Operator: Welcome to the Customers Bank Inc. Second Quarter 26 Earnings Webcast. To withdraw your question, press 1 again. I will now hand the conference over to Philip Watkins, executive vice president, head of corporate development and investor relations. Philip, please go ahead.
Philip Watkins: Thank you, Ellen, and good morning, everyone. Thank you for joining us for the Customers Bancorp's earnings webcast for the second quarter of 26. We would like to remind you that today's presentation may contain forward looking statements, which are subject to uncertainty and changes in circumstance. 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 is important to review our GAAP results in the presentation and the reconciliations in the appendix. The presentation you will see during today's webcast has been posted on the Investors webpage of the bank's website www.customersbank.com. You can also download a PDF of the full press release. 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 by the from the SEC or by visiting the investor relations section of our website. At this time, it is my pleasure to introduce Customers Bancorp CEO, Samvir S. Sidhu, Vice Chairman, President & CEO.
Samvir S. Sidhu: Thanks, Philip. Good morning, everyone. And welcome to Customers Bancorp's Second Quarter 26 Earnings Call. I am joined this morning by our chief financial officer, Mark R. McCollom. I will take you through a few key highlights from the second quarter, give you an update on our strategic priorities, and then Mark will provide detail on our financials. Customers Bank continues to deliver for our customers and shareholders with this quarter's results once again reflecting strong, consistent financial results that come from disciplined execution of our differentiated strategy by a best in class team. Turning to slide 4. In the second quarter, we--the second quarter was further evidence of our core strategy firing on all cylinders with consistent and reliable financial performance and growth. A few highlights. Total loans grew 4% in the quarter, and 17% year over year to a record 18 billion. Total deposits grew over 140 million to a record 21.7 billion. Non interest bearing deposits hit a second consecutive record at 6.9 billion or 32% of total deposits. NII increased 9% year over year. Tangible book value per share crossed $65, a period end record up 16% year-over-year extending our industry leading pace. that is 16 consecutive records for book value, 4 for loans, and 7 for total deposits. And we did all of this while maintaining pristine credit quality and robust capital levels even while growing the balance sheet and modestly buying back shares. On slide 5, you can see our priorities for 2026. The same 4 we have been executing against all year, I will provide an update on each again this quarter starting with AI on slide 6. Last quarter, we told you we were operationalizing AI and automation across customers bank. We are seeking transformational change with a goal of becoming the nation's leading AI-native regional bank. To give you some color on what that means, let me start by saying that none of this happens by chance. Every use case we build moves through the same repeatable cycle. We create AI agentic pods by pairing our engineers with subject matter experts that own the work, shadow the real workflow, and build agents in our own data and systems. Starting with the highest impact opportunities. And we then validate and measure the real impact first, and only then does it get absorbed into the operations of the bank. We are driving this through 2 complementary tracks. Top down strategic initiatives and extensive bottoms up use cases being built organically by our teams. Our top down road map spans 3 domains, lending, deposits, and payments. That top down work took a huge step forward in April when we announced the strategic collaboration with OpenAI, an expansion of a relationship that began back in 2023. This is not a typical enterprise licensing relationship with a frontier model provider. it is embedding OpenAI engineers side by side with our team building custom capabilities bespoke for our processes. Let me start by giving you an update on the first top down initiative, loans. Our engineers have architected a multi-agentic credit underwriting process that can allow us to be ready to close commercial loans in 7 days or less versus industry norms of 30 to 60 days. I am thrilled to say that we piloted this tool this quarter and successfully closed C&I and CRE loans that utilizes underwriting edge engine within a week. that is an 85% reduction in readiness to close which should result in huge productivity and revenue gains, through more business, but more importantly, it will deliver an enhanced client experience and confidence in our bank. Moving to deposits. We kicked off an effort to rebuild our commercial onboarding process from scratch, with an ambitious target of opening complex commercial accounts in minutes, not hours. We expect to have real progress and an update for you on this next quarter. On payments, we are way ahead of the curve here. We believe we were the first bank to publish an MCP or model context protocol last year for our commercial payments customers. 1 revenue generating use case we are advancing on is a modernized, fully routable network for 24/7 cross-border payment settlement on our cubiX network that we will share more detail as it develops. Now for a few examples from the bottom-up side, which is reaching every corner of our institution. We are equipping bankers to drive increased conversion has led to a 110% improvement in select front office areas prospecting success rates. To help make that tangible, just 1 commercial deposit group has averaged $2 million per month in noninterest bearing deposit growth since the launch of the tool. In the back office, we are using agentic orchestration to enable products for new deposit customers, reducing setup times from an hour down to a couple of minutes. In risk and compliance, we are leveraging AI powered KYC screening, which allows our team to boost their productivity by 50%. And in corporate functions, we are reviewing legal documents in minutes, not hours. Tracking accuracy across regulatory filings, and have shortened our month end closing cycle by 60%. Everything I have walked you through here is proprietary and purpose built in house by Customers Bank, employees. To give you some context and the impact we are experiencing, our team has now saved at least 46 thousand hours through AI enabled workflow automation, up about 65% from last quarter and equivalent to 24 FTEs. They have built more than 600 agents and custom GPTs, up 20% in the last 6 days alone. 100% of our team members are now AI licensed, up from 75% last quarter, and we are providing extensive training and support to our entire organization. And I am personally leading a 40-person and growing team today representing about 5% of our workforce focused on AI workflow transformation. How will this translate for financially for us? Well, we have set a goal of getting to a low-forties run-rate efficiency ratio in 2027, versus the 50% or so we are at today. Through a combination of revenue growth and increased productivity. I have said it before, and I will say it again. We believe AI is the most significant opportunity in a generation for a bank of our size, and we intend to be the 1 that proves what serious adoption looks like. Now moving to slide 7 and cubiX. We have said for some time that excelling in payments is critical to future success in our industry. Let me first frame where our cubiX industry expansion stands. DA 27 settlement was our foundation. Then we moved to mortgage finance clients. And now real estate has become a fast growing vertical. To put it in perspective from what was essentially a start up vertical based on adoption and pipeline, we now project this vertical could represent 20% of all payment units. Capital markets is an opportunity ahead. Think traditional finance exchanges as the whole industry moves toward continuous around the clock trading. We are also looking at incubating new verticals facilitating 27 cross border and other 27 settlement transactions as customers and in some cases, their agents. Continue to expect faster payments. The combination of a cutting edge product with a best in class team is already producing strong results. Quarter over quarter in the real estate payments vertical, transaction volume is up roughly 7x, Spot deposit balances are up more than 4x, $400 million in just a few quarters. And we have added approximately 350 new deposit accounts. A major milestone in the quarter is that we surpassed $5 trillion in cumulative transactions activity. That is a truly staggering figure and shows just how mission critical this payments network is to our clients. And importantly, the unit count of transactions is continuing to accelerate. To put that in perspective, year to date, we have processed over 200 thousand CubiX internal transfers, which is double from the same time last year. And we remain in the early innings of unlocking the full value of this platform. At the end of last year, I told you we did not expect this to be a growth vertical. However, based on tangible progress we are seeing through the end of this year, we now expect cubics to be a growth area in 2027, as these new verticals continue to scale with granular diversified low cost deposits. Turning to slide 8, I wanna discuss what we believe is a driving engine behind our success. Our organic growth flywheel. It starts with service. Our net promoter score is 81, nearly double the industry benchmark of 41 and puts us at the top of the industry. That level of service drives deeper client engagement. Stronger retention, more referrals. That engagement builds momentum and financial performance. That performance allows us to reinvest into people and technology. That investment helps us attract and retain top teams whose clients and service expertise starting the cycle over again. And you can see the output on the right of the slide. We are the number 1 core EPS compounder and number 2 intangible book value per share compounder among our peers. And our organic growth deposit rate is roughly at 2x the peer median. None of this works, though, without the right people. And that brings me to our team recruitment strategy update, which I will cover on the next slide. The teams we have recruited since 2023 now represent 18% of our deposit base, about 1-fifth of the entire franchise. Let that sink in. In just 36 months, entirely organically, we have built roughly 1 fifth of this bank through recruiting. And these new teams are extremely accretive to the bank's efficiency ratio. With mature vintages operating at efficiency ratios in the 20% to 30% range. We want to spotlight the 2025 vintage hired in the last 12 months. These teams already hold more than $500 million in deposits across 1.6 thousand accounts or over 6% of our total commercial accounts. They are incredibly granular, today averaging about $340 thousand per account. Due to the smaller balances and operational nature, 63% are non interest bearing and a spot cost of about 70 basis points. And similar to last quarter, the noninterest bearing deposit pipeline for new teams is incredible, around $250 million in the next 90 days or so. And the economics are compelling. Similar to our 24 teams, our 25 teams have already reached profitability in approximately 3 quarters. They run at roughly 1.7x deposits to loans, generating a spread of around 500 basis points on top of the excess low cost deposits they bring. And I am happy to share a quick preview of what we have accomplished with our 2026 vintage. Year to date, about 30 team members have joined or are in advanced discussions to join with 4 teams expected to join this quarter. These teams already have a 9-figure loan and deposit pipeline to capture by year end. And we are optimistic that these teams could similarly turn profitable within 12 months. With that, I will turn it over to Mark to talk you through the financials in more detail.
Mark R. McCollom: Thanks, Samvir, and good morning, everyone. My comments will begin on slide 10. We are only showing you GAAP earnings this quarter as we do not have any material adjustments to these GAAP results. We delivered EPS of $2.05. up roughly 4% from last quarter and 18% year over year. Continuing the consistent high quality earnings growth this franchise has delivered. ROE and ROA came in at 13.2%, 1.13% respectively. Turning to slide 11 and the broader deposit franchise. Total deposits ended the quarter at 21.7 billion. An increase of $2.7 billion year over year. While total deposit growth for the quarter was more measured, this may ask a lot of activity under the surface. First, we continue to remix less strategic deposits of over $600 million in the quarter picking up 150 basis points in bucking industry trends. Second, the quality continued to improve, and I will highlight a few stats. Non-interest-bearing deposits grew by about $175 million in the quarter, to a second consecutive period end record of 6.9 billion. As you can see on the top right chart, over the last 2 years, we have increased our noninterest bearing deposit percentage from 25% to 29% to 32% of total deposits, top quartile among regional bank peers. Excluding our DDA channel, bearing balances grew approximately $375 million during the quarter. This is up 14% quarter-over-quarter and 37% year-over-year. In the last 12 months, we have added over $840 million of noninterest bearing deposits outside of the DDA channel. A direct result of the commercial team recruitment strategy Samvir just walked through. I wanna be clear about our ambition here because it helps you understand the potential we see in the franchise. Our goal is to have the highest percentage of noninterest bearing deposits within our peer group. And we are almost there. Turning to slide 12 and loans. Total loans grew $624 million or 4% in the quarter, to 18 billion double the 2% linked quarter growth for the industry. On a year over year basis, loans are up 17%, Just as important, as the pace of growth is the breadth. Commercial growth was diversified across the franchise led by verticals like commercial real estate, real estate specialty finance, and community C and I. With smaller contributions from multiple other verticals. As we always say, the mix of top contributors may shift from quarter to quarter. But the diversified nature of our origination platform increases the confidence in our guidance as it lets us grow while remaining disciplined on structure and pricing. Slide 13 covers our net interest income and margin. We view the second quarter as the inflection point for the year. Net interest income was over $193 million. Up $16 million or 9% year over year driven by higher average loan balances and a lower cost of funds. On a linked quarter annualized basis, net interest income grew about 4%. We remain focused on that NII growth, which continues to be strong as I just outlined. As we signaled last quarter, our second quarter net interest margin of 3.17%, is expected to be the low point for 2026. We expect our net interest margin to move back toward first quarter levels in the third quarter and to build from there. We also expect net interest income to be stronger in the back half of the year. This NIM and NII trajectory is grounded in a few factors. Our deposit pipelines are robust and are expected to convert into continued low cost deposit gathering, We have continued deposit remixing opportunities in the second half of the year. The 25 teams have hit their stride and are helping to drive that momentum. And a surge in loan growth in the second half of the second quarter creates momentum for the third quarter as well as a strong pipeline for the third quarter. Despite the headwinds the industry is facing, continue to have levers on both sides of the balance sheet and we remain optimistic about strong NII growth and steady margin tailwinds during the second half of 26. Moving to slide 15 and expenses. Noninterest expense was $114.9 million in the quarter, which included about $1 million of severance. The story here continues to be positive operating leverage. Through the first 6 months of 26, our core efficiency ratio improved by approximately 200 basis points and revenue growth outpaced expense growth generating roughly 430 basis points of positive operating leverage over the same period last year. Our noninterest expense as a percent of average assets was 1.82%. Among the lowest of any regional bank peer. I would underscore that we are delivering this efficiency while investing heavily in people and technology. The ability to grow the franchise and improve efficiency at the same time is supported by our second operational excellence initiative or OE 2, which I will cover on slide 16. Coming into the year, OE 2 targeted $20 million in annual run rate benefits. Last quarter, we raised that to $30 million by adding $10 million to phase 2. I am pleased to report that we have now achieved the $30 million run rate target. Roughly $4 million of this comes from revenue initiatives, and about $26 million came from expense initiatives. Stepping back, that makes 2 consecutive years of over $30 million in operational excellence accomplishments. These savings are being reinvested directly into the franchise. it is how we have been able to both hire 18 new teams delivering $3.9 billion of deposit growth since 2023 while maintaining a top decile OpEx ratio compared to our peers. This has become a repeatable muscle for us, and a key component of sustaining positive operating leverage. On slide 17, tangible book value per share grew to $65.20. Up 3% quarter over quarter and 16% year over year. that is approximately 2.5x where we stood at the end of 39 a CAGR of roughly 15% compared to about a 5% CAGR for regional bank peers over the same period. We view tangible book tangible book value compounding as the clearest long term measure of shareholder value creation. Turning to slide 18. Our capital position remains strong and continues to provide meaningful strategic flexibility. Our CET1 ratio was 12.8%, and our TCE to TA ratio grew 40 basis points year over year to 8.3% even as tangible assets grew 18% over the same period. Strong organic earnings position us to support continued balance sheet growth and, when appropriate, to return capital to our shareholders. On slide 19, credit quality remains stable across the board. Nonperforming assets as a percent of total assets remain below the regional bank peer median. Net charge offs continued to perform well with charge offs remaining low at just 18 basis points and our smaller consumer portfolio performing well. Reserve coverage was solid at 293%. I will close with our management guidance on slide 20 in which we are reaffirming all key metrics: For loans, as I mentioned earlier, we continue to see good growth opportunities for many different verticals. For deposits, the account and balance momentum from our new teams and real estate payments vertical are looking strong going into the second half of the year. The combination of loan and deposit growth opportunities should result in solid growth in net interest income. On noninterest expense, we are maintaining our target even as we continue to invest significantly in people and technology. And lastly, on capital and taxes, we have no changes to our targets. Taken as a whole, we believe this guidance sets up for a strong second half to 26. With that, I will pass the call back to Samvir for closing remarks before we open up the line for your questions.
Samvir S. Sidhu: Thanks, Mark. To wrap up, the second quarter, we delivered strong consistent growth across every major dimension of the franchise. AI continues to integrate into the operating fabric to transform our core lending deposit onboarding, and payments infrastructure. Our commercial payments platform surpassed $5 trillion in cumulative activity, and we are continuing to expand into new verticals and use cases. Deposits grew 15% year over year, and noninterest bearing deposits hit another record. Our new teams added about $600 million so far this year, and our second wave of 26 teams should be starting in the third quarter. Loans grew 17% year over year. NII increased 9% year over year. And our EPS grew 18% year over year. And lastly, we continue to deliver strong positive operating leverage while investing meaningfully as you heard from Mark in people and technology.
Operator: With that, we will now open up the line for-- we will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press 1 to raise your hand. And to withdraw your question, press 1 again. We ask that you pick up your handset when asking a question for optimum sound quality And if muted locally, please remember to unmute your device. Please standby while we compile the Q and A roster. Your first question comes from the line of Steve Moss with Raymond James. Your line is open. Please go ahead.
Steve Moss: And nice quarter here. Samvir, maybe just starting off with your comments here. You mentioned you are looking to get the real estate payments real estate vertical to be about 20% of payments here. Just kind of curious as to how you are thinking about the timing of that 20% goal.
Samvir S. Sidhu: Hey, Steve. Good morning. That is a 2027 goal. We sort of forecasted a little bit about, you know, operationally how we think about sort of units and, you know, in payments volume. So we do think that is sort of a medium term goal.
Steve Moss: Okay. Got you. And then just kind of thinking about, you know, you have a lot of drivers here with regard to with regard to deposit growth. And, you know, clearly, a lot of noninterest bearing added this quarter. Just kind of curious what is the marginal cost of deposits these days that you are bringing on? It seems like it is probably lower than what we are thinking about in the past. And, you know, how much of a cadence maybe could we see in terms of funding cost declines if the Fed holds rates steady at current levels?
Samvir S. Sidhu: Yep. So I am happy to take that, Steve. So, really, I think you hit the nail on the You know, we are basically, I think, seeing a convergence of 2 of our top priorities. 1 is organic loan and deposit growth, so the teams that we are recruiting are bringing in 25% to 30% as high as sometimes 35% on interest bearing deposits and operating accounts. And then our payments related commercial teams are bringing in exclusively non interest bearing deposits, and hence you are getting that over 50%. And that is really what is what is driving this. And so we do continue to see this level of very high index noninterest bearing deposit growth coming from our commercial teams, which I think is a testament to our heads down focus and dedication to our priorities. You know, as you think about that, what does that mean? Let's say the marginal cost of deposits just for ease of simplicity, is at Fed funds. And you are bringing in 60% at non interest bearing. Majority of our loan growth coming in about a 6% NIM. So we will see, you know, our interest bearing cost deposits did go down this quarter. We remixed you know, about $600 million or so of higher cost funding. You know, which is happening on the level of the deposits, and we will continue to hopefully see tailwinds, you know, in our margin in addition to NII growth, which we have always sort of set is paramount for us.
Steve Moss: Okay. Great. Appreciate that. And let me just sneak 1 last 1 in. You know, on the loan pipeline, good to see, you know, another quarter of loan growth. Just curious, like, mean, obviously, Sierra is strong this quarter. How is that loan pipeline these days? And I know it bounces from quarter to quarter, but any color you could give on in terms of strength of verticals here?
Mark R. McCollom: Yes, Steve. Good morning. This is Mark. Yeah. I as you know, we always say the quarter to quarter, you know, different step to the forefront, you know, and be the leader in that loan growth You know, our loan pipelines feel good. You know, we have not you know, changed our guidance here midyear, you know, but we feel very optimistic about continuing strong loan growth in the back half of the year.
Steve Moss: Okay. Great. I will step back in here. Thank you. Thank you very much, guys.
Operator: Your next question comes from Kelly Motta with KBW.
Kelly Motta: Good morning. Thanks for the question. I guess kicking it off on the balance sheet, it looks like the average cash balances were down a bit, which weighed on your NII Can you provide color? Was that related to declines in average cubiX? I apologize. I did not see that data in the deck. Thanks.
Samvir S. Sidhu: Good morning, Kelly. Kelly, you were coming in and out a little bit, and I think I heard the full question. Let me know if I missed anything. I think that, you know, what I would sort of say as it relates to your question about noninterest bearing deposits, and linking it back to cubiX You know, as you are aware and maybe sort of also referenced in some of your notes, you know, digital asset trading was down in the second quarter, especially in May and June, and so low lower trading activity leads to lower payments float. In the presentation, we did reference the digital asset balances were $3.8 billion. But total cubic's balances were roughly flat in the quarter, and that is really a testament to sort of the growth in the in the real estate payments vertical. So, you know, I think I would also just highlight that what is interesting about cubiX is, you know, Steve touched on a little bit in percent of units as we look out in next sort of 12 to 18 months. But also just on our existing platform, the number of transactions actually doubled year-over-year. So we continue to deepen and integrate, you know, with our with our customer base, you know, today.
Kelly Motta: Okay. And I see those spot balances in the deck the footnote were about 3.8 billion which did not fall as much as I had expected. Do you have what happened with the average balances there?
Samvir S. Sidhu: Yes. On a spot basis, it was about $200 million. I do not know the exact average. I think it is about $300 million. On specific to that DA, but we made that up in granular real estate cubic deposits by June 30.
Kelly Motta: Got it. that is helpful. And then with the NII guide reiterated, it implies a ramp in the second half of the year you know, given this, I think, Q2 is what you have described as the low point as a jumping-off point. What gives you confidence in being able to really ramp that NII to get into that? That range? Thank you.
Mark R. McCollom: Yeah. And that is right, Kelly. Hey. Good morning. it is Mark. Yeah. that is exactly right. it is really the exit point, you know, at June 30. You know, both in the pipelines on the deposit side plus loan balances, you know, that we saw much of our loan growth in the second quarter came in the month of June. You know? So the exit points of both loans and deposits you know, plus just the momentum from our different verticals give us confidence for the back half of the year both on a NII basis and on a margin basis.
Kelly Motta: Got it. I will step back. Thank you so much.
Operator: Your next question comes from the line of Anthony Elian with JPMorgan. Your line is open. Please go ahead.
Mike: This is Mike on for Tony. On Cubic's, saw some good traction with the real estate vertical this quarter added about $300 million. Know you mentioned reaching the 20% goal is a sort of a 2027 event. But you guys also mentioned that vertical has a 9-figure pipeline. Per quarter through year end. So I guess how much of that pipeline did you sort of expect to convert in 2026 more specifically into actual deposit growth?
Samvir S. Sidhu: Hey. Good morning, Mike. Specifically, you know, as we talked about earlier in the year, we would sort of migrated some of our mortgage finance customers onto cubiX who are looking for sort of that operational you know, payment rails. Then we added new to the bank, you know, real estate customers. Those 2 in aggregate are about a billion dollars. You know, today, and we expect that we are hopeful our internal target is getting that to about $1.5 billion by the end of the year.
Mike: Great. And then on slide 6, a lot of great metrics here on the AI efforts. On an ex expense basis, you guys already gave some good context on how it is benefiting the company today. But are you able to quantify at all how much in expense savings you have sort of recognized already from these AI efforts?
Samvir S. Sidhu: So, you know, I think that, you know, we are really these are not software plug ins. We are, you know, we are actually building proprietary software. And some of the larger lifts actually take quarters, not, you know, weeks. The tech that we are sort of dealing with that has really helped us work on transformational workflow automation is really only about 6 months old or so. So we are seeing productivity lifts today. That will help us sort of think about you know, reducing expense investment in the future. But, really, our focus is decoupling our expense base from our revenue growth as we get into 2027. So I think we have put a very ambitious 2027, you know, run rate goal out there. And that kind of combines the 2 of those together. Thank you.
Operator: Your next question comes from the line of Tyler Cacciatori with Stephens Your line is open. Please go ahead.
Tyler Cacciatori: Guess just headed back to digital assets. Just wanted to clarify, that $3.8 billion that is exclusive of the mortgage finance and real estate balances. Right?
Samvir S. Sidhu: that is right. And then those are all non interest bearing? that is right.
Tyler Cacciatori: Great. Thank you. Then just moving to broker deposits, if you could update us on the balances at quarter end, Just looking at the call report last quarter. Seemed to be a large decline. I was just wondering if there was a mix shift or reclassification of some items there.
Mark R. McCollom: Yeah. that is correct. Hi. This is Mark. Yeah. Our balance is for the end of the second quarter track pretty closely to where we ended the first quarter.
Tyler Cacciatori: Okay. Helpful. And then just 1 more quick 1 for me. I was wondering if you had the spot total cost of deposits at quarter end. Thank you for taking my questions.
Mark R. McCollom: Yeah. This is Mark again. The spot cost would be pretty close to where we ended the quarter on an average balance basis as well within a couple basis points.
Operator: Your next question comes from the line of Brian Wilczynski with Morgan Stanley. Your line is open. Please go ahead.
Brian Wilczynski: Hi, good morning. Thanks for taking my questions. Maybe just going back to the loan growth guidance for the year. You mentioned that you are reiterating the guidance range If we look on a year to date basis, loans are already up about 7%. Versus the fourth quarter of 25. I was wondering when you think about the outlook for the full year, does it seem like the higher end of the loan growth guidance is becoming more likely? Is there anything that you are seeing that could indicate a slowdown? Or does it feel like things are skewed towards the higher end of the range?
Samvir S. Sidhu: That is correct. It does seem it this point that the higher end of the range would be more likely.
Brian Wilczynski: Okay. And then maybe just on the loan pricing, can you get give any color on what new loans are coming on to the balance sheet at today? And how we should think about the trajectory of loan yields in second half of the year?
Samvir S. Sidhu: Yeah. I would I would say it is been consistent with what we have saw in the last quarter where depending on the vertical, you could be anywhere from, you know, 200, 25 over SOFR to 300 over SOFR depending on the vertical. Okay.
Brian Wilczynski: Great. I appreciate the detail, and thank you for taking my questions. You bet.
Operator: Your next question comes from the line of Janet Lee with TD Securities. Your line is open. Please go ahead.
Janet Lee: Good morning. Just following up on the loan yield question earlier. So the second quarter seems to have been impacted by, I guess, the new loan yields new commercial loan yields coming on at a little lower yields versus what was on the book. So is it should we assume that loan yields are starting off better than 25 that was reported in the second quarter for the third quarter?
Mark R. McCollom: Yeah. that is right. I think when you look at it being down in $6.25 for the total, you know, loan book in the second quarter, you know, going into the third quarter then you only need SOFR plus, you know, 2.50 to 2.60 to kind of equal that, you know, or and then to go up from there.
Janet Lee: Okay. Got it. Maybe could you talk about what your view is on the Clarity Act and how that could impact Customers Bancorp either on cubiX side or just any side of your bank. Whether are you going to be a beneficiary of it, or what is what is the prospect? Around the Clarity Act? For you?
Samvir S. Sidhu: Hey. Hey, Janet. Good morning. You know, I think that I have said this, you know, publicly a number of times. I think we are very, very supportive of market structure and clarity from a regulation, pun intended. You know, perspective. You know, while the Clarity Act you know, sort of would require legislative approval in Washington DC, I think the signaling that you have heard from other agencies, including the SEC and the CFTC, is that independent of you know, whether there the Clarity Act, you know, passes through Congress, that those agencies would be ready with proposed rule making and guidance that should hopefully provide structure. So, I think that either of those paths would be a net benefit to Customers Bank existing customer base. But also open up new channels of potential, you know, verticals that are adjacent to our core DA 27 trading.
Janet Lee: Got it. I do appreciate you, you know, reiterated all the guidance across different line items, including NII. Do you have any sense around whether it is coming in at do you have any bias around like lower end, higher end, based on the trajectory so far in the first half of the year?
Mark R. McCollom: Yeah. I think, you know, there is obviously still a lot of a lot of levers on both sides of the balance sheet that can impact that. I would say right now, where the street is at, you know, feels like a good place to start.
Janet Lee: Got it. Thank you.
Operator: Your next question comes from the line of Manuel Navas with Piper Sandler. Your line is open. Please go ahead.
Manuel Navas: Hey. Good morning. Just to fine-tune the NIM expectation you have a June NIM or, like, end of period NIM to kind of get a sense for the jumping off point for the back-half-of-the-year rebound?
Mark R. McCollom: Well, yeah, I mean, just I mean, we do not usually talk about monthly results, but even with that, because a lot of the growth and the pipeline that we saw really came in the second half of the month, you know, even if we were to quote those kind of numbers, I think that is not really indicative of the optimism we see for the third quarter. You know, again, we just feel you know, and I will reiterate that we feel confident in saying that our third quarter NIM is going to be closer to our first quarter. Net interest margin. And in the pipelines that we see plus the actual loan growth that we put on in the month of June gives us confidence for the commensurate NII growth as well.
Manuel Navas: I appreciate that. Remind me how you continue to handle, cubiX funds When do you become more comfortable with the DA assets being deployable beyond cash? Are the CRE funds, real estate funds deployable from day 1, Just kind of your thoughts on how you, to this point, have been very conservative with your handling of those funds. How that moves and develops going forward.
Samvir S. Sidhu: Yeah. Sure, Manuel. Thanks for the question. I think that, you know, on the DAA side, you rightfully you know, have noted we have and have continued to be, you know, conservative there and have said that we will, you know, evaluate over time. How we think about a conservative approach on, you know, some even minority deployment of cash. You know, on and also, right so on the real estate side, you know, we those are incredibly granular. I think they are just a couple hundred thousand dollars per account today. And traditional business lines that many commercial banks you know, have with the extra sort of payments edge that we have. So we, you know, we will plan to be deploying those. That sort of gets back to the, you know, 6% NIM on those deposits that I sort of mentioned. You know, as we continue to grow. And I think what is interesting is we are taking a portion of while we saw a little bit of quarter decline on 1 side of that The other side of the business saw an incredibly granular you know, quarter over quarter increase. I appreciate that color.
Manuel Navas: I mean, the balances, I mean, even in the DDA side have kind of held in any better than folks had expected. And maybe at some point, that could become your conservatism could shift. How much closer are we to having that shift?
Samvir S. Sidhu: Yep. So I think that we are basically been flattish you know, on the overall balances, you know, including the new verticals. And I think that, you know, the next quarter or 2, I will be able to sort of give some, you know, some more confidence. I think what you are saying what you are hearing from us right now is we feel very confident that by the end of the year and the turn, you know, we should be able to get there. Maybe we get there a little bit sooner, but 2027 should be a growth year for Cubic's, you know, related deposits.
Manuel Navas: I appreciate I appreciate the color. Thank you.
Operator: We have reached the end of the Q and A session. I will now turn the call back to Samvir S. Sidhu, CEO, for closing remarks.
Samvir S. Sidhu: Well, thank you, everyone, for your continued and support of Customers Bancorp. Have a great day and a great weekend.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
