Customers Bancorp, Inc

ladies and gentlemen this is the operator today's call is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience so Thank you. Thank you. Thank you. Good day and thank you for standing by. Welcome to the Customers Bank Corp. Incorporated Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, David Paddy. Please go ahead.

Thank you, Alicia, and good morning, everyone. Thank you for joining us for the Customer Bank Corp's earnings call for the second quarter of 2021. The presentation deck you will see during today's webcast has been posted on the investor relations page of the bank's website at www.customersbank.com. You can access the deck by clicking a red button marked latest earnings presentation. Our investor presentation includes important details that we will walk through on this morning's webcast. I encourage you to use, download or print the document. Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws. Please refer to our SEC filings, including our Form 10-K and Form 10-Q, for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the investor relations section of our website. At this time, it is my pleasure to introduce Customers Bank Corp Chair, Jay Thabit. Jay, the audience is yours.

Thank you very much, David, and good morning, everybody. I, too, want to welcome you to Customers Bank Corp's Q2 earnings call. We really appreciate your interest in Customers Bank Corp. Before we begin, please join me again in saluting my friend and the bank's former Chief Executive Officer, Dick East, who retired effective July 1st after an illustrious and a very meaningful 50-year career in banking and other related financial services. Please join me also in congratulating Sam Sidhu on being named Customers Bank's President and Chief Executive Officer upon retirement of Dick. And Sam is also the president and head of corporate development at Customers Bank Corp. Today also happens to be Sam's birthday. Sam's vision, leadership, passion is already making a huge positive difference at Customers Bank Corp. And we encourage you to really follow us very closely as we start to execute on all the things that we will be discussing today. So besides James and Sam, joining me today for this call is Carla Liebold, our Chief Financial Officer, Andy Bowman, our Chief Credit Officer, and all four of us will participate in this call and will be available to answer your questions at the conclusion of our initial remarks. Q2 2021 was another exceptional quarter for us, helping us build a very strong foundation. We have a clear and unique strategy that is being executed both for the short term and for the long term and building a high performing, high tech forward thinking bank that is also supported by high touch or a relationship banking strategy. I'd like to now draw your attention to slide four and just to give you an idea of where do we stand today at a glance. You can see besides community banking, we are really positioning ourselves to be a niche bank with aspirations to become a national player. And right now we are a regional player. So besides community banking, we have developed very successful specialty lending programs or niche businesses, as well as simultaneously, both for the consumer as well as for the businesses, a digital banking platform. And we believe that that is absolutely critical for success, both in the short term and long term for midsize banks. Now, moving on to slide five, talking about our exceptional profitability and growth. As you know, our core earnings, were 176, up 182%. Our double ZPS and core earnings were about $59 million, up another similar 177%. Our return on capital common equity was 23.7%, and that's up from 11.1% last year at the same time. And talking about profitability, our core return on average assets was 1.3%. percent this quarter, and that was up from 68 basis points last year, same quarter. From a pre-tax, pre-provision return on average assets, it was 1.8 percent at Q2, and that's up from 1.5 percent last year, same quarter. We've intentionally kept our balance sheet for the core businesses reasonably flat at about $13.5 billion. and been focusing on having the allocation of balance sheet to lower risk, higher quality, higher yielding assets. And in spite of that, we've been able to show somewhat of a slight increase in loans and leases. And you will hear from my colleagues today that you should expect an acceleration of that growth in the second half of this year. And then leading on to deposits, that has been a very, very big story for the industry, but for us it's been exceptional. And so we've seen a $2.9 billion growth in deposits over the last one year, of which $2.4 billion were demand deposits. From a credit perspective, our non-performing asset ratio was only 24 basis points, and we believe that compares well with about 70 basis points for our peers. And from our reserves as a percentage of our loans held for investment, we were at 1.61% at June 30th, and again, in our opinion, equal to, if not better, than our peers. So now, besides going over the second quarter highlights, we will also cover with you where we briefly sort of come from, where we are heading, and our strategic priorities and the general guidance for both short-term and long-term. So if you look at slide six, you can see that it was only about 11 years ago that some of us put our money where our mouth is and took over control of a failing $250 million bank with 35% to 40% non-performing assets at that time. From that kind of a foundation, we built what is Customers Bank Corp today. This growth has been pretty rapid, but it's not been a straight line. We paused recently. to build the capital, we paused to take advantage of certain opportunities. For example, we were one of the first ones in the country to build a consumer digital bank, and then we decided to divest it before effectively crossing the $10 billion mark, and we divested it at a gain to our shareholders. From a strategy point of view, we believe that A tech-focused and a relationship-driven strategy and being in niche businesses is a winning, sustainable strategy for the future. And we are building on our private banking for privately held businesses. We are also building a leading-edge in-house digital bank for businesses as well as a digital bank for consumers that is not dependent upon government. So that is something which is world-class, in our opinion, that we have already built, and we are continuing to improve it. From an asset quality and deposit growth, we are very, very focused, and you should not expect us to have above-tier non-performing assets ever. As well as we are developing strategies today, when the industry is flushed with liquidity, we are building strategies today to have a very strong core deposit franchise when the rates rise and this liquidity starts to disappear. Now is not the time to turn away deposit customers. This is the time to be building strategies which will sustain and give us a very above-average deposit franchise because we believe at the end of the day, the valuation of banks is highly dependent upon the quality of their deposit franchise. All of this only is good when you have a very experienced management team. And you will hear Sam talk about how we are significantly adding to this team. And so that this team that we have assembled and we are continuing to add on is both made up of of very strong, experienced bankers, and they are complemented also with very significant technology experience that we are bringing in onto our management team as well as in our boardroom. So with that, I'd like to now hand it over to Sam to go over some of the rest of the materials in the package.