Customers Bancorp (CUBI) Q3 2026 earnings review
Customers Bancorp gathers record deposits, but its expense outlook rises
Customers Bancorp, a Pennsylvania commercial bank, gathered record deposits and loans while its operating costs climbed faster than planned. Net interest income rose 8% from a year ago by our math when excluding last year's one-off loan purchase gains, or 3% as reported, as the bank's lending spread ticked up from its second-quarter low. Chief executive Sam Sidhu lifted the full-year growth floors for both loans and deposits after newly hired commercial banking teams brought in checking accounts.
| Net interest income (underlying, by our math) | +8.4% reported +3.1% from a year ago ($208.1M) |
|---|---|
| Total deposits | $22.6B +10.6% from a year ago (+3.8% from Q2) |
| Full-year net interest income outlook | Cut $7.5M middle of the range: $807.5M (+7.6%) |
| Full-year operating expense outlook | Raised $12.5M middle of the range: $462.5M (+7.1%) |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because strong commercial deposit gathering was offset by a lower ceiling on full-year interest income and a higher bill for operating expenses. Management cut the middle of its full-year net interest income plan by $8 million and raised its expense plan by $13 million, showing that hiring and software costs are outrunning the savings claimed from artificial intelligence tools. One caution: the bank also boosted loan-loss reserves on multifamily apartments by nearly two-thirds and took a $60 million bond valuation hit that slowed book value growth.
The question now is whether the bank can turn its September lending spread into fourth-quarter profit growth without another step-up in expenses. Either the 3.25% September margin holds and carries net interest income to the top of the plan, or rising payroll, software bills and apartment loan provisions eat up the gain. Fourth-quarter results and the 2027 expense plan will settle it.
🐂 Bull Case
New Banking Teams Drive Record Deposit Growth
Customers Bancorp is a Pennsylvania-based commercial bank that has recruited experienced banking teams since 2023 to gather low-cost business accounts. Those newer teams added $415 million in deposits this quarter, helping lift total deposits by $831 million from last quarter to a record $22.6 billion. Chief executive Sam Sidhu raised the full-year outlook for both loans and deposits.
- Non-interest-bearing deposits (accounts that pay zero interest): up $295 million from last quarter to $7.2 billion, or 31.9% of total deposits
- Corporate banking loans: up 18.4% from a year ago to $7.8 billion
- Net new commercial accounts: up 618 in the quarter, with 317 coming from teams hired in 2025
This matters because zero-interest checking accounts keep the bank's average deposit cost steady at 2.50%, down from 2.77% a year ago. Because the bank already sits at 10.3% loan growth and 8.6% deposit growth through September, by our math it needs less than 2% loan growth and 0.4% deposit growth in the fourth quarter to clear its raised full-year floors.
What to watch: fourth-quarter non-interest-bearing deposit flows in the full-year report. Another gain above $250 million would confirm that commercial team recruiting can grow free funding even when digital-asset balances do not.
Interest Margin Trough Passed With Higher September Rate
Net interest margin — the lending spread a bank earns between interest on loans and interest paid on deposits — had fallen to 3.17% last quarter. Finance chief Mark McCollom said the spread rose to 3.19% in the third quarter, lifting net interest income by 7.6% from last quarter to $208.1 million. Compared with a year ago, headline net interest income rose 3.1%, or 8.4% by our math when excluding roughly $10 million of one-off loan-purchase income in the prior year.
The quarterly average missed the roughly 3.22% level management had pointed to, because of what McCollom called "a timing difference between when we brought in deposits and when we funded loan growth" that left extra cash sitting in lower-yielding accounts. "Our estimated run rate for net interest margin in September was approximately 3.25% which gives us confidence for additional expansion in Q4 2026," McCollom said. By our math, the updated full-year outlook points to $214.7 million of fourth-quarter net interest income, up 3.2% from this quarter.
What to watch: fourth-quarter net interest margin in January's release. A reading at or above 3.25% would verify that the September run rate held once the bank deployed its excess cash into loans.
🐻 Bear Case
Expense Plan Raised despite AI Savings Claims
"Our goal of decoupling revenue growth from expense growth is well underway," Sidhu said, estimating that artificial intelligence tools and automation unlocked over $15 million of yearly capacity. Footnotes in the release explain that this figure reflects savings "from positions not backfilled and open positions reduced YTD", while the 76,000 saved employee hours come from "Self-reported estimates from periodic surveys of employees using AI tools, captured at time of submission and not subsequently re-measured or validated".
The income statement and the updated outlook tell the opposite story. Customers Bancorp raised its full-year non-interest expense forecast by $12.5 million at the middle of the range to $460–465 million, while trimming its net interest income forecast by $7.5 million at the middle to $805–810 million. Operating costs rose 7.8% from a year ago to $113.4 million, outpacing the 3.2% rise in total revenue.
- Salaries and employee benefits: $56.3 million, up 15.5% from a year ago and up 2.5 percentage points of revenue
- Technology and bank operations costs: $15.1 million, up 45.1% from a year ago and up 1.8 percentage points of revenue
- Implied fourth-quarter operating expenses: $122.2 million at the middle of the range by our math, up 7.8% from this quarter
What to watch: fourth-quarter non-interest expense against the $122.2 million implied figure. Landing near that level would mean the efficiency ratio — operating costs as a share of revenue — worsens heading into 2027 despite a low-40s target.
Multifamily Reserves Jump and Bond Losses Widen
Customers Bancorp reported lower overall bad loans this quarter, with non-performing loans dipping to 0.29% of total loans from 0.31% in June. Inside the loan book, however, the bank set aside $25.4 million for credit losses and shifted reserves heavily into multifamily apartment loans. Even though multifamily non-performing loans fell by $4.8 million to $9.4 million, the allowance for credit losses on multifamily loans jumped from $29.3 million to $48.3 million, lifting reserves from 1.12% to 1.81% of that portfolio.
At the same time, the lender bought $915 million of investment securities, taking its bond portfolio up 48.4% from a year ago to $4.2 billion. Unrealized losses on available-for-sale bonds — paper losses that reduce shareholder equity before the bonds mature — widened after-tax accumulated other comprehensive loss by $60 million in the quarter to $118.0 million. That bond hit, alongside $38.3 million of share buybacks, caused total common equity to shrink by $13 million despite $78.4 million in net profit.
What to watch: multifamily loan risk ratings and charge-offs in the third-quarter 10-Q filing. A rise in substandard apartment loans would explain why management increased multifamily reserve coverage by 0.69 percentage points in three months.
Risks this quarter didn't answer
The earnings release gave no dollar figures or updates on three standing risks and one growth driver that also carries deposit concentration risk, leaving them for the conference call or the 10-Q filing.
- cubiX payment network balances and digital-asset float: Sidhu noted that real estate and mortgage finance verticals are helping diversify the network "with mortgage finance and real estate verticals now representing more than 30% of our cubiX balances at September 30, 2026", which bulls view as a new funding driver, but the release omitted total cubiX deposit dollars to test the $1.5 billion year-end non-digital-asset target or how much zero-interest funding still rests on crypto clients.
- Federal Reserve written agreement and shareholder demand letter: the release provided no update on lifting the anti-money-laundering enforcement action or the board committee reviewing related shareholder claims.
- Executive and family governance concentration: leadership remains concentrated under Chief Executive Sam Sidhu and Executive Chairman Jay Sidhu, with no board or governance changes announced.
👓 Other Themes
Palantir Partnership Aims to Scale Deposit Onboarding
Customers Bancorp completed a pilot of its rebuilt commercial deposit onboarding system this quarter, "opening commercial deposit accounts in minutes rather than days", Sidhu said. To bring that pilot into full production across its business lines, the bank announced a partnership with software maker Palantir. Management has not disclosed the contract cost of the Palantir deal or how many accounts the pilot handled.
💲 Other KPIs
Tangible book value per share — the bank's net worth per share excluding intangible assets — rose 10.0% from a year ago to $65.66, but grew just 0.7% from last quarter after rising 2.6% in the second quarter. A $60 million after-tax bond valuation loss and share buybacks above book value offset most of the quarter's $78.4 million profit.
Common Equity Tier 1 — core bank capital as a share of risk-weighted assets — dipped 0.3 percentage points from last quarter to an estimated 12.6%, staying just above the 11.5–12.5% target range. The lender repurchased 492,178 shares for $38.3 million, paying about $77.91 per share by our math after issuing 2.5 million shares at $68.50 a year ago.
Borrowings from the Federal Home Loan Bank rose $78 million from last quarter and 78.8% from a year ago to $2.14 billion. Management drew $950 million of net advances over the past year while adding $1.36 billion to its bond portfolio, funding those 4.65%-yielding securities partly with wholesale debt that cost 4.31% in the third quarter.
🔮 Guidance
Raised. The full-year floor moved to at least 12% growth, up from the prior 8–12% range that management reaffirmed in the first two quarters. Because total loans already grew 10.3% through the first nine months, by our math the bank needs just 1.5% growth in the fourth quarter to meet the new floor.
Raised. The full-year floor moved up to at least 9% growth from the prior 8–12% range. After adding $831 million in the third quarter, deposits are up 8.6% year-to-date, which by our math leaves only 0.4% growth (~$85 million) needed in the fourth quarter to clear the 9% mark.
Cut. The bank raised the bottom of the range by $5 million and lowered the top by $20 million, cutting the middle of the range by $7.5 million to $807.5 million (7.6% growth). By our math, that leaves $214.7 million for the fourth quarter, up 3.2% from the third quarter and up 5.0% from a year ago (10.4% excluding last year's one-off loan accretion).
Raised. Management lifted the full-year cost forecast by $12.5 million at the middle of the range to $462.5 million, or 7.1% growth over 2025. By our math, subtracting the $340.3 million spent in the first nine months leaves $122.2 million of expenses for the fourth quarter, a 7.8% jump from the third quarter.
Cut. The expected full-year tax rate moved down to 22–23% from the prior 23–25% target after discrete tax benefits from employee stock awards and energy tax credits kept the nine-month tax rate at 21.7%.
Unchanged. Finance chief Mark McCollom kept the call for fourth-quarter margin expansion, anchoring it to a September estimated run rate of about 3.25% compared with the 3.19% third-quarter average.
❓ Key Questions
What were total cubiX and digital-asset deposit balances in Q3?
The release stated that mortgage finance and real estate reached over 30% of cubiX balances, but omitted the total dollar figure. Without it, investors cannot tell if real estate deposits grew toward the $1.5 billion target or if digital-asset float shrank.
Why did the multifamily loan loss allowance jump by $19M?
Non-performing multifamily loans fell by $4.8 million to $9.4 million, yet the bank raised its multifamily credit allowance from $29.3 million (1.12% of loans) to $48.3 million (1.81%). Management did not explain whether specific apartment borrowers deteriorated.
Why does the outlook imply $122M of Q4 operating expenses?
Management cited $15 million in annualized capacity savings from not backfilling open roles, but raised the full-year cost plan to $460–465 million. By our math, that implies a $9 million sequential cost jump in the fourth quarter.
When will the Federal Reserve lift its written enforcement agreement?
Management previously said work on the anti-money-laundering agreement was materially complete with a goal of lifting it in 2026, but the third-quarter release gave no update on the regulator's review or the shareholder demand letter.