Customers Bancorp, Inc. Q4 FY2024 earnings call

• Jay Sidhu highlighted 15-year journey of Customers Bank from $200 million asset bank to $22 billion asset bank, with management taking 2024 bonus in stock. • Sam Sidhu discussed deposit-led growth, doubling assets in 5 years, net deposit growth of $10 billion, core EPS up over 2.5 times. • Focus on improving deposit franchise, with $1 billion gross deposit inflows in Q4, reducing higher cost deposits. • Loan portfolio growth at 19% annualized pace in Q4, diversified across Fund Finance, commercial banking, etc. • Investment in risk management infrastructure, operational excellence initiatives to drive fee income and reduce expenses, and maintaining strong credit quality with NPAs at 25 basis points.

No specific product segment breakdown mentioned. The bank saw overall growth with $22 billion in assets, $10 billion net deposit growth over 5 years, core EPS up over 2.5 times, and various deposit and loan growth metrics.

• Expect deposit-led loan growth, with loan portfolio increasing by 7%-10% or more. • NII to conservatively grow by 7%-10% (backing out venture accretion). • Efficiency ratio to come down to low-mid 50s this year and progress to mid-40s over medium term. • Capital ratios remain robust for organic growth opportunities.

• Forward-looking statements subject to risks and uncertainties that may cause actual performance to differ. • Potential impact of rate cuts, with mixed shift across the franchise taking time to stabilize. • Unexpected payoffs in loan portfolios, though most payoffs sunsetted in 2024.

Q: On loan growth guide, talk about expectations for next quarter and payoffs?

A: Phil Watkins mentioned Q1 usually rebuilds after strong Q4, and unexpected payoffs seen earlier in year. Sam Sidhu added about $1 billion payoffs/paydowns in Q4, giving confidence going forward.

Q: Thoughts on non-interest bearing deposit growth from cubiX platform and instant payments business?

A: Sam Sidhu said most non-interest bearing deposit growth came from cubiX platform customers, with client market activity leading to higher balances. Management will evaluate limits/targets holistically.

Q: NII guide range of 3%-7%, drivers?

A: Sam Sidhu said drivers include rates and pace of loan growth. High end based on current rate curve with two cuts, and potential upside from franchise power.

Q: Color on oil property reserve bill?

A: Phil Watkins said it was a security put on NPA in the quarter, in final stages of restructuring, and related to increase in loan book with relatively stable coverage ratios.

Q: Broker deposit levels and progress?

A: Sam Sidhu said down by $200 million over last couple quarters, with $500 million+ deposit remix scheduled, focusing on higher cost/less strategic deposits.

Q: Federal Reserve Bank of Philly issues and punch list?

A: Sam Sidhu said working on enhancements in people, process, and technology, with peak professional services costs in Dec/Jan tapering off by mid-year.

Q: Securities restrictions timing and reinvestment?

A: Phil Watkins said securities sales occurred late in Q4, reinvestment was gradual, with loans coming on organically, expecting ~5 basis points NIM pickup in 2025.