Customers Bancorp (CUBI)

Regional banking company Customers Bancorp (NYSE:CUBI) announced better-than-expected revenue in Q3 CY2025, with sales up 38.3% year on year to $231.8 million. Its non-GAAP profit of $2.20 per share was 14% above analysts’ consensus estimates.

Company Overview

Originally founded with a "high-tech, high-touch" branch-light banking strategy, Customers Bancorp (NYSE:CUBI) is a bank holding company that provides commercial and consumer banking services through its Customers Bank subsidiary, with a focus on business lending and digital banking.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Customers Bancorp competes with regional banks like Valley National Bancorp (NASDAQ:VLY), Webster Financial (NYSE:WBS), and Fulton Financial (NASDAQ:FULT), as well as larger national institutions including PNC Financial Services (NYSE:PNC) and Truist Financial (NYSE:TFC) in its markets.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Luckily, Customers Bancorp’s revenue grew at an exceptional 14.5% compounded annual growth rate over the last five years. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Customers Bancorp’s annualized revenue growth of 6.3% over the last two years is below its five-year trend, but we still think the results were respectable. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Customers Bancorp reported wonderful year-on-year revenue growth of 38.3%, and its $231.8 million of revenue exceeded Wall Street’s estimates by 6.9%.

Net interest income made up 89.3% of the company’s total revenue during the last five years, meaning Customers Bancorp barely relies on non-interest income to drive its overall growth.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Customers Bancorp’s efficiency ratio has increased by 8.6 percentage points, going from 40.5% to 58.6%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Customers Bancorp’s efficiency ratio came in at 45.3% this quarter, beating analysts’ expectations by 538.1 basis points (100 basis points = 1 percentage point). This result was 16.8 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Customers Bancorp to rein in some of its expenses as it anticipates an efficiency ratio of 49.1%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Customers Bancorp’s EPS grew at an astounding 19.5% compounded annual growth rate over the last five years, higher than its 14.5% annualized revenue growth. However, we take this with a grain of salt because its efficiency ratio didn’t improve and it didn’t repurchase its shares, meaning the delta came from factors we consider non-core or less sustainable over the long term.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Although it performed well, Customers Bancorp’s flat two-year EPS lower than its 6.3% two-year revenue growth.

We can take a deeper look into Customers Bancorp’s earnings to better understand the drivers of its performance. A two-year view shows Customers Bancorp has diluted its shareholders, growing its share count by 6.2%. This has led to lower per share earnings. Taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Customers Bancorp reported adjusted EPS of $2.20, up from $1.34 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Customers Bancorp’s full-year EPS of $6.90 to grow 6.5%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Customers Bancorp’s TBVPS grew at an incredible 18.1% annual clip over the last five years. TBVPS growth has recently decelerated to 14.7% annual growth over the last two years (from $45.36 to $59.72 per share).

Over the next 12 months, Consensus estimates call for Customers Bancorp’s TBVPS to grow by 8.3% to $64.66, decent growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Customers Bancorp has averaged a Tier 1 capital ratio of 12.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Customers Bancorp has averaged an ROE of 17.1%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Customers Bancorp has a strong competitive moat.

We were impressed by how significantly Customers Bancorp blew past analysts’ revenue expectations this quarter. We were also glad its tangible book value per share outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 1.8% to $66.72 immediately following the results.

Updated: December 4, 2025 at 11:34 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Customers Bancorp.

There are some positives when it comes to Customers Bancorp’s fundamentals. First off, its revenue growth was solid over the last five years and is expected to accelerate over the next 12 months. And while its worsening efficiency ratio shows the business has become less productive, its anticipated efficiency ratio over the next year signals it will gain leverage on its fixed costs. On top of that, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Customers Bancorp’s P/B ratio based on the next 12 months is 1.2x. Looking at the banking landscape right now, Customers Bancorp trades at a pretty interesting price. If you trust the business and its direction, this is an ideal time to buy.

Wall Street analysts have a consensus one-year price target of $84.75 on the company (compared to the current share price of $71.14), implying they see 19.1% upside in buying Customers Bancorp in the short term.