• Revenue Growth: 15% annual growth rate over the last five years.
• Core Earnings Per Share (EPS): $1.54 for Q1 2025.
• Net Income: $50 million for Q1 2025.
• Net Interest Income: $167.4 million for Q1 2025.
• Net Interest Margin: Increased to 3.13%, up 2 basis points sequentially.
• Loan Growth: 12% annualized pace in Q1 2025.
• Deposit Growth: Total deposits increased to just under $19 billion.
• Average Cost of Deposits: Reduced by 25 basis points in Q1 2025.
• Non-Interest Bearing Deposits: $5.6 billion, nearly 30% of total deposits.
• Core Return on Common Equity (ROCE): 11.7% for Q1 2025.
• Return on Assets (ROA): 97 basis points for Q1 2025.
• Core Efficiency Ratio: Improved to 52.7%.
• Tangible Book Value Per Share: $54.74, up more than $5.50 year over year.
• Common Equity Tier 1 (CET1) Ratio: 11.7%.
• Total Capital Ratio (TCO): Increased to 7.7%.
• Non-Performing Assets (NPA) Ratio: 26 basis points.
• Reserves to Non-Performing Loans (NPLs): 324%.

• Warning! GuruFocus has detected 3 Warning Sign with CUBI.

Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Customers Bancorp Inc (NYSE:CUBI) reported strong core performance across its franchise, with significant low-cost granular deposit growth and a 25 basis point reduction in average deposit costs.
• The company achieved a 12% annualized loan growth rate, driven by selective onboarding of credits and leveraging long-standing relationships.
• Net interest margin increased by 2 basis points due to reduced interest expenses, marking the second consecutive quarter of margin expansion.
• Operational excellence initiatives surpassed targets, realizing $30 million in annualized impact, exceeding the original $20 million target.
• Capital and liquidity metrics remain robust, with CET1 at 11.7% and a TCO ratio of 7.7%, providing substantial flexibility for organic growth.

Negative Points

• The macroeconomic landscape remains complex and volatile, posing challenges for the banking industry.
• Despite strong performance, there is uncertainty in the rate trajectory, which could impact net interest income expansion.
• The company undertook a balance sheet optimization process, indicating potential concerns about credit-sensitive securities.
• There is ongoing pressure to maintain low-cost deposits amidst market volatility and competition.
• The company faces challenges in sustaining its high growth rates in deposits and loans, given the evolving economic conditions.

Q & A Highlights

Q: In terms of the new banking teams, are the deposits coming over still 25% non-interest bearing, and is that the expectation going forward? A: Sam Sidhu, President and CEO of Customers Bank, confirmed that the deposits from new teams are generally closer to 30% non-interest bearing. He noted a significant increase in non-interest bearing deposits from commercial teams, despite some offset from lower cubiX balances.

Q: Regarding the restructuring this quarter, does this conclude any restructuring of credit-sensitive instruments within the investment securities book? A: Phil Watkins, CFO, stated that no further restructuring is expected. The recent restructuring involved reducing corporate and asset-backed securities, including CLOs and non-agency CMBS, with remaining securities being predominantly investment grade.

Q: What is the capacity for growth in commercial real estate lending, and is there sufficient capital room? A: Sam Sidhu confirmed that there is significant capacity for growth in commercial real estate lending, with current levels well below peer averages. He emphasized the self-funded nature of real estate deposits, achieving over 4% net spread.

Q: Can you provide an update on the treasury management products and technology expenses? A: Sam Sidhu mentioned that treasury fee income is on a good run rate, with recent increases due to the rollout of the cubiX platform. Technology expenses related to these fees are largely behind, indicating a positive ROI.

Q: What is the outlook for cubiX deposits, and how do you see the opportunity for growth? A: Sam Sidhu explained that cubiX deposits are payments deposits held entirely in cash, with no immediate plans to expand them. The focus remains on supporting clients' needs, with the bank holding about 1% of the liquidity in the digital asset industry.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.