Customers Bancorp, Inc

Hello everyone. Thank you for joining us and welcome to Customers Bancorp Inc. 2026 Q1 Earnings Webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Phil Watkins, Executive Vice President, Head of Corporate Development and Investor Relations. Please, go ahead.

Thank you, Miriam, and good morning, everyone. The presentation you will see during today's webcast has been posted on the Investors webpage of the bank's website at www.customersbank.com. You can scroll to first quarter 2026 results and click download presentation. You can also download a PDF of the full press release at this spot. Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking statements under applicable securities laws. These forward-looking statements are subject to change and involve 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 those 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 most recent Form 10-K and our current reports on Form 8-K for a more detailed description of the assumptions and risk factors related to our business. Copies of these filings may be obtained from the SEC or by visiting the Investors Relations section of our website. We also reference non-GAAP financial measures, so it's important to review our GAAP results in the presentation and the reconciliations in the appendix. At this time, it is my pleasure to introduce Customers Bank Corp CEO, Sam Sidhu.

Thanks, Phil. Good morning, everyone, and welcome to Customers Bank Corp's first quarter 2026 earnings call. I'm joined this morning by our Chief Financial Officer, Mark McCollum. Before we get into the results, I want to take a moment to share what makes this call meaningful to me. While I've been CEO of Customers Bank since 2021, January 1st marked my first day as CEO of Customers Bank Corp. This was the result of a careful multi-year succession process that Jay, our board and the leadership team built with intentionality. Jay is now our executive chairman and having his guidance and engagement during this transition has been invaluable. I couldn't be more grateful for what he built and for the confidence he and the board have placed in me. And I wanna be clear, the strategy, the culture and the principles that got us here are not changing. Entrepreneurial urgency, a differentiated approach centered on service and technology, an obsession with earning the right to serve each client every day. Those don't change. The clearest proof that this model is working is our net promoter score. It came in at 81 this year, up eight points from last year and nearly twice the banking industry average of 41. That puts us in the company of the most admired service brands across any sector, not just banking. It's the signal we look at very closely because it tells us whether the flywheel is humming. Great service drives retention and referrals, which drives financial performance, which attracts better teams, which makes the service even better. That cycle is self-reinforcing. And right now it's not only working, it's accelerating. Now I'll take you through some highlights from the first quarter and our priorities, then hand it over to Mark for the financial details. Turning to slide four, Q1 2026 was another clear demonstration of a model that is firing on all cylinders. I'll walk you through some financial highlights. Total deposits grew 16% and total loans grew 15% on an annualized basis in the quarter. Total non-interest bearing balances grew to a record $6.7 billion driven by our new teams. We delivered significant positive operating leverage with year over year revenue growth, far outpacing expense growth. Tangible book value per share grew 16% year over year, continuing a multi-year track record of 15% plus growth, which is among the very top in the industry. And we accomplished all of this while maintaining strong credit performance and ample liquidity. On slide five, you can see our top priorities. One of the questions I get asked most often since becoming CEO is what's changed? My answer is simple. The last several years were about building the team, aligning around a shared direction and executing on foundational investments, including in our tech, payments and risk management infrastructure. That work is largely complete and hopefully that shows. Now, I am able to focus my time less on the next two to three quarters and more on building the platform for performance over the next two to three years. This shift is what shapes our four priorities for 2026. First, AI and automation. We are moving fast and with real conviction toward a goal of workflow orchestration across the company. Second, payments and the Qubics ecosystem. We built Cubix from scratch, and now by transaction volume, it is one of the largest commercial payments platforms in the country. Third, organic balance sheet growth and talent recruitment. Our past hiring supports our guidance of growth in loans and deposits that is well ahead of the industry. And our current team onboarding and recruitment pipeline sets up for continued growth in 2027 and beyond. And fourth, risk management excellence. This is not just a compliance posture. It is a competitive one. The regulatory environment around payments and digital assets is becoming more constructive, which plays directly to our existing strengths and widens our moat. We are appreciative of the increasingly collaborative relationship with our regulatory stakeholders and intend to be a bank that regulators view as a model for risk management. We believe that risk management excellence is becoming an asset for us. Turning to slide six on AI. I want to be direct. We are moving aggressively to operationalize AI across customers' bank. We believe AI represents the biggest opportunity in a generation for a bank of our size and culture. We are small enough to move fast and large enough to invest with intent, which is a rare combination. Most organizations are focused on productivity gains, which we are too and will achieve. But we're most excited about the revenue generation and risk reduction opportunities from these tools. I am personally leading our AI transformation effort because I believe the bank in our tier that wins on AI will have compounding benefits and structural advantages that will be very difficult to match. To walk you through the evolution, in 2023, we entered into initial enterprise partnerships with companies like OpenAI and Microsoft. In 2024, we established a foundation by implementing AI governance and beginning data transformation efforts. In 2025, we moved into production. We trained 100% of our team members. We piloted targeted use cases, which are already delivering measurable results. AI began first testing, then writing code, and we started building agents. Now in 2026, we are training our team members to be builders and managers of agents, and we are seeking to automate end-to-end workflows across our operating platform. The three key initial focus areas in the commercial bank are loan onboarding with a focus on credit underwriting, deposit customer onboarding, and payments orchestration. I'm thrilled to say that we're already seeing tangible results. From an adoption standpoint, 75% of our team members have AI licenses. More than 500 agents and custom GPTs have been built by our workforce, approximately two dozen of those in the last two weeks alone. We have saved more than 28,000 hours through AI-enabled workflows, unlocking the equivalent of almost 15 FTEs. This strategic change should allow us to scale our operations far faster than we would need to scale our workforce. We already have best-in-class efficiency, as you can see from our non-interest expense to average asset ratio. Even so, we would expect that as we grow, our asset, revenue, and earnings per employee ratios would increase meaningfully. we should be able to provide medium-term targets on those in the coming quarters. At the same time, the value additive and strategic work conducted by our team members would go up immensely. To accomplish this, we are utilizing a broad range of tools. This includes strategic partnerships like one we just signed this week with a large frontier model provider that we are very excited about. We'll have more details to share on that soon, but it shows that leaders in the industry view Customers Bank as being on the forefront of utilization of this technology and assisting them in advancing adoption in the regional bank space. This partnership will initially be focused on the three priorities I outlined earlier. loans, deposits, and payments. We are only at the beginning of realizing the benefits from this technology, and we intend to be a leader in unlocking it. Moving to slide seven, we believe payments functionality is the future of banking, and Cubix is our platform for capturing that future. At its core, Cubix gives clients seamless access to all of our payments rails. from traditional wire and ACH to RTP FedNow and our proprietary 24-7, 365 intrabank instant payments platform. We built it in-house, and today it is one of the largest commercial payments platforms in the country by transaction volume. One item worth highlighting is that even though the digital asset industry saw meaningful declines in volume and prices over the last couple of quarters, our balances were relatively stable. Importantly, we processed $500 billion in transaction activity for our digital asset clients in the first quarter, a similar pace to 2025 despite the perceived market headwinds. This reflects the mission-critical nature of the service we provide and the quality of the relationships we have built with our customers. As we previously stated, we are focused on deepening that engagement through enhanced product offerings that drive increased wallet share and stickiness. In 2026, our priority is to broaden the Qubics ecosystem beyond its digital asset beginnings. We have started enabling and see significant opportunity in mortgage finance and real estate transaction settlement, where the demand for real time bank grade payments infrastructure is growing. While the mortgage finance deposits represent balances from existing clients today, we are in active discussions with networks of prospective clients in the real estate industry. and we believe they will be meaningful drivers of non-interest-bearing deposit growth in 2026. To help make it real, our 90-day pipeline for Qubics customers from new industries is greater than the slight decline in average digital asset balances we saw in the first quarter. Additionally, we see strong opportunities to partner with large institutions in traditional capital markets as exchanges move to 23.5 and eventually 24.7. This could drive both deposits and fee income opportunities for us with even further diversification. While Cubix is highly profitable serving the digital asset industry, when we achieve broader industry adoption, we will get meaningful operating leverage and even more durable earnings. We believe we are still in the early innings of unlocking the full franchise value of this technology. Moving to slide eight. Banks by nature grow at roughly the pace of the broader economy. There are only two ways to grow faster, acquire it or earn it. We earn it through our people, our platform, and our culture. We are one of the top organic growth stories in the industry. We have not relied on acquisitions to build this franchise and have still delivered disciplined growth at rates that far surpass our peers. What we have done is continuously recruited top talent, giving them access to a strong balance sheet, a sophisticated product suite, best in class technology. And importantly, they gain a culture that empowers them to do more for their clients than they could elsewhere. I'm thrilled to say that year to date, we have already had 20 bankers join us or sign offer letters. And we're in active discussions with half a dozen other team leaders. These bankers represent a mix of geographic CNI and national specialized verticals. This is not a new playbook. It is the same strategy that has driven our long-term outperformance and that has produced results at the very top of our peer group. We are the number one compounder of core EPS and a top compounder of tangible book value and revenue among peers over the last six years. They are the clearest long-term indicators of franchise value creation and share price performance. Before I hand the call over to Mark, I want to take a moment to welcome two new equity analysts joining our story. We're pleased to have Tony Elion from JP Morgan and Manuel Navas from Piper Sandler covering customers bank. Welcome to both of you. We look forward to building strong relationships for years to come with that. I'll pass it to you, Mark.