Customers Bancorp Reports Q3 EPS of $2.25, Up 10%

Customers Bancorp (NYSE: CUBI ) reported third-quarter financial results on Friday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Customers Bancorp reported a strong third quarter with record levels in deposits ($22.6 billion) and loans ($18.5 billion), alongside a 10% increase in EPS to $2.25 and a 14% ROE. The company advanced its AI initiatives, reducing loan underwriting cycle times by 95% and commercial deposit onboarding by over 90%, while also launching new AI-driven capabilities like voice agents and automated savings sweeps. Strategic growth was highlighted in the Cubic's platform, with a 19% increase in accounts and diversification into real estate and mortgage finance, accounting for over 30% of deposit balances.

The company recruited 50 new revenue producers this year, contributing significantly to deposit growth, and aims to sustain this pace into 2027. Financial guidance for 2026 expects loan growth of 12% or higher and deposit growth of 9% or more, with net interest income targeted between $805 to $810 million. Operational efficiency improved with an efficiency ratio drop of 340 basis points, aiming for a low-40s run-rate efficiency by the end of 2027. Management expressed confidence in sustained growth and financial performance, driven by AI transformations and recruitment strategies.

Full Transcript Ellen (Operator) 2026 earnings webcast. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again.

I will now hand the conference over to Phil Watkins, Executive Vice President, Head of Corporate Development and Investor Relations. Please go ahead. Phil Watkins (Executive Vice President, Head of Corporate Development and Investor Relations) Thank you, Ellen, and good morning, everyone. Thank you for joining us for Customers Bancorp's earnings webcast for the third quarter of 2026.

The presentation you will see during today's webcast has been posted on the investors webpage of the bank's website at You can also download a PDF of the full press release on the same page. I'd like to remind you that today's presentation may contain forward-looking statements which are subject to uncertainty and changes in circumstances. Actual results may differ materially from management's expectations due to a variety of factors which are described in our earnings materials and our SEC filings. We also reference non-GAAP financial measures, so it's important to review our GAAP results in the presentation and the reconciliations in the appendix.

At this time, it's my pleasure to introduce Customers Bancorp CEO Sam Sidhu. Sam Sidhu (Chief Executive Officer) Thanks, Phil. Good morning, everyone, and welcome to Customers Bancorp's third quarter 2026 earnings call. I'm joined this morning by our Chief Financial Officer, Mark McCollum.

I'll take you through a few key highlights from the third quarter, give you an update on our strategic priorities, and then Mark will provide additional detail on our financials. Simply put, it was a great quarter. We delivered record deposits and loans, real wins in AI, a more diversified Cubic's platform, and continued success recruiting teams. On top of that, we have strong momentum to finish the year and a very positive outlook as we move to 2027.

Turning to slide 4, our third quarter results reflect strong execution across the franchise. To give a few highlights, deposits grew 4% in the quarter and 11% year over year to a record $22.6 billion. Noninterest-bearing deposits grew by $300 million to $7.2 billion, a third consecutive quarterly record. Total loans grew 3% in the quarter and 14% year over year to a record $18.5 billion.

NII increased 8% quarter over quarter. EPS was $2.25, up 10% quarter over quarter. ROE rose to 14%, up more than 70 basis points quarter over quarter. Our efficiency ratio improved by approximately 340 basis points in the quarter, and tangible book value per share increased 10% year over year.

That's 17 consecutive quarterly records for book value, five for loans, and eight for total deposits. We delivered these results with strong credit quality and solid capital while growing the balance sheet and returning capital through share buybacks. Slide 5 shows our priorities for 2026, which remain unchanged. I'll provide an update on each again this quarter, starting with AI on slide 6.

Over the past several quarters we've shared our AI journey. We're currently in a phase of reimagining and automating end-to-end workflows coupled with rapid product development. We're shipping new capabilities every quarter that make banking faster and simpler for our clients and free up our team to focus on higher-value work. Everything we're doing is aimed at a better experience for our customers and, importantly, our employees.

In Q3 we advanced our top three top-down priorities. In lending, we scaled our AI-powered loan underwriting process, adding functionality and increasing utilization. The cycle time for this process is down 95%. This will allow the same team to handle significantly more loan throughput.

In deposits, we piloted our rebuilt commercial deposit onboarding process in just 10 weeks. It allows us to open complex commercial accounts in minutes instead of days at other institutions. That represents an over 90% reduction in cycle time. And in payments, we enabled programmable sub-accounts on Cubic's, enhancing our product offering for existing clients as well as broadening potential agentic payment use cases.

Using AI and automation tools, we now have an ability to rapidly ship new products. Just to give you a few examples, we launched voice agents on our main customer service line and are now working on incorporating them into our customer onboarding journey. We're expanding an AI digital twin pilot to more members across the organization, and we piloted an automated savings sweep for consumers. To drive this progress, we now have over 60 people focused on AI transformation at the bank, and our engineering talent is increasing too.

We have a dozen and growing forward-deployed engineers from our partners working in pods alongside our in-house engineers and subject matter experts. And the results are tangible. Our team doubled the number of AI agents deployed. Cumulative estimated hours saved have now grown to 76,000, and we've unlocked an estimated $15 million plus of annualized capacity.

In the last six months, revenue producers grew 6% and accounted for about 60% of the new positions we filled, while total headcount drifted lower. Even with the great results in the quarter and positive momentum for next year, if I had to leave you with one point, it is that productivity gains are showing up in our financial performance and are already above our investments to date. Revenue per employee is up 13% and pretax profit per employee is up 34% on an annualized basis this quarter versus last year. We rank number one and number four, respectively, among all $10 to $100 billion asset banks on these metrics.

A better equipped team helps us improve customer and employee experiences. This should enable us to grow revenue meaningfully faster than expenses and reach our goal of a low-40s run-rate efficiency ratio by the end of 2027. Turning to slide 7, Cubic's diversification is expanding the opportunity for our payments franchise. Cubic's accounts grew 19% in the third quarter, with real estate and mortgage finance driving new client growth.

Those two verticals now represent more than 30% of Cubic's deposit balances. That broader reach puts our payments capabilities into more of our clients' day-to-day operations and creates opportunities to deepen relationships and gather low-cost operating deposits. Network activity is on pace to hit another record this year, surpassing last year's $2 trillion volume and showcasing the value of the platform to our clients. And looking forward, we're developing extended-hours trading capabilities for capital markets and correspondent banking services that support cross-border flows.

At the end of last year we did not expect Cubic's to be a growth vertical. With this diversification, we believe there's substantial opportunity ahead to continue to increase low-cost deposits on the platform. Turning to slide 8. Our recruitment strategy, which is a unique part of our business model, continues to build a larger and more valuable deposit franchise.

The teams we've recruited since 2023 now hold approximately $4.3 billion in deposits, or 19% of our total deposit base. They added roughly $415 million in the third quarter alone and more than a billion dollars so far this year. That's more than a six-fold increase in their share of our deposits in about three years, all through organic recruiting. The breadth of the franchise is also expanding.

We've added more than 3,000 commercial deposit accounts so far this year, which is more than we achieved in all of 2025. That's up 13% year to date, and accounts have roughly doubled since 2022. And our 2026 recruiting class keeps growing. Fifteen revenue producers joined us in the third quarter.

That brings year-to-date revenue-producing hires to 50 and 12 teams represented. That's up 50% from last year. The success of these teams gives us confidence that we can sustain this pace of recruiting high-quality revenue producers in 2027 and beyond. With that, I'll turn it over to Mark to take you through the financials in more detail.

Mark McCollum (Chief Financial Officer) Thanks, Sam, and good morning, everyone. My comments will begin on slide 9. We're only showing you GAAP earnings this quarter as we did not have any material adjustments to those GAAP results. I'm pleased to walk you through another quarter of consistent growth in the balance sheet, earnings, and profitability.

We delivered EPS of $2.25, up roughly 10% from last quarter. ROE and ROA came at 14% and 1.16%, respectively. We note that many of you tend to quote ROTCE instead of ROE when comparing relative profitability among your peer groups. However, because we've grown organically rather than buying other banks, our balance sheet carries virtually no goodwill.

As a result, our third quarter ROE of 14% is within the top quintile of all banks between $10 and $100 billion in assets. On Slide 10 we provide details on our deposit franchise. Total deposits ended the quarter at a record 22.6 billion, up 4% in the quarter and an increase of 2.2 billion. Year over year, our total cost of deposits remained flat despite the increase in interest rates by the Federal Reserve during the quarter.

The quality of our growth was strong and I'll highlight a few stats. Noninterest-bearing deposits grew by about 300 million during the quarter, ending at 7.2 billion, which, as Sam noted, is another record for the third consecutive quarter. That's 32% of total deposits, which is top quartile for regional bank peers, and up more than $800 million, or 13% year over year, a direct result of team recruitment and payment strategies Sam just walked through. Our goal remains to have the highest percentage of noninterest-bearing deposits among our peers.

One additional metric I want to emphasize: our brokered deposits came in about $370 million lower for the quarter and now make up less than 20% of our deposits. Turning to Slide 11 and loans. Total loans grew nearly 500 million, or 3%, in the quarter to 18.5 billion, compared to 1% linked-quarter growth for the industry. On a year-over-year basis, loans are up 14%.

Just as important as the pace of growth is the breadth—growth was delivered, led by business units like fund finance, healthcare, and commercial real estate, which more than offset lower mortgage warehouse and real estate specialty finance balances. As we always say, the mix of top contributors may shift from quarter to quarter, but the diversified nature of our origination platform helps us deliver strong growth while remaining disciplined on structure and pricing. Slide 12 covers net interest income and net interest margin.

Net interest income exceeded $208 million, up 15 million, or 8%, from the second quarter, driven by higher average loan and security balances and higher interest spread. As we signaled last quarter, the second quarter was expected to be the low point for our margin. Our third quarter net interest margin expanded 2 basis points to 3.19%. Our margin would have expanded further but was impacted by the timing of our deposit growth, which occurred earlier in the quarter, versus when we funded loan growth, which occurred later in the quarter.

Our run-rate net interest margin in September was approximately 3.25%. Additionally, our growth in the quarter was accretive to margin, as the spread between gross loan originations and deposit inflows was about 4%. When combined, these factors set us up well for further net interest margin expansion in the fourth quarter. Looking ahead, our NIM and NII momentum are supported by a few factors: our low-cost deposit pipeline led by our new teams and our new business units on Cubix, the strength of our diversified loan origination platform, and we have a fixed asset repricing opportunity heading into 2027.

With positive levers on both sides of the balance sheet, we expect continued net interest income and margin expansion going forward. Moving to Slide 13 and expenses. Noninterest expense was $113.4 million in the quarter, down $1.5 million from the second quarter. The story here continues to be long-term strength in our efficiency ratio.

Our efficiency ratio improved by approximately 340 basis points from the second quarter. Our noninterest expense as a percent of average assets was 1.68%, among the lowest of any regional bank peer. As you can see from our updated guidance, we do expect a step-up in expenses in the fourth quarter due to incentive compensation as well as investments in technology initiatives and deposit growth. I'd underscore that we're delivering very strong efficiency while investing in people and technology and redeploying the capacity that AI creates into revenue production.

As Sam described, we remain confident the work underway will deliver sustainable positive operating leverage. On Slide 14, tangible book value per share grew to $65.66, up 10% year over year. That's approximately two and a half times where we stood at the end of 2019, a CAGR of roughly 15% compared with about a 5% CAGR for regional bank peers over this same period. Without the industry-wide impact of interest rates on AOCI this quarter, our tangible book value per share would have increased 13% year over year.

Given the short duration of our investment portfolio, our AOCI as a percent of TCE was just 5% compared to over 8% for our regional bank peer set. Further, our held-to-maturity portfolio is just 2% of total assets. Turning to Slide 15, our capital position remains strong and continues to provide meaningful strategic flexibility. Our estimated CET1 ratio was 12.6% and our tangible common equity to tangible assets ratio was 8%, while we grew our tangible assets by over 3% and repurchased nearly 500,000 shares, or about 1.5% of our common stock during the quarter.

Strong organic earnings position us to support continued balance sheet growth and, when appropriate, to return capital to our shareholders. On Slide 16, credit quality remains strong. Nonperforming assets were down 8% quarter over quarter, and NPAs as a percent of total assets were just 29 basis points, down 3 basis points quarter over quarter and well below the regional bank peer median of 36 basis points. Net charge-offs continue to perform well, with total net charge-offs improving to 28 basis points from 34 basis points last quarter, with commercial charge-offs of just 13 basis points.

I'll finish with Slide 17 where we have a few updates to provide as we close out our 2026 guidance. For loans, given the performance year to date and the strength and breadth of our platform, we are now raising our guidance and now expect loan growth to be 12% or higher for the year. For deposits, the momentum from our new teams and the new Cubix verticals continues to be strong and we expect balances to finish up 9% or more in 2026, even after deliberately moving out about $1 billion of higher-cost deposits during the year.

The combination of loan and deposit growth opportunities should continue to drive solid growth in net interest income and we are tightening our range to 805 to 810 million for the year. On noninterest expenses, we update our range to 460 to 465 million as we continue to invest in people and technology, and for income taxes we now expect a range of 22% to 23% for the year. Taken as a whole, we believe this guidance sets us up for a strong finish to 2026 and a strong springboard for 2027. With that, I'll pass it back to Sam for closing remarks before we open the line for your questions.

Sam Sidhu (Chief Executive Officer) Thanks, Mark. To wrap up, we delivered exceptional results across our priorities in the third quarter. AI is moving from pilot to production and it's already showing up in our numbers with more opportunity ahead. Cubix is on track for record activity this year and is diversifying fast, with mortgage finance and real estate now representing over 30% of balances.

Loans grew 14% year over year to a record. Deposits grew 11% year over year to a record. Noninterest-bearing deposits grew 300 million to a record. Our new teams added about $415 million in the quarter and over a billion so far this year.

From the second quarter, our NII increased 8%, our EPS increased 10%, our ROE increased to 14%, and our efficiency ratio improved by 340 basis points.