Participants

David Patti; Communications Director; Customers Bancorp Inc

Jay Sidhu; Chairman of the Board, Chief Executive Officer; Customers Bancorp Inc

Sam Sidhu; President, Vice Chairman of the Board; President, Chief Executive Officer of Customers Bank; Customers Bancorp Inc

Phil Watkins; Executive Vice President & Chief Financial Officer; Customers Bancorp Inc

Frank Schiraldi; Analyst; Piper Sandler Companies

David Bishop; Analyst; Hovde Group

Steve Moss; Analyst; Raymond James

Kelly Motta; Analyst; Kelly Motta, Keefe, Bruyette & Woods

Matthew Breese; Analyst; Stephens

Hal Goestch; Analyst; B. Riley Securities

Presentation

Operator

Hello and welcome to the Customers Bancorp 2025 first-quarter earnings webcast. (Operator Instructions)
I'll now turn the conference over to Dave. Please go ahead.

David Patti

Thank you, Sarah, and good morning, everyone. Thank you for joining us for the Customers Bancorp's earnings webcast for Q1 2025. The presentation deck you will see during today's webcast has been posted on the investors web page of the bank's website at customersbank.com.
You can scroll to Q1 2025 results and click download presentation. You can also download a PDF of the full press release at the spot. Our investor presentation includes important details that we will walk through on this morning's webcast. I encourage you to download and use 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 risk 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 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's my pleasure to introduce Customers Bancorp chair Jay Sidhu. Jay.

Jay Sidhu

Thank you, Dave, and good morning ladies and gentlemen, and welcome to Customers Bancorp first quarter 2025 earnings call. Joining me this morning are President and CEO of the bank, Sam Sidhu, and Customer Bancorp CFO, Phil Watkins.
We are pleased with the way the company started the year with strong core performance from across the franchise. We will walk through those results in more detail.
First, I'd like to take this chance to acknowledge the hard work by our incredible team members on four fronts that we have made an absolute priority at the company.
First, the continued impressive transformation of our deposit franchise.
Second, strong loan growth from well diversified sources all reflecting superior credit quality.
Third, improved efficiency with execution of our operational excellence initiatives.
And last but not the least, Significantly above average net promoter scores, making us one of the top banks delivering superior service as viewed by our clients.
The industry is currently facing, as you all know, complex and evolving macroeconomic landscape. Recent developments have led to increased market volatility and uncertainty. We believe that customers' differentiated business model positions as well to navigate these challenges while they maintain flexible and responsive and remain responsive to changes in this changing external environment. And importantly, our customer centric mindset and commitment to service provided by our very experienced colleagues. We are very well positioned to serve our clients as the environment continues to evolve.
As you can see on slide 3, we have built an incredible franchise combining the best of a large bank's technology and product offering with the nimbleness and service level of a smaller institution.
That's a good segue for us to move to slide 4, where I'll cover why we believe we are building a company that you can almost call being built to last. What does it mean by building a bank that's built to last and be able to deal with the complexities and opportunities available in this rapidly changing environment.
For us, it comes down to maintaining an absolutely clear strategic direction. Having a deep understanding of our key drivers of financial performance. And always maintaining strong risk management and excellence in client service.
Our strategy is anchored by a single point of contact service model that drives organic growth one relationship at a time by developing deeper relationships with our clients. Our proven model is infused with our commitment to exceptional client service. That commitment is the cornerstone of our culture and the key to our success. One where our goal each day is to have our clients say, wow.
Our service model, driven by exceptional and knowledgeable service-oriented colleagues who are empowered to serve their clients' needs by delivering the entire bank to them. These relationships compound driving growth through repeat businesses and referrals. This unique model is a very important key differentiator.
Our culture is inspired by the entrepreneurs we serve. In this entrepreneurial mindset that allows bankers to develop innovative solutions to address some of our clients' most pressing challenges.
In addition to fostering loyalty and generating referrals, our entrepreneurial culture draws top talent to our organization.
In the past few years, we welcomed well over 100 client facing team members as well as leaders and team members in areas such as credit, risk management, marketing, technology, and operations. Sam will talk more about those later in the presentation.
We remain focused on providing the sophisticated products and services of a larger bank with the attention and service level of a private bank.
We believe our differentiated service model and our continuous monitoring of the key drivers of our financial performance. Continue to help us lead to success over the long term, as well as in the short term.
We've said many times before that we believe a strong and sticky core deposit and loan base results in sustainable growth in revenues, in EPS, and intangible book value.
We believe these are the key metrics for long term performance in bank stocks. Over the last five years we are proud to have delivered above average annual growth rate of 15% in revenue, 20% in core EPS and 16% in tangible book value.
This performance made us the number one bank of all banks between $20 billion and $100 billion in assets in earnings per share and tangible book value compounding.
We have made significant investments in our risk management infrastructure across people, processes and technology as we strive to meet and exceed our own and our shareholders' expectations.
We believe risk management can be a strength and competitive advantage for us, and with the investments we are making in risk management, this will give us the foundation and capabilities of a much larger complex organization.
Hence, taken as a whole, our strengths are, we have a clear strategic direction. We have attracted above average experienced talent. We have a customer centric culture that is very well viewed by our clients, and we will never take our eye off of this.
Next we have keen awareness of the external environment. Next, we are making our investments in new products and technology and continuously improving upon that. And we have our absolute commitment to sound risk management and excellence in service.
In our opinion, these trends have combined to enable us to deliver above average results that Sam will now share with you for the first quarter 2025. Sam.

Sam Sidhu

Thanks, Jay, and good morning everyone. It's great to have an opportunity today to walk you through a very strong quarter for Customer's Bank. Our business continued to perform well. Our core beat was driven by strong financial performance across the franchise.
I'll walk you through some of the key accomplishments in the quarter, which provide an excellent start to the year.
Our deposit transformation momentum continued as we once again saw significant low cost granular deposit growth strengthen the quality of our deposit franchise. This is evident with another 25 basis point reduction in our average cost of deposits in the quarter.
Combined with a strong performance last quarter, our average cost of deposits are down 64 basis points from their high in Q3 of 2024.
For the second quarter in a row, our commercial teams 1 cubiX had 9 figure non-interest bearing deposit growth, with over $250 million in this quarter alone.
We bucked the market trend, growing the loan portfolio at a 12% annualized pace. We were able to accomplish this while being selective on the credits we onboarded. This is because much of the growth came from our bankers bringing over their long-standing trusted relationships to Customer's Bank.
Our net interest margin increased by 2 basis points in the quarter, driven by interest expense reduction. We executed on our operational excellence initiative, surpassing the targets that we first outlined last year.
These savings initiatives will provide us the headroom for the investments we are making in support of our future growth. We also decided to undertake an additional balance sheet optimization process by identifying a portfolio of corporate and asset-backed securities for sale. This decision was driven by two main factors. One, our bankers achieved strong loan growth in a typically soft quarter, and we are reinvesting a majority of the cash generated from this sale into loans.
With this, we felt it was prudent to reduce the credit sensitive nature of our AFS portfolio to fund this growth. We feel even better about the balance sheet optimization decisions we made based on market developments recently, and at this point, you should not expect any additional securities reposition transactions.
Last but not least, we continue to maintain extremely strong metrics across capital, liquidity, and credit quality. Capital remains strong with CET1 above our internal targets at 11.7%. And our TCO ratio increased to 7.7%. Our coverage of immediately available liquidity to uninsured deposits is robust at 155%.
Our NPA ratio remains low at 26 basis points, well below peer averages, and reserves to NPLs are strong at 324%.
Advancing to slide 6, you'll see a GAAP financials, and then moving to slide 7, I'll run you through the core financial highlights for the quarter and full year.
As I mentioned, we had an incredibly strong performance across the board as we delivered core earnings per share of $1.54 in the quarter on net income of $50 million. This represented core ROCE and ROA of 11.7% and 97 basis points respectively. Credit metrics remain strong and these results represent a great start to the year and provide excellent momentum for the balance of 2025.
Now on slide 8, I'll cover our deposit transformation, which remains our top financial priority. We are once again thrilled by the work our team by our team to improve our deposit franchise, which continued to shine in the quarter. To recap some of the impressive results, total deposits increased to just under $19 billion.
The new teams brought on since mid-2023 continue to execute exceptionally and increase their deposit balances by about $400 million in the quarter.
The quality of these deposits help reduce our deposit costs as we remix these deposits at about a 200 basis point interest expense benefit. The new teams manage relationships with over $2.1 billion of granular, low cost relationship-based deposits, representing about 11% of our deposit base.
It's an incredible accomplishment in such a short time. The momentum on commercial deposit account opening is continuing, with total commercial accounts up about 14% annualized in the quarter and over 50% since the end of 2022.
This highlights the franchise enhancing and granular nature of the growth. Our non-interest bearing deposits remained at a healthy $5.6 billion or just under 30% of total deposits.
As I mentioned earlier, our traditional commercial banking franchise brought in over $250 million of non-interest bearing deposits. Over the last two quarters, that is now nearly $400 million of non-interest bearing deposit growth from the traditional commercial banking franchise alone.
The power of the deposit remix was in full effect as evidenced by our ability to reduce our average cost of deposits by another 25 basis points this quarter.
To date, this represents the 69% beta so far in the down cycle, in excess of the 60% deposit beta we had on the way up, demonstrating the power of the deposit remix tailwinds.
With our ability to continue to take market share, that the pipeline continues to rebuild. Even with this quarters strong deposit performance, our go forward low cost granular deposit pipeline has been replenished at again over $2 billion and growing, which I'll expand on in a minute.
With that, let's turn to slide 9 for a bit of a deeper dive on the incredible success of our team recruitment strategy. Core to our strategy is our ability to consistently attract top talent from across the industry. Our recruitment efforts over the last few years showcase this and have added tremendous value to our franchise.
As a reminder, we entered the venture banking space about three years ago with a small team lift out. Then in June of '23, just months after the banking crisis, we took that business to the next level, acquiring a loan portfolio from the FDIC and brought on 30 new bankers. Today, the business now has over $850 million in deposits, is essentially self-funded, and is a top five national competitor.
Over the past two years, we've made significant we have significantly expanded our presence in the market, achieving more than a five-fold increase in our deposit accounts and growing deposits by 3/4 of a billion dollars.
Nearly a year later, we recruited 10 highly experienced commercial banking teams with deep industry expertise and strong regional market knowledge.
These teams are fundamentally changing the profile of our commercial deposit base and enabling us to scale our existing relationship banking franchise.
In less than a year, these teams are now profitable and managing approximately $1.3 billion in deposits and have added 5,000 accounts to our franchise. We've already demonstrated the power of our team-based deposit acquisition strategy, and now we're building on that foundation to enter the next phase of franchise expansion.
One centered on growing what we've proven works exceptional client service driven by the entrepreneurial colleagues who are empowered to serve their clients' needs.
The market for top tier talent remains highly dynamic, and our reputation as a high performance tech forward institution is making customers bank a destination for relationship-driven commercial bankers.
The flywheel is turning. And our pipeline for deposit team recruitment is strong. We've already on boarded a new team this year, two additional teams have accepted offers to join and more to come.
Any new additions would add to the already significant $2 billion dollar low cost deposit pipeline that I mentioned previously.
Ultimately, this phase, this next phase in our deposit transformation is about intelligent expansion, not just bigger, but better driving long-term franchise value and delivering differentiated results.
Now let's turn to slide 10 to discuss how this how these team-driven deposits are powering our strong loan growth results. This was another exceptional quarter of loan growth for us. We again delivered over $600 million of HFI loan growth, which was well diversified across our platform. But what's more important is how that growth was achieved.
It was diversified, strategic, and aligned with our franchise building model. Top commercial verticals included the new commercial banking teams, commercial real estate, and healthcare with contributions from multiple other groups. Each vertical is focused on long-term client engagement and brings with it fulsome deposit led relationships. As an example, over the last three quarters, we've had nearly $500 million of self-funded net loan growth in the commercial real estate industry, which, as you can appreciate, is typically unheard of. And this comes with more than a 4% net spread between loans and deposits.
In a muted lending environment where many peers remain on the sidelines or retrenching, we are winning client relationships often from much larger institutions. While they may be new to customers bank, these clients are not new to our team members who often have decades-long relationships. Our ability to move decisively, offer certainty of execution, and deliver relationship banking through a single point of contact model is resonating in the market.
This growth is achieved with discipline, as a strong credit culture has always been a top priority for our institution. As many of we tend to focus on verticals with inherently low credit risk and where we have deep industry expertise. This is why we've continued to have excellent credit performance through the cycles.
Let me take this opportunity to build off of what Jay covered earlier. We've talked a lot about deposit remix recently.
But I don't want to overlook the loan transformation that has occurred at our company. Over the last five years, we reduced our concentrations in mor mortgage finance from 25% to 10%, multi-family from 20% to 15%, and consumer installment from 13% to 6%. At the same time, we lean into lower risk, relationship-based, specialized verticals like fund finance with the growth of our subscription line business, regional CNI, and venture banking.
Our pipeline and backlog heading into Q2 remains robust, and we continue to prioritize capital efficient deposit accretive lending that strengthens client engagement and enhances the overall franchise.
With that, I'll turn the call over to Phil.

Phil Watkins

Thanks, Sam, and good morning everyone. Turning to slide 11, I'd like to walk through our net interest, income, and margin performance, which continue to reflect the strength of our balance sheet strategy and disciplined execution.
In Q1, we delivered $167.4 million in net interest income, and our net interest margin expanded to 3.13%, up to basis points sequentially. This marks our second consecutive quarter of margin expansion. The primary driver of this improvement was a significant reduction in interest expense, which was lowered by $14.6 million quarter over quarter. This was achieved through deliberate and proactive deposit remixing. This helped offset a decline in loan yields from lower benchmark rates and demonstrates that the quality of our funding base is improving in ways that support earnings durability.
Though the rate trajectory remains uncertain, the value-added opportunities we have on both sides of the balance sheet provide the foundation for net interest income expansion across a range of rate scenarios.
On slide 12, we'll cover non-interest expenses. We are incredibly proud of our performance on efficiency this quarter. In Q1, our core non-interest expense declined 5% sequentially to $103 million. That decline came even as we continue to invest in technology, talent, and our risk management infrastructure.
Our core efficiency ratio improved to 52.7% with non-interest expense to average assets of 1.87%, placing us at the top of banks in our peer group.
Moving to slide 13, I'll recap the progress of our operational excellence initiatives, which is how we achieve those strong results.
We previously outlined a target of $20 million of annual efficiency through a combination of fee income growth and expense savings to reinvest in our business. I'm pleased to say that we've outperformed that target. As of Q1, we've realized $30 million in annualized impact exceeding our original $20 million dollar target.
This includes approximately $22 million in cost savings and $8 million in new recurring fee income, primarily through treasury management fees enabled by our proprietary cubiX platform.
I would note that this does not include future professional services expense reductions we've discussed previously. These results reflect structural, scalable improvements across the organization. We've consolidated technology platforms, rationalized vendor spend and made strategic decisions around our operations. At the same time, we've strengthened revenue generation through enhanced payments, treasury, and commercial deposit capabilities. As a result, we expect strong growth in core non-interest income this year compared to last year.
Importantly, these savings give us tremendous headroom to reinvest in the franchise, targeting high impact areas such as risk management and technology, in addition to the team recruitment opportunities Sam outlined. This ensures we continue building a platform that is not only efficient, but differentiated and future ready.
Looking ahead, we continue to see opportunity to deepen this impact as we scale and drive operating leverage. Our commitment remains clear to grow responsibly, invest strategically and deliver long-term value to shareholders.
On slide 14, you can see the tangible book value per share ended the quarter at $54.74 up more than $5.50 year over year. This continues our track record of double-digit annual growth.
For us, tangible book value growth is a key long-term performance indicator. Over the last five years, we've more than doubled TBB per share, even while navigating a global pandemic, and inflationary rate shock and a regional banking crisis, and we're committed to continuing that trajectory.
With that, I'll move to slide 15. Our capital ratios across the board remain robust and provide us with substantial flexibility for organic growth opportunities. Our TCE ratio increased by about 10 basis points in the quarter, even with growth in the size of our balance sheet and the impact of the securities portfolio repositioning.
At 11.7%, we remain in excess of our CET1 target while utilizing some risk-based capital for loan growth in the quarter.
On slide 16, we continue to be pleased overall with our credit performance. Non-performing assets remained low at 26 basis points of total assets, and reserves to NPLs stayed strong at 324%.
Total net charge-offs were in line with the average over the previous four quarters, and our commercial and consumer portfolios are both performing well. While we continue to closely monitor any emerging risks, we feel the portfolio is well positioned.
With that, I'll pass the call back over to Sam before we open up the line for Q&A.

Sam Sidhu

Thanks for that, Phil. As we look ahead to the rest of 2025, though there is increased market volatility, we're excited about our positioning and confident in our ability to navigate the current environment.
We're reaffirming our full year loan growth guidance with a bias towards the higher end of the range given our outsized performance in the first quarter. Again, because this is in large part to, we are on board in our bankers' legacy relationships. We are able to achieve this while remaining disciplined in our credit selection and underwriting.
On the funding side, our deposit growth is driven by the expansion of the commercial franchise led by the new commercial banking teams and deepening of relationships with our within our client base.
Net interest income is projected to grow between 3% to 7% year over year, and as a reminder, we had a larger accretion income in 2024. And so this equates to 6% to 10% on a normalized basis.
Our deposit remixing efforts and strong loan growth position as well to drive NII expansion regardless of the rate environment. On the back of the success and the outperformance of our operational excellence initiatives, we are on track to achieve our core efficiency ratio target in the low to mid-50s for the full year.
And we remain committed to operating with higher levels of capital. With the clarity of strategy and strong execution, our forward outlook reflects both optimism and discipline. As we wrap up today's presentation on slide 18, I want to take a moment to recap what the first quarter demonstrated, not just in terms of financial results, but in terms of strategic clarity and execution.
We delivered on a strong performance across the franchise. On funding, we had a 25 basis point reduction in deposit costs driven by our successful remixing into lower cost deposits. On the loan side, we had 12% annualized loan growth achieved through disciplined, relationship-based lending across diversified verticals.
Our net interest margin expanded for the second consecutive quarter, signaling improved funding dynamics and continued momentum on both sides of the balance sheet, and we maintained strong credit metrics. What stands out is not what we accomplished, but how we did it.
Our client centric culture, disciplined risk framework, and high performing teams continue to drive differentiated results. In closing, we're building on a strong foundation, one defined by disciplined execution, strategic growth, and a relentless focus on our clients. With the right talent, technology, and operating model in place, we're confident in our ability to sustain this momentum. Our strategy is clear. The team is aligned, and we remain committed to delivering long-term value for our clients, communities, and shareholders.
With that, we'll open up the line for questions.

Question and Answer Session

Operator

(Operator Instructions)
Frank Schiraldi, Piper Sandler.

Frank Schiraldi

Good morning. Just in terms of the new banking teams, the deposits coming over, Sam, sounds like that's still 25% of that is not interest bearing, and that's still kind of the expectation going forward and just if that's the case, just curious, the offset in the quarter in terms of no interest bearing is that's just, continued general pressure to move some funds and get some returns overall.

Sam Sidhu

Hey, good morning, Frank. Thanks so much, for the question. So, in terms of the new teams, you're right, it's at least 25%. It's actually generally closer to 30%, compensating, non-interest bearing deposits. And, yes, we saw a couple $100 million of increase, from our commercial teams.
We also had, about $300 million in lower cubiX balances and that's sort of the netting out and that's why it's slightly down for the quarter, but really from an operating perspective, if you look at our average non-in interest bearing deposit balances, they were up significantly quarter over quarter.

Frank Schiraldi

Okay, and then, just as a -- just switching gears as a follow up just in terms of the restructuring the quarter. Is there any, does this. Kind of do it in terms of, yeah, and you might have mentioned I know you talked a little bit about the fact that you don't expect any additional restructuring but does this kind of do it for any sort of credit sensitive instrument within the investment securities book at this point?

Phil Watkins

Yeah, hey, Frank, good morning. Yes, as Sam said, we don't -- we're, we don't see anything else that we would do on the restructuring front and just a little bit more detail, we provided some detail in the back, but as you saw about 45% were corporates, which takes that down in about half, with the remaining predominantly investment grade. 40% of it was ABS and that was really CLO and non-agency CMBS and so with that essentially all of our CLOs that takes down essentially all of our CLOs and all the remaining CMBS is agency backed, and then the CMOs were unrated privates and all the remaining is AAA.

Frank Schiraldi

Okay. And just trying to think about it from others books, was there any, anything specific you would call out in the quarter in terms of credit impairment, within that stuff in terms of the loss you guys took to move that book?

Sam Sidhu

Yeah, Frank. As Phil mentioned, it was really sort of a derisking exercise, for to support our loan growth, and I think that's really the important thing. If you actually look at the last quarter, while we call these securities, repositioning in Q4, we use majority for loan growth, same thing here. So it's actually, I think balance sheet optimization is a much better way, to consider this.
So, we thought in this environment, especially with what we saw towards the end of the of the first quarter, we wanted to, focus on our deposit and loan growth, and that's where we would want to, have to focus on the asset side of the balance sheet.

Frank Schiraldi

Okay. All right, fair enough. Thank you.

Operator

David Bishop, Hovde Group.

David Bishop

Yeah, good morning, gentlemen. I'm curious. We've seen some good growth here, lately, especially on the commercial real estate side. Remind us of the capacity to grow, commercial real estate lending both on the non-owner owner occupied in the multi-family space. You still plenty of capital room, right.

Sam Sidhu

That's right, Dave. So, I think we in our book last quarter and the quarter before we talked about being under 200%, 190% plus or minus, and that, quarter over quarter, despite our loan growth typically stays flattish. So a ton of capacity compared to peers that are in sort of the 300% to 500% range, in our home markets. And I think what's really interesting is, touching on the fact that these are self-funded with real estate. Deposits, is really the interesting part, and I said, over 4%, I think that, sitting where we are today, it's 4.4%, is what we've been able to achieve over the past year.

David Bishop

Got it. And then maybe on the income statement, you noted that the traction and some of the treasury management products, is this a pretty good run rate for that, I assume the treasury management visa and that other income, do you think you can grow that off this $33 million plus run rate and from a tech spend perspective, is this a good run rate for the sort of technology expenses or will it be more investment?

Sam Sidhu

Yeah, hey Dave, so on the starting with the treasury fee income side, we're up slightly from where we were, on, the new rollout quarter over quarter, a couple $100,000. I think we feel like we're in a pretty good run, right, to answer your question. I think, I'd caveat that by just saying, these are, the successes of what we laid out in the middle of 2022 and sort of building our treasury management platform. Building our cubiX platform and then rolling it out to our larger corporate clients and then seeing, the results of that the lending to which actually speaks to the benefit the customers are achieving.
So I think we're sitting in a pretty good run rate today on the technology spend associated with these fees, absolutely it's a pretty much behind us. So I think that's I think that's the nature of where your question was going from a from an ROI perspective.

David Bishop

Got it. And final question, curious you know saw the continued decline in the cost of deposits. It was 2.82%. Do you have the spot, cost at the end of the quarter? Thanks, and I'll have them back in the queue.

Sam Sidhu

Yeah, it was at 2.82%, so spots the same as the average.

Operator

Steve Moss, Raymond James.

Steve Moss

Good morning. But in terms of the cubiX deposits here, it sounds like I think you said $300 million down quarter over quarter, Sam just kind of wondering, what you're thinking for, those balances if you're going to grow them over time here and just maybe just talk a little about, where you see the opportunity going forward.

Sam Sidhu

Yeah, sure. So they were at 33%. I think what's important is the average was also 33%, and again these are payments deposits, and as a reminder they're held entirely 100% in cash. So as we think about the spot versus average, they typically, have been oscillating between a 10%, band plus or minus. And we continue to support our clients, how they need us, when they need us. We're not necessarily looking to directly expand these, deposits, we have, the entire institutional, network base, of all of our digital asset customers. We have all the operating transactional accounts that the industry really operates on.
So, if our customers need additional, deposit headroom, related to sort of their operating transactional accounts, we will support that. Having said that, we are holding these all in cash and sitting where we are today, it's not necessarily something we're looking to, lean into and to increase deposits because this is really payments flow. And I would just contextualize that by saying that one of the things that I think that is underappreciated, number one is that we've built this proprietary technology platform that that the industry relies on. The second is really is that we hold about 1%, maybe slightly over 1%. Of the liquidity in the digital asset industry and I think that that's also something that's a really important call out is that a lot of the deposits are actually held at the large banks and by asset managers. So we hold the operating transactional accounts and as you can appreciate there's yield that's been received, on those access corporate, or reserve accounts.

Steve Moss

Great, I appreciate all the color there. And then in terms of the loan growth front, I guess, the guide strikes me as conservative here given this quarter, I, I'm assuming you just kind of a little bit uncertainty the Outlook makes you reluctant to take it up, but just kind of curious as to how you think about the pipeline here and the pull through on that pipeline

Sam Sidhu

Yes, absolutely, Steve, I think if you had asked us, on April 2, which is when we all sat down, it was a Wednesday, I believe. Monday was the 31. We sat down on Wednesday, April 2. We talked a little bit about how the quarter, the second quarter was, looking and we had sort of a soft close of the books. We had a very different outlook than we did, just a couple hours later, that afternoon.
So yes, there is market volatility. Having said that, I think what's important is that backlog is what I would focus on, as opposed to pipelines remain strong. That's, I think generally consistent from the macro sentiment we've heard across the industry, but backlog is also strong and stronger than, what we would have anticipated, especially on the heels of, the first quarter.
I think what's really important is we talked about sort of the diversification over the last couple of quarters, we've been sharing, a much more granular breakout of the loan growth that's coming by vertical, and then you also you sort of contextualize against that against the portfolio remix that we've had over the last five years. I think we're really proud of the efforts that we put together, and it is a unique differentiated model to not just be bringing in organic, commercial.
Low cost commercial deposits, but then also sort of com complementing that side of the balance sheets remakes and growth with the ability to also deliver franchise enhancing granular, loan growth. We're talking single digit millions type loan growth per average borrower here.

Steve Moss

Right, okay, appreciate that color and then maybe just, one last one for me. I assume you probably said this in your prepared remarks and I missed it, but just where's the deposit pipeline for the new, the recent hires and you know just kind of where is the blended rate these days.

Sam Sidhu

Yeah, so, the pipeline is still over $2 billion despite the, I think we called out the $400 million just from the new teams, that came in, approximately in the first quarter. It's again at about 2.5%. It's in the sort of high 20s, around, to up to 30% non-interest bearing. And it's granular, we continue to be opening up more accounts, waiting for those to fund so we sort of have, continue to have a parking lot of opened accounts waiting to be funded, a number of accounts where applications are out, and then finally I think also importantly, which you may have missed, but just to put a little bit of a bow on it is that we have a couple teams already. Either on boarded or signed up, and advanced negotiations with about, half a dozen or so, other deposit focused, low cost deposit focused commercial banking teams either in expanding into our existing, footprint and in some cases also thinking about sort of unique specialty, verticals as well that would be interesting and adjacent products for Customers Bank.

Steve Moss

Alright, great, really appreciate the color. I'll step back.

Operator

Kelly Motta, KBW.

Kelly Motta

Hey, good morning, thanks for the question. I would love to follow up again on the deposit pipeline here. Obviously the core deposit growth has been really strong and a testament to your new teams.
And you just continue to replenish the pipeline in a way that almost has made it look easy. So I'm wondering, is there a certain point, being a year with the 10 teams having brought in where the overall pipeline and so-called low hanging fruit might start to diminish? I'm sure it's hand to hand combat, regardless, but just wondering how we should start thinking about that. In terms of the outlook here.

Sam Sidhu

Yeah, thanks, Kelly. I wish I could say it was easy and for those, 152 members that have joined us in the last year or two and the additional 150 or so on our sales teams that have, been in hand to hand combat for the past couple of years, we commend your efforts such that, our external stakeholders feel that way. I think, on the, I'll start first on the new teams, the newest teams we talked about venture banking that we expect that to be a 2:1, deposit to loan, franchise over time.
So I think that speaks a little bit to just the nature of the of continuing to build and harvest first deposit only customers, then, credit customers that are typically net depositors and then, finally a little bit in the later stage, sort of net borrowers, and that's sort of how we think about the diversification. That business. We also talked about the new commercial teams that were on board last year and the size of their books, today is less than 20% of where they were when they were on boarded. And even if all of those direct customers don't come back on, they will replenish those books, given the high performance nature of these teams, the markets in which they serve, and we expected that, expect that to happen, call it over about a three year period, plus or minus, so that hopefully gives you some color there.
And then, like I mentioned, we're -- we've established ourselves as a top recruiter of talent, I think our employees and team members that join us that. Find a platform and a franchise that has a single point of contact service model. It has a ton of products and services to support some of your small customers, your medium sized customers, your large customer. Needs, and then you complement that with an incentive compensation model, that is unique in the industry, and you look at sort of banks of the scale that we are at, we're really the largest most successful, regional bank and sort of recruiting these team members, in the markets that we serve.
So I think that at the end of the day, we've had an opportunity. For many teams that have joined other institutions to have, first look or a last look, and we're really focused on the folks that are going to be the most decretive to adjacency in terms of products and services, adjacency in terms of geographies, and continuing to focus on something that is complementary to what we already have, and continue to build these pipelines and continue to transform and remix and also grow, our overall deposit franchise.

Kelly Motta

Great, that's helpful and maybe flipping to the other side of the balance sheet, with loans you've grown at a double digit pace now for the past four quarters, hoping to get a refresh as to, the average size of a loan and I know you have good diversification, so I'm hoping to get a refresh on kind of where that stands as well as where CNI utilization rates are currently and how that compares to recent history. Thank you.

Sam Sidhu

Sure, absolutely. So I'll give you some ranges. I don't have it for sort of every vertical, but I think predominantly the vast majority of our, loan growth has been coming from, team members who are new to Customers Bank but relationships that are long standing and in some cases decades long.
So sort of our new commercial banking teams have an average loan size of about $6 million. Our, venture team is also sort of in that, $6 million to $10 million dollar range. The CRE side, we've actually, closer to about $7.5 million on the CRE side, so extremely, granular, across the board. And again, these are the major loan categories that we've had, especially over the last two quarters.

Phil Watkins

Yeah, and Kelly, I can, good morning, I can jump in on the utilization. Yeah, I would say, again it obviously varies a bit by business line as Sam was saying. So, as an example, I would say in our traditional CNI we're not seeing anything sort of unusual from a line perspective, certain of the verticals actually like in ours. Fund finance business, sort of lender financing capital calls probably seeing lower than normal utilization and also with the strong CLO market we actually saw, I think as you saw on the materials some increased payoffs and so that's a, just a sign because our typical takeout there is often when they would move to a CLO. So it varies a bit by vertical but nothing out of the ordinary there.

Kelly Motta

Great. Last question for me if I can just slip it in, is, on the cubiX deposits you've you framed it more as like a payments, a payment place so I'm hoping to get an update as to the con the fee income contribution there and if that's fully realized or if there's other tweaks you're making that could, drive those revenues higher. Thanks a lot.

Sam Sidhu

Yeah, absolutely, Kelly, so we had, I think the fourth quarter, we'd mentioned $1.9 million on a sort of a full quarter basis in the first quarter it was $2.1 million. That's sort of that couple $100,000 of increase that I was sort of referring to earlier.
So we feel we're at a pretty good plus or minus, $8 million run rate. We'd sort of guided to a little bit lower last quarter, with a bit of conservatism. It's sort of [5] plus, but I think we feel pretty good about the ramp up there. Again, we're, we are charging traditional commercial banking, fees here, nothing that, is out of the ordinary and our customers have been very receptive.

Kelly Motta

Great. Thank you so much. I will step back.

Operator

Matthew Breese, Stephens.

Matthew Breese

Good morning. I was hoping to stay on cubiX, how much of those deposits reside within non-interest bearing? And do you think there's any risk to that just particularly given the openness of the regulators and inviting banks back into the industry? Do you see any risk of transition of cubiX into, interest bearing, deposits, we also know that from other banks in the industry, they tended to command higher betas at some houses. Thanks.

Sam Sidhu

Sure, absolutely, Matt. So the answer again just to be very consistent, is 100% of these deposits are non-interest bearing, and that's really that, speaks to the differentiation, I would sort of venture that we have, the vast majority of all non-yielding deposits, that exist in sort of the US banking, industry.
So, to your point about regulatory clarity and, etc. I mean, this certainty is really going to bring consistency. To the space it's going to bring in new institutional investors, that's going to increase interest in the asset class more banks, will be interested. Having said that, the banks don't have sort of the network, the technology, the industry knowledge, the know-how, the connectivity, the customer service, the support, the risk management framework, the transaction monitoring, that we have.
Banks are expected to enter and we think it very much legitimizes the industry and further strengthens the controls around the industry, and with that comes greater interest, with that comes a bigger pie and so we will, expect to have an actually welcome. More banks in the industry. Having said that, we're going to continue to be the primary transactional operating account, as they enter the pie will also be growing. And again, like I said earlier, I think the really important thing is we have about 1% of the liquidity.

Matthew Breese

Got it. And are there any updates, historically you've had about a 15% cap. Has that been updated in any ways or is there a cap in place or is it still remain in flux?

Sam Sidhu

Yes, good question. Matt, so $3.3 billion, sitting where we are at [$331 million] is about 17%, so above the old cap. When we set that initial cap back in February of 23, we didn't have a policy to hold all these deposits in cash, but since we have since that time been holding all of these deposits in cash, we thought it was prudent to make sure we're there to support our customers and no longer have that liquidity risk concentration cap.

Matthew Breese

Okay. And then on the security repositioning. Did, any of what was sold, because we've talked a little bit about the credit risk here. Did any of what was sold include the consumer installment loans that were securitized, I believe back in 2023.
And if not, could you just remind us how much of the securities book are the securitized installment loans? I know they had a shorter license duration.

Sam Sidhu

Yes, so they do not exist. This has nothing to do with anything on the consumer side. Those are actually sitting in our HTM portfolio. It was over a $1billion plus or minus, at the various stages, and it's down to a couple $100 million, I think less than $400 million today, and performing incredibly well with credit enhancement and no issues.

Matthew Breese

Understood. So what was the, I think you had mentioned CLOs, what was the underlying nature of the collateral that was sold.

Phil Watkins

Yeah, hey Matt, as outlined, about 45% of it was corporates, 40% of it the ABS was CLOs and non-agency CMBS, and then there was about a 15% tranche that was unrated privates. And again, as I mentioned, the, on that tranche all everything remaining is AAA, essentially takes down the CLOs and the remaining CMBS is agency backed.

Matthew Breese

Got it, but underneath the non-agency CMBS was it office or multi-family was, what was it driving the credit mark?

Sam Sidhu

Well, Matt, to be clear, these are AOCI marks which include interest rate breaks marks. They include credit spreads and credit marks. So it's a broad base, I don't have the specific, breakout in front of me. I don't know if you do, Phil also says he doesn't have the specifics on that, but really I think the important here is what's remaining incorporates is predominantly investment grade. No more real, CLOs essentially all sold, and on the CMBS side what we have is now all agency backed Jenny May.
And what and on the CMO side, what's, what we exited was unrated privates and what's remaining is AAA.

Matthew Breese

Okay, understood. I'll leave that there. The last question I had is just, we're now just tripping over the two year, mile marker post March Madness of '23.
Does that mile marker represent any sort of significant, milestone in terms of expiration of employee lockup agreements that'll provide additional hiring opportunities, is anything kind of broken loose just because of timing. Thank you.

Sam Sidhu

Go that. So the short answer is, yes, the long answer is actually interesting for customers banks. So yes, there are about two year sort of, agreements for, some of the institutions that were majorly impacted, in March, which is sometime in this quarter or early next quarter. Having said that, I think that the opportunity we had last year to really pick off what we felt were the top 10 teams that were, available to us, we had an opportunity, as you can probably appreciate, to evaluate significantly more at that time and since then. And like I said, we've, we really do have an opportunity to have sort of a first look and last look.
So yes, we may have additional, team or two, that is incredibly high quality that hasn't necessarily moved around because moving around creates disruption in the client experience and service of a different logo every year. So what's, but what's really important about the bank is that the vast majority of the teams that we're talking to are not from the types of banks that you're referring to that have backups.
They're actually coming from folks, the high quality teams, market Presidents, state or geographic leaders are reaching. Out, to myself, our Chief Banking Officer, and many of our senior executives, and wanting to join Customer Bank, want to join a high performing team, want to, sort of the depth of the products and services, the technology and the incentive compensation model that we offer.

Matthew Breese

Got it. I appreciate all that clarity. I'll leave it there. Thank you.

Operator

Hal Goestch, B. Riley Securities.

Hal Goestch

Hey, thank you. And my question is on the teams and maybe the pipeline of new professionals you can add like, obviously, when you hire experienced teams, they're going to bring over existing clients and that's an immediate impact maybe in the first 12 to 18 months, but like, could you show us your expectations on what those teams that are highly confident, kind of bring in years two, three, and four, are they still building their book of business and is that an expectation of their agreement to come over, tell us a little bit more about this, how this works and the runway it gives you when you hire a team, not just in year one but beyond. Thanks.

Sam Sidhu

Sure, absolutely, thanks for the question, Hal. So, we, because of some of the market, volatility and disruption and, bringing on Teams en masse, I think we're, a little bit, spoiled by our, success in a short period of time just because customers were a lot more receptive to moving, breaking even in less than a year, is really quite incredible accomplishment.
Especially given the scale of the investment that we made last year. So as I mentioned earlier, we expect these teams will continue at a similar type of pace. They're about a, $100 million plus or minus on an average month over the course of the year. There are obviously some typical months that a little slower, like a January or in April, as an example, but, at least at that type of level, then we have sort of venture banking continuing to contribute, over time, we expect sort of maturity to happen over a three to five year period. \
And then that sort of becomes more sort of maintaining, and servicing your overall, client base, and then pivoting to as we look at new teams, having said sort of that related to the success that we had, over the last year, we're still looking at about a year, or less, break even, on the teams that we're looking to bring in. And, while you may not have sort of this, the big pops, that we've had over the past year, you'll continue to have about that three year plus or minus, of rebuilding a portfolio of about the size that, you as a team leader and you as a team member used to sort of maintain and service at your prior institution, even if the constitution of that portfolio may be only 60%, 70% the same as it used to be.

Hal Goestch

If I could ask one follow up, I didn't want to have to bring up the T word, but like every conference call I'm on and payments and fintech and banking is how are how are terrorists impacting, I'm pleased to see that the word wasn't even really mentioned. And then I look at your business lines and commercial and venture banking fund finance, healthcare.
Would you rate your exposure to tariffs is basically mostly just broad economically or secondary or tertiary. You really don't have the, I don't know, manufacturing clients or might be tied up and locked down and uncertain about production schedules that might require lending right now.
Could you give us your thoughts on your direct exposure then and then maybe your thoughts on indirect exposure to tariffs.

Sam Sidhu

Yeah, Hal, absolutely, I think that the short answer is absolutely what you described as this de minimis, direct exposure, to tariffs and, we have very, low, thankfully, sort of balances and verticals that would have, exposure in a very short term basis. But as you rightfully said, sort of on a medium to longer term basis, there are, credit sensitive portions of any bank's portfolio that could have, potential sort of de minimis, exposure in a mild, type recession.
And I really think that while, the R word is continuing, to be used at the end of the day, this is sort of a policy driven, commercially, sorry, politically, sort of policy driven macroeconomic type. Effort, that, volatility can be created in a number of weeks. It can also be rolled back in a number of weeks, and it would be a shame, for anything, beyond.
A perception of a mile to even be on the table, but our hope is that, our administration and policymakers, have, the things, in under control, and we expect to be some stability with clarity at the end of the day, market volatility comes from a lack of clarity, and, we are seeing the beginnings of, at least confidence and clarity and hopefully clarity will come soon.

Hal Goestch

I appreciate you for that. Thank you.

Operator

This concludes the question-and-answer session. I'll turn the call to President and CEO Sam Sidhu for closing remarks.

Sam Sidhu

Thank you everyone for your continued interest in and support of Customers Bancorp. We appreciate you being a part of the incredible franchise we're building and we look forward to speaking to you next quarter.
Thank you and have a great day and weekend.

Operator

This concludes today's conference call. Thank you for joining. You may now disconnect.