Earnings call transcript: Customers Bancorp Q2 2025 sees EPS rise, stock climbs

Customers Bancorp reported robust financial performance in the second quarter of 2025, with core earnings per share (EPS) reaching $1.80. The bank’s net interest income grew by 6% to $176.7 million, while its net interest margin expanded by 14 basis points to 3.27%. Following these results, the company’s stock price rose by 3.01%, closing at $64.69. The financial institution also raised its full-year loan growth guidance to 8-11%, reflecting a confident outlook for the remainder of the year. According to InvestingPro data, the stock has delivered an impressive 46.42% return over the past six months, though analysis suggests it may be slightly overvalued at current levels.

Key Takeaways

• Core EPS for Q2 2025 was $1.80.
• Stock price increased by 3.01% post-earnings.
• Net interest income rose by 6% to $176.7 million.
• Full-year loan growth guidance raised to 8-11%.
• Cubix payments platform processed $1.5 trillion in 2024.

Company Performance

In Q2 2025, Customers Bancorp demonstrated strong financial health, driven by increased net interest income and an expanded net interest margin. The bank’s focus on reducing broker deposits and enhancing its core efficiency ratio to 51.6% contributed to its solid performance. InvestingPro analysis confirms this strength with a "GOOD" overall Financial Health score of 2.63, particularly strong in price momentum and profitability metrics. The Cubix payments platform, which processed $1.5 trillion in payments volume in 2024, continues to position the bank as a formidable player in the payments network space, just behind American Express and Visa Commercial.

Financial Highlights

• Revenue: $176.7 million, up 6% from the previous quarter.
• Core EPS: $1.80, reflecting strong earnings performance.
• Core ROE: 13.3%, indicating robust shareholder returns.
• Core ROA: 1.1%, showcasing effective asset utilization.
• Tangible book value per share: $56.24.

Outlook & Guidance

Customers Bancorp has raised its full-year loan growth guidance to 8-11%, signaling confidence in its lending capabilities. The bank also projects net interest income growth of 7-10% and plans to onboard 5-6 new banking teams in 2025. This strategic expansion aims to leverage the potential of deposit teams with a significant book of business, ranging from $200 million to $1 billion. InvestingPro data reveals that three analysts have recently revised their earnings estimates upward, with price targets ranging from $62 to $90, suggesting potential upside. Subscribers can access the comprehensive Pro Research Report for detailed analysis of the bank’s growth trajectory and valuation metrics.

Executive Commentary

Sam Sidhu, CEO of Customers Bancorp, stated, "We are the leading stablecoin infrastructure and payments provider in the country." This underscores the bank’s strategic focus on digital asset banking and stablecoin infrastructure. Jay Sidhu, Executive Chairman, emphasized the company’s mission to deliver long-term value for shareholders, highlighting the bank’s commitment to sustained growth.

Risks and Challenges

• Regulatory changes in digital asset banking could impact growth.
• Competition from larger financial institutions may pressure market share.
• Economic downturns could affect loan growth and asset quality.
• Interest rate fluctuations might influence net interest margins.
• Cybersecurity threats pose risks to digital payment platforms.

Q&A

During the earnings call, analysts inquired about the growth and monetization potential of the Cubix platform. Executives addressed stablecoin regulatory implications and discussed strategies for managing deposit concentration and associated risks. These discussions highlighted the bank’s proactive approach to navigating regulatory landscapes and optimizing its operational framework.

Full transcript - Customers Bancorp Inc (CUBI) Q2 2025:

Operator: Ladies and gentlemen, this is the Operator. Today’s conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience.

It.

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to the Customers Bancorp, Inc. second quarter 2025 earnings webcast and conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star then the number one on your telephone keypad. To withdraw your question, press Star one again. I would now like to turn the conference over to David Patti with Customers Bank. Please go ahead.

David Patti, Investor Relations, Customers Bank: Thank you, Regina, and good morning, everyone. Thank you for joining us for the Customers Bank Core Earnings webcast for Q2 of 2025. The presentation deck you will see during today’s webcast has been posted on the Investors webpage of the bank’s website at customersbank.com. You can scroll to Q2 2025 results and click Download Presentation. You can also download a PDF of the full press release at this spot. Our investor presentation includes important details that we will walk through on this morning’s webcast. I encourage you to download and use the document. Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated.

Please note that these forward-looking statements speak only as of the date of this presentation and we undertake no obligation to update these forward-looking statements in light of new information or future events except to the extent required by applicable securities laws. Please refer to our SEC filings, including our Form 10-K and 10-Q, for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of our website. Now, at this time, it’s my pleasure to introduce Customers Bancorp Chair Jay Sidhu.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Jay.

Jay Sidhu, Executive Chairman, Customers Bancorp: Thank you, Dave, and good morning, ladies and gentlemen. Welcome to Customers Bancorp second quarter 2025 earnings call. I’m joined this morning by our President and Chief Executive Officer of the Bank, Sam Sidhu, and Customers Bancorp CFO, Phil Watkins, and Customers Bank CFO, Mark McCollum. First, I’m thrilled to welcome Mark. On the call, Mark and I were partners at Sovereign Bancorp, and I’m thrilled he is now on the Customers team. Mark joined us in early June and will complete the transition to CFO of Customers Bancorp in the coming weeks. We are very excited about the continued depth of leadership we are building as our franchise grows. I also wish to thank Phil Watkins for his exceptional performance as Chief Financial Officer of Customers Bancorp over the past few quarters. He will continue to be a part of our top team.

We are pleased to report another strong quarter, reporting results that materially exceed the consensus street estimates. Before we dive into the results from the quarter, I’d like to take a few minutes to reflect on some of the incredible accomplishments of this organization. As many of you know, we founded Customers Bank in 2009 and then a year later Customers Bancorp, all with an objective of creating a company with a bold idea to build a client-centric, tech-forward, high-performing business bank that could compete and win in the fast-evolving industry. Since then, we’ve grown from a small, troubled $200 million asset bank in 2009, which had become a $3.2 billion asset bank by 2012, and today is a $22 billion commercial bank with national reach, high-performing, and I’m incredibly proud of our team and what we’ve accomplished together.

As you can see from slide 3, over the past 15 years we built a differentiated model anchored in disciplined growth, innovation, and exceptional client service. Over the last five years since Sam Sidhu joined the executive team, our transformation has meaningfully continued to accelerate. Under his leadership, Customers Bank team has expanded into high-growth verticals, launched cutting-edge payment platforms like Cubix, and delivered industry-leading growth in tangible book value, revenue, and earnings per share. As expected, this has resulted in incredible value for our shareholders as our stock price has increased nearly 500% over the last five years. Perhaps most importantly, we’ve attracted and developed what I believe is the best management team I’ve had the privilege to work with and I was a CEO of a $90 billion asset company and served on the board of a multinational top five bank in the world.

I am excited this morning to share that effective January 1, 2026, I will be transitioning to the role of Executive Chairman of Customers Bancorp and Sam will assume the role of Chief Executive Officer of Customers Bancorp. Sam is a visionary leader with deep conviction in our strategy and culture and we have every confidence in his ability to take this institution to even higher levels. Six years ago, the Board of Directors of Customers Bancorp and Customers Bank embarked on its responsibilities for choosing a successor for our incredible COO at that time, Dick East, who had expressed his desire to retire. One of the best decisions in my opinion that Dick and the board made at that time was to select and convince one of their fellow directors, Sam Sidhu, to join the bank as Chief Operating Officer in 2020.

A year later, upon Dick’s retirement, Sam was named the CEO of the bank. We have been thrilled with Sam’s leadership style. We couldn’t be more excited to have a thoughtful, strategic and dynamic leader like Sam to be the CEO of Customers Bancorp, Inc. and lead us into the future. We are all convinced that our best years are ahead of us. I remain the largest individual shareholder of the company and for the past several years I’ve even taken my short term annual bonus completely in Customers Bancorp stock. Even our board receives the majority of their compensation in company stock. Our interests are totally aligned with the interests of our long term shareholders. Our mission remains unchanged: to strive to deliver above average long term value for shareholders and our communities by putting clients first and executing in a superb manner.

The Board and I look forward to continuing to work closely and support and guide Sam and our exceptional management team as they take on tomorrow. Please join me in congratulating Sam and with that I’ll turn the call over to Sam on slide four.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Good morning Jay. I want to begin by expressing my deep gratitude to you and our Board of Directors for their trust and confidence in appointing me as CEO of Customers Bancorp. It is truly an honor to step into this role and to build on the incredible foundation that Jay and his team have established since the Bank’s founding in 2009. What makes this moment especially meaningful is this opportunity to lead alongside such an extraordinary team across the organization. From our commercial bankers to the team members in our operations, technology, risk, finance, and many other areas, I see a shared drive to innovate, serve with purpose, and never settle for average. That entrepreneurial winning culture is what defines Customers and it’s what gives me tremendous confidence in our future.

While we’re proud of the progress we’ve made, as you heard from Jay, and the momentum that we’re carrying, we know the opportunity ahead is even larger. We have the right foundation, a clear roadmap, and an incredibly talented team. We’re going to stay relentlessly focused on deepening client relationships, executing with discipline, and delivering durable value for all of our stakeholders. We are unwavering in our belief that long term success will be defined in three things: a client first approach, consistent financial performance, and best in class risk and operating framework. These are the principles that will make us built to last and they will continue to guide us in everything we do as we move forward. These pillars are reinforced by our culture, one that’s been entrepreneurial, client centric, and performance driven. That’s why we’ve been able to consistently attract and retain top talent.

The proof is in the results and in the trust that we’ve earned from our clients, our team, and our shareholders. From a financial perspective, Customers Bank has been the number one financial performer in EPS and in book value growth over the last five years and that’s translated into long term returns for our shareholders. We have also been, as you heard from Jay, the number one performing U.S. bank stock over a five year period. Moving to slide 5, Q2 was another very strong quarter across the board. Here’s a quick look at the highlights. We had nearly $300 million in deposit growth from our new commercial banking teams in what is typically a slow quarter. We also delivered annualized loan growth of 8% with diversified contributions across the franchise. Our net interest margin expanded by 14 basis points quarter over quarter.

Our efficiency ratio improved again, even as we continued to invest, and we continued to grow tangible book value, crossing $56 per share. We accomplished all of this while maintaining strong credit quality and liquidity metrics. Advancing to slide 6, you’ll see our GAAP financials, and then moving to slide 7, I’ll run through the core financials for the quarter. Our beat relative to expectations on both a GAAP and core basis was driven by broad strong results. We delivered core EPS of $1.80 with core ROE and ROA of 13.3% and 1.1% respectively. This reflects broad-based strength across the business, and more importantly, our credit metrics remain strong, which Phil will cover in more detail later. As you recall, on our third quarter 2024 earnings call, I stated that we could achieve 30% core EPS growth in one year if we executed in our strategic priorities.

I’m incredibly proud to say that we’ve exceeded that with about 35% of core EPS growth from those levels a quarter early. Now let’s turn to deposits in the next slide, where we continue to execute on our deposit transformation with a meaningful shift towards franchise-enhancing high quality deposits. Total deposits were steady at $19 billion, but it’s what’s under the hood that matters. Our new banking teams, onboarded since June 2023, contributed nearly $300 million in high quality deposits this quarter. These teams now manage $2.4 billion in relationship-based granular funding. That’s about 13% of our total deposits in less than two years, which is absolutely phenomenal. To reinforce the granularity of this growth, commercial account openings remain strong, up 14% this quarter and over 60% since the end of 2022.

The planned reduction in deposit service by BMTX had an approximately 3 basis point impact on total average cost of deposits and approximately a 6 basis point impact on total interest-bearing deposit costs in the quarter. Adjusting for this impact, interest-bearing deposit costs would have declined by 5 basis points in the quarter. This shows the continued power of our deposit remix efforts. We reduced our broker deposits again by $350 million this quarter and have now reduced these balances by about $1 billion over the last year. Continuing to reduce these balances remains a top priority for us. Non-interest-bearing deposits remain strong at about 29% of total deposits. At the heart of our deposit franchise transformation is one of our most powerful advantages: our ability to consistently recruit top-tier banking talent and give them the resources and platform to excel and produce quickly.

When we talk about team recruitment, we’re not just talking about adding headcount. We’re talking about strategically growing the franchise by onboarding experienced professionals with deep market knowledge, existing client relationships, and a proven track record of performance. I mentioned our commercial banking teams we onboarded over the last couple of years, and while these teams continue to have a lot of runway ahead, we are also focused on teams that will spearhead the next phase of Customers Bank’s growth.

Jay Sidhu, Executive Chairman, Customers Bancorp: Year.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: To date we’ve onboarded three new teams to the bank and continue to recruit high-performing deposit-focused teams. Two additional teams will be starting soon this quarter and we are in advanced negotiation with a few more. Our brand reputation as a high-performance, tech-forward institution with an entrepreneurial culture is attracting more and more top-tier bankers, those looking to leave behind bureaucratic legacy institutions for a platform where they can serve clients more effectively. Team recruitment is not a tactic for Customers Bank, it is core to our strategy. It’s how we win relationships, it’s how we expand our franchise with purpose, and it’s one of the clearest ways we continue to create long-term value for our shareholders. Now turning to slide 9, I’d like to illuminate Cubix, our proprietary in-house developed payments platform.

Cubix is purpose-built for our institutional clients who are looking for a tech-forward, service-oriented, and reliable banking partner. Cubix has become a mission-critical payments platform for our commercial clients. It’s delivering value to our customers in three ways: 24/7/365 instant payment capabilities, continuous product enhancements based on client feedback, and a growing network effect with thousands of unique trading pairs. Cubix is not just a tech platform, it’s a relationship deepener and a competitive edge. Today it is primarily used by the digital asset industry as an on-off ramp for institutional players looking to trade and settle on our network via APIs 24/7, providing a direct connection to all major exchanges, stablecoin providers, market makers, and institutional investors. To try and help put this in context, just how critical and utilized this network is: in 2024 we processed about $1.5 trillion in payments volume.

If you ranked us against household name payments networks, this would put us at number three, only behind Amex and Visa Commercial. This very much aligns with our philosophy of being a top three to five player in franchise businesses we participate in and being able to achieve industry-leading performance. This summer we have seen the beginning of regulatory clarity and institutional safeguards that the industry has long been awaiting. Institutional adoption began significantly increasing with ETF approvals last year and with stablecoin legislation now coming out of Washington. We as a leading stablecoin infrastructure and digital asset payments provider believe will be the bank that benefits the most from this post-genius landscape. We are building a resilient, compliance-focused, and scalable platform that is aligned with the long-term evolution of digital finance, one that positions Customers Bank as a partner of choice for the future of the industry.

Cubix has been a hidden gem in our franchise and we believe frankly has been a misunderstood and therefore mispriced asset. Let’s turn to loan growth. On slide 10, we delivered roughly $320 million of net held for investment loan growth this quarter, translating to a strong 8% annualized pace. Importantly, the growth was diversified, strategic, and relationship-driven. Here’s what’s driving that performance. Our corporate and specialized verticals continue to outperform. Mortgage finance was a nice contributor, driven by our long-standing leadership in the space. Fund finance had a strong quarter and healthcare lending is gaining solid momentum. Our equipment finance group continues to deliver consistent growth with strong yield and structure and credit. Our commercial banking teams, while primarily deposit-focused, have been also producing high-quality granular loan volume with strong relationship economics. We’re doing all this while maintaining pricing and credit discipline.

The depth and breadth of our platform means we’re not overly reliant on any one geography, industry, or client segment. That gives us the flexibility to go where the opportunity lies and where the right credit exists. Looking ahead, our loan pipelines remain strong across multiple verticals. We believe we’re well positioned to acquire high-quality clients and relationships, often from much larger institutions. With that, I’ll turn the call over to Phil on slide 11.

Phil Watkins, CFO, Customers Bancorp: Thanks Sam and good morning everyone. I’ll start on margin, where our disciplined execution continues to deliver meaningful results. In Q2, our net interest margin expanded by 14 basis points to 3.27%, marking the third consecutive quarter of NIM improvement, and our net interest income increased by about 6% to $176.7 million in the quarter. On the asset side of the balance sheet, we saw positive impacts from an increase in average loan balances of more than $500 million in the quarter. This growth, along with slightly higher loan yields and the impacts from the balance sheet optimization efforts we undertook, collectively drove interest income higher. On the liability side, our interest expense was well managed. Thanks to our robust deposit and loan pipelines, we’re well positioned to continue expanding net interest income.

One item to note was that late in the quarter we bought out a participant at a discount in an existing portfolio of loans that will positively impact interest income and margin through the remainder of 2025. The purchase closed in mid-June, so there wasn’t a significant benefit in Q2, though we expect this to increase to about $10 million in each of the next two quarters. In short, we believe we’ve built a business that has positive drivers for NNI and NIM on both sides of the balance sheet. Moving to slide 12, we’ll cover non-interest expenses. In Q2, non-interest expenses were $106.6 million as we previously communicated. These increased as we reinvested a portion of the operational excellence proceeds back into the franchise. Even with this investment, our core efficiency ratio improved for the third consecutive quarter to 51.6% as we drove positive operating leverage in the business.

Our core efficiency ratio is well below the industry average even with the investments we’ve made, and our non-interest expense to average asset ratio of 1.91% is top quartile of peers. On slide 13, we’ll talk about tangible book value, which we believe is one of the clearest markers of long-term shareholder value creation in bank stocks. At the end of Q2, tangible book value per share reached $56.24 and continues our multi-year trend of double-digit annual growth. To put that in perspective, since Q4 of 2019 we’ve more than doubled tangible book value per share, a 15% compound annual growth rate, significantly outperforming peers and positioning us at the top of the industry, and it’s worth underscoring. We’ve achieved this level of compounding through a period marked by a global pandemic, historic rate volatility, and a regional banking crisis.

We accomplish this as a result of our differentiated business model and by being strategically nimble in order to best capitalize on market opportunities. Now let’s move to slide 12 to discuss capital. Our capital ratios remain strong and provide us with substantial flexibility for organic growth opportunities. As previously announced, we fully redeemed our Series E preferred stock in the quarter utilizing a portion of our organically generated capital. Our TCE ratio increased by about 20 basis points in the quarter, even with some growth in the size of our balance sheet, and at 12%, we remain in excess of our CET1 target even while utilizing some risk-based capital for.

Loan growth in the quarter.

On Slide 15, we continue to be pleased overall with our credit performance. Non-performing assets remained low at 27 basis points of total assets. Our commercial and consumer portfolios are both performing well. You can see this as total net charge-offs improved, down about 25% quarter over quarter. Additionally, special mention and substandard loans were down 7% in the quarter. While we continue to closely monitor any emerging risks, we feel the portfolio is well positioned, and with that, I’ll pass the call back over to Sam before we open up the line for Q&A.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Thanks for that, Phil. As we look ahead to the rest of 2025, though there is some continued market uncertainty, we’re excited about our positioning and confident in our ability to navigate the current environment. We’re positively updating a few of our guidance items this quarter as an outcome of the strong results we’ve achieved in the first half of the year. On full year loan growth, we’re raising the range to 8% to 11% from 7% to 10%. We now project net interest income to grow between 7% to 10%, up from 3% to 7% previously. This increase reflects the strong performance on both sides of the balance sheet in driving increased revenue and the benefits Phil discussed earlier. Lastly, as a result of the stronger revenue growth and well-managed expenses, we now have a bias towards the low end of the efficiency ratio range.

I’d also like to echo Jay’s sentiment and thank Phil for his leadership. As Customers Bancorp CFO, we’re excited for him to be spearheading strategic initiatives to support the company’s long-term growth. In closing, we’re building on a strong foundation, one defined by disciplined execution, strategic growth, and a relentless focus on our clients. With the right talent, technology, and operating model in place, we’re confident in our ability to sustain this momentum and we remain committed to delivering long-term value for our clients, communities, and shareholders. With that, I’d like to open up the line for questions, please.

Operator: We will now begin the question and answer session. In order to ask a question, press star followed by the number one on your telephone keypad. Our first question will come from the line of Peter Winter with DA Davidson. Please go ahead.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Good morning.

Congratulations Sam, on the promotion and Jay, with your future plans to start off. If I could just, first question, Phil, you mentioned the increase of about $10 million next two quarters. Can you go over that one more time in your prepared remarks?

Phil Watkins, CFO, Customers Bancorp: Yeah.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Hey.

Jay Sidhu, Executive Chairman, Customers Bancorp: Hey.

Phil Watkins, CFO, Customers Bancorp: Good morning, Peter. I hope you’re doing well. It was a small portfolio of loans that we originated with the partner. We had the opportunity to purchase out the interest at a discount and did. The results of that will flow through net interest income over the next couple quarters.

It’s $10 million benefit each quarter, $10 million over the next 2 quarters.

We expect it to be around $10 million each of the next 2 quarters.

Got it, thank you. Sam, if I could just ask, with this passage of the Genius Act, how are you thinking about crypto-related deposits going forward? It seems like it’s going to be incredibly competitive with stablecoins. We’ve seen JP Morgan step into this. PNC announced a joint partnership as well. I’m just curious if you could talk about this.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Yeah, sure, sure. Peter, thank you so much for your comments earlier. The net takeaways, this is incredibly exciting for Customers Bank. What I would say about the recent legislation from Washington is, it is first and foremost, it really just reinforces what we at Customers Bank have believed for a long time, which is that digital assets are here to stay. I think that we have really established ourselves as the leaders in digital asset banking. In this position we have and will continue to benefit from regulatory clarity. You heard me talk about the ETFs early last year. You had a bump with the election last November. You have Genius now from a stablecoin perspective. There is further market structure legislation that is penciled out for later this year. Each one of these milestones has resulted in increased activity, increased deposits, increased fee income at Customers Bank.

To get a little bit more specific on your question about stablecoins, what I would say is that this legislation almost certainly benefits a number of our existing customers. As you can appreciate, they will likely benefit from more AUM today and in the future. It also is going to mean that there is going to be new institutional issuers, starting with non-banks. As you can appreciate, if you continue to pull this thread, all major institutional issuers that launch a stablecoin are likely going to need to be a customer of Customers Bank. We are the leading stablecoin infrastructure and payments provider in the country. A little bit more on Cubix, I don’t know if we’ve shared this before but we only have about 10% or so of our deposits that come from stablecoin issuers today out of our overall Cubix deposits.

We could very well see that increase over time. Getting back to your question about big banks, at the end of the day if you’re a large bank, this is something that you have to be involved in. If you have a large network of customers that need to move money, whether there’s pull from your customers today, you will need to have this as a means of payment. At the end of the day, large banks make money when there’s friction and inefficient flow in the banking system. Whether that’s FX payments, capital markets, and a stablecoin, if it truly proves out to be more efficient, cheaper, faster, you’re really cannibalizing your existing revenue. There are a lot of pros and cons and a lot to be determined. I think there’s going to be a long runway over the medium to long term.

The most important thing is that this is going to be a huge benefit for Customers Bank in the near to medium and to long term. The pie is going to increase and regardless of increased competition, we have the strongest payments network. We laid out some of those stats there to kind of put that in perspective. We are continuing to trend and grow that business. July, as I mentioned, will actually be our most active month to date on the platform.

That’s helpful. Just one last quick question. The professional fees increased $2 million this quarter, quarter to quarter. Could you just talk about that and maybe the outlook?

Phil Watkins, CFO, Customers Bancorp: Yeah. Hey, Peter. Good morning again. I’d say generally, if you look back, they were actually pretty consistent with where they were sort of two quarters ago. Q1 was probably a bit lower. We actually saw some increases kind of broadly across the platform. From the risk management sort of investment side, they were largely consistent quarter every quarter.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: I would just add, Peter, if you’re asking about sort of regulatory expenses, I’d say that we are largely on track with what we prior guided towards and expect those, really that portion which is not contributing to the growth this quarter, but that portion to drop off significantly, if not completely, in the next 90 days.

Got it. Thanks, Sam.

Jay Sidhu, Executive Chairman, Customers Bancorp: Thanks, Phil.

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

Kelly Motta, Analyst, KBW: Hi, good morning. Thanks for the question. I would like to continue on with the topic of Cubix. Notably, I think investors are interested as to how big of a contributor this could be to your business. I know you had previously capped these deposits at 15% of total, which has been lifted a bit. Can you, one, provide what the size of the Cubix deposits were this quarter and, two, just from a high level, as you think about the potential opportunity as well as, you know, risk management thinking through concentrations, is there a way to think about how this business could grow with the industry? Just any high level thoughts there?

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Yep. Good morning, Kelly. Happy to take that. First of all, I think you asked about where we were at the end of the quarter from a spot basis perspective. We were at $3.2 billion, which is roughly in line with where we were last quarter. It’s actually about $100 million lower. What I would say is that a spot basis is not really the best indicator of thinking about where that is. That puts it probably at 16 or 17% as of 6/30, which is above the prior cap that you know, that we had talked about. When we had that cap, we were not initially in February of 2023. We were not holding these all in cash, which is what we’re doing today. As we discussed earlier this year, that cap has been removed. I referenced July activity a little bit earlier to put that in perspective.

As of July 25, we’ve had the most active month on Cubix to date. It’s still almost a week to go in the month. Our deposit balances are up about 20% in the month of July. To put that in perspective, increased activity leads to increased deposits and increased deposits lead to higher interest income as well as increased activity, which leads to fee income. Over time we expect that these deposit balances could potentially increase as we get more institutional flow. I think one of the things that’s not fully understood and appreciated is we have about 20% of our flow today, which was not the case two years ago, comes from traditional finance players who are active in the digital asset trading and settlement space. We expect that percentage to increase over time.

As that percentage increases over time, we may see slightly increased balances as we continue to grow. Our goal is not to grow the deposits first. It’s actually to grow the strength of the network. That’s the additional products and services payment rails that we offer to our customers. With that, we will likely continue to have sort of our modest deposit growth as activity increases. Hopefully that answers your question but happy to answer any follow ups.

Kelly Motta, Analyst, KBW: That’s really helpful. I guess as a follow-up here, as you’ve mentioned several times now, you hold these deposits in cash. I think some larger players are considering lending against such related deposits given the softening regulatory tone in the industry. Is this something that’s coming up with discussions on the board, and any change in terms of how you’re viewing it potentially longer term with regards to how you hold these deposits?

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Sure. The short answer is we’re not looking to change the way that we approach and hold on these deposits. I think the longer answer is over time, as you can probably appreciate, over a multi-year period, we’ll continue to get more internal data on how these deposits operate and fluctuate. We’ll continue to have longer-term relationships with our customers and can work on structure, and you just have a sense of sort of a minimum amount of payments float. The answer over the medium term is that we will likely consider, you know, but this will be customer driven and it’ll be business driven, and sitting where we are today, it is entirely appropriate to hold these in cash, especially where rates are.

Kelly Motta, Analyst, KBW: Got it. Maybe last question for me and then I’ll step back into the queue. You know, this slide 9 where you draw the payment volume is super powerful. I know this is a huge benefit of this platform, the payments related fee income potentially generated. Can you elaborate how much that contributed to 2Q and any commentary about the potential for further monetization of payments fees longer term?

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Late last year, we instituted sort of traditional wire fees and platform fees to some of our customers. That has resulted in about an $8 million run rate of fees. It was about similar in the second quarter. Nothing necessarily material in the second quarter. Going forward, we could see that increase over time. Again, our objective is not to continue to materially drive fees. The majority of our income today is coming from interest income. Over time, we’ll likely see that shift from a mix perspective, especially as there’s a potentially changing rate environment over the medium term. One of the things that is important about that overall volume is it really just shows the incredible strength of the network. While it was $1.5 trillion last year, we’re at about $1 trillion year to date.

It puts it in perspective that this is growing, activity is growing, and the strength of the network is only growing and our lead and our moat is increasing.

Operator: Got it.

Kelly Motta, Analyst, KBW: Thank you so much for all the color. I’ll step back.

Operator: Our next question comes from the line of Hal Goetsch with B. Riley Securities. Please go ahead.

Hey, thank you. Congratulations for all the changes and the leadership there. I hope you all succeed and are happy with where things are headed. Congratulations. My question is still on the Cubix and the payment flows across the rails are just enormous. The monetization is quite low. I mean, I guess is this really a vehicle outside of even digital assets, increase banking relationships and the size of connections to many commercial accounts? Because it seems like I appreciate your comment on how banks, big banks make money. They make it through friction and this seems to be very, almost a low cost producer or a low cost option because of that volume is coming your way. Could you just kind of comment on your strategy with your current pricing and the related volume gains you’re getting?

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Yeah. Good morning, Hal. Happy to take that. As we think about the Cubix platform, it’s helpful to kind of just remind folks what it is. It’s really just software that sits on top of our existing core and payments infrastructure at the bank. It allows our customers, commercial customers who are more institutional and in many cases tech savvy, to operate. Prior to Cubix, we had something called CBIT, which was a blockchain tokenized deposit.

From a traditional finance perspective, I will admit that was a lot tougher of a sell to get some of the traditional commercial customers to interact with that when you’re talking about the digital deposit sort of format that we’re using today 24/7, 365, along with a ton of other additional, not just intra bank type transfers but really a full suite of products and payment rails and services and connectivity and data and information. We are seeing a tremendous amount of use cases from commercial customers. I was just sitting in someone’s office yesterday and we have a real estate customer who has hundreds of accounts with us that’s now going to be using this for some of their internal GL ledger type activity. This is not necessarily driving new deposits with that customer, but it is actually strengthening our relationship.

It’s providing an incremental service and think of it as sort of a software as a service type solution. We continue to see it as an opportunity to strengthen relationships, drive incremental deposits with our existing customer but also importantly open up more traditional finance type opportunities. Many of the big banks have these types of capabilities but on a one off basis and a very clunky basis and an inability to do it in the incredibly streamlined format that we have.

Thank you very much.

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

Yeah, good morning. A quick question, Sam. In terms of the loan mix here, you guys have been pretty successful past couple quarters in growing commercial real estate, maybe taking some share given your capacity. Just curious, your appetite to grow some of those commercial real estate segments. As we look at the loan mix in terms of the breakdown for segment, does that stay relatively consistent, you think, over the next year, do you continue to see the sort of specialty lending C&I billed as a % of loans?

Jay Sidhu, Executive Chairman, Customers Bancorp: Thanks.

Phil Watkins, CFO, Customers Bancorp: Yeah. Hey Dave, good morning, it’s Phil. I’ll take that for you. I mean, I think, yeah, we’ve talked about over the last two or three quarters, we somewhat opportunistically stepped into a bit of a void, especially here in our New York markets or in the Northeast markets in commercial real estate. As others pulled back in Q4 and Q1, we were really able to win again, not transactional but fully relationship-based opportunities where we were able to perform for clients when others weren’t. We still definitely see some opportunities there in the pipeline. We’ve got a nice pipeline on the commercial real estate side, but we’re being very disciplined. Again, not seeking out just transactional interest-earning assets. It’s got to be full relationship driven. We have seen some of the participants that had stepped out for a few quarters start to step back in.

We are not going to chase transactions there just for the sake of it, but we are still seeing some good opportunities as we look across the rest of the franchise. As Sam mentioned in his comments, that is one of the real strengths here is that we have the ability to dial up or down, especially across the various specialty lenders. Even as you just highlighted in areas like commercial real estate over the last couple of quarters. We will continue to do that and go where we see the best opportunities for that franchise-enhancing growth. We can give you the look out of the pipeline, call it 90 days out, which does have some commercial real estate but also some continued contributions from the specialized C&I. As we look three, four quarters out, it’ll be very dependent on the opportunities, but we’re incredibly well positioned for that.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: I would just add, David mentioned we have about $500 million or so in the loan backlog right now.

Got it. Appreciate that guidance there. Just curious, in terms of the BMT deposit to run off, is there any more plans in the near future? Will that be a headwind or is that mostly behind you? Thanks.

I think we well telegraphed that that was a Q2 headwind, and it and anything like it is behind us.

Great, thank you.

Operator: Our next question comes from the line of Steve Moss with Raymond James. Please go ahead.

Good morning guys, and Sam, congratulations on the promotion here. Maybe just on the deposit side with the pipeline remaining strong there. Just curious if you know what the expectation is for rates coming down here at some point over the short to medium term. Is that entering the conversation with the deposit customers you’re bringing on these days, and just kind of where is, you know, what’s the blended cost of deposits today?

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Yeah, I think the good news is that we’re continuing to bring on new deposit customers at similar levels that we were, sort of high twenties, 30% non-interest-bearing component, blending at about that 2.5%, plus or minus, type basis, which we feel pretty privileged to be doing. A lot of that credit goes to our existing and as well as new teams, the bank as well as future teams to the bank. When you’re in competition and taking market share, in some cases you have to match the top dollar as rates decline. A receding tide brings all boats down. I think that many of those conversations are had and expected by customers, especially when it’s not connected with a migration of an account.

Okay, appreciate that. Just in terms of the teams you hired here, Sam, and the ones you’re about to bring on, just kind of curious if you could size up the potential of those deposit books.

I don’t want to get premature in sizing up the deposit books, but what I would say is that it looks like we’ll have about half a dozen or so teams this year based upon sort of where we are in discussions with five already, three on boarded to this quarter, and another one or two plus or minus, even more. The goal would be to start building for 2026 and 2027. One of the things that’s worth mentioning about our prior teams, as a reminder, they were break even in the first half of this year. Call that 100% efficiency ratio. Right. There’s a lot of opportunity for that to come down, first by having the revenues be two times expenses.

Eventually we’d like to get that to a minimum of three, and that’s going to provide us a tremendous amount of operating leverage over the next 12 to 24 months. On the old teams, on new teams we’re considering, we’re working on a similar 12 to 18 month type break even. Safe to say each one of our teams we would expect to be at a minimum in sort of that couple hundred million dollars or so book. On the high end, they do get to 10 figure.

Okay, appreciate that. In terms of, you know, I know you guys have gotten to NII growth, just curious how you guys are thinking about the margin here. I realize there’s a lot of moving pieces, but is it relative stability at current levels, or could we see some more margin expansion just given your deposit base? Should continue to get better here.

Phil Watkins, CFO, Customers Bancorp: Yeah. Hey Steve, good morning. I’d say overall, you know, there are, as you said, there are moving pieces on both sides. I mean we’ve got the positive on the loan growth side and we continue to have some positive momentum, you know, opportunities on the remix side. Some of it does continue to depend on the rate outlook. You know, we do continue to be modestly asset sensitive though. As you know, we’ve taken meaningful steps, you know, and measured steps over the last year plus to continue to bring that closer to neutral. I’d say overall on a net basis we probably have a little bit of an upward bias, but it will be a bit dependent on that outlook.

I guess the one thing I would highlight, as I noted earlier, you will see clearly some benefits in Q3 and Q4 from that additional interest income flowing through.

Right, okay, thanks for that, Phil. I guess just maybe I hear you guys in terms of going to be bringing on more customers with regard to Cubix and definitely the potential for deposit growth out of that, out of the platform. I realize it’s kind of difficult to see where it could shake out, but just kind of curious as to how you’re thinking about managing those deposit balances. Are you just willing to let it ramp up, and how do I think about concentration with regard to that? If you guys have any thoughts over.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: the medium term, it’s a very valid question, Steve. You know, from a liquidity risk perspective, I think we’ve well contained it. I think as you think about strategic risks, you also don’t want a lot of concentration from any one vertical. These are conversations that we’re having and that we’re thinking about, and that’s why, you know, I’ve stated before our goal is not to sit here and drive, you know, deposits. It is to increase the strength of the network. Increasing the strength of the network increases, you know, sort of activity and associated, you know, deposit balances, and we view those as the high quality, you know, value of the franchise, not spot balances with sort of a new account funding that’s not active.

Right.

Jay Sidhu, Executive Chairman, Customers Bancorp: Okay.

I appreciate all the call here today and thank you very much.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Thanks, Steven. I forgot to say at the beginning, congratulations on the new baby.

Jay Sidhu, Executive Chairman, Customers Bancorp: Thanks Sam.

Operator: Our final question comes from the line of Matthew Breese with Stephens. Please go ahead.

Hey, good morning. I had a few questions. First of all, how much more room do you have to remix securities into loans, and how should we be thinking about kind of overall balance sheet size over the next year?

Phil Watkins, CFO, Customers Bancorp: Yeah.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Hey.

Phil Watkins, CFO, Customers Bancorp: Hey Matt. Good morning. I’d say overall we probably feel pretty good about where our securities portfolio as a % of average assets is. Obviously, we did, we were able to reinvest a portion of those proceeds as we talked about from some of the sales. At this point it would probably be more cash flow driven and then, as far as balance sheet, from a balance sheet growth perspective. Excuse me. As I said, as we’ve said before, the first half of this year we would continue to expect to be heavier on the deposit remix side. As a result you wouldn’t see a lot of balance sheet growth.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Which is what occurred.

Phil Watkins, CFO, Customers Bancorp: As we got into the back half of the year and certainly into 2026, while we still have some opportunities on the remix side, we would expect more growth overall on the balance sheet.

Okay. Is it safe to say that we should expect more of the loan growth transition into total asset growth at this point? That’s a fair statement.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: That.

Phil Watkins, CFO, Customers Bancorp: That’s right.

In the presentation and in the earnings release you noted that part of the deposit mix shift resulted in, I think, $350 million less brokered deposits. For the call report last quarter, I thought you had around $6.6 billion brokered. Is it fair to take those two numbers and figure out the net number, or what is your brokered deposit balances today and is there a targeted goal there? Where would you like to be brokered deposits? Total deposits?

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Yep, that’s the simple math, you know, Matt. Yes, they have declined and they’ve declined by about $1 billion over the last year. I think we’ve been pretty vocal about some of the changes and categorization of some deposits that happened over time, but it is consistent that those changes have been made more broadly across the industry. Those deposits are now being deemphasized and remixed out. Where do we want those deposits to be? We are not a traditional branch-based bank that has a broad base of branch-based retail deposits. Having said that, I think we’ve always said we expect to operate a little bit on the higher range of a traditional bank. Whether that’s 25% or 20%, it’s to be determined. We definitely want these below 30% in the near to medium term.

Thank you. Okay. I had a couple questions on Cubix myself. I guess the first one is just on the stablecoin bill, and I was hoping you could help me better understand, you know, one of the inherent things is that all stablecoins will need to be backed by U.S. Treasuries, which inherently invites global usage. I think there’s some strong UK use cases around that. For yourselves and others in the banking system, how do you protect yourself from a BSA/AML, know your customer standpoint? Who bears responsibility for making sure that there’s good incremental actors into the system, especially if this now becomes something that extends beyond the U.S. borders?

I think that from first and foremost, I mentioned this earlier in the call. It is incredibly helpful to have our customers commit, customers come into formal federal regulatory framework. While all of our customers are regulated in some way, shape or form and in some cases many shapes and forms, this provides a very constructive and cohesive roadmap not only on the compliance side and BSA AML, but also importantly on liquidity management and consumer protection as you were referencing before. There’s about a plus or minus 18-month implementation phase where a lot of detail will be coming out for a number of our customers. As I mentioned, this is about 10% plus or minus of our existing deposits today.

We’re thrilled that there’s now going to be a federal framework that also includes much more comprehensive BSA AML and we’ll look to really just partner with the structure that our customers are in. What we’re looking to do at Customers Bank on the BSA AML side is we’ve already invested significant sums of money to build up our infrastructure and our technology and we view it as a strength of the organization. The fact that our customers are also going to be leveling up and entering a U.S. federal framework is going to even further strengthen the overall institutional flow of the bank, but also really increase the moat on our business.

You said stablecoin is 10% of existing deposits. Is that total deposits or just the Cubix deposits?

Cubix deposits.

Okay. The other thing I was curious about is just in terms of your Cubix customers, could you talk a little bit about the granularity of those deposits and how many accounts are frequent users of Cubix? I just wanted to get a sense for, is this kind of an upside down pyramid where there’s a small number of really big deposit holders or is it pretty granular across the board? Frame for us what kind of customers are actually within your system.

Yep. We have essentially all major exchanges, all major stablecoin providers, all major market makers, all major investors, digital asset specific as well as traditional institutional investors who operate in the digital asset space. It is a wide swath of market share. The folks that bank with us come to us for the payments network, first and foremost. That’s really where our focus has been. The short answer to the question is everyone is looking to be active on the network, and that’s also why they’re customers of the bank. The longer answer is that as you can appreciate, the larger the exchange, the larger the AUM of the stablecoin provider and the larger the network, even when someone is new to the bank, it takes time for them to build a larger network. They do build, in many cases, larger activity which comes from larger deposit balances.

The deposit balances are diversified across those major thresholds. You will see, say, a nine-figure deposit with an exchange and you will see maybe a $5 million deposit with a medium sized investor.

I’ll leave it there. Thanks for taking my question, Sam. Appreciate it.

Operator: That will conclude our question and answer session. I will hand the call back over to Sam Sidhu for any closing remarks.

Sam Sidhu, President and CEO (Incoming), Customers Bancorp: Thanks so much everyone for your continued interest and support of Customers Bancorp. We really appreciate you being a part of this incredible franchise that we’re building, and we look forward to speaking with you next quarter. Thank you so much, and have a great day and weekend.

Operator: This concludes today’s call. Thank you all for joining. You may now disconnect.

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