Sam Sidhu: So a high rate environment should be most challenging for a bank like us, given that we don’t have the retail network. However, we noted that with the deposit trends and really the positive mix shift into noninterest bearing lower cost deposit over the course of last year. The down rate is going to be beneficial to us from an asset sensitivity perspective, as you know, there are limitations from a shock perspective and a spot perspective in the sense that our K is going to be out in a couple of weeks. But even if you look at our September 30th numbers, noninterest bearing deposit growth increases your asset sensitivity. However, rolling off of fixed rate wholesale CDs into floating rate deposits decreases your asset sensitivity.
So we’re very prepared for declining rates and while we’re moderately slightly asset sensitive. Today, the shock that you’ll sort of see in those types of financials is not necessarily representative of how we will actually operate in a gradually declining rate environment, which is what we and the market overall expect directionally, whether it’s 3 or 6 to be determined.
Peter Winter: And then just how do we think about average earning assets from fourth quarter level? I mean positive outlook on the loans, but funded with excess cash and securities cash flows. Just how do we think about the average earning asset growth rate?
Sam Sidhu: So I think I talked about the 10% to 15% growth rate. If you take the midpoint of that range, it really you can sort of directionally see you’re getting back to 12/31/22 in terms of our directional loan balances, that earning asset mix shift is really going to be coming from cash and securities as opposed to any changes in the balance sheet. So you can sort of think of the average earning assets as moderately flattish. I’d also mention that I think we’ve disclosed our securities portfolio is somewhere in the low to mid 5% range on a blended basis. Our cash, as you can probably appreciate, is generating something directionally similar. And our incoming loan yields are typically, especially for some of our national corporate businesses, which is where greater than 50% of the expected growth is planned to come from, it sort of gives you an extra 300 basis points plus or minus spread above what those earning assets are currently yielding.
Peter Winter: Just my last question. You guys are in some of these businesses of the failed banks last year and then you, of course, bought Signature’s venture capital banking portfolio from the [FDIC]. Are you seeing a lot of opportunities to add more bankers to the platform?
Sam Sidhu: Yes, Peter, it’s a great question. I think you sort of heard me talk about market share gains and the hundreds of billions of impacted customer deposits and loans from the failed institutions. I think that what’s important about our business is we haven’t added any new business lines or new business verticals. We happen to have a lot of high quality low risk high growth opportunity, commercial verticals at our bank existing today. From a lending perspective, we have very strong lenders across the franchise. From a deposit perspective, I think you’re absolutely right, there will be opportunities for us to find teams and individual performers in motion because clients are in motion. Clients have already changed banks once or twice in the past 12 months and folks are looking to find high quality commercial oriented platforms like ourselves to be able to port into.
Operator: Your next question comes from the line of Michael Perito from KBW.
Michael Perito: So obviously, the guide for ’24 is pretty thorough. I just had a couple of high level questions, I’d love some color on if that’s all right. Number one is just you guys are pretty clear and laid out the remixing opportunities for ’24. But I was wondering if you could go a layer deeper just on the mindset around balance sheet growth. Like what are the pieces of the equation when that comes back into consideration in more earnest? Is it a certain capital level, is it a certain amount of liquidity remixing or deposit mix when you guys will start to consider growing the balance sheet? I realize it’s not ’24 consideration, but just as we look out to ’25 and maybe even ’26 in the next quarter or two. Just trying to get a better sense of your thought process around when balance sheet growth might and could resume.
Sam Sidhu: So firstly, starting from a capital perspective. We hit our minimum target of 7% by the end of the year, which was really important to us. We expect in the first half of the year, we would hope to achieve at least a 7.5% TCE. I think from a regulatory capital perspective, we’ve more than cleared and gotten to top quartile levels. We think it’s important to be at that 7.5% type range. Focusing on the inside of the balance sheet for a time period and then I’ll address the latter part of your question sort of a bit of more of a medium to longer term cast. From a loan growth perspective, I think we’ve pretty much covered that from sort of a transfer of cash and securities to loans within the asset side of the balance sheet.
From a deposit perspective, while we’re top quartile or top decile and all the other most important profitability and balance sheet metrics, I think from a self awareness perspective, from a deposit side, we’re still on the higher end. And we’d like to continue to improve the mix and reduce the cost and the cost sensitivity of those deposit customers over the course of the coming quarters and years, and that’s really what our focus is going to be on. You heard me talk about deposit led growth. I think the real differentiator for Customers Bank today is the customers and the teams that are in motion that are going to really help us enter 2025 and beyond are going to help us build deposits first internally and then a deposit led growth in ’25 and beyond, maintaining our current capital goals, which we hope to achieve pretty quickly.
Michael Perito: And then just you mentioned the expense guide kind of shifting to the efficiency ratio would give you guys flexibility to invest where you see opportunities. Just was wondering if you could maybe spend a minute, not that you guys need more because you’ve obviously been very busy and done very well. But what initiatives or what does that mean? Like what are you going to look to invest in, is it new business lines, is it just adding more people in the business lines you’ve added over the last two years? Just would love another layer deeper on that as we think once again about the kind of forward outlook and growth opportunities?
Sam Sidhu: Our reinvestment for the near to medium term is really going to be focused on continuing to build out the infrastructure from — you heard about sort of treasury management, marketing, a lot of the support functions that allow us to have the breadth of products and services, generate fee income, enhance the customer experience. Those could also sort of bleed into sort of technology and other AI type initiatives, which will help enhance the customer experience and customer service. But the real focus from a true material sort of noninterest expense perspective is going to be on people that help us service and acquire new customers really focus on those deposit customers.
