Customers Bancorp has spent the last five years taking a step back for every step forward. But 2025 could be an inflection point, as the bulk of the metamorphosis is behind the Pennsylvania company.
Now, Customers has to prove that
“This is the year to reap the benefits of the investments that we have made and have been making,” Sam Sidhu, president and CEO of the company’s bank subsidiary, told American Banker.
Sidhu’s father, Jay, took control of the bank in 2009, when it was a $265 million-asset institution, then rebranded it and took it public. In 2019, the company passed $10 billion of assets.
The following January, the younger Sidhu, who had served on Customers’ board for eight years but mostly had a background in private equity, stepped into the C-suite as heir apparent. He was tapped to help Customers map out its next phase of growth.
Since then, the now-$22.4 billion-asset Customers has added business lines, upgraded its technology, remixed its balance sheet and overhauled its regulatory infrastructure.
But over the last five years — as the COVID-19 pandemic, a mini-banking crisis and the rapid rise of interest rates slapped around the industry — some of Customers’ strategies strayed from the bank’s January 2020 blueprint.
“Everyone has a plan until you get punched in the face,” Sam Sidhu said.
In an industry known for being slow-moving, Customers has improvised several successful initiatives. The bank became a heavy hitter in Paycheck Protection Program lending in 2020; acquired a venture banking portfolio during the bank failures in 2023; and added dozens of bankers from larger institutions during the last two years.
Some of the moves have been rewarded.
Customers’ stock price has surged more than 120% since the start of 2020, and about 14% so far this year. The company is forecasting higher deposit and loan growth in 2025 than those of its peers. And its focus on technology and digital assets has put it ahead of other smaller regional banks as the Trump administration seeks to make crypto services more ubiquitous.
Last year,
But progress hasn’t been linear. Customers has tallied up expenses. The bank has also realized losses from repositioning its balance sheet and pivoted away from certain banking verticals.
Additionally, the Federal Reserve Bank of Philadelphia
Those distractions have kept investors on their toes, even as the bank has rolled out more elements of its game plan.
Peter Winter, an analyst at D.A. Davidson, told American Banker that 2024 was a major transition period for Customers. But the bank now seems poised to take advantage of its turnaround plays, he said.
“They’ve got all the pieces in place for tailwinds,” Winter said. “The loan pipelines are strong. The deposit pipelines are strong… .Everything is there. It’s just a matter of, can they execute?”
When Sam Sidhu joined Customers, he wanted the bank to narrow in on a few lines of business where it could excel. Sidhu, who had experience in institutional real estate lending, private capital lending and fintech operations, saw chances for Customers to develop niches in those areas.
“You can’t be everything to all people,” Sidhu said. “You have to pick and choose the verticals and business lines you enter into.”
One might say Customers’ timing was lucky.
The bank planned to launch a venture banking business before the failures of Silicon Valley Bank, First Republic Bank and Signature Bank in 2023. But that disruption gave Customers the chance to buy a $631 million venture loan portfolio — previously owned by Signature — at a discount from the Federal Deposit Insurance Corp. The bank then recruited the 30 former Signature employees who had originated the book.
Two years later, that business managed about $900 million of deposits, and a similar amount of loans, as of the first quarter.
And although the bank landed in regulatory hot water for its crypto-related services a few months ago, new Trump administration regulators have already taken steps to encourage banks’ adoption of such offerings.
“The thinking is, more banks are going to get involved in this as there’s more clarity on regulation for crypto,” Winter said. “And the nice thing is: Customers has a head start on the competition.”
The bank didn’t anticipate the partisan shift in crypto policy, Sidhu said, but it’s hoping for more regulatory clarity on specific standards for managing those businesses.
The company’s digital asset business is more of a play for payments than for deposits. Customers doesn’t directly touch cryptocurrencies, but works with exchanges like Coinbase, Gemini and Kraken to hold dollar-denominated deposits at the bank. The company also generates fee income through cubiX, a closed-loop, blockchain-based payments system that it developed in-house.
Customers holds about 1% of the liquidity in the digital asset industry, Sidhu said on Customers’ latest earnings call. In the latest quarter, the platform reeled in about $2.1 million of fee income.
Sidhu said part of the bank’s confidence in its business rests on its technology, which he described as a leap above the “very low bar” for the banking industry, but still below where he hopes to land.
Customers hit $30 million of annual run rate efficiency last quarter, largely from cost-saving initiatives such as technology consolidation efforts and the fee income generation from its payments platform focused on clients in the digital asset industry.
The bank’s infrastructure, Sidhu said, along with an entrepreneurial ethos “within a risk management framework,” has made it easier for Customers to pounce on some of the opportunities that have popped up during the last five years.
“Sometimes you put yourself in the right situations and positions to be able to take advantage,” Sidhu said.
But the bank has also stuck to long-term strategies on its journey. Driving many of its moves has been the ongoing transformation of its deposit franchise to increase stable, inexpensive stores of liquidity.
Early last year, Customers hired 10 commercial banking teams from the failed Signature Bank, focused on reeling in low-cost deposits. While the acquisition of that workforce was initially dilutive to earnings, those teams turned a profit in the first quarter.
The bankers that have joined Customers since mid-2023 manage more than $2.1 billion of deposits — about 11% of the bank’s total, Sidhu said on an earnings call. The company estimates that it will record deposit growth of 5%-9% this year.
As the cost of deposits dropped in the first quarter, Customers’ net interest margin expanded for the second-consecutive period. Still, it will take time for investors to feel as confident as Sidhu does that blue skies are ahead, Winter said.
“The banks that get the premium valuations are those banks that have consistency through cycles and have a strong deposit franchise,” Winter said. “To me, that is a big piece that’s missing at Customers.”
Since 2020, Customers has become a fundamentally different bank, Winter said.
“Sam has really changed the company quite a bit since he’s taken over,” Winter said. “He’s been opportunistic. … The problem is, when you’re opportunistic, you take a step back when you’re doing it.”
But the bank has finished tweaking its strategy — checking off plans to add lines of business, calibrate its balance sheet and develop a modern technology stack. Sidhu said the bank is done taking steps back to move forward.
Jay Sidhu still sits at the helm as chairman and CEO of the holding company, and as executive chairman of the bank. Sam Sidhu was tapped as president and CEO of the bank in July 2021. When he first joined Customers, the board had discussed a five- to six-year transition period, he said. That was five and a half years ago.
On Wednesday, the bank’s stock closed trading at $53.82, roughly in line with its tangible book value of $54.74 per share. The average price-to-book ratio among regional banks is 1.13, according to a January analysis by Aswath Damodaran, a corporate finance professor at New York University.
“I don’t think anyone’s going to give them the benefit of the doubt,” Winter said. “It’s the show-me story, but I feel like they’ve got the pieces to do it.”