Progress hasn't been linear for Customers Bancorp as it's worked to diversify its deposit base, recruit banking teams and remix its balance sheet. But the start of 2025 showed some payoff.
The West Reading, Pennsylvania-based bank maintained its financial guidance for the year, projecting strong deposit growth, net interest income and loan growth. Despite industry-wide tepid loan demand and volatility from Trump administration tariff policies, Customers is still forecasting loan growth this year above what most of its peers are expecting, along with decreased expenses from deposits.
Customers President and CEO Sam Sidhu said on a call with analysts Friday that the company's exposure to tariffs is mild, though the bank would have some credit sensitivity in the event of a broader recession.
"At the end of the day, this is sort of a … policy-driven, macroeconomic-type effort," Sidhu said. "Volatility can be created in a number of weeks. It can also be rolled back in a number of weeks. … Our hope is that our administration, policymakers have things under control."
Customers, which has added venture capital banking and commercial banking teams in the last two years, expects to grow loans by 7% to10% for the year. In the first quarter, total loans increased by 16% from the prior year.
The $22.4 billion-asset company is also projecting that deposits will grow by 5% to 9% in 2025, and that net interest income will rise by 3% to 7%.
Peter Winter, an analyst at D.A. Davidson, said in a research note that 2025 seemed to be "off to a solid start."
Customers also continued to restructure its balance sheet in the first quarter, incurring a loss of about $40 million. The bank opted to sell $620 million of securities during the quarter, following a sale of $480 million of lower-yielding assets in the prior three-month period. These actions capped off the bank's plans for balance sheet remixing, Sidhu said.
The balance sheet optimization was designed to reduce the credit sensitivity of Customers' securities portfolio, Sidhu said. He added that since "our bankers achieved strong loan growth in a typically soft quarter," the company wanted to invest more in lending.
The bank plans to use the $1.1 billion of proceeds from the two recent asset sales to reinvest in $400 million worth of higher-yielding securities, and to fund $600 million in loan growth.
Sidhu said that pipelines of potential loan deals remain strong, and the company also has a solid backlog — that is, booked loans the bank still has to work through. The bank's effort to diversify its lending verticals has complemented efforts to reel in low-cost commercial deposits, he said.
With the one-time losses, Customers reported first-quarter net income of $9.5 million, or 29 cents per diluted share, compared with an analyst consensus estimate of $1.30. Excluding the nonrecurring items, the bank's bottom line beat estimates, at $53.4 million, or $1.52 per share.
In the past several years, one of the bank's top missions has been to build its volume of noninterest bearing deposits, especially after interest rate volatility jacked up deposit costs across the industry in 2022 and 2023.
The focus on the deposit franchise has been "taking shape as new deposit teams are gaining traction," Winter wrote.
In the last two years, Customers has brought on more than 10 new banking teams, which in the first quarter accounted for the addition of $400 million in new deposits, according to the bank. The new teams represent some 11% of the bank's total deposits.
Customers continued to see its cost of deposits drop, which helped to boost its net interest margin to 3.13%, up from 3.10% in the same period one year prior. Net interest income in the quarter was up 4.4%, due to lower interest expenses as the bank shifted its deposit makeup.
The bank recently brought on, or is in advanced negotiations with, about half a dozen other low-cost deposit-focused commercial banking teams, Sidhu said. Those new teams will both help Customers expand in existing verticals and put the bank into new, adjacent specialties.
"The flywheel is turning, and our pipeline for deposit team recruitment is strong," Sidhu said.
