Customers Bancorp Reports Results for First Quarter 2025

Customers Bancorp, Inc. (NYSE:CUBI):

First Quarter 2025 Highlights

• Q1 2025 net income available to common shareholders was $9.5 million, or $0.29 per diluted share; ROAA was 0.23% and ROCE was 2.23%.
• Q1 2025 core earnings*¹ were $50.0 million, or $1.54 per diluted share; Core ROAA* was 0.97% and Core ROCE* was 11.72%.
• Q1 2025 net income available to common shareholders included $39.9 million of post-tax losses in connection with a securities portfolio repositioning to improve structural liquidity, enhance credit profile, reduce asset sensitivity and benefit margin.
• Total loans and leases held for investment grew by $611.7 million, or 4.2%, in Q1 2025 from Q4 2024.
• Total deposits increased by $86.5 million or 0.5% in Q1 2025 from Q4 2024.
• Non-interest bearing demand deposits decreased $55.7 million or 1.0% in Q1 2025 from Q4 2024; non-interest bearing deposits represented 29.3% of total deposits at March 31, 2025.
• Q1 2025 average cost of deposits was 2.82% compared to Q4 2024 of 3.07%, a decrease of 25 basis points.
• Q1 2025 net interest margin, tax equivalent ("NIM") was 3.13%, compared to Q4 2024 NIM of 3.11%, an increase of 2 basis points primarily due to lower deposit costs.
• Ratio of non-performing assets to total assets was 0.26% at March 31, 2025 compared to 0.25% at December 31, 2024.
• Q1 2025 provision for credit losses was $28.3 million compared to $21.2 million in Q4 2024
• The allowance for credit losses on loans and leases equaled 324% of non-performing loans at March 31, 2025, compared to 316% at December 31, 2024.
• CET 1 ratio of 11.7%² at March 31, 2025, compared to 12.1% at December 31, 2024.
• TCE / TA ratio* of 7.7% at March 31, 2025, compared to 7.6% at December 31, 2024.
• Q1 2025 book value per share and tangible book value per share* both grew by approximately $0.66, or 1.2% over Q4 2024, or 4.9% annualized, with a tangible book value per share* of $54.74 at March 31, 2025. This was driven by current quarter earnings and a decrease in AOCI losses of $28.9 million.

CEO Commentary

"We are pleased to share our first quarter results that highlight the company's continuing incredible deposit transformation and underscore our success in growing franchise value. Though there is currently a high degree of economic uncertainty and volatility in the macro environment, we believe that Customers' differentiated business model positions us well to navigate these challenges while we remain flexible and responsive to changes in the external environment. And importantly, with our customer-centric mindset and commitment to service provided by our extraordinary colleagues, we are here to serve our clients as the business environment continues to evolve," said Customers Bancorp Chairman and CEO Jay Sidhu.

"In the first quarter, we once again demonstrated the power of our deposit remix efforts. The impact can be seen in a 24 basis points lower average cost of interest bearing deposits in Q1 2025 compared to last quarter as we continue to improve the quality of our deposit franchise. Non-interest bearing deposits remained at a healthy level of 29.3% of total deposits. As a result of these efforts we had a 25 basis point reduction in our total cost of deposits during the quarter.

"Our deposit pipelines continue to expand with a significant conversion ratio. In addition, deposit focused teams we have recruited since March 2023 managed $2.1 billion or 11% of total deposits. Enhanced by their efforts, we've increased commercial deposit accounts by 53% since year end 2022, adding granular and sticky relationships while significantly lowering our cost of deposits, increasing our non-interest bearing deposits, and driving franchise value. We believe the company is extremely well-positioned to continue to strengthen our deposit franchise, improve our profitability, and maintain our already strong capital ratios," stated Jay Sidhu.

"Our Q1 2025 GAAP earnings were $9.5 million, or $0.29 per diluted share, and core earnings* were $50.0 million, or $1.54 per diluted share. First quarter GAAP results include an impact in connection with a balance sheet optimization through a securities portfolio repositioning that the Bank decided to undertake as of March 31, 2025 designed to enhance structural liquidity, extend duration and benefit margin while reducing the credit sensitive portion of the portfolio given the volatile and uncertain macroeconomic environment. Even with the impact of the balance sheet optimization transaction and balance sheet growth we experienced during the quarter, our TCE / TA ratio* increased by 9 basis points. We maintain a strong liquidity position, with $8.7 billion of liquidity immediately available, which covers approximately 155% of uninsured deposits¹ and our loan to deposit ratio was 80%, at March 31, 2025. We continue to focus on loan production where we have a holistic and primary relationship. Total loans and leases held for investment grew by $611.7 million driven by strong commercial loan growth of $460.3 million led by growth in our existing specialized lending verticals. Asset quality remains strong with our NPA ratio at just 0.26% of total assets and reserve levels are robust at 324% of total non-performing loans at the end of Q1 2025. Our exposure to the higher risk commercial real estate office sector is minimal, representing approximately 1% of the loan portfolio. We will remain disciplined, but opportunistic, with our balance sheet capacity to manage risk and maintain robust capital levels. Tangible Book Value per share* grew to $54.74. We believe that our unique strategy and the investments we have and are making, along with the exceptional talent in our organization, will position us for success in 2025 and beyond," Jay Sidhu continued.

Financial Highlights

Financial Highlights

Key Balance Sheet Trends

Loans and Leases

The following table presents the composition of total loans and leases as of the dates indicated:

Loans and Leases Held for Investment

Loans and leases held for investment were $15.1 billion at March 31, 2025, up $611.7 million, or 4.2%, from December 31, 2024. Specialized lending increased by $227.7 million, or 3.9% quarter-over-quarter, to $6.1 billion. Non-owner occupied commercial real estate loans increased by $79.8 million, or 5.9% to $1.4 billion. Multifamily loans increased by $69.9 million, or 3.1% to $2.3 billion. Mortgage finance loans increased by $37.0 million, or 2.6% to $1.5 billion. Owner-occupied commercial real estate loans increased by $38.2 million, or 3.5% to $1.1 billion. Consumer installment loans increased by $152.5 million, or 21.4% to $866.2 million, inclusive of the transfer of $133.8 million from loans held for sale in Q1 2025 as it elected to retain these loans in connection with the sunsetting of an arrangement with a fintech company, which recently was acquired by a bank.

Loans and leases held for investment of $15.1 billion at March 31, 2025 were up $2.2 billion, or 16.8%, year-over-year. Specialized lending increased by $965.7 million, or 18.9% year-over-year. Mortgage finance loans increased by $406.8 million. Owner-occupied commercial real estate loans increased by $332.8 million. Non-owner occupied commercial real estate loans increased by $256.8 million. Multifamily loans increased by $198.4 million. Consumer installment loans increased $73.6 million, inclusive of the transfer from loans held for sale in Q1 2025. These increases were partially offset by a decrease in other commercial and industrial loans of $50.6 million.

Loans Held for Sale

Loans held for sale decreased $167.3 million quarter-over-quarter, and were $37.5 million at March 31, 2025. In Q1 2025, the Bank transferred $133.8 million of other consumer installment loans from held for sale to held for investment as it elected to retain these loans in connection with the sunsetting of an arrangement with a fintech company, which recently was acquired by a bank, whereby the Bank has been originating and holding these loans prior to sale.

Allowance for Credit Losses on Loans and Leases

The following table presents the allowance for credit losses on loans and leases as of the dates and for the periods presented:

Net charge-offs increased with $17.1 million in Q1 2025, compared to $14.6 million in Q4 2024, and decreased slightly from $18.0 million in Q1 2024.

Provision (benefit) for Credit Losses

The provision for credit losses on loans and leases in Q1 2025 was $21.4 million, compared to $18.2 million in Q4 2024. The higher provision in Q1 2025 was primarily due to slight deterioration in macroeconomic forecasts and an increase in loan balances held for investment.

The provision for credit losses on available for sale investment securities in Q1 2025 was $6.9 million, compared to $3.0 million in Q4 2024.

The provision for credit losses on loans and leases in Q1 2025 was $21.4 million, compared to $16.0 million in Q1 2024. The higher provision in Q1 2025 compared to the year ago period was primarily due to slight deterioration in macroeconomic forecasts and an increase in loan balances held for investment.

The provision for credit losses on available for sale investment securities in Q1 2025 was $6.9 million compared to $1.1 million in Q1 2024.

Asset Quality

The following table presents asset quality metrics as of the dates indicated:

Over the last decade, the Bank has developed a suite of commercial loan products with one particularly important common denominator: a relatively low credit risk assumption. The Bank's commercial and industrial ("C&I"), mortgage finance, corporate and specialized lending lines of business, and multifamily loans for example, are characterized by conservative underwriting standards and historically low loss rates. Because of this emphasis, the Bank's credit quality to date has been incredibly healthy despite a challenging economic and rate environment. Maintaining strong asset quality also requires a highly active portfolio monitoring process. In addition to frequent client outreach and monitoring at the individual loan level, management employs a bottom-up data driven approach to analyze the commercial portfolio.

Total consumer installment loans held for investment at March 31, 2025 were less than 4% of total assets and approximately 6% of total loans and leases held for investment, and were supported by an allowance for credit losses of $51.6 million. At March 31, 2025, the consumer installment portfolio had the following characteristics: average original FICO score of 739, average debt-to-income of 20% and average borrower income of $104 thousand.

Non-performing loans at March 31, 2025 decreased to 0.29% of total loans and leases, compared to 0.30% at December 31, 2024 and increased, compared to 0.27% at March 31, 2024.

Investment Securities

The investment securities portfolio, including debt securities classified as available for sale ("AFS") and held to maturity ("HTM") provides periodic cash flows through regular maturities and amortization, can be used as collateral to secure additional funding, and is an important component of the Bank's liquidity position.

The following table presents the composition of the investment securities portfolio as of the dates indicated:

Customers' securities portfolio is highly liquid, short in duration, and high in yield. At March 31, 2025, the AFS debt securities portfolio, excluding the securities that the Bank decided to sell, had a spot yield of 5.50%, an effective duration of approximately 3.6 years, and approximately 22% are variable rate. Additionally, 66% of the AFS securities portfolio was AAA rated at March 31, 2025.

At March 31, 2025, the HTM debt securities portfolio represented only 4.2% of total assets at March 31, 2025, had a spot yield of 3.95% and an effective duration of approximately 4.1 years. Additionally, at March 31, 2025, approximately 51% of the HTM securities were AAA rated and $0.4 billion were credit enhanced asset backed securities with no current expectation of credit losses.

Deposits

The following table presents the composition of our deposit portfolio as of the dates indicated:

Total deposits increased $86.5 million, or 0.5%, to $18.9 billion at March 31, 2025 as compared to the prior quarter. Money market deposits increased $213.0 million, or 5.5%, to $4.1 billion, savings deposits increased $196.0 million, or 17.3%, to $1.3 billion and time deposits increased $148.8 million, or 5.5%, to $2.9 billion. These increases were offset by decreases in interest bearing demand deposits of $415.7 million, or 7.5%, to $5.1 billion and non-interest bearing demand deposits of $55.7 million, or 1.0%, to $5.6 billion. The total average cost of deposits decreased by 25 basis points to 2.82% in Q1 2025 from 3.07% in the prior quarter primarily due to a favorable shift in deposit mix and lower market interest rates. Total estimated uninsured deposits were $5.6 billion¹, or 30% of total deposits (inclusive of accrued interest) at March 31, 2025 with immediately available liquidity covering approximately 155% of these deposits.

Total deposits increased $971.5 million, or 5.4%, to $18.9 billion at March 31, 2025 as compared to a year ago. Non-interest bearing demand deposits increased $863.7 million, or 18.4%, to $5.6 billion, money market deposits increased $709.6 million, or 21.2%, to $4.1 billion and time deposits increased $674.5 million, or 30.9% to $2.9 billion. These increases were offset by decreases in savings deposits of $752.5 million, or 36.2%, to $1.3 billion and interest bearing demand deposits of $523.8 million, or 9.3%, to $5.1 billion. The total average cost of deposits decreased by 63 basis points to 2.82% in Q1 2025 from 3.45% in the prior year primarily due to a favorable shift in deposit mix and lower market interest rates.

On April 1, 2025, Customers transferred approximately $166.7 million of deposits serviced by BM Technologies, Inc. under a white label relationship to a new sponsor bank.

Borrowings

The following table presents the composition of our borrowings as of the dates indicated:

Total borrowings increased $5.2 million, or 0.4%, to $1.4 billion at March 31, 2025 as compared to the prior quarter. As of March 31, 2025, Customers' immediately available borrowing capacity with the FRB and FHLB was approximately $7.9 billion, of which $1.1 billion of available capacity was utilized in borrowings and $1.5 billion was utilized to collateralize deposits.

Total borrowings decreased $86.2 million, or 5.7%, to $1.4 billion at March 31, 2025 as compared to a year ago. This decrease primarily resulted from net repayments of $70.0 million in FHLB advances and $25.0 million in senior notes upon maturity.

Capital

The following table presents certain capital amounts and ratios as of the dates indicated:

Customers Bancorp's common equity increased $27.9 million to $1.7 billion, and tangible common equity* increased $27.9 million to $1.7 billion, at March 31, 2025 compared to the prior quarter, respectively, primarily from earnings of $9.5 million and decreased unrealized losses on investment securities of $28.9 million (net of taxes) deferred in accumulated other comprehensive income ("AOCI"). These increases were offset in part by $5.6 million of common share repurchases in Q1 2025. Similarly, book value per common share increased to $54.85 from $54.20, and tangible book value per common share* increased to $54.74 from $54.08, at March 31, 2025 and December 31, 2024, respectively.

Customers Bancorp's common equity increased $172.9 million to $1.7 billion, and tangible common equity* increased $172.9 million to $1.7 billion, at March 31, 2025 compared to a year ago, respectively, primarily from earnings of $130.0 million and decreased unrealized losses on investment securities in AOCI of $64.7 million (net of taxes), offset in part by $24.9 million of common share repurchases. Similarly, book value per common share increased to $54.85 from $49.29, and tangible book value per common share* increased to $54.74 from $49.18, at March 31, 2025 and March 31, 2024, respectively.

At the Customers Bancorp level, the CET 1 ratio (estimate), total risk based capital ratio (estimate), common equity to total assets ratio and tangible common equity to tangible assets ratio* ("TCE / TA ratio") were 11.7%, 14.6%, 7.7%, and 7.7%, respectively, at March 31, 2025.

At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At March 31, 2025, Tier 1 capital (estimate) and total risk based capital (estimate) were 12.4% and 13.9%, respectively.

Key Profitability Trends

Net Interest Income

Net interest income totaled $167.4 million in Q1 2025, a decrease of $0.4 million from Q4 2024. This decrease was driven by a decrease in interest income of $15.0 million primarily due to lower interest income from interest-earning deposits and investment securities, partially offset by lower interest expense of $14.6 million due to a favorable shift in deposit mix and lower market interest rates.

"Net interest margin expanded in the quarter primarily driven by improvements in the liability side of the balance sheet as we lowered interest bearing deposit costs and had higher levels of average non-interest bearing deposits. This is evident in the fact that our total cost of deposits declined by 25 basis points during the quarter.

Additionally, diversified and robust loan growth late in the quarter which we achieved through taking market share should provide a strong foundation for our net interest income throughout the remainder of 2025," stated Customers Bancorp President Sam Sidhu. "We have positive drivers to net interest income on both sides of the balance sheet though we continue to believe the best opportunity remains in reducing our interest expense with continued momentum from our new deposit focused commercial banking teams and across our franchise," stated Sam Sidhu.

Net interest income totaled $167.4 million in Q1 2025, an increase of $7.1 million from Q1 2024. This increase was primarily due to lower interest expense from a favorable shift in deposit mix and lower market interest rates, partially offset by lower interest income from interest-earning deposits and investment securities.

Non-Interest Income (Loss)

The following table presents details of non-interest income (loss) for the periods indicated:

Reported non-interest income totaled a loss of $24.5 million for Q1 2025, an increase of $24.1 million compared to a loss of $0.4 million for Q4 2024. The increase in losses was primarily due to $51.3 million of impairment loss on certain AFS debt securities that the Bank decided to sell as of March 31, 2025, in order to further improve structural liquidity, enhance credit profile, reduce asset sensitivity and benefit margin, partially offset by a decrease of $26.3 million in net realized loss on sale of investment securities and an increase in bank-owned life insurance income of $2.5 million primarily due to death benefits received from insurance carriers.

Excluding the impact of the securities repositioning in Q1 2025 and Q4 2024, non-interest income was $26.8 million in Q1 2025 compared to $25.9 million in Q4 2024.

Non-interest income totaled a loss of $24.5 million for Q1 2025, a decrease of $45.7 million compared to Q1 2024. The increase in losses was primarily due to $51.3 million of impairment loss on certain AFS debt securities that the Bank decided to sell as of March 31, 2025, partially offset by increases in commercial lease income of $1.0 million, loan fees of $2.0 million primarily resulting from increased unused line of credit fees, bank-owned life insurance income of $1.4 million primarily due to death benefits received from insurance carriers and deposit account fees of $2.1 million.

Non-Interest Expense

The following table presents details of non-interest expense for the periods indicated:

Non-interest expenses totaled $102.8 million in Q1 2025, a decrease of $7.6 million compared to Q4 2024. The decrease was primarily attributable to decreases of $4.5 million in salaries and employee benefits primarily due to lower headcount, severance and incentives, $2.1 million in technology, communication and bank operations primarily due to lower software-as-a-service expenses and $1.6 million in professional fees, partially offset by an increase of $1.7 million in FDIC assessments, non-income taxes and regulatory fees primarily due to higher FDIC assessments.

"During the quarter we realized the benefit of our operational excellence initiatives which are providing the capacity for the continued investments which we are making in our franchise to position us for success in the both the near-term and over the long-term. While we are pleased with the results of these efforts, we will look for continued opportunities to build on this success in the future," stated Sam Sidhu.

Non-interest expenses totaled $102.8 million in Q1 2025, an increase of $3.6 million compared to Q1 2024. The increase was primarily attributable to increases of $6.6 million in salaries and employee benefits primarily due to higher headcount including the addition of new banking teams in April 2024 and annual merit increases, and $5.5 million in professional fees including the investment in our risk management infrastructure. These increases were partially offset by decreases in technology, communication and bank operations primarily due to $7.1 million of deposit servicing fees and FDIC assessments, non-income taxes and regulatory fees, primarily due to $4.2 million of FDIC premiums recorded in Q1 2024, both of which relate to periods prior to 2024.

Taxes

Income tax expense decreased by $10.0 million to a benefit of $1.0 million in Q1 2025 from a provision of $8.9 million in Q4 2024 primarily due to lower pre-tax income and an increase in discrete tax benefits from share-based compensation for 2025, partially offset by lower investment tax credits estimated in 2025 as compared to 2024.

Income tax expense decreased by $16.7 million to a benefit of $1.0 million in Q1 2025 from a provision of $15.7 million in Q1 2024 primarily due to lower pre-tax income and an increase in discrete tax benefits from share-based compensation for 2025. The effective tax rate was (8.6)% for Q1 2025.

Outlook

"Looking forward, our strategy remains unchanged. We are focused on continuing the transformation of our deposit franchise, further strengthening our risk management and compliance infrastructure, improving our profitability and growing net interest income, and maintaining strong capital ratios, liquidity, and credit quality. We began the year with strong performance toward achievement of our loan, deposit, and net interest income growth targets as well as our target of lowering our core efficiency ratio. We remain focused on executing in those areas which differentiate us from our peers and believe that providing truly exceptional service, sophisticated product offerings and a single-point-of-contact service model will deliver strategic, organic growth. We believe we are incredibly well positioned to continue to take market share winning new client relationships and that we have the right strategy, the right team, and a client-centric culture to achieve our goals in 2025 and beyond," concluded Sam Sidhu.

The live audio webcast, presentation slides, and earnings press release will be made available at https://www.customersbank.com and at the Customers Bancorp 1st Quarter Earnings Webcast.

You may submit questions in advance of the live webcast by emailing our Head of Corporate Communications, Jordan Baucum at [email protected].

The webcast will be archived for viewing on the Customers Bank Investor Relations page and available beginning approximately two hours after the conclusion of the live event.

Institutional Background

Customers Bancorp, Inc. (NYSE:CUBI) is one of the nation's top-performing banking companies with over $22 billion in assets making it one of the 80 largest bank holding companies in the U.S. Customers Bank's commercial and consumer clients benefit from a full suite of technology-enabled tailored product experiences delivered by best-in-class customer service distinguished by a Single Point of Contact approach. In addition to traditional lines such as C&I lending, commercial real estate lending and multifamily lending, Customers Bank also provides a number of national corporate banking services to specialized lending clients. Major accolades include:

• No. 1 on American Banker 2024 list of top-performing banks with $10B to $50B in assets
• No. 72 out of the 100 largest publicly traded banks in 2025 Forbes Best Banks list
• 2024 Inc. Magazine Best in Business List in Financial Services Category

A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender. Learn more: www.customersbank.com.

"Safe Harbor" Statement

In addition to historical information, this press release may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.'s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words "may," "could," "should," "pro forma," "looking forward," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," "project," or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.'s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.'s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, such as the FDIC special assessments; the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to our reputation; effects of competition on deposit rates and growth, loan rates and growth and net interest margin; failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks; public health crises and pandemics and their effects on the economic and business environments in which we operate; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and military conflicts, including the war between Russia and Ukraine and ongoing conflict in the Middle East, which could impact economic conditions in the United States; the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; higher inflation and its impacts; the effects of changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs on its trading partners; and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management's current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.'s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2024, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.

Q1 2025 Overview

The following table presents a summary of key earnings and performance metrics for the quarter ended March 31, 2025 and the preceding four quarters: