CUBI Q1 Deep Dive: Deposit Growth and Operational Efficiency Drive Profit Amid Revenue Pressure

June 24, 2025 at 02:08 AM EDT

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Regional banking company Customers Bancorp (NYSE: CUBI) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 21.3% year on year to $143 million. Its non-GAAP profit of $1.54 per share was 18.6% above analysts’ consensus estimates.

Is now the time to buy CUBI? Find out in our full research report (it’s free).

Customers Bancorp (CUBI) Q1 CY2025 Highlights:

Revenue: $143 million vs analyst estimates of $193.3 million (21.3% year-on-year decline, 26% miss)
Adjusted EPS: $1.54 vs analyst estimates of $1.30 (18.6% beat)
Market Capitalization: $1.7 billion

StockStory’s Take

Customers Bancorp’s first quarter results saw revenue fall short of Wall Street’s expectations, though non-GAAP profit per share outperformed analyst estimates. The company’s management attributed the quarter’s performance to continued transformation of its deposit franchise, selective loan growth grounded in existing relationships, and operational efficiency initiatives. CEO Sam Sidhu highlighted a “25 basis point reduction in average cost of deposits” and described commercial deposit growth as “bucking the market trend.” The company also executed a balance sheet optimization, reallocating assets from securities to loans to support growth, which CFO Phil Watkins described as “a prudent move in this environment.”

Looking ahead, management expects sustained momentum from its recently recruited commercial banking teams and further improvements in deposit quality to underpin growth. CEO Sam Sidhu reaffirmed full-year loan growth guidance, noting that “our deposit remixing efforts and strong loan growth position us well to drive net interest income expansion regardless of the rate environment.” Investments in technology and risk management are set to continue, but management aims to maintain its efficiency ratio in the low to mid-fifties. The company is also focused on deepening client relationships and selectively expanding its talent base to further differentiate its franchise.

Key Insights from Management’s Remarks

Management pointed to franchise-wide deposit growth, disciplined loan expansion, and operational improvements as the most significant drivers of the quarter’s performance, while also highlighting the impact of recent balance sheet adjustments and ongoing talent recruitment.

Deposit transformation progress: The company’s ongoing efforts to attract low-cost, relationship-based deposits led to a 25 basis point reduction in average deposit costs, with over $250 million of noninterest-bearing deposit growth from commercial teams. Management emphasized that these deposits are more granular and stable, supporting improved funding quality.
Team-based recruitment momentum: Customers Bancorp’s strategy of hiring experienced commercial banking teams has resulted in significant increases in deposit balances and client accounts. These new teams managed approximately $1.3 billion in deposits and added 5,000 accounts within a year, which management sees as a catalyst for further franchise expansion.
Loan growth amid selectivity: Despite a muted lending environment, the bank achieved 12% annualized loan growth, focusing on diversified verticals such as commercial real estate and healthcare. Management stressed that much of this growth came from existing client relationships brought by new team hires, contributing to lower credit risk.
Operational efficiency gains: Through cost-saving initiatives and technology upgrades, the bank reduced core noninterest expenses by 5% and improved its efficiency ratio. CFO Phil Watkins cited $30 million in annualized impact from these initiatives, surpassing prior targets and providing resources to reinvest in technology and risk management.
Balance sheet optimization: The company sold portions of its securities portfolio, reallocating capital to fund loan growth. Management described this as a proactive measure to reduce exposure to credit-sensitive securities and enhance the quality of earning assets, with no further restructuring transactions expected in the near term.

Drivers of Future Performance

Customers Bancorp’s forward guidance is anchored by continued deposit growth, disciplined loan expansion, and ongoing investments in operational efficiency and talent.

Deposit pipeline and team expansion: Management expects its pipeline of low-cost, relationship-based deposits to remain robust, driven by both recently onboarded and newly recruited commercial banking teams. Sam Sidhu highlighted a replenished deposit pipeline exceeding $2 billion, and noted that additional teams are in advanced stages of recruitment.
Efficiency and technology investment: The company aims to maintain its core efficiency ratio in the low to mid-fifties for the year, leveraging cost savings from operational initiatives to support strategic technology upgrades and strengthen risk management infrastructure.
Balanced growth strategy and risk monitoring: Management intends to balance growth with disciplined credit selection, favoring lending verticals with lower inherent risk. Continued vigilance over macroeconomic volatility and regulatory changes, especially in digital asset-related deposits, remains a key focus area.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will be watching (1) whether deposit growth from newly recruited banking teams continues at the current pace, (2) the bank’s ability to sustain loan growth while maintaining strong credit quality, and (3) further improvements in operational efficiency and cost control. Developments in the digital asset sector and regulatory environment could also influence funding dynamics and fee income.

Customers Bancorp currently trades at $53.91, down from $54.53 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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