Customers Bancorp: The AI Payoff Meets the Deposit Beta Test

Record growth and a new Palantir partnership are real; the debate is whether low-beta deposits can keep outrunning a Fed hike.

CUBI · Earnings Call · 2026-10-23

The quarter that made the AI pitch tangible

Customers Bancorp’s third quarter was, on the surface, another record-setting regional-bank print: “Deposits grew 4% in the quarter and 11% year over year to a record $22.6 billion” — Samvir S. Sidhu, Chief Executive Officer · 2026-10-23, loans reached $18.5 billion, net interest income rose 8% sequentially to $208 million, EPS was $2.25, and ROE hit 14%. But the more important change is that the AI story finally moved from slideware to the P&L. Management disclosed 76,000 cumulative hours saved and “$15 million+ of annualized capacity,” with revenue per employee up 13% and pretax profit per employee up 34%. The new bits are concrete: a partnership with Palantir, a rebuilt commercial deposit onboarding process piloted in 10 weeks, and a 95% reduction in loan-underwriting cycle time. That is a different kind of claim than the open-ended “AI efforts” of prior quarters.

Even with the great results in the quarter... if I had to leave you with 1 point, it is that productivity gains are showing up in our financial performance. And are already above our investments today. Revenue per employee is up 13%, and pretax profit per employee is up 34% on an annualized basis this quarter versus last year.
Samvir S. Sidhu, Chief Executive Officer · 2026-10-23

Yet the AI narrative is not new. On the July call, the CEO was already pushing back on the idea that this was off-the-shelf software: “these are not software plug ins. We are... actually building proprietary software.” — Samvir S. Sidhu, Chief Executive Officer · 2026-07-24 The company has been talking about AI transformation since at least 2025. So the right read is not “new theme” but “proof quarter.” The innovation is the operating detail—AI pods alongside forward-deployed engineers—and the fact that expense growth is still being contained while revenue-producing headcount rises. A regional bank that can grow revenue per employee faster than headcount is a different compounding machine than one that buys growth through hiring.

Deposit beta: the quiet star against a Fed hike

The global tape’s hottest macro keyword this quarter was Fed rate hike, and CUBI’s answer was unusually good. CFO Mark McCollom said “Our total cost of deposits remained flat despite the increase in interest rates by the Federal Reserve during the quarter.” — Mark R. McCollom, Chief Financial Officer · 2026-10-23 More striking, he estimated the first-30-day deposit beta at 33%, versus roughly 60% in the prior upcycle: “our deposit beta has been about 33%. And that compares to... the last time there was an upcycle in rates Our beta was around 60%.” — Mark R. McCollom, Chief Financial Officer · 2026-10-23 That is the difference between a bank that has to pay up for money and one whose deposit franchise is actually improving. The quality markers support the claim. Noninterest-bearing deposits hit $7.2 billion, or 32% of total deposits, up $800 million year over year; broker deposits fell about $370 million and are now under 20% of deposits. Cost of deposits was flat, and the bank deliberately moved out about $1 billion of higher-cost deposits during the year. This is not just a rate-cycle tailwind—it is a mix shift toward operating accounts from new commercial teams and payments clients. The same theme is visible across regional banks this earnings season, but CUBI’s combination of 14% loan growth and flat deposit costs is at the strong end of the peer set.

cubiX: diversification is real, but the competition question returns

The payments and digital-asset franchise remains the most differentiated part of the story. Digital-asset deposits were $3.1 billion this quarter, while non-digital-asset cubiX balances reached $1.4 billion. Real estate and mortgage finance now represent more than 30% of cubiX deposit balances, up from a standing start, and the title team alone contributed roughly $150 million. That is close to the $1.5 billion non-DA target management set for year-end. On the prior call, the CEO framed the build this way: “those 2 in aggregate are about a billion dollars. You know, today, and we expect that we are hopeful our internal target is getting that to about $1.5 billion by the end of the year.” — Samvir S. Sidhu, Chief Executive Officer · 2026-07-24 They are nearly there. But the Q&A exposed the tension. An analyst asked whether a large crypto exchange’s direct Fed payment access and settlement deal with another bank would pull balances away, or force CUBI to pay interest on zero-cost deposits. Management’s response was that there has been “no material change” in customer activity and that the 24/7 network is a barrier to entry. The market should treat that as a claim to monitor, not a settled fact. The real estate payments diversification is precisely what reduces the risk of Cubix deposit concentration, but the legacy digital-asset base is still the swing factor in noninterest-bearing balances. The regulatory overhang also cleared a notch. The Pennsylvania Department of Banking and Securities lifted its order, which the CEO called “a very good big recognition” — Samvir S. Sidhu, Chief Executive Officer · 2026-10-23, while noting the Fed agreements are “essentially the same.” After several quarters of discussing the written agreement, that is a genuine milestone. It does not change day-to-day operations, but it weakens a bear case that had little to do with earnings power.

Guidance, valuation, and what the tape already knows

Management raised full-year loan growth guidance to 12% or higher and deposits to 9% or more, tightened NII to $805 million–$810 million, and lifted the expense range to $460 million–$465 million to fund incentive compensation and technology. That is a confident guide, but the stock is not oblivious: CUBI is up 12.8% over the last 90 trading days, a steady 17-week advance into the print. At 1.2x price to book, it is not expensive for a bank generating mid-teens ROE, but it is also no longer a broken-down recovery trade. The fundamentals confirm the direction: net interest income reached $193 million in the June quarter before management reported $208 million for Q3, and deposits stood at $21.7 billion at the June filing. Credit remains clean—NPAs at 29bp, net charge-offs at 28bp—so the near-term risk is not asset quality; it is execution on NIM and the durability of low-cost deposits. If the AI productivity gains keep dropping through to the efficiency ratio, and if the commercial deposit teams keep bringing in operating accounts at low betas, CUBI can keep compounding book value faster than peers. If cubiX competition starts to bite or fourth-quarter expenses step up more than guided, the stock’s recent run leaves less room for error. The quarter’s real message is that CUBI is no longer just telling an AI and payments story; it is beginning to show the math.