Customers Bancorp (CUBI) Q1 2026 earnings call transcript

Thank you, Miriam, and good morning, everyone. The presentation you will see during today's webcast has been posted on the Investors web page of the bank's website at www. customersbank. com. You can scroll to first quarter 2026 results and click Download Presentation. You can also download a PDF of the full press release at this spot. Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking statements under applicable securities laws.

These forward-looking statements are subject to change and involve a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update those forward-looking statements in light of new information or future events except to the extent required by applicable securities laws.

Please refer to our SEC filings, including our most recent Form 10K and our current reports on Form 8K for a more detailed description of the assumptions and risk factors related to our business. Copies of these filings may be obtained from the SEC or by visiting the Investors Relations section of our website. We also reference non-GAP financial measures, so it's important to review our GAP results in the presentation and the reconciliations in the appendix.

At this time, it is my pleasure to introduce Customer's Bank Corp CEO, Sam Sidu.

Thanks, Phil. Good morning, everyone, and welcome to Customer's Bank Corp's first quarter, 2026 earnings call. I'm joined this morning by our Chief Financial Officer, Mark McCollum. Before we get into the results, I want to take a moment to share what makes this call meaningful to me. While I've been CEO of Customer's Bank since 2021, January 1st marked my first day as CEO of Customer's Bank Corp. This was the result of a careful multi-year succession process that Jay, our board, and the leadership team built with intentionality.

Jay is now our Executive Chairman, and having his guidance and engagement during this transition has been invaluable. I couldn't be more grateful for what he built, and for the confidence he and the board have placed in me. And I want to be clear, the strategy, the culture, and the principles that got us here are not changing. Entrepreneurial urgency, a differentiated approach centered on service and technology, an obsession with earning the right to serve each client every day. Those don't change.

The clearest proof that this model is working is our net promoter score. It came in at 81 this year, up eight points from last year, and nearly twice the banking industry average of 41. That puts us in the company of the most admired service brands across any sector, not just banking. It's the signal we look at very closely, because it tells us whether the flywheel is humming.

Great service drives retention and referrals, which drives financial performance, which attracts better teams, which makes the service even better. That cycle is self-reinforcing, and right now it's not only working, it's accelerating.

Now I'll take you through some highlights from the first quarter and our priorities, then hand it over to Mark for the financial details.

Turning to slide four, Q1-2026 was another clear demonstration of a model that is firing on all cylinders. I'll walk you through some financial highlights. Total deposits grew 16%, and total loans grew 15% on an annualized basis in the quarter. Total non-interest bearing balances grew to a record, $6.7 billion driven by our new teams. We delivered significant positive operating leverage with year over year revenue growth, far outpacing expense growth.

Tangible book value per share grew 16% year over year, continuing a multi-year track record of 15% plus growth, which is among the very top in the industry. And we accomplished all of this while maintaining strong credit performance and ample liquidity.

On slide five, you can see our top priorities. One of the questions I get asked most often since becoming CEO is what's changed. My answer is simple. The last several years were about building the team, aligning around a shared direction and executing on foundational investments, including in our tech, payments, and risk management infrastructure. That work is largely complete, and hopefully that shows.

Now I am able to focus my time less on the next two to three quarters and more on building the platform for performance over the next two to three years. This shift is what shapes our four priorities for 2026.

First, AI and automation. We are moving fast and with real conviction toward a goal of workflow orchestration across the company. Second, payments in the cubic ecosystem. We built Cubics from scratch. And now, by transaction volume, it is one of the largest commercial payments platforms in the country.

Third, organic balance sheet growth and talent recruitment. Our past hiring supports our guidance of growth in loans and deposits that is well ahead of the industry. And our current team onboarding and recruitment pipeline sets up for continued growth in 2027 and beyond.

And fourth, risk management excellence. This is not just a compliance posture. It is a competitive one. The regulatory environment around payments and digital assets is becoming more constructive, which plays directly to our existing strengths and widens our moat. We are appreciative of the increasingly collaborative relationship with our regulatory stakeholders and intend to be a bank that regulators view as a model for risk management. We believe that risk management excellence is becoming an asset for us.

Turning to slide six on AI. I want to be direct. We are moving aggressively to operationalize AI across customers' bank. We believe AI represents the biggest opportunity in a generation for a bank of our size and culture. We are small enough to move fast and large enough to invest with intent, which is a rare combination.

Most organizations are focused on productivity gains, which we are to and will achieve. But we're most excited about the revenue generation and risk reduction opportunities from these tools. I am personally leading our AI transformation effort because I believe the bank in our tier that wins on AI will have compounding benefits and structural advantages that will be very difficult to match. To walk you through the evolution, in 2023, we entered into initial enterprise partnerships with companies like OpenAI and Microsoft.

In 2024, we established a foundation by implementing AI governance and beginning data transformation efforts. In 2025, we moved into production. We trained 100% of our team members. We piloted targeted use cases, which are already delivering measurable results. AI began first testing, then writing code, and we started building agents. Now in 2026, we are training our team members to be builders and managers of agents, and we are seeking to automate end-to-end workflows across our operating platform.

The three key initial focus areas in the commercial bank are loan onboarding with a focus on credit underwriting, deposit customer onboarding, and payments orchestration. I'm thrilled to say that we're already seeing tangible results. From an adoption standpoint, 75% of our team members have AI licenses. More than 500 agents and custom GPTs have been built by our workforce, approximately two dozen of those in the last two weeks alone. We have saved more than 28,000 hours through AI-enabled workflows, unlocking the equivalent of almost 15 FTEs. This strategic change should allow us to scale our operations far faster than we would need to scale our workforce.

We already have best-in-class efficiency, as you can see from our non-interest expense to average asset ratio. Even so, we would expect that as we grow, our asset, revenue, and earnings per employee ratios would increase meaningfully. We should be able to provide medium-term targets on those in the coming quarters. At the same time, the value additive and strategic work conducted by our team members would go up immensely.

To accomplish this, we are utilizing a broad range of tools. This includes strategic partnerships, like one we just signed this week, with a large frontier model provider that we are very excited about. We'll have more details to share on that soon, but it shows that leaders in the Industry View Customers Bank as being on the forefront of utilization of this technology and assisting them in advancing adoption in the regional bank space.

This partnership will initially be focused on the three priorities I outlined earlier, loans, deposits, and payments. We are only at the beginning of realizing the benefits from this technology, and we intend to be a leader in unlocking it.

Moving to slide seven. We believe payments functionality is the future of banking, and Cubex is our platform for capturing that future. At its core, Cubex gives clients seamless access to all of our payments rails. From traditional wire and ACH to RTP FedNow and our proprietary 24-7-365 Interbank Instant Payments Platform, we built it in-house, and today it is one of the largest commercial payments platforms in the country by transaction volume.

One item worth highlighting is that even though the digital asset industry saw meaningful declines in volume and prices over the last couple of quarters, our balances were relatively stable. Importantly, we processed $500 billion in transaction activity for our digital asset clients in the first quarter, a similar pace to 2025 despite the perceived market headwinds. This reflects the mission critical nature of the service we provide and the quality of the relationships we have built with our customers.

As we previously stated, we are focused on deepening that engagement through enhanced product offerings that drive increased wallet share and stickiness. In 2026, our priority is to broaden the Cubex ecosystem beyond its digital asset beginnings.

We have started enabling and see significant opportunity in, mortgage finance and real estate transaction settlement, where the demand for real-time bank grade payments infrastructure is growing. While the mortgage finance deposits represent balances from existing clients today, we are in active discussions with networks of prospective clients in the real estate industry, and we believe they will be meaningful drivers of non-interest bearing deposit growth in 2026.

To help make it real, our 90-day pipeline for Cubex customers from new industries is greater than the slight decline in average digital asset balances we saw in the first quarter. Additionally, we see strong opportunities to partner with large institutions in traditional capital markets as exchanges move to 23.5 and eventually 24.7. This could drive both deposits and fee income opportunities for us with even further diversification.

While Cubex is highly profitable serving the digital asset industry, when we achieve broader industry adoption, we will get meaningful operating leverage and even more durable earnings. We believe we are still in the early innings of unlocking the full franchise value of this technology.

Moving to slide eight, banks by nature grow at roughly the pace of the broader economy. There are only two ways to grow faster, acquire it or earn it. We earn it through our people, our platform and our culture. We are one of the top organic growth stories in the industry. We have not relied on acquisitions to build this franchise and have still delivered disciplined growth at rates that far surpass our peers.

What we have done is continuously recruited top talent giving them access to a strong balance sheet, a sophisticated product suite, best in class technology and importantly, they gain a culture that empowers them to do more for their clients than they could elsewhere. I'm thrilled to say that year to date, we have already had 20 bankers join us or sign off for letters and we're in active discussions with half a dozen other team leaders. These bankers represent a mix of geographic CNI and national specialized verticals. This is not a new playbook.

It is the same strategy that has driven our long-term out performance and that has produced results at the very top of our peer group. We are the number one compounder of core DPS and a top compounder of tangible book value and revenue among peers over the last six years. They are the clearest long-term indicators of franchise value creation and share price performance.

Before I hand the call over to Mark, I want to take a moment to welcome two new equity analysts joining our story. We're pleased to have Tony Elian from JP Morgan and Manuel Navas from Piper Sandler covering customers bank. Welcome to both of you. We look forward to building strong relationships for years to come.

With that, I'll pass it to you, Mark.

Thanks, Sam. Good morning, everyone. On slide nine, you can see our gap financials and I'll start my comments on slide 10. In the quarter, we delivered gap and core EPS of $1.97 as gap and core earnings were materially consistent.

Core ROE and ROA came at 13.1% and 1.13% respectively. Our consistent execution has led to core EPS increasing 28% from last year.

Turning to slide 11, total deposits grew over 800 million in the quarter to 21.6 billion. Up 2.7 billion or 14% year over year. The quality of our deposit franchise continued to improve and I want to highlight two dynamics in particular.

First, non-interest bearing deposits grew by over 400 million in the quarter. Included in this total was a $200 million contribution from spot balance increases in our digital assets channel. But what I really want to point out is the approximately $230 million contribution during the quarter from our traditional commercial franchise.

These balances were up 9% quarter over quarter and 22% year over year. This is directly attributable to the success of our commercial banking team strategy and the strength of the relationships these bankers bring.

As you heard from Sam, total non-interest bearing deposits reached a record 6.7 billion or over 31% of total deposits. Not just top quartile, but about top decile of regional bank peers.

Second, average total deposit cost declined again in the quarter by eight basis points to 2.46% and our cost of interest bearing deposits declined by 18 basis points. We were continuing to benefit from the positive mix shift of our deposit book as we grow lower cost relationship based deposits.

Turning to slide 12, it highlights the results of our commercial banking team strategy. And I'll give you a spotlight on our 2024 vintage teams as they recently hit their two year anniversary with customers.

The 10 teams launched in April of 2024 now manage over 2.1 billion in deposit balances across approximately 8,000 accounts with 32% of these balances being non-interest bearing at an average total deposit cost of around 2%. They've also generated a positive to loan ratio of about 2.7 times. These economics are really compelling. These teams became profitable and approximately three quarters and are generating a loan to deposit spread of over 400 basis points in addition to the significant excess deposits they generate.

This slide also highlights the tremendous momentum we were seeing across our commercial businesses. In total, we added over 1,100 net commercial accounts in the first quarter. That's a 5% increase in our commercial account base in a single quarter, which is incredible. Notably, over 50% of that net growth came from the 2025 vintage teams. These teams have already produced low nine figure balances of deposits at an extremely attractive blended cost of about 50 basis points.

These accounts are operational in nature and therefore there's a lag between account openings and deposit balances coming over to our company. You can see this in the fact that less than 15% of the accounts opened during the quarter were meaningfully funded with deposits. These are similar stats that we used to show you in 2024 to give you a sense of the deposit balance fundings to come in future periods.

This level of account activity gives us optimism for meaningful deposit balance growth from these 2025 vintage teams in the coming quarters.

Turning to slide 13 and loans. Total loans grow over 600 million to 17.4 billion representing 15% annualized growth. We typically see the fourth, the first quarter as the slowest growth quarter of the year. So we're very pleased with this performance. Growth was broad based across the franchise. Top contributors in the first quarter included fund finance, mortgage finance, and healthcare.

As we often say, the mix of contributors can shift from quarter to quarter, but what remains consistent is the diversified multi-vertical nature of our asset generation platform.

When slide 14, net interest income for the first quarter was 191.4 million. Net interest income grew by 24 million year over year or 14%. The expected sequential decline in net interest income and net interest margin was driven by two primary factors, approximately $10 million of accretion income in the fourth quarter, which did not repeat, as well as a lower date count in the first quarter. If you account for those factors, we were essentially flat quarter over quarter, despite the full impact of December's rate cut.

One other item impacting net interest income for the quarter was the planned redemption of 110 million of higher costs subordinated debt laid in the quarter. This redemption will help our net interest income in the second quarter.

We continue to have levers on both sides of the balance sheet, including loan growth and deposit mix improvement opportunities. With that, we remain optimistic about our ability to drive strong net interest income growth in 2026.

Moving to slide 15, non-interest expense was 112 million for the quarter. As we highlighted on our previous call, we had about $5 million of expenses that were unique to the fourth quarter. And so expenses came in pretty much flat to the fourth quarter, excluding those discrete costs. We talked a lot about positive operating leverage. And I want to take a moment to show you what that means for our franchise.

Year over year, core revenue growth outpaced core expense growth by nearly two times. As a result, our core efficiency ratio improved by 300 basis points and core EPS grew 28% over the same period. That's very strong positive operating leverage. And we believe this is what disciplined high quality growth should look like.

Our core non-interest expense as a percent of average assets was 1.82%. Once again placing us among the top decile of regional bank peers.

On slide 16, many of you recall that coming into 2026, we outlined our second operational excellence initiative targeting $20 million in annual run rate proceeds across both revenue and expenses. I'm pleased to report that phase one of that initiative has been substantially achieved on a run rate basis. And we are now increasing our target by an additional 10 million in phase two, bringing our total target to $30 million in run rate proceeds.

On the revenue side, this was driven primarily by capital market sales within our existing SBA business. And you saw some of this in the first quarter of 2026. And the savings on the cost side were a mix of vendor, technology, and risk management infrastructure improvements.

These savings are being reinvested into the franchise in people, technology, and the capabilities that differentiate us. We view this as a key component of sustaining positive operating leverage into the future.

On slide 17, tangible book value per share grew to $63.54. Up 3% quarter over quarter and 16% year over year. This continues our multi-year track record of double-digit tangible book value per share growth and represents a cager of over 15% since the fourth quarter of 2019.

Turning to slide 18, our capital position remains robust and continues to provide significant strategic flexibility. Our TCE ratio of 8.3% was up 60 basis points year over year, even as our tangible asset grace grew 15% over the same period.

We also repurchased about 620,000 shares of our common stock during the quarter at a weighted average price of about $68. Given the trajectory of our tangible book value, I just described, that felt like an attractive price.

During the quarter as planned, we also redeemed the subordinated debt issue as I mentioned earlier, which explains some of the additional reductions in our risk-based ratios during the quarter. Even with these items, we still maintain the comfortable cushions to our internal capital targets.

In addition to the subordinated debt over the last year, we've also redeemed over $140 million in preferred stock, simplifying and improving the quality of our capital stock.

We believe strong organic earnings positioned us well to support continued balance sheet growth and when appropriate to return capital to shareholders.

On slide 19, credit performance remains stable across the board. MPAs as a percent of total assets remain low and below our peers. Total net charge-offs declined modestly quarter over quarter with strong performance across both commercial and consumer portfolios.

Commercial NCOs remain very low, and our consumer portfolio represents only a small portion of our total loans continues to perform within expectations.

Reserve coverage was solid, though we continued to monitor the geopolitical uncertainty that exists in the macroeconomic environment. With that, I'll close with our 2026 outlook on slide 20.

We are reaffirming our full year 2026 management outlook across all key metrics. On loan growth, we have a strong start to the year, and our pipeline remains solid. For deposits, we also had a good start to the year, and both the newer teams in the franchise as a whole have good prospects to continue that momentum.

With respect to net interest income, we continue to project growth of 7 to 11% over 2025. For non-interest expense, we are maintaining the range of 440 to 460 million for the year. That is growth of only 2 to 6%, even as we continue to invest significantly in people and technology.

And lastly, there are no changes currently to either our capital or our tax rate targets. With that, I'll pass the call back to SAM for closing remarks before we open the line for Q&A.

Thanks, Mark. Before I offer my closing remarks, I want to share something that I believe may be a first in the history of public company earnings calls. The prepared remarks you heard on my behalf today were delivered by my AI cloned, not read by me directly. The execution of this call itself is a live demonstration of what we mean when we say AI is not an experiment in customer spec. We will be using it to transform our company.

You can imagine use cases for this technology to support our relationship manager to drive revenue and enhance the client experience.

To wrap up, in the first quarter, we delivered strong growth across every major dimension of the franchise. Deposits grew 14% year over year, non-interest bearing deposits hit a new record, loans grew 15% year over year, our cubic payments platform onboarded new clients, creating diversification and repositioning this as a non-interest bearing deposit growth vertical.

Finally, we delivered positive operating leverage with a 300 basis point decline in our efficiency ratio, leading to core EPS growing by 28% year over year. We'll now open up the line for live questions.

The period and numbers were read around four billion and totally average numbers were read around 3.6 billion.

Yeah, sure. I'd be happy to take that. I think that what's really interesting about the mortgage use case, as we discussed before, this is to date existing customers that are using our advanced payments capabilities that we're using more traditional payments capabilities with us prior sort of more traditional think of the sort of Y-R-A-C-H in and out. And this has been a priority for us in 2026 to sort of see a bit of broad use of cubic not only much further beyond the digital asset industry and also creating diversification in our deposit base, I'll get to sort of the new deposits in a second.

But what I would say is we're thrilled with the early progress on that goal, and we did not expect that as early as the first quarter would be able to show you that slide that you referenced on slide seven. So they currently represent about 20% of our deposits. The growth is really going to be coming from that 1% number you see there on the real estate transaction side, which is really hugely valuable to customers that are currently banking with other banks that are looking for advanced payment capabilities beyond what they're able to get in addition to the service that we offer. So we see that you heard in my scripted AI remarks that we expected about $250 million or so of non-interest bearing deposit growth related to new verticals and cubics just in the next 90 days.

We'll continue to update on progress as the year progresses. Your last question was around the traditional capital markets use cases. That's still a little bit early days to add a little bit of color and what that would be is we have markets on the traditional side that are open 23.5 today, they will be open 24.7. And as you can imagine, there's a number of use cases to have, that now RTP and cubics for after hours fiat reconciliation.

No, I don't think we're, I mean, we're still sticking to the guide that this year, you know, there's certainly a lot of still geopolitical uncertainty out there in the market. You know, candidly, we were pleased by the level of loan growth we were able to generate in the first quarter. You know, we had a couple quarters ago. You know, we had a couple of deals that we thought were, you know, we're going to close and didn't close during the quarter and then you end up being a little below and then you start out, you know, you know, the next quarter really hot, you know, in this case, you know, you saw that our average loan growth versus our spot loan growth, you know, was pretty materially different, you know, which implies we had a lot of loan growth actually closing in the month of March.

You know, so, you know, so we feel that, you know, obviously sets us up well for the second quarter, but at this point, we're still sticking to our our four-year numbers.

Yeah, sure. Sure, Kelly, and then I assure you, this is really, really me. You know, what I would say is that, you know, just to add a bit more color, you know, on the prepare remarks, I talked about how we feel we can scale the company at significantly higher rates than our head count will grow. And you can imagine sort of when you have an autonomous agent, you're essentially creating a digital worker. And when you have end-end automation across your workflows, which is very easy to say, very difficult to achieve, you can deploy these digital workers under human supervision, and they can work around the clock. So you can appreciate getting to the state as much more than creating what folks will call a, you know, sort of a GPT, they can save a couple of hours or a chat prompt that can help you, you know, research or write faster.

Really the challenge here, the difficulty here and the opportunity here is about having a change management strategy. It's about training and enabling your team members. It's about redesigning workflows and processes. It's about having developers and process mavens that are on staff. It's having broad base, you know, AI frontier model and newer emergent, and you know, commercial partnerships.

You know, we used a couple of KPIs of how it might show up in our financials with asset revenue and pre-tax profit, you know, employee KPIs. And I think we'll have tailwinds on each of those if we're successful. And that's something that we'll be able to provide targets on in the future. At the end of the day, they kind of all come into, you know, lower efficiency ratio. That's sort of the net output.

The use cases to kind of get to the heart of your question that typical companies and banks will be focused on will be productivity as well as, in some cases, improving the client experience, which is table stakes. And I think those are hard to do and we feel very good about our ability to achieve success there.

But, you know, where we are really focused and feel we're uniquely focused is on the new revenue opportunities as well as reducing risk. So, you know, to get to your question, we plan to start using AI first, you know, business models to attract new customers to attack new verticals that will sort of help drive new opportunities that don't exist today. And these are, you know, things that are live and in production now that could result in, you know, impacts as early as the end of the year, but definitely into 2027.

You know, and then, you know, we're also looking at really interestingly, completely redesigning the first, second, and third line processes to reduce risk across all of our operations. And I think that's really also a unique way that we're approaching things. So, it's not just sort of the loans, the deposits, and the payments orchestration life cycles. We're also thinking more broadly, you know, about areas within, you know, risk compliance audit, finance, marketing, legal, where we can really transform some of those, you know, risk and, you know, in revenue enabling functions as well.

Yeah. Yeah, Kelly. This is Mark. Good morning. And that was me the whole time, by the way. But, you know, as we, as you think about NII, you're correct. You know, I think, you know, as the year, you know, is starting to play out, you know, we had a couple of shifts. You know, we did see, I mean, we were really pleased to only see, you know, average, you know, cubic deposits, you know, you know, going down from, you know, 3.8 to prior quarter to 3.6, you know, where, where you see, you know, on slide seven, and you see, you know, the mortgage finance, but more importantly, the real estate, which really then ties to our 2025 teams and some of the things we highlighted on commercial account growth.

You know, I would expect to see, you know, for in the second quarter and the third quarter, you'll start to see some of that account growth, which was only, you know, approximately 15% funded with deposits, some of that, you know, starting to take hold. You know, so then that provides, you know, a little bit of a hedge for us in terms of our guidance.

You know, if we would, you know, continue to see a little bit, you know, more of a drop in cubic deposits, I think it's, you know, early, certainly in the second quarter to be able to predict, you know, where those will end up on an average balance basis.

But, but then I'd also say, you know, that we had both really strong marches, you know, which led to, you know, our spot balance is being significantly higher in both loans and deposits, you know, than our average balances for the quarter.

So, you know, when you look at, you know, take loan yields, you know, loan yields end of the quarter at 362. Well, so for, you know, yesterday was at about 360, right? So even if you're going to, you know, bring on new originations, I mean, across most of our verticals, we bring on new originations at, you know, 225 to 300 basis points over. But even at 300 basis points, you know, over so for, you know, the majority, you know, might still be coming in, you know, below, you know, where that current loan yield is on commercial, because you can see, you know, on top of that margin table, you know, our commercial book today is kind of right around 680, you know, all in.

You know, so even at 300 basis points over, which is really tough to do across all your verticals, you know, new productions still coming in a little bit lower. You know, so I would expect to see, you know, on a margin basis, you know, to be, you know, loan yields coming down a little bit more, how much that impacts margin is really going to be, you know, how successful are we on the deposit front?

Again, given the green shoots we're seeing in the first quarter, you know, it feels like we're setting up well for the year, but it's still early, you know, so that's why you put all that together, you know, we're saying, hey, we're not going to, you know, move on our guide yet for the year for NII.

And the last comment I'll make on all of that is that, you know, as a growth company, we focus on NII. We understand, you know, that you as an analyst community, you know, you know, like the look at margin, because that's a, you know, kind of a shortcut to help fill out an earnings model. But at the end of the day, NII drives earnings growth, not an interest margin.

And so we're really focused on that. And, you know, we're sticking to our door guide at this point in the year.

Yeah. Well, happy to jump in here and welcome, you know, and formally. You know, so I think that, you know, we've always said is that on the digital asset side, we've been, you know, we had an opportunity to really start to, you know, getting a good amount of customer behavior the past couple of years we have, and we'll continue to sort of hold these in cash for the time being. I think there's some things that we would look to the external environment that would give us, you know, some more confidence and comfort. One of the things that's interesting about the new verticals is these commercial customers come from traditional industries with long histories of operating account behavior.

They're currently at banks and they're that where they, you know, without these advanced payment capabilities that cubics can provide them, those banks deploy the deposits. We're going to do the same, but also offer those customers, you know, superior technology and really improve their operations and experience. So I think that's really one of the interesting differentiating factors. Those levels are already at 20%, including existing customers, though that 1% is a very small portion and we expect that to significantly increase in the coming months and quarters.

I'm happy to take that. So, you know, it's a combination of expansion of talent and existing geographies. You know, there are, you know, one or two sub-markets where we will be sort of, I call sort of adjacent, you know, expanding into, and there are some actually some new national deposit verticals. Given that not every one of these team members has fully started the bank, I'd sort of defer to come back to you to give you a little bit more color, but it's consistent with the way that we've approached, you know, team hiring to date.

Your second part of your question was about the teams and the pipeline. Similar story on the first part of your question in terms of, you know, how we would approach geographic and vertical focus, but I would also, you know, add that, you know, these, you know, while we've had, you know, 20 or so hired this year, we had about 40 last year, 100 the year before, 40 the year before, you know, sales first line, you know, bankers, you know, so I think that, you know, we still expect to have some more hiring to do based upon the expense guide that we gave, you know, in the first half of, sorry, in the first call of the year, and also, you know, had an opportunity to, you know, to share with you some of the benefits of OE2 operational excellence too, as we're calling it, and from the extra savings and plan to reinvest those savings into the institution, which one of the big, you know, use cases and uses of that, of those savings will be into, you know, hiring and supporting new teams.

Well, yeah, we're typically staying in new deposits, you know, and remixes, we're typically seeing them coming in about 150 basis points below the highest cost of interest-bearing deposits, I think, which is, which is interesting. So the marginal cost is significantly lower than our interest-bearing costs, and also below our overall cost deposits.

Yeah, sure. Thanks, Steve. And so the simple answer is there's sticky and long duration with, you know, we're really just helping them, you know, add payments capability, streamline their operations, lower the cost of their business, increase revenue opportunities for them that they otherwise wouldn't have. You know, coming back to, you know, cubic deposit diversification, this is something we've been, you know, talking about for some time.

We have now, you know, I think now we're really showing that we're able to sort of on board, you know, reference the $250 million, you know, just the next 90 days. What I would say is, you know, we're at 31% non-interest-bearing deposits, which is already at the top end of the industry.

And we believe the opportunity ahead of us will allow us to keep taking this up even further. You know, you look at the percentage of non-interest-bearing deposits of our total, you know, net deposit growth for the quarter. That's pretty impressive and staggering. Let's also not lose sight of the fact that we grew our non-cubics non-interest-bearing deposits by 230 million in this quarter and adding that to last quarter. That's six month total is almost $400 million from, you know, traditional commercial customers.

Yeah. It would kill me, but it is significantly higher, you know, than it has been in the past. And I think that, you know, typically we've been operating about that $2 billion or so pipeline. It is significantly higher just by nature of the fact that you have new teams who joined us, you know, late last year, set, you know, middle summer to Q3 of last year who have had an opportunity, you know, Mark shared some stats on, you know, over 50% of the account openings were from 25 teams, right. So these are folks who've been with us for, you know, less than a year, in some cases, only six months.

And what I would also say, you know, is that, you know, as you think about sort of what, you know, going forward, you know, hiring new teams for 27 is going to be really important, you know, as well. So the 25 teams are building momentum for 26. The 26 teams will build momentum for 27.

And we're doing it earlier in the year from a hiring perspective, which I think is, you know, very unique. And it just shows that there's a lot more inbound requests and inbound conversations. That in some cases start, you know, well beyond, you know, the beginning of this year and bonus season really started last year.

Yeah, I'll take that. This is Mark. You know, if you think and we had provided. If you look at our loan growth slide, you know, this quarter, you know, it happened at fund finance, which, you know, is a combination both our capital call lines and our lender finance business. You know, fund finance mortgage warehouse and health care, you know, in the forefront.

Last quarter, you know, fund financials down at the very bottom. You know, but then the quarter before that, you know, fun finance was actually up. So the, you know, look within fun finance, our lender finance category was 2.8 billion back in the third quarter of 25. You know, it dipped about 300 million in the fourth quarter and then it came back again in the first quarter. You know, what I would say about that is that, you know, we have a very defined credit box that we like to operate in.

And, you know, at certain times, then that will mean when certain segments get a little bit more frothy, you know, we're probably going to underperform a little bit. But then, you know, in cases like the first quarter, you know, where I think there, you know, was a pullback. You know, in NDFI and specifically in the lender finance base, we just, you know, stay in our credit box and in periods like that, you know, we're going to benefit a little bit. You know, but the performance in that segment, which we, you know, because of some of the additional questions around NDFI and lender finance in particular, you know, we added an extra slide Steve, which you can see on page 2523 in the deck.

You know, we've been in this business for a long time. And, you know, as we, you know, commented after the third quarter call, you know, have really, you know, good looks through LTVs. We have collateral substitution rights. And maybe most importantly, we have, you know, incredible diversification, both in terms of the total number of facilities, you know, that we participate in and within those facilities, the weighted average number of obligors and are, you know, low, largest, you know, obligor within facility, you know, gives us comfort and diversification.

And then, you know, lastly, just being in the business for 10 years, we've never had a delinquency or a net charge off. You know, and that doesn't mean that, you know, it will hopefully stay that way, obviously, you know, banks from the business to take, take risk and credit risk. But, you know, this has been a business for us. It's been actually a very strong performer.

Yeah. Yeah. Also, I'll sort of just jump in. You know, I think that, you know, there's a combination of sort of private valuations and, as you know, in sort of Black Sholes Model, et cetera, for private market warrant valuations is also a transaction that can happen that could be, you know, private or public like an IPO in nature, and believe it or not, then in some cases you have restrictions on when you can sell your shares for up to six months. So there's a lot, that's sort of the way to think about what's really interesting is we have a portfolio of these, you know, warrants that are dozens and dozens and dozens related to, you know, how many loans that we've sort of originated, you know, over the past couple of years.

And one of the things that we say really interestingly here is we have very, very low, you know, historical over multiple decades of credit charges lower than traditional CNI in this business, and these warrant gains more than make up for any sort of net reductions that this industry has seen, despite some of the potential perception. And I think that's really the interesting part about this is that, you know, we have, you know, these are, these have been recurring over the past couple of quarters. And I think that's, you know, what we're proud about.

Sure, Peter. Thank you. Thanks so much. So I think that they, I'll start with sort of the high level sort of point that you made is that I think that I mentioned this in my prepared remarks as well as that. You know, we really truly feel and believe that risk management is becoming, you know, a competitive edge for the organization and also for sort of simplistic, you know, business unit perspectives. A competitive moat for say our cubics, you know, cubics business.

We have said that, you know, professional services and insurance costs will continue to reduce over time. You know, as, you know, as we progress, you know, our efforts there, I did say on the last call, which I think went a little bit unnoticed that we materially completed our work related to the written agreement at the end of last year. And then in 2026, we want to, you know, put that behind us. And that's really, you know, the interesting part about the whole story is when you add sort of technology plus risk management, plus, you know, AI, plus a, you know, a business line, you know, that is facing sort of regulatory clarity and tailwinds plus the diversification of using that technology from that business line into new traditional markets that are also seen.

The need to go into after hours in 24, 7 or 23, 5, you know, type payments capabilities. It is, it is really interesting how uniquely positioned we are today.

Peter, this is Mark. Yeah, we, we obviously had a really strong growth for loans this quarter. You know, from an overall ACL as a percent of loans, you know, we went up one basis point. You know, so, yes, I would say that, you know, most of our kind of over provision to charge off was just a function of that. You know, I mean, we continue to definitely watch, you know, the geopolitical uncertainty out there and, you know, are continuing to watch on, you know, if that could have any impact on any of our portfolios in coming, coming quarters.

You know, but for this quarter, you know, we felt that was appropriate to, you know, just have a very small increase to our ACL percentage overall.

Yeah. Yeah, so specifically within the multi family, you know, non performers, I mean, we had, we had one loan, you know, that we made the decision to put on to NPA. It's, you know, when you move it to NPA, I mean, we've actually charged down to its, you know, current collateral value alone is still performing, you know, according to its contractual terms. But, you know, we just made, you know, to the conservative stance, put on the performing, although it is still paying, you know, you know, 40 to its contractual terms.

Yeah, the priority order for capital, you know, really, really remains the same. You know, and that's, you know, first and foremost, it's organic growth.

And, you know, to the extent that we have excess capital generation, you know, after supporting that organic growth, then number two, you know, would be in organic growth opportunities. And, you know, for us, you know, you really need to think about that, you know, more in terms of expenses, you know, necessarily in terms of capital. You know, because for us, in organic growth has historically been a lot of these team lift outs.

And, you know, but those team lift outs cost money, you know, which ultimately impacts capital. And then number three, you know, if we have excess capital after those, you know, then, you know, our board had approved $100 million, you know, share offer, share with purchase authorization back in February. And, you know, we felt in the first quarter, a weighted average price, around $68, you know, we felt that was approved in use of capital there as well.

Yep. Thanks, Janet. It has not been directly asked. And I think that one of the things that Mark did sort of refer, which I'll sort of focus on is that, you know, we're a growth organization. And we're focused on, on increasing NII and I think that, you know, prior to you sort of joining the coverage, we, you know, sort of going back a couple of years, we really, you know, also sort of showcased NII trajectory and how that would sort of translate into nim trajectory over time.

We gave sort of an AI growth, you know, guidance for this year. You're absolutely right on sort of the deposit, the marginal cost of deposits, whether they use for remix or whether they use to fund incremental loan growth. And I think that's something that we, you know, are and will continue to be proud of. And that's really what's unique about our overall story as we think out sort of, you know, the improvement as well as the funding of our organic growth.

You know, banks with the flatter balance sheets that don't have the growth opportunities that we have, nim makes a lot more sense for them. And this is the point that I was sort of continuing to make. That's their main level, you know, lever for growing NII, where ours is really a combination of balance sheet growth and maintaining margin, maintaining margin, I think is really important. And that's really the value proposition of cubby. And I think that that it's really around our ability to grow and interest income year over year, independent of, you know, rate and environment independent of competitive environments.

No, Janet, this is Mark. I was just going to add that, you know, I made this point earlier in the Q&A that, you know, if you look at our commercial business today, you know, which makes up obviously the majority of our loan book. You know, that that's had a blended average cost in the first quarter of about, you know, six, six, 80, you know, current current so for is that about 360.

Right. So, you know, in a commercial business, you know, most of our commercial businesses tend to be, you know, kind of 225, maybe per commercial real estate, you know, up to 275 approaching 300 for some of our other verticals over sofa. You know, but, you know, that then implies that, you know, new loan volumes, you know, in both the first quarter and continuing in the second quarter, you know, we'll continue to come on, you know, at a little bit lower yields.

You know, then our overall commercial portfolio yield, you know, so that's going to continue to have, you know, maybe a little bit of downward, you know, pressure on them. But again, given the amount of loan volume that we put on in the month of March, you know, we feel we still feel comfortable with the NII guide, you know, that we put out.

Well, I think if you look, you know, back to where we were maybe maybe a year ago, you know, when some of the discrete light on instead today, you know, our commercial lease income is about 50%. And, you know, and I would say that, you know, of the different line items of the income we have, it's probably the least episodic, because really what that commercial lease income represents, it represents interest income on operating leases.

You know, those operating leases, you know, put actually put some pressure, you know, back to our conversation, put some pressure on margin, because it shows up on your balance sheet as a non-interest earning asset. You know, but then you have both commercial lease income, but then also commercial lease depreciation on the expense line. You know, but, you know, but for fee income, you know, you can see that, you know, our trajectory's gone from, you know, 10, 10 and a half million a year ago to 15.4 million in the first quarter of this year, so almost 50% growth in that line.

You know, so when you look at the other lines, maybe with things like, you know, for this quarter, you know, I did see, you know, I think one analyst maybe pulled out our sales of loans out of core earnings, and I would say, well gosh, to us that feels like core earnings because that's actually sales of just a SBA loan forward. You know, so when you look to, you know, how we've grown overall fee income, you know, we think it's now appropriate to think about, you know, a good more for the income is going to be somewhere in the 30 to 32 million range.

If you have the detail, you know, Tyler, I think that we have provided this, you know, a couple of years ago and it generally stays stays the same. Exchanges are sort of the biggest participants, as you can imagine, then followed by, you know, market makers and followed by stablecoins. I don't have the percentages.

Sorry, I didn't catch the beginning of that. What was the question?

Yeah. Yeah. I think I think that's really more function of the force quarter than the first quarter. I, you know, in the fourth quarter. You know, we did have, you know, a couple of adjustments relating to prior quarters, which I should pull down that deal a little bit artificially. And so, you know, I think when you look at that for 70, you know, yield that we had investment securities, you know, I feel like that's going to be a better, you know, kind of run right going forward.

Yeah, sure. It's a great question, Brian. And I think that, you know, over the years, we have, you know, continuously expanded our treasury management capabilities. And that's really, you know, the big driver. And, you know, even prior to Cubics, you know, that was one of the large initiatives a number of years ago. You know, the organization has sometimes new teams or new verticals, you know, or new sort of sub verticals come on that have, you know, what we call sort of edge case treasury management capabilities. We continue to expand and broaden the edge case becomes our base case as we continue to expand. And over time, we've also thought about and incorporated, you know, parts of our team members that allow us to expand into, you know, new products and services to service customers.

So what ends up happening is the new teams, the, you know, edge case for our overall company becomes their base case and that that becomes something that we can then sort of cross sell into our existing, you know, client base as well.

Bit of jumping on that, Brian. It's obviously something that we spend a lot of time thinking about and trying to, in some cases, you know, create connections. I think what I would sort of say just generally, you know, we haven't seen anything tangible that we can put our finger on at the end of the year. You usually see folks who try to sort of close loans quickly by the end of the year at 1231, you know, some, some loans slipped into into April that we would have normally expected to close into 331. Why does happened? Difficult to say, but they still closed. So, you know, I'd say that sitting where we are today, we don't see any changes to go forward pipelines.

We didn't really see any changes to commitments to closings, but it's something we continue to sort of stay close on.

Yeah, thank you to everyone for your continued investment in and support of customers bank Corp. We believe customers bank can be the most admired commercial bank of its size in the United States, not the biggest, but the most admired. We're grateful for the confidence of our board, the dedication of our nearly 900 team members and the trust of our shareholders.

Thank you, everyone. Have a great day and a great weekend.