Customers Bancorp, Inc

Hello everyone, thank you for joining us and welcome to the Customers Bancorp, Inc. second quarter 2026 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. Phil, please go ahead.

Thank you Ellen and good morning everyone. Thank you for joining us for the Customers Bancorp's earnings webcast for the second quarter of 2026. We'd like to remind you that today's presentation may contain Thank you for joining us. Thank you for joining us. Copies of these filings 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 Bancorp CEO, Sam Sidhu.

Thanks, Phil. Good morning, everyone, and welcome to Customers Bancorp's second quarter 2026 earnings call. I'm joined this morning by our Chief Financial Officer, Mark McCollum. I'll take you through a few key highlights from the second quarter, give you an update on our strategic priorities, and then Mark will provide additional detail on our financials. Customers Bank continues to deliver for our customers and shareholders with this quarter's results once again reflecting strong, consistent financial results that come from disciplined execution of our differentiated strategy by a best-in-class team. Turning to slide four, in the second quarter, the second quarter was further evidence of our core strategy firing on all cylinders with consistent and reliable financial performance and growth. A few highlights. Total loans grew 4% in the quarter and 17% year over year to a record $18 billion. Total deposits grew over $140 million to a record $21.7 billion. Noninterest bearing deposits hit a second consecutive record at 6.9 billion or 32% of total deposits. NII increased 9% year over year. Tangible book value per share across $65, a period and record up 16% year over year, extending our industry leading pace. That's 16 consecutive records for book value, four for loans and seven for total deposits. and we did all of this while maintaining pristine credit quality and robust capital levels, even while growing the balance sheet and modestly buying back shares. On slide five, you can see our priorities for 2026, the same four we've been executing against all year. I'll provide an update on each again this quarter, starting with AI on slide six. Last quarter, we told you we were operationalizing AI and automation across customers bank. We're seeking transformational change with a goal of becoming the nation's leading AI native regional bank. To give you some color on what that means, let me start by saying that none of this happens by chance. Every use case we build moves through the same repeatable cycle. We create AI agentic pods by pairing our engineers with subject matter experts that own the work, shadow the real workflow, and build agents in our own data and systems, starting with the highest impact opportunities. and we then validate and measure the real impact first and only then does it get absorbed into the operations of the bank. We're driving this through two complimentary tracks, top-down strategic initiatives and extensive bottoms-up use cases being built organically by our teams. Our top-down roadmap spans three domains, lending, deposits and payments. That top-down work took a huge step forward in April when we announced a strategic collaboration with OpenAI, an expansion of a relationship that began back in 2023. This isn't a typical enterprise licensing relationship with a frontier model provider. It's embedding OpenAI engineers side by side with our team, building custom capabilities bespoke for our processes. Let me start by giving you an update on the first top-down initiative, loans. Our engineers have architected a multi-agentic credit underwriting process that can allow us to be ready to close commercial loans in seven days or less versus industry norms of 30 to 60 days. I'm thrilled to say that we piloted this tool this quarter and successfully closed CNI and CRE loans that utilize this underwriting engine within a week. That's an 85% reduction in readiness to close, which should result in huge productivity and revenue gains through more business, but more importantly, it will deliver an enhanced client experience and confidence in our bank. Moving to deposits. We kicked off an effort to rebuild our commercial onboarding process from scratch with an ambitious target of opening complex commercial accounts in minutes, not hours. We expect to have real progress and an update for you on this next quarter. On payments, we're way ahead of the curve here. We believe we were the first bank to publish an MCP or model context protocol last year for our commercial payments customers. One revenue generating use case we're advancing on is a modernized, fully routable network for 24-7 cross-border payment settlement on our Cubix network that will share more detail as it develops. Now for a few examples from the bottom-up side, which is reaching every corner of our institution. We're equipping bankers to drive increased conversion, which has led to 110% improvement in select front office areas prospecting success rates. To help make that tangible, just one commercial deposit group has averaged $2 million per month in non-interest-bearing deposit growth since the launch of the tool. In the back office, we're using agentic orchestration to enable products for new deposit customers, reducing setup times from an hour down to a couple of minutes. In risk and compliance, we're leveraging AI-powered KYC screening, which allows our team to boost their productivity by 50%. And in corporate functions, we're reviewing legal documents in minutes, not hours, tracking accuracy across regulatory filings, and have shortened our month-end closing cycle by 60%. Everything I've walked you through here is proprietary and purpose-built in-house by Customers Bank employees. To give you some context on the impact we're experiencing, our team has now saved at least 46,000 hours through AI-enabled workflow automation, up about 65% from last quarter and equivalent to 24 FTEs. They've built more than 600 agents and custom GPTs, up 20% in the last 60 days alone. 100% of our team members are now AI-licensed, up from 75% last quarter, and we're providing extensive training and support to our entire organization. and I'm personally leading a 40 person and growing team today representing about 5% of our workforce focused on AI workflow transformation. How will this translate for financially for us? Well, we've set a goal of getting to a low 40s run rate efficiency ratio in 2027 versus the 50% or so we're at today through a combination of revenue growth and increased productivity. I've said it before and I'll say it again. We believe AI is the most significant opportunity in a generation for a bank of our size and we intend to be the one that proves what serious adoption looks like. Now moving to slide seven and QBICS. We've said for some time that excelling in payments is critical to future success in our industry. Let me first frame where our QBICS industry expansion stands. DA 24-7 settlement was our foundation. Then we moved to mortgage finance clients. and now real estate has become a fast growing vertical. To put it in perspective from what was essentially a startup vertical based on adoption and pipeline, we now project this vertical could represent 20% of all payment units. Capital markets is an opportunity ahead. Think traditional finance exchanges as the whole industry moves toward continuous around the clock trading. We are also looking at incubating new verticals, facilitating 24-7 cross-border and other 24-7 settlement transactions as customers and in some cases their agents continue to expect faster payments. The combination of a cutting-edge product with a best-in-class team is already producing strong results. and many more. and importantly, the unit count of transactions is continuing to accelerate. To put that in perspective, year to date, we've processed over 200,000 cubic internal transfers, which is double from the same time last year. And we remain in the early innings of unlocking the full value of this platform. At the end of last year, I told you we did not expect this to be a growth vertical. However, based on tangible progress we are seeing through the end of this year, we now expect Cubix to be a growth area in 2027 as these new verticals continue to scale with granular, diversified, low-cost deposits. Turning to slide eight, I want to discuss what we believe is a driving engine behind our success, our organic growth flywheel. It starts with service. Our net promoter score is 81, nearly double the industry benchmark of 41, and puts us at the top of the industry. That level of service drives deeper client engagement, stronger retention, more referrals. That engagement builds momentum and financial performance. That performance allows us to reinvest into people and technology. That investment helps us attract and retain top teams who bring clients and service expertise starting the cycle over again. And you can see the output on the right of the slide. We're the number one core EPS compounder and number two intangible book value per share compounder among our peers. and our organic growth deposit rate is roughly at two times the pure median. None of this works though without the right people. And that brings me to our team recruitment strategy update, which I'll cover on the next slide. The teams we've recruited since 2023 now represent 18% of our deposit base, about one fifth of the entire franchise. Let that sink in. In just 36 months, entirely organically, we've built roughly one fifth of this bank through recruiting. and these new teams are extremely accretive to the bank's efficiency ratio with mature vintages operating at efficiency ratios in the 20 to 30% range. We want to spotlight the 2025 vintage hired in the last 12 months. These teams already hold more than half a billion dollars in deposits across 1600 accounts or over 6% of our total commercial accounts. They're incredibly granular, today averaging about $340,000 per account. Due to the smaller balances and operational nature, 63% are non-interest bearing and a spot cost of about 70 basis points. And similar to last quarter, the non-interest bearing deposit pipeline for new teams is incredibly around 250 million in the next 90 days or so. And the economics are compelling. Similar to our 2024 teams, our 2025 teams have already reached profitability in approximately three quarters. They run at roughly 1.7 times deposits to loans, generating a spread of around 500 basis points on top of the excess low-cost deposits they bring. And I'm happy to share a quick preview of what we've accomplished with our 26 vintage. Year-to-date, about 30 team members have joined or are in advanced discussions to join, with four teams expected to join this quarter. These teams already have a nine-figure loan and deposit pipeline to capture by year-end. We're optimistic that these teams could similarly turn profitable within 12 months. With that, I'll turn it over to Mark to talk you through the financials in more detail.