Customers Bancorp Signals Confident Growth After Strong Year

Customers Bancorp ((CUBI)) has held its Q4 earnings call. Read on for the main highlights of the call.

Customers Bancorp’s latest earnings call painted a decidedly upbeat picture, with management emphasizing strong earnings momentum, improving profitability, and disciplined balance sheet growth. Core EPS jumped 36% year over year, tangible book value climbed at a double‑digit annualized rate, and the bank posted robust deposit gathering, margin expansion, and record payments volume. While executives acknowledged some near-term headwinds—one-off expenses, elevated professional fees, deposit remixing complexity, and isolated credit noise—the overall tone underscored confidence in the bank’s trajectory and its ability to compound shareholder value through 2026.

Core EPS Surges, Showcasing Earnings Power

A central theme of the call was the strength and durability of earnings. Core EPS for 2025 came in at $7.61, up from $5.60 in 2024, a roughly 36% increase. Management framed this as evidence of multiyear compounding in core earnings per share, driven by disciplined growth in loans and deposits, better asset mix, and improved efficiency. The strong EPS result, alongside expanding capital ratios and tangible book value, positions Customers Bancorp as a bank that is not just growing but doing so profitably, with ample capacity to support further balance sheet and franchise expansion.

Deposit Growth Underscores a Strengthening Franchise

Customers Bancorp highlighted a sharply improved deposit story in 2025, with total deposits rising about $2.0 billion, or roughly 10%, to just under $21 billion. A key driver was new commercial banking teams, which contributed about $1.6 billion of deposits in a single year, suggesting that recent hiring investments are already paying off. Noninterest-bearing DDA balances were another bright spot, growing more than $500 million for the year and about $150 million in the fourth quarter alone. The bank reported a 54% deposit beta for the quarter (71% on interest-bearing deposits, about 61% through the easing cycle), indicating reasonably good funding discipline in a still-competitive rate environment.

Broad-Based Loan Growth Across Core Verticals

The lending franchise continues to diversify and expand, with loans growing about 15% for the year and roughly $500 million, or around 3%, on a linked-quarter basis. Growth was broad-based but led by commercial real estate, healthcare, and mortgage finance, signaling a deliberate strategy to deepen relationships across higher-value verticals. Management also pointed investors to its 2026 loan growth target of 8%–12%, signaling confidence that current pipelines, new teams, and ongoing market share gains can sustain mid- to high-single-digit-plus expansion without stretching credit standards.

Record Net Interest Income and Margin Expansion

Profitability benefited from both higher volumes and better spreads. Net interest income rose 22% year over year to $204 million, while net interest margin widened by 29 basis points to 3.4%. Sequentially, NII grew by $2.5 million, helped by higher average loan balances and a lower blended cost of deposits, which fell from 2.77% to 2.54% quarter over quarter. Management tied these gains to disciplined pricing on both sides of the balance sheet and to ongoing remixing of deposits into more efficient funding, reinforcing the narrative that the franchise is becoming structurally more profitable.

cubiX Payments Network Delivers Scale and Strategic Optionality

Customers Bancorp’s cubiX/instant payments platform emerged as a major strategic differentiator. The bank processed more than $2.0 trillion in payments volume in 2025, up 30% from $1.5 trillion in 2024, and claimed the position of the #1 commercial payments network in the U.S. This engine supports average cubiX-related deposits of about $3.9 billion and, importantly, gives the bank transaction and data scale that many peers lack. Management pointed to a newly identified network opportunity that could add as much as $50 billion in transaction volume in 2026, though they continue to plan conservatively for deposits tied to digital assets.

Efficiency Gains and Operating Leverage Improve Profit Profile

The bank reported meaningful productivity improvements, with its efficiency ratio dropping more than 6 percentage points year over year and landing at 49.5% in the fourth quarter. Noninterest expense to average assets came in at 1.88%, placing Customers Bancorp in the top quartile of peers, even as it invests in growth initiatives and new teams. These gains suggest the bank is generating real operating leverage—growing revenues faster than expenses—which sets the stage for further EPS expansion as the balance sheet continues to scale.

Capital Strength and Tangible Book Value Growth

Capital and book value trends reinforced the bank’s improving fundamentals. Tangible book value per share rose to $61.77, a 3% sequential increase and roughly 14% annualized for the year. The tangible common equity ratio improved to 8.5%, up 90 basis points year over year, while the company completed a $100 million subordinated debt issuance categorized as Tier 2 capital. Management stressed that these capital moves were made while supporting 12% asset growth, illustrating that the bank is expanding without compromising balance-sheet resilience.

Stable Credit Metrics and Low Loss Experience

Credit quality remains solid, with nonperforming assets at just 29 basis points of total assets. Total net charge-offs declined 10% sequentially, and commercial net charge-offs—excluding a small consumer portfolio—were around 16 basis points on an annualized basis. Management emphasized strong reserve coverage in the allowance for credit losses, indicating they feel appropriately guarded against potential macro or sector-specific stress. Overall, the credit story continues to be one of low loss rates and disciplined underwriting.

AI Adoption Drives Tangible Productivity Gains

Beyond traditional banking metrics, Customers Bancorp highlighted extensive use of artificial intelligence across the organization. Every employee has been trained on AI, with department-specific programs to encourage practical adoption. More than half of the workforce uses enterprise AI platforms, and the bank is already seeing nearly a 20% productivity lift from these tools according to internal reports. Management sees AI as a key driver of efficiency, risk management, and scalability, providing a structural advantage as the bank grows.

One-Off and Elevated Costs Create Near-Term Noise

The quarter did include several discrete expense items that muted some of the reported operating leverage. Q4 featured $4.8 million of unique expenses: $1.9 million in legal fees tied to onboarding new teams, $2.2 million in insurance costs associated with tax-credit purchases (offset by related tax benefits), and $0.7 million in compensation and benefits. Additionally, commercial lease depreciation increased by $2.2 million quarter over quarter. Professional and legal expenses overall have been elevated versus historical levels—roughly in the $12.5–$13.5 million range in that line—reflecting transition and build-out costs. Management expects these professional fees to normalize as the growth investments mature, but near term they remain a modest headwind to reported results.

Managing Deposit Remixing and Digital Asset Volatility

Management also pointed to operational complexity from deposit remixing and digital-asset-linked balances. Throughout 2025, the bank averaged about $675 million of quarterly deposit remixing, which helped produce a favorable deposit beta but also added some variability to reported deposit trends. On the digital asset side, cubiX-related balances tend to move within roughly ±10% bands tied to crypto market volatility. Reflecting this volatility, the bank is taking a conservative stance by not baking in material deposit contributions from digital assets in its 2026 guidance, despite strong underlying payments volume growth.

Isolated NPA Uptick and Regulatory Remediation Progress

Nonperforming assets ticked up modestly due largely to a single transaction of roughly $10–$11 million that migrated into nonperforming status. Management expects a resolution or restructuring in the first quarter and emphasized that this movement reflects the sensitivity of metrics when the overall NPA base is very low, rather than a broader deterioration in credit. On the regulatory front, the bank noted that remediation efforts related to a prior regulatory order are “substantially done,” with a goal of closing the matter in 2026. While this has been a multi-quarter operational focus, management’s commentary suggested that regulatory risk is moving in the right direction.

Guidance Signals Confident but Conservative 2026 Outlook

Looking ahead, management laid out ambitious yet measured guidance for 2026. They are targeting loan and deposit growth of 8%–12% (on deposits, net of remixing), which is expected to drive net interest income to a range of $800–$830 million, representing about 7%–11% year-over-year growth. Noninterest expense is projected at $440–$460 million, up only 2%–6%, implying continued positive operating leverage as revenues outpace costs. Capital strength is expected to remain robust with a CET1 ratio of 11.5%–12.5%, and the effective tax rate is guided to 23%–25%. Management also plans to generate about $20 million in run-rate savings from operational excellence initiatives, using those proceeds to fund further growth investments, building on the 2025 performance that featured $2.0 billion in deposit growth, roughly $700 million of noninterest-bearing inflows, and core EPS of $7.61.

In closing, Customers Bancorp’s earnings call combined strong current performance with a confident roadmap for the next year. Earnings, margins, deposits, and payments volumes are all moving in the right direction, supported by solid credit quality and strengthening capital. While investors need to stay mindful of one-off costs, elevated professional fees, deposit remixing dynamics, and minor NPA noise, the overarching narrative is one of a bank gaining scale, improving efficiency, and building competitive advantages—particularly in payments and AI—that could support continued shareholder returns in the years ahead.