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Customers Bancorp Reports Results for Second Quarter 2025

WEST READING, Pa.--(BUSINESS WIRE)-- Customers Bancorp, Inc. (NYSE:CUBI):

Second Quarter 2025 Highlights

• Q2 2025 net income available to common shareholders was $55.8 million, or $1.73 per diluted share; ROAA was 1.09% and ROCE was 12.79%.
• Q2 2025 core earnings*¹ were $58.1 million, or $1.80 per diluted share; Core ROAA* was 1.10% and Core ROCE* was 13.32%.
• Total loans and leases held for investment grew by $319.0 million, or 2.1%, in Q2 2025 from Q1 2025.
• Total deposits increased by $43.1 million or 0.2% in Q2 2025 from Q1 2025.
• Q2 2025 net interest margin, tax equivalent (鈥淣IM鈥�) was 3.27%, compared to Q1 2025 NIM of 3.13%, an increase of 14 basis points, primarily due to higher interest income from loan growth.
• Ratio of non-performing assets to total assets was 0.27% at June 30, 2025 compared to 0.26% at March 31, 2025.
• Q2 2025 provision for credit losses was $20.8 million compared to $28.3 million in Q1 2025.
• The allowance for credit losses on loans and leases equaled 518% of non-performing loans at June 30, 2025, compared to 324% at March 31, 2025.
• CET 1 ratio of 12.0%² at June 30, 2025, compared to 11.7% at March 31, 2025.
• TCE / TA ratio* of 7.9% at June 30, 2025, compared to 7.7% at March 31, 2025.
• Q2 2025 book value per sharerice-to-book-ratio-guide" title="Read: Price-to-Book Ratio (P/B): Complete Guide & Calculator" class="article-link" rel="noopener">book value per share and tangible book valuearticles/price-to-book-ratio-guide" title="Read: Price-to-Book Ratio (P/B): Complete Guide & Calculator" class="article-link" rel="noopener">book value per share* both grew by approximately $1.50, or 2.7% over Q1 2025, or 11% annualized, with a tangible book valuearticles/price-to-book-ratio-guide" title="Read: Price-to-Book Ratio (P/B): Complete Guide & Calculator" class="article-link" rel="noopener">book value per share* of $56.24 at June 30, 2025.
• Redeemed all outstanding shares ($57.5 million) of our Series E Preferred Stock on June 16, 2025.

CEO Commentary

鈥淲e are pleased to share our second quarter results that highlight the company鈥檚 continued execution of its strategic priorities and underscore our success in growing franchise value. 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,鈥� said Customers Bancorp Chairman and CEO Jay Sidhu.

鈥淚n the second quarter, we demonstrated the strength of our unique business model. The impact can be seen in a 14 basis points increase in our net interest margin in Q2 2025 compared to last quarter as we continue to source loans at attractive yields and manage our interest expenses.

Deposit focused teams we have recruited since March 2023 managed $2.4 billion or 13% of total deposits. Enhanced by their efforts, we鈥檝e increased commercial deposit accounts by approximately 60% 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,鈥� stated Jay Sidhu.

鈥淥ur Q2 2025 GAAP earnings were $55.8 million, or $1.73 per diluted share, and core earnings* were $58.1 million, or $1.80 per diluted share. We maintain a strong liquidity position, with $8.6 billion of liquidity immediately available, which covers approximately 150% of uninsured deposits¹ and our loan to deposit ratio was 81%, at June 30, 2025. Total loans and leases held for investment grew by $319.0 million driven by strong commercial loan growth of $360.7 million led by growth in our existing specialized lending verticals. Asset quality remains strong with our NPA ratio at just 0.27% of total assets and reserve levels are robust at 518% of total non-performing loans at the end of Q2 2025. Our exposure to the higher risk commercial real estate office sector is minimal, representing approximately 1% of the loan portfolio. Tangible Book Value per share* grew to $56.24 and our TCE / TA ratio* increased by 20 basis points to 7.9%. This year three new teams have joined the Bank and the recruitment pipeline remains strong. We believe that our unique strategy, the investments we have continued to make, and the exceptional talent across our organization position us strongly for continued success in 2025 and beyond,鈥� 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 $15.4 billion at June 30, 2025, up $319 million, or 2%, from March 31, 2025. Specialized lending increased by $385 million, or 6% quarter-over-quarter, to $6.5 billion. Mortgage finance loans increased by $148 million, or 10% to $1.6 billion. Non-owner occupied commercial real estate loans increased by $58 million, or 4% to $1.5 billion. These increases were partially offset by decreases in multifamily loans of $75 million, or 3% to $2.2 billion, owner-occupied commercial real estate loans of $74 million, or 7% to $1.1 billion, consumer installment loans of $64 million, or 7% to $802 million and construction loans of $56 million, or 36% to $99 million.

Loans and leases held for investment of $15.4 billion at June 30, 2025 were up $2.1 billion, or 16%, year-over-year. Specialized lending increased by $926 million, or 17% year-over-year. Mortgage finance loans increased by $503 million. Non-owner occupied commercial real estate loans increased by $295 million. Owner-occupied commercial real estate loans increased by $259 million. Multifamily loans increased by $180 million. Consumer installment loans increased $45 million, inclusive of the transfer from loans held for sale in Q1 2025. These increases were partially offset by decreases in construction loans of $65 million and other commercial and industrial loans of $54 million.

Loans Held for Sale

Loans held for sale decreased $5 million quarter-over-quarter, and were $33 million at June 30, 2025.

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 decreased with $13.1 million in Q2 2025, compared to $17.1 million in Q1 2025, and $18.7 million in Q2 2024.

Provision (benefit) for Credit Losses

The provision for credit losses on loans and leases in Q2 2025 was $18.5 million, compared to $21.4 million in Q1 2025. The lower provision in Q2 2025 was primarily due to lower balances in the consumer installment loan portfolio, partially offset by slight deterioration in macroeconomic forecasts and an increase in commercial loan balances held for investment.

The provision for credit losses on available for sale investment securities in Q2 2025 was $2.3 million, compared to $6.9 million in Q1 2025.

The provision for credit losses on loans and leases in Q2 2025 was $18.5 million, compared to $17.9 million in Q2 2024. The higher provision in Q2 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 Q2 2025 was $2.3 million compared to $0.3 million in Q2 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 an important common denominator: a relatively low credit risk assumption. The Bank鈥檚 commercial and industrial (鈥淐&I鈥�), 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鈥檚 credit quality to date has been strong despite a challenging economic and interest 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 June 30, 2025 were less than 4% of total assets and approximately 5% of total loans and leases held for investment, and were supported by an allowance for credit losses of $44.9 million. At June 30, 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 $106 thousand.

Non-performing loans at June 30, 2025 decreased to 0.18% of total loans and leases, compared to 0.29% at March 31, 2025 and 0.35% at June 30, 2024.

Investment Securities

The investment securities portfolio, including debt securities classified as available for sale (鈥淎FS鈥�) and held to maturity (鈥淗TM鈥�) 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鈥檚 liquidity position.

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

At June 30, 2025, the AFS debt securities portfolio had a spot yield of 5.78%, an effective duration of approximately 3.0 years, and approximately 23% are variable rate. Additionally, 64% of the AFS securities portfolio was AAA rated at June 30, 2025.

At June 30, 2025, the HTM debt securities portfolio represented only 3.8% of total assets at June 30, 2025, had a spot yield of 3.79% and an effective duration of approximately 4.2 years. Additionally, at June 30, 2025, approximately 54% of the HTM securities were AAA rated and $0.3 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 $43 million to $19.0 billion at June 30, 2025 as compared to the prior quarter. Money market deposits increased $149 million, or 4%, to $4.2 billion, time deposits increased $143 million, or 5%, to $3.0 billion and savings deposits increased $47 million, or 4%, to $1.4 billion. These increases were offset by decreases in interest bearing demand deposits of $225 million, or 4%, to $4.9 billion, which included the reduction of approximately $187 million of deposits serviced by BM Technologies, Inc. primarily from the transfer of deposits to a new partner bank during the quarter, and non-interest bearing demand deposits of $72 million, or 1%, to $5.5 billion. The total average cost of deposits increased by 3 basis points to 2.85% in Q2 2025 from 2.82% in the prior quarter. Total estimated uninsured deposits were $5.7 billion¹, or 30% of total deposits (inclusive of accrued interest) at June 30, 2025 with immediately available liquidity covering approximately 150% of these deposits.

鈥淭he planned reduction in deposits serviced by BM Technologies, Inc had an approximately 3 basis point impact on total average cost of deposits and an approximately 6 basis point impact on total interest bearing cost of deposits in the quarter. Adjusting for this impact, total average deposit costs would have been flat and interest bearing deposit costs would have declined by 5 basis points in the quarter from the continued progress on our deposit remix efforts,鈥� stated Customers Bancorp President Sam Sidhu.

Total deposits increased $1.3 billion, or 7%, to $19.0 billion at June 30, 2025 as compared to a year ago. Non-interest bearing demand deposits increased $1.0 billion, or 22%, to $5.5 billion, time deposits increased $805 million, or 37% to $3.0 billion and money market deposits increased $667 million, or 19%, to $4.2 billion. These increases were offset by decreases in interest bearing demand deposits of $981 million, or 17%, to $4.9 billion and savings deposits of $199 million, or 13%, to $1.4 billion. The total average cost of deposits decreased by 55 basis points to 2.85% in Q2 2025 from 3.40% in the prior year.

Borrowings

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

Total borrowings increased $62 million, or 4%, to $1.5 billion at June 30, 2025 as compared to the prior quarter. This increase primarily resulted from draws of $60 million in FHLB advances during Q2 2025. As of June 30, 2025, Customers鈥� immediately available borrowing capacity with the FRB and FHLB was approximately $8.0 billion, of which $1.2 billion of available capacity was utilized in borrowings and $1.7 billion was utilized to collateralize deposits.

Total borrowings increased $152 million, or 12%, to $1.5 billion at June 30, 2025 as compared to a year ago. This increase primarily resulted from net draws of $165 million in FHLB advances, partially offset by repayments of $25 million in senior notes upon maturity.

Capital

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

Customers Bancorp鈥檚 common equity increased $55 million to $1.8 billion, and tangible common equity* increased $55 million to $1.8 billion, at June 30, 2025 compared to the prior quarter, respectively, primarily from earnings of $56 million, partially offset by increased unrealized losses on investment securities of $4 million (net of taxes) deferred in accumulated other comprehensive income (鈥淎OCI鈥�). Similarly, book value per common share increased to $56.36 from $54.85, and tangible book value per common share* increased to $56.24 from $54.74, at June 30, 2025 and March 31, 2025, respectively.

Customers Bancorp鈥檚 common equity increased $172 million to $1.8 billion, and tangible common equity* increased $172 million to $1.8 billion, at June 30, 2025 compared to a year ago, respectively, primarily from earnings of $132 million and decreased unrealized losses on investment securities in AOCI of $60 million (net of taxes), offset in part by $25 million of common share repurchases. Similarly, book value per common share increased to $56.36 from $50.81, and tangible book value per common share* increased to $56.24 from $50.70, at June 30, 2025 and June 30, 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* (鈥淭CE / TA ratio鈥�) were 12.0%, 14.5%, 7.9%, and 7.9%, respectively, at June 30, 2025.

At the Customers Bank level, capital levels remained strong and well above regulatory minimums. At June 30, 2025, Tier 1 capital (estimate) and total risk based capital (estimate) were 13.0% and 14.4%, respectively.

Key Profitability Trends

Net Interest Income

Net interest income totaled $176.7 million in Q2 2025, an increase of $9.3 million from Q1 2025. This increase was driven by an increase in interest income of $13.1 million primarily due to higher interest income from specialized lending, mortgage finance and investment securities.

鈥淣et interest margin expanded in the quarter as we realized the benefits of strong loan growth, balance sheet optimization, and well managed deposit costs,鈥� stated Sam Sidhu. 鈥淲e continue to have positive drivers to net interest income on both sides of the balance sheet with a strong loan pipeline and continued momentum from our roster of primarily deposit focused commercial banking teams, which we continue to add to each quarter,鈥� stated Sam Sidhu.

Net interest income totaled $176.7 million in Q2 2025, an increase of $9.1 million from Q2 2024. This increase was primarily due to lower interest expense from a favorable shift in deposit mix and lower market interest rates, and higher interest income from specialized lending, multifamily and mortgage finance, which were partially offset by lower interest income from investment securities, consumer installment loans and interest-earning deposits.

Non-Interest Income

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

Reported non-interest income totaled $29.6 million for Q2 2025, an increase of $54.1 million compared to a loss of $24.5 million for Q1 2025. The increase was primarily due to $51.3 million of impairment loss on certain AFS debt securities recorded in Q1 2025 that the Bank decided to sell as of March 31, 2025, and increases in other non-interest income of $4.5 million primarily from $1.7 million of gain on sale of leased assets and $1.8 million of fees associated with the sunsetting of a loan origination program with a fintech company, which was recently acquired by a bank. These increases were partially offset by a decrease in bank-owned life insurance income of $2.4 million primarily due to lower death benefits received from insurance carriers.

Non-interest income totaled $29.6 million for Q2 2025, a decrease of $1.4 million compared to Q2 2024. The decrease was primarily due to $11.0 million of unrealized gain on equity method investments purchased at a discount in Q2 2024, partially offset by increases in loan fees of $3.9 million primarily resulting from increased unused line of credit fees, $1.8 million of fees associated with sunsetting of a loan origination program with a fintech company, which was recently acquired by a bank, and deposit account fees of $1.7 million.

Non-Interest Expense

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