Customers Bancorp, Inc. Q2 FY2025 earnings call

• Jay Sidhu introduced Mark McCollom as the soon-to-be CFO of Customers Bancorp and announced his transition to Executive Chairman, with Sam Sidhu assuming CEO role effective January 1, 2026.
• Q2 was a strong quarter with nearly $300 million deposit growth from new commercial banking teams, 8% annualized loan growth, net interest margin expanded by 14 basis points quarter-over-quarter, efficiency ratio improved to 51.6%, tangible book value per share reached $56.24.
• Focus on deposit transformation with shift to high-quality deposits, reduced brokered deposits by $350 million this quarter (down $1 billion over last year), and strong commercial account openings (up 14% this quarter, over 60% since end of 2022).
• cubiX, a proprietary payments platform, processed $1.5 trillion in payments volume in 2024, with institutional adoption increasing due to regulatory clarity, positioning Customers Bank as a partner of choice for digital finance.

Total deposits were steady at $19 billion, with new commercial banking teams onboarded since June 2023 contributing nearly $300 million in high-quality deposits, managing $2.4 billion in relationship-based granular funding (about 13% of total deposits in less than 2 years). Loan growth was roughly $320 million this quarter, translating to an 8% annualized pace, diversified across corporate, specialized verticals, mortgage finance, fund finance, health care lending, equipment finance, and commercial banking teams. cubiX had $3.2 billion in deposits as of Q2, and in 2024, processed about $1.5 trillion in payments volume, positioning it #3 behind Amex and Visa Commercial in payments networks.

• Revised loan growth range to 8%-11% from 7%-10%.
• Projected net interest income growth to 7%-10% from 3%-7%.
• Bias towards the low end of the efficiency ratio range due to stronger revenue growth and well-managed expenses.

• Regulatory changes could impact crypto-related and cubiX operations.
• Concentration risks with cubiX deposits, though efforts are made to manage liquidity and strategic risk.
• Potential impact of interest rate changes on deposit costs and margin.

Q: Could you go over the $10 million benefit from the loan purchase mentioned?

A: It was a small portfolio of loans originated with a partner, purchased out at a discount, and expected to increase net interest income by about $10 million each of the next 2 quarters.

Q: How are you thinking about crypto-related deposits going forward with the GENIUS Act?

A: Regulatory clarity from the GENIUS Act benefits Customers Bank, with increased activity, deposits, and fee income expected, and cubiX positioned as a leader in digital asset payments.

Q: What's the size of cubiX deposits this quarter and potential growth?

A: cubiX deposits were $3.2 billion as of Q2, with July being the most active month to date, and deposit balances up 20% in July, expecting growth with increased institutional flow.

Q: What about the BMT deposit runoff?

A: The Q2 headwind from BMT deposit runoff is behind them, and no further significant runoff is expected in the near future.

Q: How much room is there to remix securities into loans and balance sheet size?

A: Expect more loan growth to transition into total asset growth in the back half of 2025 and beyond, with focus on deposit remix and then broader balance sheet growth.