Customers Bancorp (CUBI) Q2 2025: Cubics Payments Deposits Jump 20% in July, Signaling Digital Asset Tailwind
Customers Bancorp’s Q2 results highlight a franchise expanding beyond traditional banking, with Cubics payments deposits up 20% in July and regulatory clarity driving digital asset momentum. Deposit remixing and new commercial team onboarding underpin margin expansion and loan growth, while leadership transitions reinforce strategic continuity. Upward guidance revisions and a growing digital payments moat position CUBI as a differentiated player in a consolidating industry.
Summary
- Digital Asset Payments Network Expands: Cubics platform deposits rose 20% in July, with regulatory clarity accelerating adoption and positioning CUBI as a leading stablecoin infrastructure provider.
- Deposit Franchise Transformation: New commercial banking teams contributed $300 million in high-quality deposits, supporting margin and funding mix improvement.
- Guidance Raised on Loan and NII Growth: Upward revisions reflect broad-based execution and signal confidence in durable earnings power.
Performance Analysis
CUBI delivered a quarter of broad-based strength, with core EPS, ROE, and ROA all exceeding expectations as the business model continues to diversify away from legacy funding sources. Deposit growth of nearly $300 million from new commercial teams—in a seasonally slow quarter—demonstrates the effectiveness of the bank’s targeted talent acquisition strategy and the stickiness of relationship-based funding. Net interest margin (NIM) expanded by 14 basis points for the third consecutive quarter, underpinned by both asset-side growth and disciplined liability management.
Loan growth was robust at an annualized 8%, with diversified contributions from corporate, mortgage finance, fund finance, healthcare, and equipment finance verticals. The reduction of brokered deposits by $350 million (down $1 billion YoY) and an increase in non-interest-bearing deposits to 29% of total further improved the funding profile. Credit quality remains strong, with non-performing assets at 27 basis points of total assets and net charge-offs down 25% QoQ. Tangible book value per share rose to $56.24, continuing a multi-year trend of double-digit annual growth and reflecting top-tier capital compounding even amid sector volatility.
- Margin Expansion Driven by Remixing: Deposit transformation and higher-yielding loan growth sustained NIM improvement, with further tailwinds expected from recent portfolio actions.
- Efficiency Ratio Improves Despite Investment: Operating leverage increased as the core efficiency ratio fell for a third straight quarter, even as expenses rose to support growth.
- Digital Payments Activity Accelerates: Cubics processed $1.5 trillion in payments in 2024 and is on pace for record volume in 2025, supporting both deposit growth and fee income.
CUBI’s operational and financial trajectory reflects a franchise moving up the value chain, with digital infrastructure and talent-driven growth offsetting legacy headwinds and positioning the bank for continued outperformance.
Executive Commentary
"Cubics is not just a tech platform, it's a relationship deepener and a competitive edge. Today it is primarily used by the digital asset industry as an on-off ramp for institutional players looking to trade and settle on our network via APIs 24/7 providing a direct connection to all major exchanges, stable coin providers, market makers and institutional investors."
Sam Sidhu, President and Chief Executive Officer
"Our net interest margin expanded by 14 basis points to 327, marking the third consecutive quarter of NIM improvement...we believe we've built a business that has positive drivers for NNI and NIM on both sides of the balance sheet."
Phil Watkins, Chief Financial Officer
Strategic Positioning
1. Digital Asset Infrastructure Leadership
Cubics, CUBI’s proprietary payments network, has emerged as a mission-critical platform for institutional digital asset clients, processing over $1.5 trillion in payments in 2024. Regulatory clarity, including stablecoin legislation, is catalyzing institutional adoption, with management positioning CUBI as the “partner of choice” for stablecoin issuers and digital finance players. Deposit balances on Cubics grew 20% in July alone, and management expects further upside as traditional finance flows increase and product enhancements deepen network effects.
2. Franchise Deposit Remix and Team-Based Growth
Deposit remixing remains a core strategic lever, with $300 million in new deposits this quarter from teams onboarded since June 2023, now representing 13% of total deposits. Commercial account openings are up 14% QoQ and over 60% since 2022, reflecting the success of the talent-centric recruitment model. Brokered deposits are being methodically reduced, and the bank’s focus on relationship-based, granular funding supports both margin and credit quality.
3. Diversified Loan Origination and Relationship Focus
Loan growth is balanced across specialized verticals, including mortgage finance, fund finance, healthcare, and equipment finance, reducing reliance on any single geography or client segment. Commercial real estate growth is opportunistic and relationship-driven, not transactional, with management maintaining discipline as competitors re-enter the market. The loan pipeline remains robust, with $500 million in backlog and flexibility to dial up or down based on opportunity and risk.
4. Operating Leverage and Capital Flexibility
Efficiency ratio improvement and disciplined expense management enable reinvestment in technology and growth without sacrificing profitability. Capital ratios remain strong, with excess CET1 supporting organic growth and balance sheet expansion as remixing opportunities moderate. The redemption of preferred stock and tangible book value compounding highlight prudent capital allocation and risk management.
5. Leadership Transition and Cultural Continuity
Succession planning is a strategic asset, with Sam Sidhu set to become CEO of the holding company in 2026 and Jay Sidhu transitioning to executive chairman. Management and board alignment with shareholders—via significant equity ownership—reinforces a long-term, client-first orientation and stability through industry cycles.
Key Considerations
CUBI’s Q2 performance and commentary signal a franchise at an inflection point, leveraging digital payments infrastructure and relationship-driven deposit growth to build a differentiated funding and earnings profile. The following considerations frame the bank’s evolving risk-reward:
Key Considerations:
- Digital Payments Moat Deepens: Cubics’ payments volume and deposit growth are outpacing legacy competitors, with regulatory clarity likely to accelerate institutional adoption and fee income potential.
- Deposit Quality and Mix Improvement: The shift toward granular, relationship-based funding reduces reliance on brokered and rate-sensitive deposits, supporting margin and balance sheet resilience.
- Operating Leverage Opportunity: New commercial teams are at breakeven, with significant upside as efficiency ratios normalize and revenue per team scales over the next 12-24 months.
- Loan Growth Diversification: Specialized verticals and disciplined commercial real estate exposure reduce concentration risk and enable opportunistic, high-return origination.
- Leadership and Culture Stability: Aligned management and board incentives, coupled with a clear succession plan, underpin strategic continuity and risk discipline.
Risks
CUBI faces risks from increased competition in digital asset banking, especially as large incumbents like JPMorgan and PNC enter stablecoin and payments rails. Deposit concentration and liquidity management in Cubics remain under close watch, as does the potential for regulatory shifts to alter the economics or compliance burden of digital asset banking. Loan growth could slow if macro conditions deteriorate or if competition intensifies in core verticals. Management’s focus on network strength over spot deposit balances mitigates some risk, but concentration in digital asset flows and continued regulatory evolution represent material uncertainties.
Forward Outlook
For Q3 2025, Customers Bancorp guided to:
- Continued NIM expansion, with an incremental $10 million per quarter in interest income from recent loan portfolio actions.
- Further deposit remixing and high-quality commercial deposit growth as new teams ramp productivity.
For full-year 2025, management raised guidance:
- Loan growth target increased to 8% to 11% (from 7% to 10%).
- Net interest income growth now expected at 7% to 10% (up from 3% to 7%).
- Efficiency ratio bias toward the low end of the prior range.
Management cited regulatory clarity in digital assets, robust loan pipelines, and continued operating leverage as key drivers for the upward revisions.
- Stablecoin and digital payments activity expected to accelerate further as institutional adoption grows.
- Deposit quality and funding mix improvement to support margin sustainability even in a lower rate environment.
Takeaways
Customers Bancorp is building a differentiated franchise at the intersection of digital payments and commercial banking, with Cubics driving both deposit and fee income growth as regulatory clarity unlocks new client segments.
- Digital Payments Lead: Cubics’ accelerating volumes and July’s 20% deposit growth highlight a growing moat and potential for outsized fee and funding benefits as the digital asset ecosystem matures.
- Deposit and Loan Diversification: New commercial teams and specialized lending verticals are de-risking the balance sheet and providing operational flexibility to pursue high-return opportunities.
- Operating Leverage and Capital Strength: Efficiency gains and prudent capital allocation enable reinvestment and organic growth, positioning CUBI to outperform as legacy peers retrench.
Conclusion
Customers Bancorp’s Q2 results confirm a franchise outpacing peers in digital asset payments, deposit remixing, and operational execution. Upward guidance, robust pipelines, and a deepening payments network reinforce the bank’s trajectory as a high-performing, tech-forward business model with durable earnings power and strategic flexibility.
Industry Read-Through
CUBI’s results offer a clear signal that digital asset payments and stablecoin infrastructure are moving from niche to mainstream, with regulatory clarity driving institutional adoption and network effects. Banks lacking proprietary payments rails or the ability to attract top commercial talent risk margin compression and funding instability as clients migrate to tech-forward platforms. The acceleration in Cubics deposits and payments volume also underscores the growing importance of compliance and risk management in digital asset banking, with federal frameworks likely to favor well-capitalized, tech-enabled players. Peer banks and fintechs should watch for further shifts in deposit mix and payments economics as competition intensifies in digital rails and stablecoin services.