Customers Bancorp, Inc. (NYSE:CUBI) Q3 2018 Earnings Conference Call Transcript

Oct 26, 2018 • 09:00 am ET


Customers Bancorp, Inc. (NYSE:CUBI) Q3 2018 Earnings Conference Call Transcript


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Good morning, and welcome to the Third Quarter 2018 Customers Bancorp Incorporated Earnings Call. Today's call is being recorded.

At this time, I would like to turn the call over to Mr. Bob Ramsey. Please go ahead, sir.

Bob Ramsey

Thank you and good morning everyone. Customers Bancorp's third quarter earnings release was issued yesterday evening as well as an investor presentation. Both are posted on the company's website at Representing the company on our call today are Jay Sidhu, Chairman and CEO; Bob Wahlman, CFO; Dick Ehst, COO; and Carla Leibold, our CTO; and myself, Bob Ramsey, Director of IR and Strategic Planning.

(Forward Looking Cautionary Statements).

At this time, it's my pleasure to introduce Customer Bancorp's, CEO, Jay Sidhu. Jay, the floor is yours.

Jay Sidhu

Thank you very much Bob, and good morning, ladies and gentlemen. Thanks for calling in for our third-quarter earnings call. Although the corporation reported a diluted operating EPS of $0.62, which were 29%, and operating return on average assets of 88 basis points and operating return on average common equity of about 11%. The Community Business Banking segment continues to perform very well. And we reported operating diluted EPS for that segment, which is our core bank, of $0.73, which were up 14% over last year. And operating return on average assets of little over 1%, and the return on average common equity of about 13.5%, and efficiency ratio of 50%, which we expect to get down in the low 40s within the 24 month period.

So, from an earning asset point of view, we reported 15% year-over-year growth in C&I lending, which excludes our loans held for sale in the mortgage warehouse category. And as you would expect, based upon the guidance that we had provided, we are reporting a 7% year-over-year decline in multifamily loans, and that decline will increase over the next couple of quarters.

On the liability side, we achieved $1.2 billion, which is 17% quarter-over-quarter deposit growth, and I'll talk a little bit more about that in a minute. And simultaneously, we are totally balanced on an interest rate risk point of view at September 30, since we sold about $500 million of lower-yielding securities and repaid a similar amount of borrowings significantly improving the interest rate risk profile and putting an absolute floor on our margin.

Credit quality remained very strong, and basically no change in our pristine credit quality. From a deposit point of view, as I mentioned, the core deposit growth as part of our strategy accelerated immensely in Q3, 2018. We did that for three reasons. Number one was that for the year, we've been planning and executing many improvements in our deposit generation and product offering capabilities, all of those were implemented starting Q3 and ending results is that our escrow balances increased significantly, as an example, starting Q3.

Also, we launched a CB digital bank, which is a direct bank for high income, high net-worth individuals across America, and that's generating approximately between $52 million