sheet guardrails, expecting to you a But might sheet I like piece all balance going we it the you should

right. That's

NIM then the guide And end lastly Okay. just high That's if the towards recall. right, full guide, range. a year I the of on

would that in be back to the like of the that half Is expect you XXX, range the in year. the So NIM generally XXX fair? maybe suggest

the NIM guide was Yes. and the The XXX the was XXX. full year, to range the

So to the well. in we this half way think margin that as the about think year using good XXX around of is a QX it back

detail guys giving the additional taking and my questions. all busy us Very Okay. Appreciate for Thanks good for it. quarter.

Thanks Michael.

Thanks.

Jefferies. question next of the Casey And comes line from your Haire from

is open. line Your

the you NIM, quarter the deposit as was on guess, in got everyone. front, give the it if and pieces well? of the yield the given moving costs, what the loan on morning if could Yes. wondering, direction. obviously have loan the We spot NIM. in XXX spot on Thanks. right the you I A I questions, was all moving Good spot follow-up couple

say it average, the the end We gave X% we to – quarter, the focusing don't yields, hard XXX spot different was by at the and portfolios. much of to I think NIM that the right. about loan have about varies it's spot or the on higher so because feels But say just on Yes.

the bit And little a just more to Yes. Casey, pride color yields. on loan

As actually lending like our high XXX to of actually a you at These cetera, in a direct may the XXX more of recall, lines, are now range. specialty end of type and over XXX. verticals typically we're range relationships. to were those capital sort that They're deposit-generating XXX whereas call SOFAR minimum et the XXX in

plus prime you're those and Venture XXX, an verticals which as Group, points is on typically Venture a to the Banking well. additional Additionally, & XX over at basis XXX Tech

Got you.

the on Okay. target. CETX just And then XX%

like you're path. guys a nice You clearly sound on

do Just could at position, which get book? organically? And to the terms obviously, sheet, pay very much sheet, shrink be utilized in the to the and the you then XX% mean, get you can of pruning you need balance of borrowings. is wondering of I – do more down loan will strong there balance of any cash Or there how

Yes.

we that can so So organic of on there XXXX. far from generation right. core on basis bit XXX a a alone little just considering color made in get you're We

So generation the strategies. you that with earnings optimization half targeted get balance other to no our could year of additional XX.X% the to sheet back retained with XX%

we just just back, think as could type NIM your remind talked X%-ish whole I connect the at were range. some largely about dots a wanted loan it, question fully I the go call average answered portfolio. of, were weighted the if Casey, And cost mid-teens. just consumer I to don't loan, filled we that and Venture at loan The Banking which sales But

on the the So other are some in desired and quarter also were second while of neutralized very and the quarter, are month continuing there kind headwinds June there headwinds, but into the each of year progresses. as and they trends those positive

Yes. like coming that's in nice the consumer No, on and is Venture book lower. obviously a book, the the my yield rate is had very Right. point then

perspective, a curious that's yield. all I from that's that understand for. loan why But were on Just you what guys was yes, risk just in going the

the other my assessments? just you the venture FDIC is between so was – banking the breakdown is break the side, of the on what yes, what guide what's on up expense versus then Can assessments. – much how out And Okay. that FDIC taking

Yes.

there. couple points of a So

to tied insurance deliver banking to component incentives larger the So of we as is reiterate the then increased increased previous first, component full target if it expenses our the earth as just were on venture sort for some to that performance. associated be I'd tied like the Obviously, these on-boarding the two items. guidance second and wouldn't of expense with team to new well is

the be insurance piece larger the expenses. So would

you Got on basis? comes is later to in nature? greater that's understanding Are assessments it's quarter, FDIC, an my you. – And in ongoing and fourth FDIC just the onetime referring that the

commercial we just jumping such larger perspective. highly one sort a industry venture going across back to sort we'll really ratio we're team that large capital base, for It's this plus go and to beyond. the we'll back large banks or you the low of high-XXs, We're commercial cost such to sort go be efficiency, ratio Casey. once of and we the headroom probably have of we have blip from have our banks. And We referring XXXX to quarter. think for efficiency minus again in expenses seen and way Yes, going a that we'll base digest targeting two-quarter this our expense of efficient is is back out, in efficiency XX% banking about but created of in and sort what forward broad-based that and in if a accruals you to of in dig back BAU; to some we that the

guys. Got it. Thanks

Piper And comes of Frank your Sandler. question line from the next Schiraldi from

line Your is open.

morning. Good

Good Frank. Hi morning.

Hey the want just – follow that on to quarter. of of was eye-popping just I get the question. kind Obviously, up Sam, deposit the part a most wanted

mostly billion understand. additional to balances? you want Is noninterest-bearing? the those just So $X sure I characterize would how just make Is pipeline, general? in just the low-cost that that Or in

marginal opposed of of cost it rest as Great this right Sure. of it's at to I as sort interestingly that in deposits at cost And the moderately of say you XX% cost. low to similar think when the in the point average time, of Frank high XX% deposits. in question, of noninterest-bearing, and operating low of we're strike enough sort as now, zone sort cost being our

was not is sort I'd hope about or week say we million million, that now. our pipeline, I bringing plus plus that $XX in think the million mentioning that per $X the minus can noninterest-bearing. $XX continue I $XXX of million, of is on So that if we're right

and to continuing proceeds that higher paying the of deposits we'll the in this off is up pace going in of be high-cost use to of this and to XXXX. jump the look digital mix in the XXXX half and wholesale deposit deposits is down continue half again, to run the So of costs, set off nice a really digital of trend second second year, platform letting shift some

Okay.

noninterest-bearing, XX% interest-bearing, stuff So even off all all on is if hired coming yielding that's stuff. the is is coming or cost higher

increase, So noninterest-bearing percentage to we should a as over to time. of that I assume, total would expect continue

these today, assumes into That's relationships noninterest-bearing that we we is given balances but think static the fully Obviously, from for control to accurate customer to account a you have conversations, to are can where interest-bearing noninterest-bearing account, sort incredible or you imagine, demand be hope, probably that which as either someone there value-added into proposition a those XXX% can't and interest-bearing it move Frank. least to account at of things, the hold an or would you operating true has payments like put an not some income. an of

Sure.

to Okay. sale And capital tied call in you one-off. mentioned of of There's the then quarter was a sort deposits The it. business lines. the no the

there the business? expect what's and one-offs on is generally why point, stuff the you – its that where so there portfolio of Is deposits expect is And speaking, – that's wouldn't additional of on this that at kind fair? those wouldn't So you lines? side funding operating

right, Frank. That's

and of that way our about it a plus or the balance of we about $XXX the represented So that commitments the $XXX million was to outstandings sheet. million minus approximately think is, is third it about on had in outstandings

about at summer. have $XXX a first we today that banking which of last from it's sort in we And quarter. as is million self-funded, significantly testament of of technology couple to the just of Finance Those the that a no XX% enablement are ago. end up outstandings balances Fund quarters of So transaction started talking

to of have some of well as direct relationships relationships to deposit vertical. noninterest-bearing that noncredit though add in So a counterbalance the credit continuing number also we net the we're

sheet? Okay. got sizable And that what's portion theme; the What the this of given last with on can for right on the point not that curious branch-light ultimately there? that balance still funding this provide model, that continue sheet to just are your we've run? you got you for then these that brokered guys given model you a question on at we're balance brokered niches level balances on thoughts you've the be say any just maybe is that guys, sizable of do the thoughts sort sticking your just Or sort going of looking to

and the Yes. good That's a to it. Frank, question, for thanks thoughtful approach

strategy of one entire the banking insured X% deposit sort to deposits of that franchise deposits. learned contractual in traditional things the that a and March XX% XX% end, sort to from Typically, brokered of be any retail that the think industry diversified incredible bank. in an that high somewhere is broker or can I of for has on wholesale So

also risk perspective, rate longer hedging portfolios term; that and months split XX% us, an management It XX it also commercial allows the for right have helps liability is grower target on us than to space. contractual number sort given some you for less side from if for right between and interest of the that think I also you branch-light reference a short-term, probably to we're good the to that XX% purposes. diversified is have

number we'd – I we sort that as have think So like early the to early as of half the year. see way of you'll next year or progresses the end that it that

Great.

Okay. Thanks the all for Sam. color,

Absolutely.

D.A. Peter And your next of from comes question from Davidson. the Winter line

line open. Your is

I were bank morning. how competitive enhance the capabilities? to Good Banking ask the Can this loan your Venture and business. talk portfolio, then Thanks. got and just positioning the with that also wanted about in deal of you've your acquisition failures this you recent

I Thanks and absolutely. question. appreciate and the morning sure, good Peter, Yes,

offices D.C. nationwide the to team a end-to-end allows ground Angeles, prepared San I Boston, Atlanta, and Francisco, think presence in on presence, Raleigh, I So Los presence in Chicago, us with or mentioned have Denver, this my remarks, Austin,

five relationship credit of plus dozen a maybe on-the-ground nationwide nine or dozen eight footprint or comes with fully So team, or with treasury a about, and minus truly It also side half so the on about or managers. relationship managers. person folks a comes it

a So integrated well-regarded it's truly team. very fully

but and And referenced, virtually have head the on combined incredible I right customers that that over past vertical. business existing $X with commitments you the occurred things weeks since is of did, the spent good of say. nothing $X amount are things couple combined that that of on-boarding that to we basis, outstandings, the dislocation of a this now one there with we're in noticed all a had personally have of time about some over billion few the running banks a of in very in start we billion as important an

truly XXXX side team future really a both next continuing to from quarters lending with this a apart, deposit and the space perspective of credit in well on best-in-class as gathering nationwide and And presence is as from as XXXX in the set grow that the over plus well. about us going couple thinking to

what year? of in do then next it. Got then you that balance you going nonstrategic grow inning think And terms you're these would think are we the to sheet relationships? exiting And

Peter. Good Yes. question,

as upside opportunity So very recruit XXX in I days. call in execute to syndicated the of it course would have the do terms the a We of to a cleanup These nonstrategic what quarter, number plan well in over the lines to to days, you in the and to team, acquire next the FDIC was as as on exiting, had were be an say quarter late call portfolio these late know, would the all be capital it, to non-bilateral gradual catch-up. year. happened of that the prudent of maturing sort call we thought the things XXX

we year-end. was to that commitment not two-steps capital significant and capital we also perspective. had liquidity So acceleration; important forward, left headroom a an one very really were deposit make stuck truly by that of increase that back from on-hand one-step that both and and sure going this the cash differentiated But step forward, the our we remix so

cleanup this to quarter. a So of summarize, catch-up was sort

continuing core trade focus loan us see on deposit or remix deposit remainder that us on verticals the at to side. is the opportunity to this credit really in. you deposit for strategically really through BOLI going just important growth and the a exceed have Having focus on of clean growth sort and an year we're the focused growth the when we're liquidity-led core cetera, out now et You're exceed X.X%, of

that sheet sheet lead so grow the to growing that would next – can year? that would balance the or you And accelerate start balance

It's time, at too to early this in Peter. point say

is too really on of a kind think our that. I put point focus just finer

flows on $XXX year portfolio. of in the million cash of our this remaining remainder We have securities

in enough liquidity have an billion progresses. no as there's do tune maturities. in and increase industry where point will lead, because opportunity as opportunities. for continue deposit We are plenty plans to the reevaluate to deposit time, on to grow the Again, back have to opportunities well remix to side franchise lending. At from of as in did year quarter loan this the gross We remix we we to the balance There's sheet going the and continue as the side loan second $XXX plus, originate $X plus of us we'll And originate. of enhancing. million we deposit-led

just million virtually was question. capital the just sale line? last in the guess call I of And the given surprised this line? loss losses no color $X of me, type some just it. I business Can for this history Got on of around credit my you long provide

a credit was not is this meaning Yes, exit is there absolutely, syndicated, of an the with one institutions this a half Peter. partnered sale. about dozen – credits. of This are These non-bilateral, – essentially failed is

side, billion small $XX the On size. fund we're billion talking to $X

this for you to relationships manager. we strategic and of important FDIC the as both side It billion-plus nice the us larger of the $XXX that not a the we to year. On the other was be sure deviating Again, institution transaction been commitments would earlier liquidity this high to onboarding mature. take money and not to had and plan lines from on could talking was over from we're have that capital the transaction, given have importance it those our but XXX% or were we headroom, we much end this These make are good. made

very nice it. on a Got Congrats Thanks. quarter. Great.

Thanks Peter.

line the from Matthew And your comes from Breese question of next Stephens.

open. is line Your

good Hey morning.

morning, Good Matt.

up increase go quarter-over-quarter. to FDIC to the meaningfully wanted I in expense back

banks but As quarter. with of in X this last seen annualized measured a one over terms out the a stands of deposits it's now increase, degree. at I've versus And XX quarter-to-quarter lot basis points

Was So matters items attention? drivers change? more something you regulatory a requiring were I'm what the there or why behind these the standpoint Can from curious related? it the robust address and is deposit increase? broker Or

Yes, Matt.

less are catch-up $X.X increase insurance is rate off replaced – of the reaffirmed clear, jumping the sort million $X So included off or million run in of this X guidance first be which we this also by we referenced rate why minus a or team, of million of the FDIC be sort run full of quarter. point. to we point. To more of banking That venture for the a jumping as the a plus will

So way it's the apples-to-apples not you it. fully described

be Those this consistent. consistent absolutely looked is, a banks have that I this and is And at. as are expect And large to again, commercial evaluated levels with again, we be think we Carla this short mentioned; to assessments medium the that two-way dialogue. term, opportunity have more meaning this sort of there's after is not revised a multiyear stabilization, ongoing some are and to expect increase especially we there'll and

tied to the So is the you FDIC in and team in? increase brought VC insurance loans

to one any It's thing. not tied

back as at well a in industry those, that with levels FDIC, about the go large the this the you transacted is point, consistent commercial as we quarter. to banks your to that are If have overall increase for the talking

noninterest-bearing. was in seen from depositors particularly to shifting the side, the year-to-date Maybe deposit shift much versus change new? we've Okay. existing or How done the on customers existing mix of

I'm described. speak call question. $XXX $XXX the less a verticals to would is or earlier minus existing million going balances from I from rest but $XXX existing or the because and I with directionally higher million actually, from customers plus maybe little don't coming plus It's say, a it maybe numbers, exact is I have good – million, minuses

more in point? you And noninterest-bearing they The is, where ones this color stand balance wise today? those at do are see Okay. And would at one, year-end? were on two I appreciate deposits CBIT where

quarter Average That's were and at That's $X.XX continue we billion three, be. we to for or two, year-end target the will we're two. I were The around our, our last below as maybe XX% right. similar right. quarter. CBIT at of balance, believe were balances They balances to a

Are Right. those point? at noninterest-bearing in this

Yes, they're noninterest-bearing. Correct. all

Okay. And noninterest-bearing were those at year-end?

were at They noninterest-bearing QX end.

Got it.

Okay.

There the quarter. a big first [indiscernible] was from

from were earlier this noninterest-bearing interest-bearing there moved So year? into

Correct, in quarter. the first

And accounts we've for Yes, much one what did of these been is very we us. Matt, account focused operating essentially, customers. with relationships operating are every on then having that our the as And decision only as not made, and that get nothing other where we exited interest-bearing and digital businesses do we strategic else. is well businesses we relationships get – we

right digital So to our all systems. noninterest-bearing, their accounts our asset are payment relationships now tied operating and

Understood.

Okay.

per are base where at they point? those in this the sitting se of noninterest-bearing there are are deposits. or today? balances stand The other What terms And are at interest-bearing – chunky BMTX deposit BankMobile,

I give. Yes. can

I believe that. Go ahead Carla.

they're just a the to No, going add part and at deposit interest-bearing sitting are that was they this not our balance in deposits in meaningful I of point time.

single low It's like digits, Matt.

that from away diversified we've So relationship.

terms Low overall deposit? single percentage of of in

overall Of right. deposits. That's

that Is XXXX. by accurate? late Okay. supposed And they're wind to down

then so the base. be of relationship, less material as a overall that half our would would Half deposit the remaining percentage of even be

it. Got

remember portfolio switching book. how of third at much remember – securities book? how Can if just there the a the back this point securitizations, couldn't installment but I ties sorry, to Maybe Okay. installment I the us I much been remind to – I'm one. was think you Because has two

Yes.

a book book, little So of is for the half purchased consumer securities out over of the we HTM securitizations. roughly have installment in that our

been the the And through securitization? as go Could in any protections recent there's I past then you remind past some the with protections? of And Okay. this. most you think there us were

It's consistent, Matt.

AAA So to of other not this senior completely so is dissimilar protected that a position, truly sort ABS double in that's any range.

it. Got

VC me. failed the recent more those assume Last were institutions? we Okay. from should one one of for team, The

right. That's

From Bank. Signature

Signature. From

Okay.

PacWest This is the One Square old team.

Perfect.

loss VC content. of is That understanding lot the my a loss of My bit for deposits, What's was Okay. rate? historically have tends thought. it what remind to historical a with the loss a higher of us Could comes content you is but lending? little

Yes.

on team some income, this et of you when or it's cetera, track the net X% actually basis. XX-year And of less. warrant zero in add the record actually is So a

Got Perfect. it.

what Along around should provisioning those for the of expect the we expectations or year? are Okay. lines, remainder

Yes.

So $XX to of $XX I this it's for predict, range half the the would that hard right. year for million between but provision, say again million to back feels

it. Got

Okay.

Thanks.

Matt. Thanks

our time little only left, final take question from have Dezellem Markets. we so one from a Bill Tieton we'll Capital And

is open. line Your

Thank of you. A couple questions.

ones year all, then background and of secondarily, relative you us First all you addition, the FDIC there would that we're walk of through got portfolio we are ultimately to other the the in chose? VC there opportunities may And other that VC or how the this at the how not that or there. dislocation you may just creating otherwise, whether just the it's see that's other place opportunities, broader industry taken than opportunities out

Sure, Bill. happy morning, that absolutely, I'm take happy – to question. good

And So of we time. we and portfolio from a team, this saw this an the extended relationships And period recruitment had this Venture firstly, perspective prior team on and frankly for with seen Banking side, had bank XX. June we diligence there's the and that process sort whole a week with type with had closing and several transaction. it on FDIC-related the monitored of gone not

strategic side. loan a credit focused process recruitment was from from the it really So on side a very portfolio accelerated and

from that has which of the which in the look perspective with roll point five-year the fully plan but of focus making the cultural the we team is a if of it we're accelerated but us less basis. goals bit the off right incredibly taking over recruit and of was to we portion aligned provided to portfolio that now and completed nationwide would portfolio, have we've doing team also you feel comfortable it taking cushion couldn't of onboarded a had provided been at sure And headroom business credit time. that $X.X consideration obviously with discount that what a fit is perspective little of period, some not the now billion real normally diligence, on and from approximately team, to this had The which accelerated an for fully the three- our a that had extra

an think this reminder, announcement, bring and as momentum I that that we those portfolio saw there So to mentioned customer significant growth. as of fortunate Venture as a I to of that outside that we the in None and interest actually deposits feel very in related XXth. came Banking was earlier, June opportunity deposit of after are team,

to in that's So sort think of third the venture the they're I coming so quarter, banking about way think the process.

where also a are else seeing You opportunities. second we question asked about

banking – commercial whether board equipment focused focused of Tech of dislocation, technology niche focused There's bank. Finance, niche a tremendous across Banking, finance, our in it's been verticals. Venture, the a service-oriented it's think that many I Private technology it's whether best-in-class being whether amount Fund it's & whether

a to opportunities onboarding a with to to teams capital focus seeing in We're at we both for lean any venture to lot seeing competitive environment. as a at dozen we're to and added who and them sort of members a those added number So of also institutions, recruit. the or some great opportunities that in given new in verticals. from We've much more of dozen dislocated customers a new franchise a institution less at usual figuring We've at? their what be of business remix current enhancing minimum and team discussing half our mean in a their meeting Fund maximum, Finance of continue does time they're team some out are a sort

And congratulations on purchase. that

Bill. Thanks

And this some remarks. for over closing back our question-and-answer Sidhu, brings I call Mr. you turn us to to Sam the the session. end of final

much, appreciate interest and Customers Really everyone. focus so Bancorp. in Thanks your

date, quarters relative is to our – support. we appreciate as very strongest one our are incredible of earlier, said, we a Jay off an team's We of basis foundation our I this proud very feel on and ever to we build customer we I As And as it's mentioned much of. think and efforts.

a much, morning. you everyone. thank great so So Have

today's concludes conference participation. you your for call. This Thank

may disconnect. You now