Q3 2025 Customers Bancorp Inc Earnings Call

Speaker #2: Hello and thank you for standing by . My name is Regina and I will be your conference operator today . At this time , I would like to welcome everyone to the Customers Bancorp, Inc. third quarter 2025 Earnings Webcast and Conference call .

Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Customers Bancorp, Inc. Third Quarter 2025 Earnings Webcast and Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Philip Watkins, Executive Vice President, Head of Corporate Development and Investor Relations. Please go ahead.

Speaker #2: All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .

Speaker #2: If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.

Speaker #2: To withdraw your question , press star one . Again , I would now like to turn the conference over to Philip Watkins Executive Vice President , Head of Corporate Development and Investor Relations .

Speaker #2: Please go ahead .

Speaker #3: Thank you , Regina , and good morning , everyone . Thank you for joining us for the customer Bancorp's earnings webcast for the third quarter of 2025 .

Philip Watkins: Thank you, Regina, and good morning, everyone. Thank you for joining us for the Customers Bancorp's Earnings Webcast for the third quarter of 2025. 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 these forward-looking statements in light of new information or future events except to the extent required by applicable securities laws.

Speaker #3: 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 .

Speaker #3: 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 .

Speaker #3: 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 .

Speaker #3: Please refer to our SEC filings , including our most recent form 10-K and 10-q and our current Reports on Form 8-K . For a more detailed description of the assumptions and risk factors related to our business .

Philip Watkins: Please refer to our SEC filings, including our most recent Form 10-K and 10-Q, 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 Investor Relations section of our website. At this time, it is my pleasure to turn the call over to Customers Bancorp Chair, Jay Sidhu. Jay?

Speaker #3: 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 turn the call over to Customers Bancorp, Inc. chair Jay Sidhu J .

Speaker #4: Thanks , Phil and good morning , ladies and gentlemen , and welcome to Customers Bancorp, Inc. third Quarter 2020 Earnings Call . I'm joined this morning by our president and CEO of the Bank , Samvir Sidhu and customers Bank and Customers Bancorp, Inc. CFO , Mark McCullum .

Jay Sidhu: Thanks, Phil, and good morning, ladies and gentlemen, and welcome to Customers Bancorp's Third Quarter 2025 Earnings Call. I'm joined this morning by our President and CEO of the bank, Sam Sidhu, and Customers Bank and Customers Bancorp CFO, Mark McCollum. We are very pleased to report another strong quarter. Once again, our results materially exceeded expectations. We experienced deposit-led growth in our balance sheet of more than $1.5 billion over the quarter, delivered positive operating leverage, and strengthened our already robust capital levels through a very successful common equity offering that was oversubscribed by about 10 times. That speaks volumes about investor confidence in our franchise. We also delivered top-tier earnings performance, continued to improve capital quality, and drove disciplined franchise-enhancing growth across deposits, loans, and also fee income. You'll hear more from Sam and Mark on those results in a moment.

Speaker #4: We are very pleased to report another strong quarter . Once again , our results materially exceeded expectations . We experienced deposit led growth in our balance sheet of more than $1.5 billion over the quarter , delivered positive , positive operating leverage and strengthened our already robust capital levels through a very successful common equity offering that was oversubscribed by about ten times .

Speaker #4: That speaks volumes about investor confidence in our franchise . We also delivered top tier earnings performance , continued to improve capital quality and drove disciplined franchise enhancing growth across deposits , loans and also fee income .

Speaker #4: You'll hear more from Sam and Mark on those results in a moment . It is exactly these sorts of financial results that gave me the confidence last quarter to announce my transition to executive chairman , beginning in 2026 .

Jay Sidhu: It is exactly these sorts of financial results that gave me the confidence last quarter to announce my transition to Executive Chairman beginning in 2026 and for Sam to be named Chief Executive Officer of the holding company besides being the CEO of the bank. From this seat, the Board of Directors and I will continue to provide all the guidance to Sam and our awesome management team to ensure Customers continues to build on its trajectory of growth, consistency, full transparency, resilience, and delivering the results to you on a regular, consistent basis. From a financial perspective, Customers has been an industry-leading EPS and book value compounder over the last five years for banks of our size, and that's translated into long-term results for our shareholders as we've been the number one performing bank stock in the U.S. for institutions over $10 billion in assets over a five-year period.

Speaker #4: And for Sam to be named chief executive officer of the holding company . Besides being the CEO of the bank from this seat , the board of directors and I will continue to provide all the guidance to Sam and our awesome management team to ensure customers continues to build on its trajectory of growth , consistency , full transparency , resilience and delivering the results to you on a regular , consistent basis .

Speaker #4: From a financial perspective , customers has been an industry leading EPs in book value , compounder over the last five years . For banks of our size , and that's translated into long term results for our shareholders .

Speaker #4: As we've been the number one performing bank stock in the United States for institutions with over $10 billion in assets over a five-year period.

Speaker #4: Thank you . For and kudos to all of you for being our long term shareholders . And I'm thrilled to be one of them .

Jay Sidhu: Thank you and kudos to all of you for being our long-term shareholders, and I'm thrilled to be one of them. Our mission remains unchanged: to deliver long-term and consistent value for our shareholders and our communities by putting clients first and executing with excellence. The numbers you see are the result of our leadership team executing superbly on our unique strategy of single point of contact banking with the strongest risk management principles. Before we dive into the quarter, I'd like to take a moment to welcome Janet Lee and the TD Cowen team to coverage of Customers Bancorp. It's terrific to have you and Steve following our story. We appreciate your interest and look forward to your insights as we continue to execute on our strategy. With that, I'm going to turn it over to Sam to discuss in detail the quarter with you. Sam?

Speaker #4: Our mission remains unchanged to deliver long term and consistent value for our shareholders and our communities by putting clients first and executing with excellence .

Speaker #4: The numbers you see are the result of our leadership team executing superbly on our unique strategy of single point-of-contact banking with the strongest risk management principles.

Speaker #4: Before we dive into the quarter , I'd like to take a moment to welcome Janet Lee and the TD team to coverage of customers Bancorp .

Speaker #4: It's terrific to have you and Steve following our story . We appreciate your interest and look forward to your insights as we continue to execute on our strategy .

Speaker #4: With that , I'm going to turn it over to Sam to discuss in detail the quarter with you . Sam .

Speaker #5: Thank you . Jay , and good morning , everyone . This quarter was yet another clear demonstration of the strength of customers . Bank's diversified model across the franchise .

Sam Sidhu: Thank you, Jay, and good morning, everyone. This quarter was yet another clear demonstration of the strength of Customers Bank's diversified model. Across the franchise, we delivered strong performance, disciplined growth, and continued transformation of our deposit base. We are firing on all cylinders, and our team is performing at an elite level. Q3 results represented another quarter of very strong financial performance. Here are a few of the highlights. We generated $1.4 billion of deposit growth led by our new commercial banking teams and Qubix clients. Our loan growth was 6% quarter over quarter with diversified contributions across multiple verticals. Our net interest margin expanded meaningfully by 19 basis points quarter over quarter, and our net interest income increased by 14% in the quarter. Our efficiency ratio improved again, even as we continued to invest in new teams, technology, and risk management.

Speaker #5: We delivered strong performance , disciplined growth and continued transformation of our deposit base . We are firing on all cylinders , and our team is performing at an elite level .

Speaker #5: Q3 results represented another quarter of very strong financial performance . Here are a few of the highlights . We generated $1.4 billion of deposit growth led by our new commercial banking teams and clients .

Speaker #5: Our loan growth was 6% quarter over quarter, with diversified contributions across multiple verticals. Our net interest margin expanded meaningfully by 19 basis points quarter over quarter, and our net interest income increased by 14% in the quarter.

Speaker #5: Our efficiency ratio improved again even as we continued to invest in new teams , technology and risk management . As you heard from Jay , we had a tremendously successful common stock offering in early September , which was about ten times oversubscribed .

Sam Sidhu: As you heard from Jay, we had a tremendously successful common stock offering in early September, which was about 10 times oversubscribed. The equity raise even further improved our capital quality and ratios meaningfully. We compounded tangible book value at a 25% annualized pace in the quarter to nearly $60 per share, continuing our multi-year trend of 15% annualized growth, which is number one for banks $20 to $100 billion in assets. We accomplished all of this while maintaining strong credit performance and ample liquidity. Advancing to the next slide, you'll see our GAAP financials, and moving to slide six, I'll run through the core financial highlights for the quarter. Our beat relative to consensus expectations on both a GAAP and core basis was driven by strong results across the franchise.

Speaker #5: The equity raise even further improved our credit quality , our capital quality and ratios meaningfully , and we compounded tangible book value at a 25% annualized pace in the quarter to nearly $60 per share .

Speaker #5: Continuing our multi-year trend of 15% annualized growth , which is number one for banks 20 to $100 billion in assets . We accomplished all of this while maintaining strong credit performance and ample liquidity .

Speaker #5: Advancing to the next slide , you'll see our GAAP financials and moving to slide six , I'll run through the core financial highlights for the quarter .

Speaker #5: Our beat relative to consensus expectations on both a GAAP and core basis was driven by strong results across the franchise . We delivered core EPs of $2.20 with a core ROE and ROA of 15.5% and 1.25% , respectively , both important profitability milestones .

Sam Sidhu: We delivered core EPS of $2.20 with a core ROE and ROA of 15.5% and 1.25% respectively, both important profitability milestones. This reflects solid growth on both sides of the balance sheet, resulting in total revenues of $232 million, which was up 12% in the quarter. Our credit metrics also remained strong, which Mark will cover in more detail. Our third quarter EPS grew by 22% in the quarter, which is on top of the 17% growth last quarter. As you may recall, a year ago on our third quarter call, I said that we'd look to grow our core EPS by 30% or more this year. I'm incredibly pleased to say that we more than doubled that, up 64% from the same period a year ago.

Speaker #5: This reflects solid growth on both sides of the balance sheet, resulting in total revenues of $232 million, which was up 12% in the quarter.

Speaker #5: And our credit metrics also remained strong , which Mark will cover in more detail . Our third quarter EPs grew by 22% in the quarter , which is on top of the 17% growth last quarter .

Speaker #5: As you may recall, a year ago, on our third quarter call, I said that we'd look to grow our core EPS by 30% or more this year.

Speaker #5: I'm incredibly pleased to say that we more than doubled that , up 64% from the same period a year ago , and we believe that our $24 billion balance sheet is stronger than ever with very robust capital ratios , strong credit quality and reserves , and ample liquidity to support our growing pipelines .

Sam Sidhu: We believe that our $24 billion balance sheet is stronger than ever, with very robust capital ratios, strong credit quality and reserves, and ample liquidity to support our growing pipelines. Now let's turn to deposits on slide seven, where we continue to execute in our deposit transformation with a meaningful shift towards franchise-enhancing granular, high-quality deposits. As I mentioned, total deposits grew $1.4 billion in the quarter, ending at $20.4 billion. This included an increase of $900 million in non-interest-bearing deposits, which was led by growth from existing institutional customers on our in-house developed Qubix payments platform. Our deposit growth was supported by several other areas, including our new banking teams onboarded since June of 2023, contributing nearly $350 million in high-quality deposits this quarter.

Speaker #5: Now let's turn to deposits on slide seven , where we continue to execute in our deposit transformation with a meaningful shift towards franchise enhancing , granular , high quality deposits .

Speaker #5: As I mentioned , total deposits grew $1.4 billion in the quarter , ending at $20.4 billion . This included an increase of $900 million in noninterest bearing deposits , which was led by growth from existing institutional customers .

Speaker #5: On our in-house developed Cubic's platform . Our deposit growth was supported by several other areas , including our new banking teams onboarded since June of 2023 , contributing nearly $350 million in high quality deposits this quarter .

Speaker #5: These teams now manage approximately $2.8 billion in relationship-based granular funding, which is about 14% of our total deposits in just two years. This is akin to buying a $3 billion bank.

Sam Sidhu: These teams now manage approximately $2.8 billion in relationship-based granular funding, which is about 14% of our total deposits in just two years, which is akin to buying a $3 billion bank, but without the tangible book value dilution and integration risk of traditional bank M&A. The $900 million of growth in non-interest-bearing deposits led to a record $6.4 billion in non-interest-bearing deposit balances. In addition to Qubix growth, our core commercial franchise again delivered nine figures of non-interest-bearing growth, which is truly incredible. As a result, non-interest-bearing deposits now represent about 31% of our total deposits at quarter end, placing us number one amongst our peers. Our team responded well to the Fed easing in September, and we were able to lower our deposit cost by 15 basis points post-Fed action, which represents a deposit beta of approximately 59%.

Speaker #5: But without the tangible book value dilution and integration risk of traditional bank M&A , the $900 million of growth in noninterest bearing deposits led to a record $6.4 billion in noninterest bearing deposit balances .

Speaker #5: In addition to Cubic's growth growth , our core commercial franchise again delivered nine figures of noninterest bearing growth , which is truly incredible .

Speaker #5: As a result , noninterest bearing deposits now represent about 31% of our total deposits at quarter end , placing us number one amongst our peers .

Speaker #5: Our team responded well to the Fed easing in September, and we were able to lower our deposit costs by 15 basis points.

Speaker #5: Post fed action , which represents a deposit beta of approximately 59% . As a result of the combination of these two factors , our total average cost of deposits declined eight basis points in the quarter .

Sam Sidhu: As a result of the combination of these two factors, our total average cost of deposits declined eight basis points in the quarter. To emphasize this point further, our spot cost of deposits was another nine basis points lower at 2.68% at quarter end, or 17 basis points below our Q2 average. Now let's turn to slide eight, where I'll provide more detail on the incredible success of our deposit transformation. We've talked a lot about our deposit gathering efforts on our calls in recent quarters, but we thought it would be helpful to look back and highlight just how much we have transformed our franchise over the past few years. In less than three years, we have onboarded nearly $7 billion in deposits from our new banking teams and Qubix clients.

Speaker #5: And to emphasize this point further , our spot cost of deposits was another nine basis points lower at 2.68% at quarter end or 17 basis points below our Q2 average .

Speaker #5: Now, let's turn to slide eight, where I'll provide more detail on the incredible success of our deposit transformation. We've talked a lot about our deposit gathering efforts on our calls in recent quarters, but we thought it would be helpful to look back and highlight just how much we have transformed our franchise over the past few years.

Speaker #5: In less than three years , we have onboarded nearly $7 billion in deposits from our new banking teams and cubics clients . That represents nearly 40% of our deposit base at year end of 22 , and about a third of our deposits today .

Sam Sidhu: That represents nearly 40% of our deposit base at year end of 2022 and about a third of our deposits today. Hence, the quality of the transformation really shines. The growth is very granular, with nearly 8,000 accounts helping us to drive over 50% growth in our commercial client base. Incredibly, they are very low cost at just 1.06%. This has allowed us to increase our non-interest-bearing deposits to 31%, as I mentioned, from 10%, while simultaneously reducing our wholesale CDs from 22% to 9%. Our average cost of deposits this quarter was essentially flat relative to the end of 2022. Over that time period, interest rates are 65 basis points higher on average today than they were at the end of 2022. The industry's deposit costs, however, are 128 basis points higher, which means that our outperformance is incredibly 124 basis points over that time period compared to peers.

Speaker #5: And it's the quality of the transformation that really shines . The growth is very granular , with nearly 8000 accounts helping us to to drive over 50% growth in our commercial client base .

Speaker #5: Incredibly , there are very low cost at just 1.06% . This has allowed us to increase our noninterest bearing deposits to 31% . As I mentioned , from 10% , while simultaneously reducing our wholesale CDs from 22% , down from 22% to 9% .

Speaker #5: Our average cost of deposits this quarter was essentially flat relative to the end of 2022 . Over that time period , interest rates are 65 basis points higher on average .

Speaker #5: Today than they were at the end of 22 . The industry's deposit costs , however , are 128 basis points higher , which which means that our outperformance is incredibly 124 basis points over that time period compared to peers .

Speaker #5: That shows the power of our deposit transformation . Moving to slide nine , central to our success has been our ability to consistently recruit top talent in the first quarter of this year , we highlighted the exceptional results from the teams who joined us in 2023 and 2024 , and we also outlined a roadmap for the types of continued team recruitment .

Sam Sidhu: That shows the power of our deposit transformation. Moving to slide nine, central to our success has been our ability to consistently recruit top talent. In the first quarter of this year, we highlighted the exceptional results from the teams who joined us in 2023 and 2024. We also outlined a roadmap for the types of continued team recruitment we'd look to execute on in 2025. This included top-performing bankers to deepen our geographic presence and continue to enhance our national specialized deposit verticals. We had shared we would add at least two new teams this quarter. In fact, we were able to recruit and onboard four new teams in the quarter. This included two additional geographic C&I teams, as well as two national teams, one serving title companies and one in the sports and entertainment segment.

Speaker #5: We'd look to execute on in 2025. This includes top-performing bankers to deepen our geographic presence and continue to enhance our national specialized deposit verticals.

Speaker #5: We had shared . We would add at least two new teams this quarter . In fact , we were able to recruit and onboard four new teams in the quarter .

Speaker #5: This included two additional geographic CNI teams, as well as two national teams: one serving title companies and one in the sports and entertainment segment.

Speaker #5: This brings our 2025 total to seven deposit focused teams , with approximately 30 new team members . Our brand reputation as a high performance tech forward bank continues to attract top tier talent .

Sam Sidhu: This brings our 2025 total to seven deposit-focused teams with approximately 30 new team members. Our brand reputation as a high-performance tech-forward bank continues to attract top-tier talent. The flywheel is turning, and we have incredible tailwinds, both from continuing to scale the portfolios of the teams that join us in 2023 and 2024 and now significant additional opportunities from the teams that have joined us this year in 2025. It is important to highlight that in almost every one of the bankers that have joined us have come through direct referrals from our existing team members. We'll look to continue to add to the roster of new teams each quarter. Let's turn to loan growth on slide 10. Loans grew approximately $900 million, or 6% quarter over quarter. Growth was broad-based and relationship-driven, led by fund finance, commercial real estate lending, and venture banking.

Speaker #5: The flywheel is turning and we have incredible tailwinds both from continuing to scale the portfolios of the teams that join us in 23 and 24 , and now significant additional opportunities from the teams that have joined us this year .

Speaker #5: In 2025 . It is important to highlight that in almost every one of the bankers that have joined us have come through direct referrals from our existing team members , we'll look to continue to add to the roster of new teams each quarter .

Speaker #5: Let's turn to loan growth on slide ten . Loans grew approximately $900 million , or 6% quarter over quarter . Growth was broad , based in relationship driven , led by fund finance , commercial real estate and venture banking .

Speaker #5: Our new commercial banking teams also contributed , contributed to loan growth while maintaining strong deposit led economics . The portfolio remains diversified and we continue to prioritize credit discipline and pricing .

Sam Sidhu: Our new commercial banking teams also contributed to loan growth while maintaining strong deposit-led economics. The portfolio remains diversified, and we continue to prioritize credit discipline and pricing. Given the depth and breadth of our platform, we continue to see opportunities to add franchise-enhancing loans with an utmost focus on credit discipline. With that, I'll turn the call over to Mark on slide 11.

Speaker #5: Given the depth and breadth of our platform , we continue to see opportunities to add franchise enhancing loans with an utmost focus on credit discipline .

Speaker #5: With that, I'll turn the call over to Mark on slide 11.

Speaker #6: Great . Thanks , Sam , and good morning , everyone . Thanks for joining us on the call . I'm going to start with our net interest margin , where we reported strong results .

Mark McCollum: Great. Thanks, Sam, and good morning, everyone. Thanks for joining us on the call. I'm going to start with our net interest margin, where we reported strong results. Net interest margin expanded by 19 basis points this quarter to 3.46%, marking the fourth consecutive quarter of improvement. Our net interest income increased by about 14% to $202 million for the quarter. As we noted last quarter, we did have a positive impact from loan accretion on a small pool of participated loans we repurchased at a significant discount last quarter. This added $10 million to net interest income this quarter compared to the second quarter. This net interest income benefit will repeat again in the fourth quarter of 2025 and then is expected to drop off in the first quarter of 2026.

Speaker #6: Net interest margin expanded by 19 basis points this 2:45 .46 percent , marking the fourth consecutive quarter of improvement . Our net interest income increased by about 14% to $202 million for the quarter .

Speaker #6: As we noted last quarter , we did have a positive impact from loan accretion on a small pool of participated loans . We repurchased at a significant discount last quarter .

Speaker #6: This added 10 million to net interest income this quarter , compared to the second quarter . This net interest income benefit will repeat again in the fourth quarter of 2025 .

Speaker #6: And then it is expected to drop off in the first quarter of 2026. However, when excluding this $10 million from our third quarter results, our net interest income still increased 9% sequentially due to the following core trends.

Mark McCollum: However, when excluding this $10 million from our third quarter results, our net interest income still increased 9% sequentially due to the following core trends. We had an increase in average deposits of over $1.4 billion at a blended cost of 2.77% for the quarter compared to 2.85% last quarter, with nearly $800 million of higher average non-interest-bearing balances. We also had an increase to average loan balances of $630 million. Lastly, our overall funding needs declined as a result of the $163 million of net proceeds we received from our common equity offering in September. As Sam noted, our team responded well to the first Fed Funds rate cut. Within a week of that cut, our interest-bearing deposits had declined by 15 basis points on a spot basis, or a beta of almost 60% early on.

Speaker #6: We had an increase in average deposits of over $1.4 billion at a blended cost of 2.77% for the quarter, compared to 2.85% last quarter, with nearly $800 million of higher average non-interest bearing balances.

Speaker #6: We also had an increased average loan balances of 630 million . And lastly , our overall funding needs declined as a result of 163 million of net proceeds .

Speaker #6: We received from our common equity offering in September . As Sam noted , our team responded well to the first fed funds rate cut within a week of that cut , our interest bearing deposits had declined by 15 basis points on a spot basis or a beta of almost 60% early on .

Speaker #6: We also executed off balance sheet strategies during the quarter , layering on $800 million in notional value of received fixed swaps on the asset side of the balance sheet in order to further neutralize our asset sensitivity while we remain modestly asset sensitive , we think we have well positioned the bank to produce solid net interest income growth in future periods , regardless of macro monetary policy .

Mark McCollum: We also executed off-balance sheet strategies during the quarter, layering on $800 million in notional value of received fixed swaps on the asset side of the balance sheet in order to further neutralize our asset sensitivity. While we remain modestly asset sensitive, we think we have well positioned the bank to produce solid net interest income growth in future periods, regardless of macro monetary policy. Moving on to slide 12, our non-interest expenses declined $1.4 million to $105.2 million, while we continue to invest in people, technology, and risk infrastructure. Compensation and occupancy were the categories that increased during the quarter, with reductions in our FDIC assessments and professional fees driving the bulk of the decrease. Importantly, our efficiency ratio improved again, now at 45.4%, placing us firmly among the top quartile of peers, even as we continue to invest in this growth.

Speaker #6: Moving on to slide 12 . Our non-interest expenses declined 1.4 million to 105.2 million . While we continue to invest in people , technology and risk infrastructure compensation and occupancy were the categories that increased during the quarter with reductions in our FDIC assessments and professional fees driving the bulk of the decrease .

Speaker #6: Importantly , our efficiency ratio improved again . Now at 45.4% , placing us firmly among the top quartile of peers . Even as we continue to invest in this growth .

Speaker #6: And lastly, when just focusing on expenses, our non-interest expense to average asset ratio declined to 1.74%, which rates the best within our regional bank peer group.

Mark McCollum: Lastly, when just focusing on expenses, our non-interest expense to average asset ratio declined to 1.74%, which rates the best within our regional bank peer group. On slide 13, tangible book value per share grew to $59.72, up 6.2% sequentially, or 25% annualized. We believe this represents one of the clearest markers of long-term shareholder value creation and continues our multi-year track record of double-digit tangible book value growth. Now let's move to slide 14 to discuss capital. We significantly strengthened our capital position this quarter. Our successful common equity raise provided $163 million of net proceeds. Through the combination of this capital raise, strong quarterly earnings, and reductions in our AOCI, which is currently at a loss position, our shareholders' equity grew $263 million, which is 14% sequentially.

Speaker #6: On slide 13 , tangible book value per share grew to $59.72 , up 6.2% sequentially , or 25% annualized . We believe this represents one of the clearest markers of long term shareholder value creation and continues our multi-year track record of double digit tangible book value growth .

Speaker #6: Now , let's move to slide 14 to discuss capital . We significantly strengthen our capital position this quarter . Our successful common equity raise provided $163 million of net proceeds through the combination of this capital raise , strong quarterly earnings and reductions in our Aoci , which is currently at a loss position .

Speaker #6: Our shareholders' equity grew by $263 million, which is a 14% increase sequentially. As a result of this growth, our Common Equity Tier One ratio improved by 100 basis points to 13%, and tangible common equity grew by 50 basis points to 8.4%.

Mark McCollum: As a result of this growth, our CET1 ratio improved 100 basis points to 13%, and tangible common equity grew 50 basis points to 8.4%. This was even after supporting more than $1.7 billion of balance sheet growth during the period. On slide 15, our credit performance remains stable and well managed. A strong credit culture has always been a critical success factor of Customers, and the results bear this out, as you can see from our metrics. Our non-performing assets were just 25 basis points of total assets and have been consistently below peers for each of the five quarters shown. Excluding our small consumer loan portfolio, net charge-offs for commercial loans remain very low at 16 basis points annualized. Additionally, special mention and substandard loans were down about $14 million, or about a 3% decline during the quarter.

Speaker #6: And this was even after supporting more than $1.7 billion of balance sheet growth during the period . On slide 15 , our credit performance remains stable and well managed .

Speaker #6: A strong credit culture has always been a critical success factor . Customers and the results bear this out . As you can see from our metrics , our non-performing assets were just 25 basis points of total assets and have been consistently below peers for each of the five quarters shown , excluding our small consumer loan portfolio , net charge offs for commercial loans remained very low at 16 basis points annualized .

Speaker #6: Additionally , special mention and substandard loans were down about 14 million , or about a 3% decline during the quarter . Overall , we believe the loan portfolio is well positioned and we have strong reserve coverage within our allowance for credit loss .

Mark McCollum: Overall, we believe the loan portfolio is well positioned, and we have strong reserve coverage within our allowance for credit loss. Currently, this allowance sits at 103 basis points and represents 534% coverage of our non-performing loans. Moving to slide 16, as a result of the strong quarter and emerging clarity on the remainder of the year, we are revising several of our guidance items for 2025. For deposits, we are increasing the full-year growth range to 8% to 10% for the year, up from 5% to 9%, given the momentum we experienced during the quarter. For loans, we are increasing full-year growth to 13% to 14%, up from 8% to 11% previously. I would note that we had a very strong third quarter, which did pull forward some closings from the fourth quarter, which is why we may see less growth next quarter.

Speaker #6: Currently , this allowance sits at 103 basis points and represents 534% coverage of our non-performing loans . Moving to slide 16 . As a result of the strong quarter and emerging clarity on the remainder of the year , we are revising several of our guidance items for 2025 .

Speaker #6: For deposits , we are increasing the full year growth range to 8 to 10% for the year , up from 5 to 9% .

Speaker #6: Given the momentum we experienced during the quarter for loans, we are increasing full year growth to 13% to 14%, up from 8% to 11% previously.

Speaker #6: I would note that we had a very strong third quarter , which did pull forward some closings from the fourth quarter , which is why we may see less growth next quarter , but we still feel very good about our ability to deliver above industry average loan growth with a disciplined and credit first mindset .

Mark McCollum: We still feel very good about our ability to deliver above industry average loan growth with a disciplined and credit-first mindset as we head into 2026. We are now projecting our net interest income to grow between 13% and 15% for the year, up from 7% to 10% previously. This reflects the strong performance on both sides of the balance sheet in driving increased revenue, as well as the margin benefits I discussed earlier. For efficiency, as a result of this stronger revenue growth and well-managed expenses, we now believe our efficiency ratio will be below 50% for the year versus 56% in 2024. As a result of our common stock offering, our CET1 ratio is now projected to be around 13% at the end of 2025, consistent with third quarter levels.

Speaker #6: As we head into 2026, we are now projecting our net interest income to grow between 13% and 15% for the year, up from 7% to 10% previously.

Speaker #6: This reflects the strong performance on both sides of the balance sheet and driving increased revenue , as well as the margin benefits . I discussed earlier .

Speaker #6: For efficiency, as a result of this stronger revenue growth and well-managed expenses, we now believe our efficiency ratio will be below 50% for the year, versus 56% in 2024.

Speaker #6: As a result of our common stock offering, our CET1 ratio is now projected to be around 13% at the end of 2025, consistent with third quarter levels.

Speaker #6: And with that , I'll now pass the call back to Sam for closing remarks before we open up the line for Q&A .

Mark McCollum: With that, I'll now pass the call back to Sam for closing remarks before we open up the line for your Q&A.

Speaker #5: Thanks , Mark . In closing , customers Bank is delivering on its strategy , disciplined deposit transformation , diversified loan growth , efficiency , efficiency improvements and a strong capital , credit and risk management .

Sam Sidhu: Thanks, Mark. In closing, Customers Bank is delivering on its strategy: disciplined deposit transformation, diversified loan growth, efficiency improvements, and strong capital, credit, and risk management. We increased deposits by $1.4 billion, with most of the growth coming from non-interest-bearing deposits. Our non-interest-bearing deposits now stand at 31%, which is number one of our peers. We grew our loan portfolio with franchise-enhancing relationships. We improved our net interest margin for the fourth consecutive quarter, improved our efficiency ratio for the fourth consecutive quarter, delivered a 1.25% ROA, delivered a more than 15% ROE, increased our TCE ratio by 50 basis points to 8.4%, all while maintaining excellent credit performance. Our tangible book value has grown at 15% over the last five years, number one in the industry for banks of our size.

Speaker #5: We increased deposits by 1.4 billion , with most of the growth coming from noninterest bearing deposits . Our noninterest bearing deposits now stand at 31% , which is number one of our peers .

Speaker #5: We grew our loan portfolio with franchise enhancing relationships . We improved our net interest margin for the fourth consecutive quarter , improved our efficiency ratio for the fourth consecutive quarter , delivered a 1.25 ROA , delivered a more than 15% ROE increased our TCE ratio by 50 basis points to 8.4% .

Speaker #5: All while maintaining excellent credit performance . Our tangible book value has grown at 15% over the last five years . Number one in the industry for banks of our size .

Speaker #5: Importantly, our loan, deposit, and team recruitment pipelines are strong, and that is why we're incredibly excited about the prospects for this company to close the year.

Sam Sidhu: Importantly, our loan, deposit, and team recruitment pipelines are strong, and that is why we're incredibly excited about the prospects for this company to close the year and excel in 2026 and beyond. Operator, we'll now open the line for questions.

Speaker #5: And excel in 2026 and beyond . Operator we'll now open the line for questions . .

Speaker #2: At this time, I'd like to remind everyone that in order to ask a question, please press star, followed by the number one on your telephone keypad.

Operator: At this time, I'd like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. Our first question will come from the line of Janet Lee with TD Cowen. Please go ahead.

Speaker #2: Our first question will come from the line of Janet Lee with TD Cowan. Please go ahead.

Speaker #7: Good morning .

Janet Lee: Good morning.

Speaker #5: Good morning Janet .

Sam Sidhu: Morning, Janet.

Speaker #7: Hi , thank you for the welcome on the deposits . So if I were to look at obviously you guys have been bringing in a lot of about 200 to 350 million of deposits , lower cost deposits from the new banking team hires .

Janet Lee: Hi, Janet.

Operator: Hi.

Janet Lee: Thank you for the welcome. On the deposits, if I were to look at, obviously, you guys have been bringing in a lot of about $200 million to $350 million of lower-cost deposits from the new banking team hires. If I were to look at 2026, should we expect the pace of deposit growth from the new banking team hires to continue around this pace, or is that contemplating also the pace of new banking team hires is maintained in that like four teams hire per quarter range? I just want to get some color around the pace of deposit growth, how that could move versus what we saw in this quarter as we're reaching the saturation point from the big banking team hires that you guys made in 2024.

Speaker #7: If I were to look at 2026, should we expect the pace of deposit growth from the new banking team hires to continue around this pace?

Speaker #7: Or is that contemplating also the pace of new banking team hires ? Is maintained in that , like four teams higher per quarter range , just want to just want to get some color around the pace of deposit growth .

Speaker #7: How that could move versus what we saw in this quarter as we're reaching the saturation point from the big banking team hires that you guys made in 2024.

Speaker #5: Sure . Well , Janet , thank you so much for that question . You know , so to add a little bit of color , you rightfully , you know , sort of mentioned that we sort of guided previously to about 3 to 400 million or so of quarterly deposit growth from the new teams , which we , you know , this quarter , roughly achieved .

Sam Sidhu: Sure. Janet, thank you so much for that question. To add a little bit of color, you rightfully sort of mentioned that we had sort of guided previously to about $300 million to $400 million or so of quarterly deposit growth from the new teams, which we this quarter roughly achieved. Sometimes we're a little lower, sometimes we're a little higher, but we're kind of in that type of target. We would expect that pace to continue in 2026 based upon the 2023 and 2024 teams. The 2025 teams are really going to start adding balances in the sort of end of the first half to the middle of next year and really ramp up. We expect over the course of the year, that should give us about a 25% lift on that $300 million to $400 million.

Speaker #5: Sometimes we're a little lower, sometimes we're a little higher, but we're kind of in that type of target. We would expect that pace to continue in 2026 based upon the 2023 and 2024 teams.

Speaker #5: The 25 teams , you know , are really going to start adding balances , you know , in the sort of end of the first half to the middle of next year and really ramp up .

Speaker #5: We expect that over the course of the year, this should give us about a 25% lift on that $300 million to $400 million. So, it kind of gives you a sense of the layering of the vintages of teams that are being onboarded.

Sam Sidhu: It kind of gives you a sense of the layering of the vintages of teams that are being onboarded. One thing that I would mention, the $350 million of growth that we saw this quarter continued to maintain that sort of just at or under 30% non-interest-bearing deposits. Those deposits also came in at less than 2%, just under 2%, in fact. I think that, and that's prior to rate cuts. It just gives you a sense of the high-quality nature of those, sort of we call them the singles and double type deposits that our teams are bringing in from the C&I and commercial real estate lending side.

Speaker #5: You know , one thing that I would mention , the $350 million of growth that we saw this quarter , it continued to maintain that sort of just a , you know , at or under 30% noninterest bearing deposits .

Speaker #5: Those deposits also came in at less than 2%, just under 2%, in fact. So I think that, and that's prior to the rate cuts.

Speaker #5: So it just gives you a sense of the the high quality nature , you know , of those , you know , you know , sort of we call them the singles and double , you know , type deposits that are , that our teams are bringing in from the Cnis and CRE side .

Speaker #7: Thank you. That's very helpful. And obviously, the Cubic's deposits grew a lot—about $800 million this quarter, which is about 19% of deposits.

Janet Lee: Thank you. That's very helpful. Obviously, the Qubix deposits grew a lot, about $800 million this quarter, about 19% of deposits. Any changes to your sort of the internal target, maybe target is not even the right word, how big could this become? I know a lot of all of these deposits from Qubix are going into cash. What drove that much of an increase in Qubix? Do you think that these Qubix deposits could sustain in terms of the growth? What is the strategic value that Qubix brings to your platform aside from the NII? Maybe if you could touch on the fee income opportunities from the Qubix payments platform, that would also be very helpful.

Speaker #7: Any changes to your in sort of the the internal target maybe target is not even the right word . How big could this become ?

Speaker #7: I know a lot of these deposits from Cubic's are going into cash. What drove that much of an increase in Cubic's?

Speaker #7: Do you think that this cubic's deposits could sustain in terms of the growth? What is the strategic value that Cubic brings to your platform, aside from the NII?

Speaker #7: Maybe if you could touch on the fee income opportunities from Cubic's payments platform, that would also be very helpful.

Speaker #5: Sure, absolutely. And if I miss anything, Janet — because I think there's a couple of layers in the question — please remind me after I'm done here.

Sam Sidhu: Sure. Absolutely. If I miss anything, Janet, because I think there's a couple of layers in the question, please remind me after I'm done here. I think on the Qubix payments platform side, just as a reminder, this is a payments platform, right? At the end of the day, our customers hold transactional and operating accounts with us to support that payments business. There's a minimum amount of deposits that they hold with us at any given time. We actually had a little bit of a slide on the deck that showed this. What we've seen is, especially since November of last year, we've seen a continuous increase in the payments activity, which translates into higher average deposit balances. On the Q2 call, if you recall, I talked about balances being about 20% higher as of the end of July when we had our call relative to the second quarter.

Speaker #5: But , you know , I think on the on the cubic side , just as a reminder , this is this is a payments platform , right ?

Speaker #5: So at the end of the day, our customers hold, you know, transactional operating accounts with us to support that payments business.

Speaker #5: So there's a minimum amount of deposits that they hold with us at any given time . What we we had a little bit of a slide on the , on the deck that showed this is what we've seen is , is especially since November of last year , we've seen a continuous increase in the payments activity as well as the you know , which which translates into higher average deposit balances .

Speaker #5: So on the Q2 call , if you recall , I talked about balances being about 20% higher as of end of July when we had our call relative to the second quarter , as you can see , we we , maintained or even slightly increased those balances as the quarter continued post the sort of genius stablecoin , you know , legislation .

Sam Sidhu: As you can see, we maintained or even slightly increased those balances as the quarter continued post the sort of Genius stablecoin legislation. We are continuing to see increased institutional activity from our existing customer base. We are also continuing to see increased institutional adoption. You also heard me say that about 20% of our deposits were coming from traditional finance customers. Even with the growth in our average deposit base, we have continued to maintain that percentage, which just gives you a sense of the growth is broad-based across all of our large core customers as opposed to a customer or two or three. It is universal across the overall customer base. The low end of our top customers grew by 10%. The rest were growing overall across the base to that 25% or so growth.

Speaker #5: So, we're continuing to see increased institutional activity from our existing customer base. We're also continuing to see increased institutional adoption. You also heard me say that about 20% of our deposits were coming from traditional finance customers.

Speaker #5: Even with the growth in our average deposit base , you know , we have continued to maintain that percentage , which sort of just gives you a sense of the growth is broad based across all of our , you know , large core customers as opposed to a customer or 2 or 3 .

Speaker #5: It is it is universal , you know , across , you know , the overall customer base and the low end of our top customers grew by , you know , 10% .

Speaker #5: The rest , you know , we're sort of growing overall across the base to that 25% or so or so growth . One other thing that I would add , just talking about , you activity on the network and franchise value , as you were asking about , is we're continuing to sustain .

Sam Sidhu: One other thing that I would add, just talking about activity on the network and franchise value, as you were asking about, is we are continuing to sustain. In October, our levels are about where they were in the third quarter. I would also say that October, going back to activity, is on track to be our highest Qubix payments platform month ever in terms of network volume and activity as well, with just three weeks of the quarter in. You also got a sense that our activity and overall volume this year as of 9/30 or the third quarter is roughly at where we were for full year 2024, which just gives you a sense of how year over year we are continuing to increase. I think that was the first part of your question. I'll address the fee income, and then let me know if I missed anything.

Speaker #5: So in October , our levels are about where they were , you know , in the in the third quarter , I'd also say that October , going back to activity , is on track to be our highest Cubic's month ever in terms of network volume and activity .

Speaker #5: You know , as well , with just three weeks , you know , of the quarter in , you also got a sense that , you know , our activity and overall volume this year , as of 930 or the third quarter is is roughly at where we were for full year 24 , which just gives you a sense of how year over year , you know , we're continuing to to increase .

Speaker #5: So I think that was the first part of your question. I'll address the, you know, the fee income, and then let me know if I missed anything.

Speaker #5: So on the the fee income and late last year we , we started instituting , you know , outbound wire fees and some modest fees , you know , to our overall customer base .

Sam Sidhu: On the fee income, late last year, we started instituting outbound wire fees and some modest fees to our overall customer base. That's to the tune of $8 million or so of overall fee income. At the end of the day, we want to make sure that we have a partnership approach with our customer base, that we're making sure that fees are aligned with driving value to our customers and to our customers' customers. Right now, we're focused on continuing to broaden the institutional breadth of our network. We're also really focused on product expansion with our core customers.

Speaker #5: That's to the tune of 8 million or so of overall fee income . At the end of the day , you know , we want to make sure that we have a partnership approach , you know , with our customer base that we're not that we're making sure that , you know , fees are aligned with driving value , you know , to our customers and to our customers , customers .

Speaker #5: So right now we're focused on continuing to, you know, broaden the institutional breadth of our network. We're also really focused on product expansion.

Speaker #5: And , you know , with our core customers and really what's also important internally at customers Bank is we're continuing to to further enhance our risk and compliance , going far above the expectations of what regulatory standards could be .

Sam Sidhu: What's also important internally at Customers Bank is we're continuing to further enhance our risk and compliance, going far above the expectations of what regulatory standards could be, and really thinking about how we can continue to build sort of a best-in-class North Star for the overall industry because we and even our customers are going to continue to see more competition as there's broader institutional adoption in the industry, which is a rising tide. It will obviously lift all boats, but at the same time, we want to make sure that we truly have built a platform that we, our customers, and all of our stakeholders view as best in class.

Speaker #5: And really thinking about how we can continue to build , you know , sort of a best in class North Star for the overall industry because , you know , you know , we and even our customers are going to continue to see , you know , more , you know , more competition as there's broader , you know , institutional adoption in the industry , which is , you know , a rising tide will lift all boats .

Speaker #5: But at the same time , we want to make sure that , you know , we truly have built a platform that we , our customers are and all of our stakeholders view as best in class .

Speaker #7: Thank you .

Operator: Thank you. Our next question will come from the line of Steve Moss with Raymond James. Please go ahead.

Speaker #2: Our next question will come from the line of Steve Moss with Raymond James. Please go ahead.

Speaker #8: Good morning . Good morning Steve . Maybe just morning , Sam . Mark . Maybe following up on cubics here for the moment .

Steve Moss: Hi, good morning.

Sam Sidhu: Good morning, Steve.

Operator: Maybe just.

Steve Moss: Morning, Sam, Mark. Maybe following up on Qubix here for the moment, with the likelihood of additional rate cuts coming, just curious how to think about if there will be any potential increase in fees from the platform.

Speaker #8: You know , with the likelihood of additional rate cuts , rate cuts coming . Just curious . You know , how to think about , you know , if there will be any potential increase in fees from the platform .

Speaker #5: You know , so , Steve , it's a it's a it's sort of building off of the answer I gave to sort of the last question is that , you know , at the end of the day , as we're continuing to add new products and continuing to partner with our customers on of more overall initiatives , we'll , you know , we will explore , you know , fees right now , deposit growth is far outpacing any type of quote unquote asset sensitivity of of noninterest bearing deposits that are held in cash .

Sam Sidhu: Steve, it's sort of building off of the answer I gave to the last question. At the end of the day, as we're continuing to add new products and continuing to partner with our customers on more overall initiatives, we will explore fees. Right now, deposit growth is far outpacing any type of "asset sensitivity" of non-interest-bearing deposits that are held in cash. I think that for the time being right now, we feel very good about the position that we're in. Qubix, let's say all things equal, just with the growth that we've seen this quarter, Qubix's associated interest income would be higher based upon the balances today that we have relative to well over 100, 150 basis point rate cut relative to prior balances.

Speaker #5: So I think that for the time being right now, you know, we feel very good about the position that we're in.

Speaker #5: You know , sort of cubic's , let's say all things equal , just with the growth that we've seen this quarter , you know , Cubic's associated interest income would be higher , you know , based upon the balances today that we have relative to well over 100 , hundred and 50 basis point rate cut relative to prior balances .

Speaker #8: Okay . Got you . Appreciate that color , Sam . And then in terms of , you know , the loan pipeline , Mark .

Steve Moss: Okay. Got it. Appreciate that call, Sam. In terms of the loan pipeline, Mark, you made a comment about a bit of a pull-through. Just kind of curious, where does the loan pipeline stand these days? Maybe just kind of a, you know, what does that business mix look in the current pipeline?

Speaker #8: You know you made the comment about a bit of a pull through . Just kind of curious , you know , where does the loan pipeline stand up these days .

Speaker #8: And maybe just kind of a, you know, what does that business mix look like in the current pipeline?

Speaker #6: Yeah , the the loan pipeline is , is broad based . And , you know , I think what you've seen throughout this year is that our growth from quarter to quarter , you know , will come from different segments .

Mark McCollum: Yeah, the loan pipeline is broad-based. I think what you've seen throughout this year is that our growth from quarter to quarter will come from different segments. We have a good graphic depiction on that on slide 10 in the deck that shows where the growth came from this past quarter, where fund finance and commercial real estate led. We've had other quarters where the commercial banking teams, healthcare, equipment finance, etc., are all going to be meaningful contributors. The point I was making was that the almost $900 million of growth that we saw in the third quarter did include some deals that a quarter ago we may have thought were in a pipeline to maybe close in the fourth quarter. Our anticipation is that there will still be growth in the fourth quarter, but we don't expect it to approach third quarter levels.

Speaker #6: You know , you know , we have a good graphic depiction on that on slide ten . You know , in the deck that shows where the growth came from this past quarter .

Speaker #6: You know , where fund finance and commercial real estate led . But we've had other quarters where the commercial banking teams , healthcare equipment , finance , etc.

Speaker #6: , you know , are all going to be meaningful contributors . You know , the point I was making was that the , you know , almost 900 million of growth that we saw in the third quarter did include some deals that a quarter ago we may have thought were in a pipeline to maybe close in the fourth quarter .

Speaker #6: So our anticipation is that there will still be growth in the fourth quarter, but we don't expect it, you know, to approach third quarter levels.

Speaker #8: Right , okay . And then maybe just one more for me here . Just kind of curious . You know , you mentioned less .

Steve Moss: Right. Okay. Maybe just one more for me here. Just kind of curious, you mentioned that you've reduced your asset-sensitive position. Just kind of curious what you're thinking about with regard to the margin pressure from a 25 bps rate cut. I realize there's a lot of noise with the Qubix payments platform deposits coming in here, but maybe just size that up a little bit.

Speaker #8: You know , you've reduced your asset sensitive asset sensitive position . Just kind of curious what you're thinking about with regard to the margin pressure from a 25 basis point rate cut .

Speaker #8: I mean, I realize there's a lot of noise with the Cubic's deposits coming in here, but maybe just size that up a little bit.

Speaker #6: Yeah , sure . So so for us , you know , when you go and look at our our quarterly numbers , you know , we quote numbers for , you know , the impact of 100 basis point , 200 basis points up or down rate move .

Mark McCollum: Yeah, sure. For us, when you go and look at our quarterly numbers, we quote numbers for the impact of 100 basis point, 200 basis point, up or down rate move. That's that static view, which is at least one measuring stick to compare us to relative asset sensitivity to other peer banks. Obviously, the limitations on that are that no bank experiences a static across all points of the curve and then sits on their hands and does nothing to react to that. What I would tell you is that while we are still inherently asset sensitive because we are a commercial bank, and as Sam pointed out, our asset sensitivity then also increases a little bit because of our decision to hold all of the Qubix balances in cash.

Speaker #6: That's that static view that , you know , which is at least you know , one measuring stick to compare us , you know , to relative asset sensitivity to other peer banks .

Speaker #6: Obviously the limitations on that are that no bank , you know , experiences a static across all points of the curve and then sits on their hands and does nothing , you know , to react to that .

Speaker #6: You know what I would tell you is that , you know , while we are still inherently asset sensitive because we are a commercial bank , and as Sam pointed out , our asset sensitivity , then also increases a little bit .

Speaker #6: You know , because of our decision to hold all of the cubic's balances in cash , you know , but with some of the , you know , just the mix of businesses that we have as well as some of the synthetic things that we've done with with adding on , some received fixed swaps .

Mark McCollum: With just the mix of businesses that we have, as well as some of the synthetic things that we've done with adding on some receipt-fixed swaps, we're now at a point where for a 25 basis point rate move, it's around $1 million and $1.5 million annualized impact to our NII. We think that my comment that we think we're positioned to still be able to produce net interest income growth, regardless of monetary policy, is that we think there will be sufficient growth to make up any NIM compression we could see from those 25 basis point rate moves.

Speaker #6: We're now at a point where, for a 25 basis point rate move, you know, it's around a million, a million and a half dollars.

Speaker #6: You know , annualized impact to our NII , you know , but we think that , you know , my comment that we think we're positioned to still be able to produce net interest income growth , you know , regardless of of monetary policy , is that we think there will be sufficient growth , you know , to make up any Nim compression .

Speaker #6: We could see from that those 25 basis point rate moves.

Speaker #8: Okay , that's that's really helpful . Actually . Maybe if I could just squeeze one last one in , you know , Sam , you mentioned the title and sports entertainment teams here .

Steve Moss: Okay. That's really helpful. Actually, maybe if I could just squeeze one last one in. You know, Sam, you mentioned the title and sports entertainment teams here. Maybe, and I hear you in terms of potential deposit growth, is it going to be a similar kind of loan-to-deposit type mix? You know, maybe kind of curious, how many, you know, are there any additional verticals you may be looking at?

Speaker #8: You know, maybe, and I hear you in terms of potential deposit growth, it's going to be a similar kind of loan-to-deposit type mix.

Speaker #8: And, you know, maybe I'm kind of curious how many, you know, are there any additional verticals you may be looking at?

Speaker #5: Yeah , sure . Steve . So I'd say that , you know , it's it's difficult to fully project . I'd say broadly the deposit to loan is a better way to think about it , because these are mostly deposit focused , team based upon sort of the teams that we've we've onboarded .

Sam Sidhu: Yeah, sure, Steve. I'd say that it's difficult to fully project. I'd say broadly, the deposit to loan is a better way to think about it because these are mostly deposit-focused teams. Based upon the teams that we've onboarded, we expect actually that ratio to be higher than what we brought in last year. Remember last year, we also had stated that in the beginning, as we were taking market share, we were doing more lines and onboarding more existing relationships and refinancing, which meant that our deposits to loans was three to one versus stabilized being at four to one. I'd say these teams are a little bit lighter on the lending side relative to especially some of these specialized national teams and more heavy on the deposit side.

Speaker #5: We expect to actually that ratio to be higher than what we brought in last year . Remember last year we also had stated that in the beginning , as we were taking market share , we were doing more lines and onboarding sort of more existing relationships .

Speaker #5: And refinancing , you know , which which meant that our , you know , deposits to loans was was 3 to 1 versus , you know , stabilized being at sort of 4 to 1 , I'd say these teams are a little bit lighter on , you know , on the lending side relative to especially some of these specialized national teams and more heavy on on , on the deposit side .

Speaker #8: Okay. Great. I appreciate all the color, and I'll step back in the queue.

Steve Moss: Okay. Great. Appreciate all the color, and I'll step back in the queue.

Speaker #5: Thanks , Steve .

Sam Sidhu: Thanks, Steve.

Speaker #2: Our next question will come from the line of Peter Winter with D.A. Davidson. Please go ahead.

Operator: Our next question will come from the line of Peter Winter with DA Davidson. Please go ahead.

Speaker #9: Thanks . Congratulations on a great quarter . My question is on expenses . Mark , can you just give some context around the 3.4 million decline in FDIC assessment ?

Peter Winter: Thanks. Congratulations on a great quarter. My question is on expenses. Mark, can you just give some context around the $3.4 million decline in FDIC assessment? Is there still room to lower it? With this $1.6 million decline in professional fees, is that a function of a lot of the work has been done to address the written agreement? Now you're expecting kind of just in the back-testing phase.

Speaker #9: Is there still room to lower it ? And then secondly , you know , the 1.6 million decline in professional fees , is that a function of a lot of the work has been done to address the the written agreement .

Speaker #9: Now, you're expecting kind of just in the back testing phase. Sure.

Mark McCollum: Sure. Good morning. I'll answer the second question first. On the professional fees, yes, we continue to build out and invest in our risk infrastructure and work through the agreement. Some of that is hiring of people. Some of that is augmenting with professional services. Some of that is starting to be completed. We were pleased that we were able to pull through some of that reduction in the third quarter. We would hope to be able to continue to see that progress being made in the fourth quarter and into 2026 in that professional fees line. On the FDIC expenses, as I'm sure you're aware, that calculation, which used to be fairly straightforward, is now a very complex calculation on a quarterly basis, which incorporates several factors, but ultimately is a risk-based calculation.

Speaker #6: And good morning . Yeah , I'll answer the second question first on the professional fees . Yes . We continue to , you know , build out and invest in our risk infrastructure and work through the agreement .

Speaker #6: And some of those , you know , some of that is hiring of of people , some of that is augmenting with with professional services .

Speaker #6: You know , some of that is starting to be completed , you know , so we were pleased that we we were able to kind of pull through some of that reduction in the third quarter .

Speaker #6: You know , we would hope to be able to continue to see that progress being made in the fourth quarter . And into 26 in that professional fees line on the FDIC expenses , as I'm sure you're aware , you know , that calculation , which used to be fairly straightforward , you know , is now a very complex calculation on a quarterly basis , which incorporates several factors , you know , but ultimately is a risk based calculation .

Speaker #6: And , you know , as we continue to to work through , you know , and de-risk our balance sheet , you know , we are making progress and ultimately getting reductions in our FDA .

Mark McCollum: As we continue to work through and de-risk our balance sheet, we are making progress in ultimately getting reductions in our FDIC insurance. In this past quarter, I will say that we were pleased that not only did we see a reduction when we go through the calculation, but that reduction was actually retroactively applied to the first quarter of 2025. Of that $3.4 million reduction, about $1.9 million of that actually related to first and second quarter adjustments. When you see the total line sitting there at about $8.4, $8.5 million, I would expect that line in the fourth quarter to come back up to be closer to $9.5 to $10 million, but down significantly from where it was in the second and third quarters. I'd also remind you that in that line, the way it's worded, it does include more than just FDIC insurance.

Speaker #6: ESI insurance in this past quarter , I will say that , you know , we were pleased that not only did we see a reduction when we go through the calculation , but that reduction was retroactively applied to the first quarter of 2025 .

Speaker #6: So of that $3.4 million reduction , about 1.9 million of that actually related to first and second quarter adjustments . So when you see the total line , you know , sitting there at about 8.4 , 8.5 million , I would expect that line in the fourth quarter to come back up to be closer to nine and a half to 10 million .

Speaker #6: But but down , you significantly from where it was in the second and third quarters . I'd also remind you that , you know , in that line , you know , that the way it's worded , it does include more than just FDIC insurance .

Speaker #6: I mean , it also includes other above the line for us as a Pennsylvania bank , we have a PA shares tax , which also rolls through that line as well , plus a couple of other more minor regulatory fees .

Mark McCollum: It also includes other above-the-line where us as a Pennsylvania bank, we have a PA shares tax, which also rolls through that line as well, plus a couple of other more minor regulatory fees. Good progress being made. We would continue to see progress being made going forward into next year.

Speaker #6: But , you know , good progress being made . We would continue to see progress being made going forward . You know , into next year .

Speaker #9: That's great . Thank you . And then Sam , big picture question . Just you know , we're seeing more prevalent use of AI industrywide .

Peter Winter: That's great. Thank you. Sam, big picture question. We're seeing more prevalent use of AI industry-wide. I'm just wondering, can you talk about, you know, maybe outline how AI is helping the bank today and maybe how it can help the business going forward?

Speaker #9: I'm just wondering if you could talk about, you know, maybe outline how AI is helping the bank today and how it can help the business going forward?

Speaker #5: Well , Peter , thank you . It's great to get a strategy question . And it's probably our first non modeling question in a couple of quarters .

Sam Sidhu: Thank you, Peter. It's great to get a strategy question, and it's probably our first non-modeling question in a couple of quarters. Thank you so much for allowing us to not look necessarily 90 days back, but look a couple of years forward. You know, AI is going to be one of the biggest efficiency and client experience unlocks that we as an industry and country and a nation and a globe have seen since mobile banking. Our journey, I'll give you just a little bit of history. In December of 2023, we formed a cross-functional AI discovery team. We use it to learn about AI, buy the first wave of tools, test and build solutions, train, and figure out how to democratize it for everyone at the bank.

Speaker #5: So thank you so much for allowing us to not look necessarily 90 days back . But look a couple years forward . But you know you know AI is is going to be you know one of the biggest efficiency in client experience unlocks that .

Speaker #5: You know, we, as an industry and country, and a nation and a globe, have seen since mobile banking, you know, our journey.

Speaker #5: I'll give you just a little bit of history . So in December of 2023 , we formed a cross-functional AI discovery team . We use it to learn about AI by the first wave of tools , test and build solutions , train and figure out how to democratize it for everyone you know , at the bank .

Speaker #5: You know, since then, we've had various areas of the bank that have seen about a 10% productivity lift, or set a different way.

Sam Sidhu: Since then, we've had various areas of the bank that have seen about a 10% productivity lift, or said a different way, 10% savings lift, however you want to think about it. We see in 2025 that we're going to continue to drive further adoption throughout the bank and begin expanding our planning of agentic AI systems, which is, said a different way, sort of AI that can observe and decide and act across our platforms and workflows. That's also going to be how we think about the overall client experience and client onboarding over time as well. That's our medium to long-term plan. Over the next couple of years, we're going to expect AI to lift our productivity significantly. We're going to have it unlock more client experiences. It's not a side project for us. I'm leading the efforts.

Speaker #5: 1,010% savings lift. However, you want to think about it. And we see in 2025 that we're going to continue to drive further adoption throughout the bank.

Speaker #5: And begin expanding our planning of agentic AI systems , which has set a different way . It's sort of AI that can observe and decide and act across our platforms and workflows , and that's also going to be sort of how we think about sort of the overall client experience and client onboarding over time as well .

Speaker #5: That's sort of our our medium to long term plan . So , you know , again , over the next couple of years , we're going to expect AI to lift our productivity significantly .

Speaker #5: We're going to have it unlock more client experiences . It's not a side project for us . I'm leading the efforts . We see it as a foundation for the next phase of of customers bank .

Sam Sidhu: We see it as a foundation for the next phase of Customers Bank. We've mobilized incredibly early, as you can tell by looking at that timeline of when we formed our team and our governance process, and it's proving value. Just to kind of put a finer point on it, we've developed over 100 use cases for agentic AI, and we're gearing up to start beginning to test and implement.

Speaker #5: You know, we've mobilized incredibly early, as you can tell by looking at that timeline of when we formed our team and our governance.

Speaker #5: You know , process . And it's proven value . And so just to kind of put a finer point on it , we've developed over 100 use cases for Agentic AI .

Speaker #5: And you know , we're gearing up to , to to start , you know , beginning to test and implement .

Speaker #9: That's great. Thanks, Sam. I appreciate it.

Peter Winter: That's great. Thanks, Sam. Appreciate it.

Speaker #2: Our next question comes from the line of David Bishop with Hobday Group. Please go ahead.

Operator: Our next question comes from the line of David Bishop with Hovde Group. Please go ahead.

Speaker #10: Hey good morning gentlemen .

David Bishop: Hey, good morning, gentlemen.

Speaker #5: Morning .

Speaker #10: David . Yeah , Mark . Just curious , you know , you've seen some good growth here of late , especially in the non occupied commercial real estate .

Sam Sidhu: Morning, David.

Kelly Motta: Hey, how are you doing?

David Bishop: Yeah, Mark, just curious, you've seen some good growth here of late, especially in the non-owner-occupied commercial real estate, commercial real estate segment. Remind me where your concentration ratio is ending the quarter and appetite to grow those verticals?

Speaker #10: Commercial real estate segment. Remind me where your concentration ratio is. Any of the quarter in appetite to grow those verticals.

Speaker #6: Yeah yeah yeah .

Sam Sidhu: Yeah. Yeah. Dave, sorry, Mark, I'll take that. We're still, you know, we still remain below 200%, Dave. I think that's sort of the core of your question. What I would also like to add beyond sort of the actual question is, you know, I think a couple of quarters ago, we sort of talked about how our, you know, deposit to loan ratio was, you know, set differently. Our commercial real estate loan growth since we onboarded the new teams was fully funded by deposit growth. That has continued. In fact, our deposits are greater than loans since the third quarter of last year when the team started originating. We have, you know, about $700 million or so deposits we, you know, brought in across the franchise at 1.7%. Less than that in loan growth at loan yields of north of 6.3%, which is about a 4.5% spread.

Speaker #5: So, sorry, sorry, Mark. I'll take that. So, we're still, you know, we still remain below 200%. Dave, I think that's sort of the core of your question.

Speaker #5: But what I would also like to add beyond sort of the actual question is , is , you know , I think a couple quarters ago we sort of talked about how our , you know , deposit to loan ratio was , you know , said differently .

Speaker #5: Our scary loan growth since we onboarded the new teams was fully funded by deposit growth . Well , that's continued . In fact , our deposits are greater than loans since the third quarter of last year when the team started originating .

Speaker #5: So , you know , we have , you know , about 700 million or so deposits . We , you know , brought in across the franchise at 1.7% .

Speaker #5: And less than that in loan growth of at at loan yields of north of 6.3% , which is about a 4.5% spread . And what's interesting is , is , you know , the sort of 200 million plus loan growth in the third quarter .

Sam Sidhu: What's interesting is, you know, the sort of $200 million plus of loan growth in the third quarter, it's incredibly granular. Our average loan size is less than $10 million.

Speaker #5: It's incredibly granular. Our average loan size is less than $10 million.

Speaker #10: Got it . Great color and Mark , you noted the the swaps . The six first received . Just curious . Any granularity you can give us just in terms of maybe rates on receive versus fixed .

David Bishop: Got it. Great color. Mark, you noted the swaps, the six first received. Just curious, any granularity you can give us in terms of maybe, you know, rates on receipt versus fixed? Just curious if you have that handy.

Speaker #10: Just curious if you have that handy.

Speaker #11: I don't have that.

Mark McCollum: I don't have that right in front of me on the details of that notional. It ended up being two separate transactions that we did at different times of the quarter. I can follow up with the actual each side of that leg for you.

Speaker #6: Right in front of me on the details of that notional. I mean, in the end, it ended up being two separate transactions that we did at different times of the quarter.

Speaker #6: But I can follow up with the, you know, actual each side of that leg for you.

Speaker #10: Got it. And then, Sam, turning it back to the team, especially on the title team, you said that was the national basis.

David Bishop: Got it. Sam, turning back to the, especially on the title team, you said that was a national basis. Any way to ring-fence the deposit opportunity there? Just curious maybe how big of a book they manage at their product shop and what the potential is there to move the needle from the deposit basis?

Speaker #10: Is there any way to ring-fence the deposit opportunity there? But just curious, maybe how big of a book they managed at their prior shop and what the potential is there to move the needle from a deposit basis?

Speaker #10: Thanks .

Speaker #5: Yep . So , Dave , it's , you know , a bit early to to sort of think of this as sort of a payments platform that is , you know , sort of supported on top of our existing , you know , retail and commercial title , you know , team efforts and platform that we have at the existing bank .

Sam Sidhu: Yeah. David, it's a bit early to sort of tell. Think of this as a payments platform that is supported on top of our existing retail and commercial title team efforts and platform that we have at the existing bank. What I would say about this is these types of team recruitment initiatives, I think we've stated this before when folks have come to us and asked about the types of teams that we look for. If you go back to 2023, the team that we brought on in 2023 had a multi-billion dollar book. The teams that we brought in in 2024, most of the teams had individually about a billion dollars or more of book. Similarly, as we look to acquire and recruit larger teams in 2025, we've also looked for that similar type of threshold.

Speaker #5: And , you know , what I would say about this is , you know , these types of , you know , team recruitment initiatives .

Speaker #5: I think we've stated this before when when folks have come to us and asked about sort of the types of teams that we look for , if you go back to 2023 , you know , the team that we brought on in 23 had , you know , a , you know , multi-billion dollar book , the team that we brought in , the teams we brought in 24 , most of the teams had individually , you know , about $1 billion or more of book and , and similarly , as we sort of look to , to , to acquire and recruit sort of larger teams , you know , in , in 25 , we've also looked for that similar type of threshold .

Speaker #5: So we see it as an interesting opportunity for us to leverage our operational strength , our technology strength , as well as sort of the single point of contact , you know , commercial delivery model .

Sam Sidhu: We see it as an interesting opportunity for us to leverage our operational strength, our technology strength, as well as the single point of contact commercial delivery model.

Speaker #10: Great. I appreciate the color, guys.

David Bishop: Great. Appreciate the color, guys.

Speaker #2: Our next question comes from the line of Kelly Motta with KBW. Please go ahead.

Operator: Our next question comes from the line of Kelly Motta with KBW. Please go ahead.

Speaker #12: Hey . Good morning . Thanks for the questions . And congrats on the quarter . Maybe maybe hitting on asset quality . Your track record has been really strong .

Janet Lee: Hey, good morning. Thanks for the questions and congrats on the quarter. Maybe hitting on asset quality, your track record has been really strong. In light of the really strong growth you've been seeing and the earlier focus during earnings season towards C&I lending, can you provide some comments as to, clearly, you've been very thoughtful in your approach, what are the biggest verticals within that for you and what gives you comfort on those? Thank you.

Speaker #12: And just in light of the really strong growth you've been seeing and the earlier focus during earnings season towards NFI lending , can you just provide some some comments as to , you know , clearly you've been very thoughtful in your approach just how how what are the biggest verticals within that for you ?

Speaker #12: And what gives you comfort on those? Thank you.

Speaker #6: Sure , Kelly , it's Mark . Good morning . Yeah , we do think , you know , as I mentioned earlier , credit quality has always been a critical success factor for us .

Mark McCollum: Sure, Kelly. It's Mark. Good morning. Yeah, we do think, you know, as I mentioned earlier, credit quality has always been a critical success factor for us. When we focus on our NDFI exposure, we think that that's also a credit strength of our franchise, and we believe arguably one of the lower risk credit risk portions of our overall C&I portfolio. I'm sure as, you know, the analyst community has learned, when you look at that category on a call report, not all NDFI lending is created equal. There are several different categories that roll up to that. For Customers, NDFI loans generally fall into three categories: mortgage warehouse and what we call fund finance or capital call lending. Those two categories make up just a little less than 0.5% of our overall exposure, and then the lender finance piece makes up the other half.

Speaker #6: And when we focus on our NFI exposure, we think that that's also a credit strength of our franchise. We believe it's arguably one of the lower risk credit risk portions of our overall CNI portfolio.

Speaker #6: You know , I'm sure as you know , the analyst community , you know , has learned when you look at that category on a call report , not all NFI lending is created equal .

Speaker #6: There are several different categories that roll up to that for customers. NFI loans generally fall into three categories: mortgage, warehouse, and what we call fund finance or capital call lending.

Speaker #6: Those two categories make up just a little less than half a percent of our overall exposure. And then the lender finance piece makes up the other half.

Speaker #6: The first two categories, mortgage warehouse and capital call lending, I think most people understand those businesses and understand that they have inherently very low credit risk.

Mark McCollum: The first two categories, mortgage warehouse and capital call lending, I think most people understand those businesses and understand that they have inherently. Very

Operator: Low credit risk. Most of the recent attention this past quarter has been on the lender finance space. For Customers, this is one of the oldest specialized lending businesses we've been in. It's one we've been in for over a decade, and we've not only had zero losses, but zero loan defaults. In this business, this is typically lending to a private credit fund where the collateral is a broadly diversified pool of loans to middle-market companies. There's significant over-collateralization. We have low advance rates, and it is very diversified, so our single obligor exposure is very low, kind of mid-single digit. When you put all those things together, it's translated into, again, zero losses, zero defaults. The last comment I'll make on that space is that it's always really important to understand who you're lending to. Depth of relationship is key.

Speaker #6: Most of the recent attention this past quarter has been on the lender finance space for customers. This is one of the oldest specialized lending businesses we've been in.

Speaker #6: It's one we've been in for over a decade , and we've not only had zero losses , but zero loan defaults , you know , in this business , this is typically lending to a private credit fund where the collateral is a broadly diversified pool of loans to middle market companies .

Speaker #6: You know , there's significant over we have low advance rates and there is a you know , it's very diversified . So our single obligor exposure is very low kind of mid single digit .

Speaker #6: So when you put all those things together you know , it's translated into again zero losses zero defaults . The last comment I'll make on that space , you know , is that it's always really important to understand who you're lending to .

Speaker #6: You know . So you know , depth of relationship is key . Again , we've been in the business for ten years and we have , you know , on average about a five year track record with with the managers that we do business with .

Operator: Again, we've been in the business for 10 years, and we have, on average, about a five-year track record with the managers that we do business with.

Speaker #12: That's really helpful . Color Mark . Thank you . Thank you for that . And then , you I know we've covered Cubex quite , quite in depth here .

Operator: That's really helpful color, Mark. Thank you for that. I know we've covered Qubix payments platform quite in depth here, and it's been a source of strength for you guys. Wondering, given the news of De Novo entering the digital asset space, any updated thoughts in terms of the competitive moat here?

Speaker #12: And and it's been a source of strength for you guys . Wondering you know , given the the news of a de novo entering the digital asset space , any , any updated thoughts in terms of the competitive moat here ?

Speaker #5: Yep . Sure . You know , I think that just to sort of highlight , you know , Kelly , at the end of the day we've we've I think we've done a pretty good job of highlighting the strength of the existing , you know , sustainable , stable , you know , large scale network and the benefits of network effect .

Philip Watkins: Yep, sure. I think that just to sort of highlight, Kelly, at the end of the day, I think we've done a pretty good job of highlighting the strength of the existing, sustainable, stable, large-scale network and the benefits of network effect. We've also made sure that we're fully integrated in and broadening our relationship with our existing customers. We built an incredible amount of brand loyalty, and we've made significant investments in technology and risk management. I think that's what I would sort of just recap a little bit with. To your question about competition from fintechs, there's a host of reasons that companies may want to get banking or trust licenses like trust and custody. You do consolidate under a national charter, engage in international activities beyond typical state borders, and offer consumer products and services. All of these are complementary to the Qubix payments platform.

Speaker #5: We've also , you know , made sure that we're fully integrated in , you know , and broadening our relationship with our existing customers .

Speaker #5: We built an incredible amount of of brand loyalty . And we've made significant investments in technology and risk management . So I think that's what I would sort of just sort of recap a little bit with , but , you know , to your question about sort of , you know , competition from fintechs and , you know , there's there's a host of reasons that that , you know , companies may want to get banking or trust licenses like trust and custody .

Speaker #5: You do consolidate under a national charter , you know , engage in , you know , activities beyond sort of typical state borders and offer sort of consumer products and services .

Speaker #5: So all of these are complementary . You know , to cubics . And , you know , one of the things that's really interesting is , is that , you know , we have a , you know , a significant number of customers that either , you know , directly are a license holder , you know , over charter or are or hold , you know , subsidiaries that have a charter already and they hold their primary accounts at customers bank because the value of our network .

Philip Watkins: One of the things that's really interesting is that we have a significant number of customers that either directly are a license holder of a charter, or hold subsidiaries that have a charter already, and they hold their primary accounts at Customers Bank because of the value of our network. I think that's one of the most important things is we have a very robust 24/7 network that our customers, our customers' customers in the industry rely on.

Speaker #5: And I think that's one of the most important things , is we have , you know , a very , you know , robust 24 over seven network that our customers , our customers , customers and the industry relies on .

Speaker #12: Thank you for that, Sam. I will step back.

Operator: Thank you for that, Sam. I will step back.

Speaker #2: Our next question will come from the line of Hal with B. Riley Securities. Please go ahead.

Jay Sidhu: Our next question will come from the line of Hal Goetsch with B. Riley Securities. Please go ahead.

Speaker #13: Hey , first question is , can you just go over the details of the of the $10 million net income kind of benefit in the quarter ?

Sam Sidhu: The first question is, could you just go over the details of the $10 million net income kind of benefit in the quarter? I think you said it was going to benefit the fourth quarter as well. It's just kind of a housekeeping item just to better understand that. Two, back to the second question is on the FDIC insurance. Is there any way to say like, hey, your equity raise helped lower, you know, de-risk the company a little bit? That helped lower your FDIC assessments. Is there any way of quantifying what that might have been as part of the formula? This is just for our own edification. Thanks.

Speaker #13: And, I think you said it was going to benefit the fourth quarter as well. It's kind of housekeeping to understand that.

Speaker #13: And then two , back to second question is on on the FDIC insurance is is there any way to say like , hey , your equity raise helps lower de-risk the company a little bit ?

Speaker #13: That helped lower your FDIC assessments? Is there any way of quantifying what that might have been as part of the formulas? This is just for our own edification.

Speaker #13: Thanks .

Speaker #6: Yeah . Yeah , sure . Hal , this is Mark . So for the FDIC insurance . Yes , the capital raise , you know , would have helped that somewhat .

Operator: Yeah, sure, Hal. This is Mark. For the FDIC insurance, yes, the capital raise would have helped that somewhat. It is a very complex calculation with multiple factors, but your CET1 ratio is one of the factors that goes into that. However, I would say that some of this is also just more broader-based progress we've made across deposit growth, reducing broker deposits. There are multiple factors that play into it. The capital raise impacted our third quarter assessment. As I said, some of the relief that we received was retroactive to the first quarter. It really reflects the progress we had made in the prior two quarters as well. Moving to the net interest income benefit, in the second quarter, we had previously originated some loans and had participated in those loans to a partner.

Speaker #6: You know , again , it is a very complex calculation with multiple factors . But you know , but your your common equity tier one ratio , you know , is one of the factors that goes into that , you know , however , I would say that , you know , some of this is also just more broader based progress .

Speaker #6: We've made , you know , across , you know , just just deposit growth , you know , reducing broker deposits there are there are multiple factors that play into it .

Speaker #6: And the capital raise impacted our third quarter assessment . But as I said , some of the relief that we received , you know , was due to was retroactive to the first quarter .

Speaker #6: So it really reflects , you know , the progress we had made in the prior two quarters as well . Moving to the , you know , net interest income benefit in the second quarter , we had previously originated some loans and had participated those loans to a partner .

Speaker #6: You know, we had an opportunity, you know, where that partner approached us in the second quarter to repurchase those loans.

Operator: We had an opportunity where that partner approached us in the second quarter to repurchase those loans. It was a small pool of loans, but we had an opportunity to repurchase them at a pretty significant discount. We executed on that transaction in June and had a very small level of accretion benefit in the second quarter. We had highlighted on that call that we would then see a $10 million benefit from that discount accretion in the third quarter. We would see another $10 million incremental benefit in the fourth quarter, and then that discount accretion would largely go away for the first quarter of 2026. Hope that explains that. While I also have the benefit here, I'll answer David Bishop's earlier question on the received fixed swaps that we put on.

Speaker #6: And it was a small pool of loans, but we had an opportunity to repurchase them at a pretty significant discount. So we executed on that transaction in June.

Speaker #6: You know , had a , you know , very small level of accretion benefit in the second quarter . But then , you know , we had highlighted on that call that we would then see a $10 million benefit from that discount accretion in the third quarter .

Speaker #6: We would see another 10 million incremental benefit in the fourth quarter . And then and then that discount accretion would , would largely go away for the first quarter of 2026 .

Speaker #6: Hope that explains that. And while I also have the benefit here, I'll answer Dave Bishop's earlier question on the received fixed swaps that we put on.

Speaker #6: We put on , you know , those at a at a receive fixed rate between 350 and 360 and , and then we're , we're paying one month sofr on that .

Operator: We put on those at a received fixed rate between 3.50% and 3.60%, and then we're paying one month SOFR on that. When you put on those kind of swaps, that's actually a negative to our net interest income right now. You don't put on swaps to earn money or not earn money. It's for risk management purposes. If rates would fall more than 75 basis points from where we are today, which the forward forecast would certainly predict at some point in 2026, those swaps would actually turn positive on us.

Speaker #6: So, you know, when you put on those kinds of swaps, that’s actually a negative to our net interest income right now.

Speaker #6: But again you don't put on swaps to to earn money or not earn money . You know it's for risk management purposes . And you know , if rates would fall , you know , more than 75 basis points from where we are today , which the forward you know , forecast would certainly predict .

Speaker #6: You know, at some point in 2026, those swaps would actually turn positive on us.

Speaker #13: Thank you very much.

Sam Sidhu: Great. Thank you very much.

Speaker #6: Sure .

Operator: Sure.

Speaker #2: Our final question will come from the line of Matthew Breese with Stephens. Please go ahead.

Jay Sidhu: Our final question will come from the line of Matthew Breese with Stephens. Please go ahead.

Speaker #14: Hey good morning . Hey good morning Matt . A few questions from me , maybe big picture . Sam for you in April , the Treasury put out a report looking at potential growth of stablecoin .

Mark McCollum: Hey, good morning.

Sam Sidhu: Hey, good morning, Matt.

Mark McCollum: A few questions from me, maybe big picture, Sam, for you. In April, the Treasury put out a report looking at potential growth of stablecoin, and they set some really lofty targets. I think they said stablecoin outstanding could hit $2.8 trillion by 2028, longer term north of $6 trillion. Balance is today around $300 billion. The use cases in stablecoin are still very heavily tilted towards crypto. Maybe one, do you agree with these longer-term targets? Two, how do you expect stablecoin usage to kind of break out of its current pie chart being so heavily tilted towards crypto trading and hit the masses?

Speaker #14: And they they set some really lofty targets . I think they said stablecoin outstanding could hit 2.8 trillion by 2028 . Longer term , north of 6 trillion balances today , around 300 billion .

Speaker #14: The use cases in stablecoin are still very heavily tilted towards crypto. So maybe one—do you agree with these longer-term targets?

Speaker #14: And two, how do you expect stablecoin usage to kind of break out of its current pie chart, being so heavily tilted towards crypto trading, and hit the masses?

Speaker #5: Good morning Matt . And thanks for the question . It's you know , it's helpful to have an analyst like you who's been covering and following , you know , the industry for for such a , you know , a long period of time .

Philip Watkins: Good morning, Matt, and thanks for the question. It's helpful to have an analyst like you who's been covering and following the industry for such a long period of time. Your question is a good one. I think the Treasury put out some incredibly lofty targets, and I think the perspective from Treasury's perspective, as I understand it, was to sort of give it a little bit of a reference point and justification for genius, but then also sort of a sense of demand for U.S. Treasuries. This is sort of a bit of my view in early stages. What I would say is that you're absolutely right. Somewhere between 85% to 95% plus of current stablecoin activity is related to digital asset trading and settlement. That's something that we see on our platform as well.

Speaker #5: So you know , your question is a good one . I think the , the Treasury put out some incredibly lofty , you know , targets .

Speaker #5: And I think the perspective for the from Treasury's perspective , as I understand it , was to sort of give a little bit of a reference point and justification for genius , but then also sort of a sense of demand , you know , for U.S.

Speaker #5: treasuries . So , you know , this is sort of a bit of my view . In early stages . You know , what I would say is , is that you're you're absolutely right .

Speaker #5: Somewhere between 85 to 95% plus of current stablecoin , you know , activity is related to digital asset . You know , trading in settlement .

Speaker #5: And that's something that we see , you know , on our on our platform as well . You know what I would say , you know , is that there are tremendous amount of obvious , obvious use cases for stablecoins , as you think about cross-border and FX .

Philip Watkins: What I would say is that there are a tremendous amount of obvious use cases for stablecoins as you think about cross-border and FX. It's just reasonably intuitive and easy to kind of reconcile that for anyone who's tried to operate with U.S. cards or U.S. fiats, just physically going as a tourist, but then also imagine that from a commercial perspective and engaging and holding working capital and transacting with folks across the border. I expect that some of the large banks that have capital markets divisions will find some interesting use cases for stablecoins in a lot of their businesses as you think about the utilization specifically of blockchain beyond just the U.S. dollar movement across. Finally, I think the biggest demand from my perspective is going to come from non-U.S. domiciled customers and countries where there could be high inflation.

Speaker #5: Just it's reasonably intuitive and easy to kind of , you know , reconcile that for anyone who's tried to , you know , operate with sort of US cards or U.S.

Speaker #5: Fiats just physically going as a tourist, but then also imagine that from a commercial perspective and sort of engaging and holding working capital and transacting with folks across the border.

Speaker #5: I expect that some of the large banks that have capital markets divisions will find some interesting use cases for stablecoins in a lot of their businesses.

Speaker #5: As you think about the utilization specifically of blockchain beyond just sort of the U.S. dollar, you know, sort of movement across.

Speaker #5: And then finally , I think the biggest demand from my perspective is going to come from non US domiciled . You know , customers and and and and countries where there could be high inflation .

Speaker #5: There's an opportunity to leapfrog from point of sale perspective and really utilize the stablecoin as a transactional stablecoin , you know , to , you know , to transact off of and sort of pay off of .

Philip Watkins: There's an opportunity to leapfrog from a point-of-sale perspective and really utilize the stablecoin as a transactional stablecoin to transact off of and pay off of. I think those are where I see some of that non-U.S. growth potentially coming, and that would flow into Treasury's more locally. What I would just remind you and everyone is that we have designed our platform to be really the infrastructure provider just to the stablecoin to U.S. dollar stablecoin issuers. To really be prevalent and relevant, you really need to be on our network and present in our bank. That's really what we think we've done in a very unique way.

Speaker #5: I think those are sort of where I see some of that sort of non-U.S. growth potentially coming . And that would sort of flow into , you know , into treasuries , you know , more locally .

Speaker #5: But what I would just remind , remind you and everyone is , is that , you know , we have designed our , our platform to be really the infrastructure provider to , to , you know , to stablecoin to US dollar sort of stablecoin issuers and , you know , and to really to really be prevalent and relevant , you know , you really need to be on our network and present in our bank .

Speaker #5: And that's really what we think we've done in a very unique way.

Speaker #14: I appreciate all that . A couple more from me on cubics . I think someone else asked it earlier , but you know , you're now up to , you know , knocking on 20% of total deposits north of 60% of your demand .

Mark McCollum: Appreciate all that. A couple more from me on the Qubix payments platform. I think someone else asked it earlier, but you're now up to knocking on 20% in total deposits. North of 60% of your demand deposits are in the Qubix payments platform. Where do you draw the line in terms of safe balance sheet exposure to this industry? I know historically you had a 15% cap. Where do we stand in terms of updating that cap or putting some limitations, especially given the volatile nature of the industry and the history of banks that have catered here?

Speaker #14: Deposits are in cubics. Where do you draw the line in terms of, you know, safe balance sheet exposure to this industry?

Speaker #14: I know historically you had a 15% cap . You know , where do we stand in terms of updating that cap or putting some limitations , especially given , you know , the volatile nature of the industry and the history of banks that have that have catered here .

Speaker #5: Sure . I'm happy to take that . So I think that , Matt , this question was asked last quarter and our view doesn't change and hasn't changed quarter to quarter .

Philip Watkins: Sure. I'm happy to take that. I think that, Matt, this question was asked last quarter, and our view doesn't change and hasn't changed quarter to quarter. What I would say is that just as a reminder, even prior to March of 2023, the industry did not hold these deposits in cash, ourselves included. I think that's a really important change that we decided to make until we sort of had really strong operating history that we could rely on. One of the things that's a little bit more internal that we haven't necessarily highlighted as much is a number of our large institutional customers sort of give us minimum target thresholds that they want to operate in, average balance thresholds that they want to operate in that they adhere to, which is incredibly helpful for us from a stability perspective.

Speaker #5: You know what I would say is that just as a reminder , even prior to to March of 23 , the industry did not , you know , hold these deposits in cash , ourselves included .

Speaker #5: And I think that's a really important , you know , change that that we decided to make until we sort of had really strong operating history and that we could rely on one of the things that's a little bit , you know , you know , perspective that's more internal that we haven't necessarily highlighted as much as , you know , a number of our large institutional customers , you know , sort of give us , you know , minimum target thresholds that they want to sort of operate in average balance thresholds that they sort of want to operate in that that they adhere to , which incredibly helpful for us from sort of a stability perspective .

Speaker #5: And that's seen in that , you know , 30 day rolling average deposit balance chart that we provided to you there . And I think that's really important .

Philip Watkins: That's seen in that 30-day rolling average deposit balance chart that we provided to you there. I think that's really important. That's the way that we think about the $900 million that we, or $800 million, rather, I should say, that we grew in this quarter. It's being held in cash. It's adding interest income to our platform and continuing to strengthen the value of our overall franchise and earning space. Right now, I think, as I mentioned earlier, we're really focused on institutional breadth of the network and product expansion, which will bring additional opportunities on the fee side and really also bring additional competitive moat to the overall infrastructure, especially when you layer on the risk and compliance investments.

Speaker #5: So that's sort of the way that we think about the 900 million that we , you know , 800 million rather , I should say that we grew in this quarter .

Speaker #5: It's been held in cash . It's adding interest income to , you know , to our platform , you know , and continuing to , you know , strengthen the value of our overall franchise and sort of earnings base .

Speaker #5: And right now, I think, as I mentioned earlier, we're really focused on the institutional breadth of the network and product expansion, which will bring additional opportunities on the fee side.

Speaker #5: And really also , you know , bring additional , you know , competitive mode to the overall infrastructure , especially when you sort of layer on the risk and compliance investments .

Speaker #14: Got it . And then , you know , I did notice that , you know , the , you know , the dollar amount of uninsured deposits ticked up this quarter .

Mark McCollum: Got it. I did notice that the dollar amount of uninsured deposits kicked up this quarter. I asked a similar question last quarter, but I was curious about what the average size of deposits are on the Cubix platform. Are there any that are, or how many are north of, call it, $250 million in kind of average balances?

Speaker #14: And I asked a similar question last quarter, but I was curious about what the average size of deposits are on the Qubits network.

Speaker #14: And, you know, are there any that are, or how many are north of, call it $250 million in kind of average balances?

Speaker #5: Yeah . So , Matt , I think that I don't have the exact sort of number on , on , you know , on insured deposits .

Philip Watkins: Yeah. Matt, I think that, you know, Dan's, I don't have the exact sort of number on, you know, uninsured deposits, but I think our overall uninsured deposits or insured deposits and sort of collateralized deposits is well above industry averages, which I think is incredibly important. Large, you know, Qubix depositors, I mentioned this before, is, yes, we have large exchanges that are incredibly critical to the industry and to Customers Bank and to the network. At times, these deposits do get into the multiple nine-figure type territory. What's important about the network, which is helpful, and I mentioned this earlier, is broad-based, nearly every customer, you know, increased, of the hundreds of customers that are on the platform, increased their deposits based upon activity in the third quarter. I think that's sort of how to think about the overall growth of our platform and strength of the network.

Speaker #5: But , you know , I think our , our overall uninsured deposit or insured deposits and sort of collateralized deposits is , you know , is well above sort of industry averages where I think is , is incredibly important on sort of large .

Speaker #5: You know , cubics depositors . I've mentioned this , you know , before is yes . The you know , we have large exchanges that are incredibly critical .

Speaker #5: You know , to the industry and to customers bank and to the network and at times these , you know , these these deposits do get into sort of the multiple nine figure type , you know , territory .

Speaker #5: But what's important about the network , which is helpful , I , I mentioned this earlier is broad based . Nearly every customer , you know , increased you know , of the hundreds of customers that are on the on the platform , increased their deposits based upon activity in the third quarter .

Speaker #5: And I think that's sort of how to think about the overall growth of our platform and the strength of the network.

Speaker #14: I appreciate all that. I'll leave it there. Thank you. Sam.

Mark McCollum: I appreciate all that. I'll leave it there. Thank you, Sam.

Speaker #5: Thanks , Matt .

Philip Watkins: Thanks, Matt.

Speaker #2: That will conclude our question-and-answer session. I'll hand the call back over to Sam Sidhu for any closing comments.

Jay Sidhu: That will conclude our question and answer session. I'll hand the call back over to Sam Sidhu for any closing comments.

Speaker #5: Thank you, everyone, for your interest in and support of Customers Bank. We really appreciate you. You know, being a part of this incredible franchise that we're building.

Philip Watkins: Thank you, everyone, for your interest in and support of Customers Bank. We really appreciate you being a part of this incredible franchise that we're building. I really want to give a special shout out and thank you to our incredible team. Have a great day and a great weekend.

Speaker #5: And I really want to give a special shout-out and thank you to our incredible team. Have a great day and a great weekend.

Jay Sidhu: That will conclude today's call. Thank you all for joining. You may now disconnect.