Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbols

Name of Each Exchange on which Registered

Voting Common Stock, par value $1.00 per share

CUBI

New York Stock Exchange

Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series C, par value $1.00 per share

CUBI/PC

New York Stock Exchange

Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series D, par value $1.00 per share

CUBI/PD

New York Stock Exchange

Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series E, par value $1.00 per share

CUBI/PE

New York Stock Exchange

Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series F, par value $1.00 per share

CUBI/PF

New York Stock Exchange

5.375% Subordinated Notes due 2034

CUBB

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated Filer

Non-accelerated filer

Smaller Reporting Company

☐

~~Large accelerated filer~~

~~Accelerated filer~~

~~Non-accelerated filer~~

o ~~(Do not check if a smaller reporting company)~~

~~Smaller Reporting Company~~

Emerging Growth Company

¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

¨o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨☐ No x

________________________________________

On ~~October 31, 2017, 30,806,122~~August 6, 2021, 32,373,955 shares of Voting Common Stock were outstanding.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

Table of Contents


Part I

~~Part I~~

Item 1.	Customers Bancorp, Inc. Consolidated Financial Statements as of ~~September 30, 2017~~June 3 0 , 2021 and for the three and ~~nine~~ six month periods ended ~~September 30, 2017~~June 3 0 , 2021 and ~~2016~~2020 (unaudited)		35

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		5147

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		7781


Item 4.	Controls and Procedures		7882

PART II

Item 1.		Legal Proceedings		7984

Item 1A.		Risk Factors		7984

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		8184

Item 3.		Defaults Upon Senior Securities		8184

Item 4.		Mine Safety Disclosures		8184

Item 5.		Other Information		8184

Item 6.		Exhibits		8285

SIGNATURES				8487

~~Ex-31.1~~

~~Ex-31.2~~

~~Ex-32.1~~

~~Ex-32.2~~

~~Ex-101~~

Table of Contents

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

The following list of abbreviations and acronyms may be used throughout this Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements.





ACL			Allowance for credit losses
AFS			Available for sale
ASC			Accounting Standards Codification

AOCI			Accumulated other comprehensive income
ASU			Accounting Standards Update
ATM			Automated teller machine
Bancorp			Customers Bancorp, Inc.
Bank			Customers Bank
BBB spread			BBB rated corporate bond spreads to U.S. Treasury securities

BMT			BankMobile Technologies, Inc.
BM Technologies			BM Technologies, Inc.
BOLI			Bank-owned life insurance

CAA			The Consolidated Appropriations Act, 2021
CARES Act			Coronavirus Aid, Relief and Economic Security Act
CCF			Customers Commercial Finance, LLC
CECL			Current expected credit loss
Company			Customers Bancorp, Inc. and subsidiaries




COVID-19			Coronavirus Disease 2019

CPI			Consumer Price Index
CUBI			Symbol for Customers Bancorp, Inc. common stock traded on the NYSE
Customers			Customers Bancorp, Inc. and Customers Bank, collectively
Customers Bancorp			Customers Bancorp, Inc.
DCF			Discounted cash flow
Department			Pennsylvania Department of Banking and Securities

Disbursement Business			One Account Student Checking and Refund Management Disbursement Services Business

ED			U.S. Department of Education

EPS			Earnings per share

ERISA			The Employee Retirement Income Security Act of 1974
EVE			Economic value of equity
Exchange Act			Securities Exchange Act of 1934

FDIC			Federal Deposit Insurance Corporation

Fed Funds			Federal Reserve Board's Effective Federal Funds Rate
Federal Reserve Board			Board of Governors of the Federal Reserve System

FHA			Federal Housing Administration
FHLB			Federal Home Loan Bank

FPRD			Final Program Review Determination
FRB			Federal Reserve Bank of Philadelphia

GDP			Gross domestic product
GNMA			Government National Mortgage Association

Higher One			Higher One Holdings, Inc.
HTM			Held to maturity

IRS			Internal Revenue Service
LIBOR			London Interbank Offered Rate
LPO			Limited Purpose Office
MFAC			Megalith Financial Acquisition Corp.
MMDA			Money market deposit accounts
NIM			Net interest margin, tax equivalent
NM			Not meaningful

NPL			Non-performing loan

NYSE			New York Stock Exchange

OCI			Other comprehensive income

OREO			Other real estate owned


PCD			Purchased Credit-Deteriorated
PCI			Purchased Credit-Impaired

Table of Contents


PPP			Paycheck Protection Program
PPPLF			FRB Paycheck Protection Program Liquidity Facility
Rate Shocks			Interest rates rising or falling immediately
ROU			Right-of-use

SBA			Small Business Administration
SBA loans			Loans originated pursuant to the rules and regulations of the SBA
SEC			U.S. Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended
Series C Preferred Stock			Fixed-to-floating rate non-cumulative perpetual preferred stock, series C
Series D Preferred Stock			Fixed-to-floating rate non-cumulative perpetual preferred stock, series D
Series E Preferred Stock			Fixed-to-floating rate non-cumulative perpetual preferred stock, series E
Series F Preferred Stock			Fixed-to-floating rate non-cumulative perpetual preferred stock, series F



TDR			Troubled debt restructuring
TRAC			Terminal Rental Adjustment Clause
UCC			Uniform Commercial Code

U.S. GAAP			Accounting principles generally accepted in the United States of America

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET — UNAUDITED

(amounts in thousands, except share and per share data)


	June 30, 2021		December 31, 2020
ASSETS
Cash and due from banks	$	36,837	$	78,090
Interest earning deposits	393,663		615,264
Cash and cash equivalents	430,500		693,354
Investment securities, at fair value	1,526,792		1,210,285

Loans held for sale (includes $6,074 and $5,509, respectively, at fair value)	34,540		79,086
Loans receivable, mortgage warehouse, at fair value	2,855,284		3,616,432
Loans receivable, PPP	6,305,056		4,561,365
Loans and leases receivable	7,772,142		7,575,368
Allowance for credit losses on loans and leases	(125,436)		(144,176)
Total loans and leases receivable, net of allowance for credit losses on loans and leases	16,807,046		15,608,989
FHLB, Federal Reserve Bank, and other restricted stock	39,895		71,368
Accrued interest receivable	90,009		80,412

Bank premises and equipment, net	10,391		11,225
Bank-owned life insurance	329,421		280,067

Goodwill and other intangibles	3,853		3,969
Other assets	362,661		338,438
Assets of discontinued operations	0		62,055
Total assets	$	19,635,108	$	18,439,248
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing	$	2,699,869	$	2,356,998
Interest bearing	11,174,070		8,952,931
Total deposits	13,873,939		11,309,929


Federal funds purchased	0		250,000
FHLB advances	0		850,000
Other borrowings	124,240		124,037
Subordinated debt	181,534		181,394
FRB PPP liquidity facility	3,865,865		4,415,016
Accrued interest payable and other liabilities	338,801		152,082
Liabilities of discontinued operations	0		39,704
Total liabilities	18,384,379		17,322,162
Commitments and contingencies (NOTE 14)	0		0
Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 9,000,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020	217,471		217,471
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 33,633,875 and 32,985,707 shares issued as of June 30, 2021 and December 31, 2020; 32,353,256 and 31,705,088 shares outstanding as of June 30, 2021 and December 31, 2020	33,634		32,986
Additional paid in capital	519,294		455,592
Retained earnings	496,844		438,581
Accumulated other comprehensive income (loss), net	5,266		(5,764)
Treasury stock, at cost (1,280,619 shares as of June 30, 2021 and December 31, 2020)	(21,780)		(21,780)
Total shareholders’ equity	1,250,729		1,117,086
Total liabilities and shareholders’ equity	$	19,635,108	$	18,439,248

September 30,
2017 December 31,
2016
ASSETS
Cash and due from banks $ 13,318
$ 37,485
Interest-earning deposits 206,162
227,224
Cash and cash equivalents 219,480
264,709
Investment securities available for sale, at fair value 584,823
493,474
Loans held for sale (includes $1,963,076 and $2,117,510, respectively, at fair value) 2,113,293
2,117,510
Loans receivable 7,061,338
6,154,637
Allowance for loan losses (38,314 ) (37,315 )
Total loans receivable, net of allowance for loan losses 7,023,024
6,117,322
FHLB, Federal Reserve Bank, and other restricted stock 98,611
68,408
Accrued interest receivable 27,135
23,690
Bank premises and equipment, net 12,369
12,769
Bank-owned life insurance 255,683
161,494
Other real estate owned 1,059
3,108
Goodwill and other intangibles 16,604
17,621
Other assets 119,748
102,631
Total assets $ 10,471,829
$ 9,382,736
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 1,427,304
$ 966,058
Interest-bearing 6,169,772
6,337,717
Total deposits 7,597,076
7,303,775
Federal funds purchased 147,000
83,000
FHLB advances 1,462,343
868,800
Other borrowings 186,258
87,123
Subordinated debt 108,856
108,783
Accrued interest payable and other liabilities 59,654
75,383
Total liabilities 9,561,187
8,526,864
Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 9,000,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016 217,471
217,471
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 31,317,892 and 30,820,177 shares issued as of September 30, 2017 and December 31, 2016; 30,787,632 and 30,289,917 shares outstanding as of September 30, 2017 and December 31, 2016 31,318
30,820
Additional paid in capital 429,633
427,008
Retained earnings 240,076
193,698
Accumulated other comprehensive income (loss), net 377
(4,892 )
Treasury stock, at cost (530,260 shares as of September 30, 2017 and December 31, 2016) (8,233 ) (8,233 )
Total shareholders’ equity 910,642
855,872
Total liabilities and shareholders’ equity $ 10,471,829
$ 9,382,736

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) — UNAUDITED

(amounts in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Interest income:
Loans and leases	$	153,608	$	118,447	$	305,725	$	234,527

Investment securities	8,327		6,155		16,306		11,132
Other	946		616		1,965		4,902
Total interest income	162,881		125,218		323,996		250,561
Interest expense:
Deposits	15,653		23,238		31,311		57,591
FHLB advances	963		4,736		6,155		10,127
Subordinated debt	2,689		2,689		5,378		5,378
FRB PPP liquidity facility, federal funds purchased and other borrowings	4,819		2,573		9,664		4,163
Total interest expense	24,124		33,236		52,508		77,259
Net interest income	138,757		91,982		271,488		173,302
Provision for credit losses on loans and leases	3,291		20,946		372		52,732
Net interest income after provision for credit losses on loans and leases	135,466		71,036		271,116		120,570
Non-interest income:


Interchange and card revenue	84		193		169		463

Deposit fees	891		502		1,754		1,054
Commercial lease income	5,311		4,508		10,516		8,776
Bank-owned life insurance	2,765		1,757		4,444		3,519
Mortgage warehouse transactional fees	3,265		2,582		7,512		4,533
Gain (loss) on sale of SBA and other loans	1,900		23		3,475		34
Mortgage banking income	386		38		849		334

Gain (loss) on sale of investment securities	1,812		4,353		25,378		8,328

Unrealized gain (loss) on investment securities	1,746		1,200		2,720		(178)
Loss on sale of foreign subsidiaries	(2,840)		0		(2,840)		0
Unrealized gain (loss) on derivatives	(439)		(4,158)		2,098		(5,304)
Loss on cash flow hedge derivative terminations	0		0		(24,467)		0
Other	1,941		713		3,682		1,312
Total non-interest income	16,822		11,711		35,290		22,871
Non-interest expense:
Salaries and employee benefits	28,023		23,192		51,994		43,716
Technology, communication and bank operations	19,618		11,103		39,606		21,642
Professional services	8,234		2,974		14,523		6,519
Occupancy	2,482		2,639		5,103		5,252
Commercial lease depreciation	4,415		3,643		8,706		7,070
FDIC assessments, non-income taxes and regulatory fees	2,602		2,368		5,321		5,235
Merger and acquisition related expenses	0		0		418		0
Loan workout	102		1,808		(159)		2,175
Advertising and promotion	313		372		874		1,795

Other	5,034		1,692		6,364		5,354
Total non-interest expense	70,823		49,791		132,750		98,758
Income before income tax expense	81,465		32,956		173,656		44,683
Income tax expense	20,124		7,980		37,684		11,254
Net income from continuing operations	$	61,341	$	24,976	$	135,972	$	33,429

	(continued)

Table of Contents

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Interest income:
Loans receivable $ 67,107
$ 60,362
$ 195,605
$ 173,847
Loans held for sale 21,633
18,737
53,103
50,272
Investment securities 7,307
3,528
21,017
10,875
Other 2,238
1,585
5,507
3,937
Total interest income 98,285
84,212
275,232
238,931
Interest expense:
Deposits 18,381
13,009
48,934
34,365
Other borrowings 3,168
1,642
6,767
4,867
FHLB advances 7,032
3,291
15,433
9,274
Subordinated debt 1,685
1,685
5,055
5,055
Total interest expense 30,266
19,627
76,189
53,561
Net interest income 68,019
64,585
199,043
185,370
Provision for loan losses 2,352
88
5,937
2,854
Net interest income after provision for loan losses 65,667
64,497
193,106
182,516
Non-interest income:
Interchange and card revenue 9,570
11,547
31,729
13,806
Gain (loss) on sale of investment securities 5,349
(1 ) 8,532
25
Deposit fees 2,659
4,218
7,918
5,260
Mortgage warehouse transactional fees 2,396
3,080
7,139
8,702
Bank-owned life insurance 1,672
1,386
5,297
3,629
Gain on sale of SBA and other loans 1,144
1,206
3,045
2,135
Mortgage banking income 257
287
703
737
Impairment loss on investment securities (8,349 ) —
(12,934 ) —
Other 3,328
5,763
7,741
6,943
Total non-interest income 18,026
27,486
59,170
41,237
Non-interest expense:
Salaries and employee benefits 24,807
22,681
69,569
58,051
Technology, communication and bank operations 14,401
12,525
33,227
19,021
Professional services 7,403
7,006
21,142
13,213
Occupancy 2,857
2,450
8,228
7,248
FDIC assessments, taxes, and regulatory fees 2,475
2,726
6,615
11,191
Provision for operating losses 1,509
1,406
4,901
1,943
Loan workout 915
592
1,844
1,497
Other real estate owned 445
1,192
550
1,663
Advertising and promotion 404
591
1,108
1,178
Acquisition related expenses —
144
—
1,195
Other 5,824
4,905
13,634
12,106
Total non-interest expense 61,040
56,218
160,818
128,306
Income before income tax expense 22,653
35,765
91,458
95,447
Income tax expense 14,899
14,558
34,236
36,572
Net income 7,754
21,207
57,222
58,875
Preferred stock dividends 3,615
2,552
10,844
5,900
Net income available to common shareholders $ 4,139
$ 18,655
$ 46,378
$ 52,975
Basic earnings per common share $ 0.13
$ 0.68
$ 1.52
$ 1.95
Diluted earnings per common share $ 0.13
$ 0.63
$ 1.42
$ 1.80


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Loss from discontinued operations before income taxes	$	0	$	(3,190)	$	(20,354)	$	(9,911)
Income tax expense (benefit) from discontinued operations	0		(932)		17,682		(2,299)
Net loss from discontinued operations	0		(2,258)		(38,036)		(7,612)
Net income	61,341		22,718		97,936		25,817
Preferred stock dividends	3,299		3,581		6,690		7,196
Net income available to common shareholders	$	58,042	$	19,137	$	91,246	$	18,621

Basic earnings per common share from continuing operations	$	1.80	$	0.68	$	4.03	$	0.83
Basic earnings per common share	1.80		0.61		2.84		0.59
Diluted earnings per common share from continuing operations	1.72		0.68		3.88		0.83
Diluted earnings per common share	1.72		0.61		2.74		0.59

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED

(amounts in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020


Net income	$	61,341	$	22,718	$	97,936	$	25,817
Unrealized gains (losses) on available for sale debt securities:
Unrealized gains (losses) arising during the period	592		35,315		992		26,217
Income tax effect	(154)		(9,182)		(258)		(6,816)
Reclassification adjustments for (gains) losses included in net income	(1,812)		(4,353)		(25,378)		(8,328)
Income tax effect	471		1,131		6,598		2,165
Net unrealized gains (losses) on available for sale debt securities	(903)		22,911		(18,046)		13,238
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period	6		(6,369)		12,321		(34,066)
Income tax effect	(2)		1,684		(3,204)		9,035
Reclassification adjustment for (gains) losses included in net income	1,046		2,718		26,972		4,196
Income tax effect	(272)		(734)		(7,013)		(1,118)
Net unrealized gains (losses) on cash flow hedges	778		(2,701)		29,076		(21,953)
Other comprehensive income (loss), net of income tax effect	(125)		20,210		11,030		(8,715)
Comprehensive income (loss)	$	61,216	$	42,928	$	108,966	$	17,102

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income $ 7,754
$ 21,207
$ 57,222
$ 58,875
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains on securities arising during the period (3,570 ) 329
15,192
15,256
Income tax effect 1,393
(124 ) (5,924 ) (5,721 )
Reclassification adjustments for (gains) losses on securities included in net income (5,349 ) 1
(8,532 ) (25 )
Income tax effect 2,086
—
3,327
9
Net unrealized (losses) gains on available-for-sale securities (5,440 ) 206
4,063
9,519
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period 171
890
(189 ) (2,523 )
Income tax effect (67 ) (334 ) 74
946
Reclassification adjustment for losses included in net income 572
703
2,166
1,306
Income tax effect (223 ) (264 ) (845 ) (490 )
Net unrealized gains (losses) on cash flow hedges 453
995
1,206
(761 )
Other comprehensive (loss) income, net of income tax effect (4,987 ) 1,201
5,269
8,758
Comprehensive income $ 2,767
$ 22,408
$ 62,491
$ 67,633

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

(amounts in thousands, except shares outstanding data)



	Three Months Ended June 30, 2021
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, March 31, 2021	9,000,000	$	217,471	32,238,762	$	33,519	$	515,318	$	438,802	$	5,391	$	(21,780)	$	1,188,721


Net income	—	—		—	—		—		61,341		—		—		61,341

Other comprehensive income (loss)	—	—		—	—		—		—		(125)		—		(125)


Preferred stock dividends (1)	—	—		—	—		—		(3,299)		—		—		(3,299)



Share-based compensation expense	—	—		—	—		4,264		—		—		—		4,264

Issuance of common stock under share-based compensation arrangements	—	—		114,494	115		(288)		—		—		—		(173)
Balance, June 30, 2021	9,000,000	$	217,471	32,353,256	$	33,634	$	519,294	$	496,844	$	5,266	$	(21,780)	$	1,250,729

	Three Months Ended June 30, 2020
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, March 31, 2020	9,000,000	$	217,471	31,470,026	$	32,751	$	446,840	$	319,529	$	(30,175)	$	(21,780)	$	964,636

Net income	—	—		—	—		—		22,718		—		—		22,718

Other comprehensive income (loss)	—	—		—	—		—		—		20,210		—		20,210


Preferred stock dividends(1)	—	—		—	—		—		(3,581)		—		—		(3,581)
Share-based compensation expense	—	—		—	—		3,599		—		—		—		3,599

Issuance of common stock under share-based compensation arrangements	—	—		40,261	40		225		—		—		—		265
Balance, June 30, 2020	9,000,000	$	217,471	31,510,287	$	32,791	$	450,665	$	338,665	$	(9,965)	$	(21,780)	$	1,007,847

(1)Dividends per share of $0.350359, $0.336942, $0.403125, and $0.375 per share were declared on Series C, D, E, and F preferred stock for the three months ended June 30, 2021. Dividends per share of $0.4375, $0.40625, $0.403125, and $0.375 per share were declared on Series C, D, E, and F preferred stock for the three months ended June 30, 2020.

Table of Contents

Nine Months Ended September 30, 2017
Preferred Stock Common Stock
Shares of
Preferred
Stock
Outstanding Preferred
Stock Shares of
Common
Stock
Outstanding Common
Stock Additional
Paid in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income/(Loss) Treasury
Stock Total
Balance, December 31, 2016 9,000,000
$ 217,471
30,289,917
$ 30,820
$ 427,008
$ 193,698
$ (4,892 ) $ (8,233 ) $ 855,872
Net income —
—
—
—
—
57,222
—
—
57,222
Other comprehensive income —
—
—
—
—
—
5,269
—
5,269
Preferred stock dividends —
—
—
—
—
(10,844 ) —
—
(10,844 )
Share-based compensation expense —
—
—
—
4,536
—
—
—
4,536
Exercise of warrants —
—
50,387
50
507
—
—
—
557
Issuance of common stock under share-based compensation arrangements —
—
447,328
448
(2,418 ) —
—
—
(1,970 )
Balance, September 30, 2017 9,000,000
$ 217,471
30,787,632
$ 31,318
$ 429,633
$ 240,076
$ 377
$ (8,233 ) $ 910,642

Nine Months Ended September 30, 2016
Preferred Stock Common Stock

Shares of
Preferred
Stock
Outstanding
Preferred Stock
Shares of
Common
Stock
Outstanding

Common
Stock

Additional
Paid in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income/(Loss)

Treasury
Stock
Total
Balance, December 31, 2015 2,300,000
$ 55,569
26,901,801
$ 27,432
$ 362,607
$ 124,511
$ (7,984 ) $ (8,233 ) $ 553,902
Net income —
—
—
—
—
58,875
—
—
58,875
Other comprehensive income —
—
—
—
—
—
8,758
—
8,758
Issuance of common stock, net of offering costs of $217 —
—
226,677
227
5,450
—
—
—
5,677
Issuance of preferred stock, net of offering costs of $5,520 6,700,000
161,980
—
—
—
—
—
—
161,980
Preferred stock dividends —
—
—
—
—
(5,900 ) —
(5,900 )
Share-based compensation expense —
—
—
—
4,569
—
—
—
4,569
Exercise of warrants —
—
259,851
259
862
—
—
—
1,121
Issuance of common stock under share-based compensation arrangements —
—
155,888
156
673
—
—
—
829
Balance, September 30, 2016 9,000,000
$ 217,549
27,544,217
$ 28,074
$ 374,161
$ 177,486
$ 774
$ (8,233 ) $ 789,811



	Six Months Ended June 30, 2021
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, December 31, 2020	9,000,000	$	217,471	31,705,088	$	32,986	$	455,592	$	438,581	$	(5,764)	$	(21,780)	$	1,117,086



Net income	—	—		—	—		—		97,936		—		—		97,936

Other comprehensive income (loss)	—	—		—	—		—		—		11,030		—		11,030


Preferred stock dividends(1)	—	—		—	—		—		(6,690)		—		—		(6,690)
Sale of non-controlling interest in BMT (2)	—	—		—	—		31,893		—		—		—		31,893
Distribution of investment in BM Technologies (3)	—	—		—	—		—		(32,983)		—		—		(32,983)
Restricted stock awards to certain BMT team members (4)	—	—		—	—		19,592		—		—		—		19,592
Share-based compensation expense	—	—		—	—		7,873		—		—		—		7,873

Issuance of common stock under share-based compensation arrangements	—	—		648,168	648		4,344		—		—		—		4,992

Balance, June 30, 2021	9,000,000	$	217,471	32,353,256	$	33,634	$	519,294	$	496,844	$	5,266	$	(21,780)	$	1,250,729

	Six Months Ended June 30, 2020
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, December 31, 2019	9,000,000	$	217,471	31,336,791	$	32,617	$	444,218	$	381,519	$	(1,250)	$	(21,780)	$	1,052,795


Cumulative effect of change in accounting principle - CECL	—	—		—	—		—		(61,475)		—		—		(61,475)
Net income	—	—		—	—		—		25,817		—		—		25,817

Other comprehensive income (loss)	—	—		—	—		—		—		(8,715)		—		(8,715)


Preferred stock dividends(1)	—	—		—	—		—		(7,196)		—				(7,196)
Share-based compensation expense	—	—		—	—		6,827		—		—		—		6,827

Issuance of common stock under share-based compensation arrangements	—	—		173,496	174		(380)		—		—		—		(206)

Balance, June 30, 2020	9,000,000	$	217,471	31,510,287	$	32,791	$	450,665	$	338,665	$	(9,965)	$	(21,780)	$	1,007,847

(1)Dividends per share of $0.69514, $0.743192, $0.806250, and $0.750 per share were declared on Series C, D, E, and F preferred stock for the six months ended June 30, 2021. Dividends per share of $0.8750, $0.81250, $0.806250, and $0.750 per share were declared on Series C, D, E, and F preferred stock for the six months ended June 30, 2020.

(2)Refer to NOTE 3 – DISCONTINUED OPERATIONS for additional information about the sale of non-controlling interest in BMT including the reverse recapitalization of MFAC.

(3)Immediately after the closing of the BMT divestiture, Customers distributed all of its remaining investment in BM Technologies' common stock to its shareholders as special dividends, equivalent to 0.15389 of BM Technologies common stock for each share of Customers common stock. Refer to NOTE 3 – DISCONTINUED OPERATIONS.

(4)At the closing of the BMT divestiture, certain team members of BMT received restricted stock awards in BM Technologies' common stock. Refer to NOTE 3 – DISCONTINUED OPERATIONS.

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(amounts in thousands)

Nine Months Ended
September 30,
2017 2016
Cash Flows from Operating Activities
Net income $ 57,222
$ 58,875
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses, net of change to FDIC receivable and clawback liability 5,937
2,854
Depreciation and amortization 7,476
4,138
Share-based compensation expense 5,377
5,213
Deferred taxes 286
(4,846 )
Net amortization of investment securities premiums and discounts 520
664
Gain on sale of investment securities (8,532 ) (25 )
Impairment loss on investment securities 12,934
—
Gain on sale of SBA and other loans (3,553 ) (2,674 )
Origination of loans held for sale (22,770,726 ) (27,092,862 )
Proceeds from the sale of loans held for sale 22,925,668
26,473,789
Decrease in FDIC loss sharing receivable net of clawback liability —
255
Amortization of fair value discounts and premiums 93
312
Net loss on sales of other real estate owned 154
85
Valuation and other adjustments to other real estate owned, net of FDIC receivable 298
1,261
Earnings on investment in bank-owned life insurance (5,297 ) (3,629 )
Increase in accrued interest receivable and other assets (27,862 ) (38,672 )
(Decrease) increase in accrued interest payable and other liabilities (14,106 ) 66,577
Net Cash Provided By (Used In) Operating Activities 185,889
(528,685 )
Cash Flows from Investing Activities
Proceeds from maturities, calls and principal repayments of securities available for sale 36,461
46,097
Proceeds from sales of investment securities available for sale 698,451
2,853
Purchases of investment securities available for sale (796,594 ) (5,000 )
Net increase in loans (921,049 ) (641,093 )
Proceeds from sales of loans 124,703
91,868
Purchase of loans (262,641 ) —
Purchases of bank-owned life insurance (90,000 ) —
Proceeds from bank-owned life insurance 1,418
619
Net (purchases of) proceeds from FHLB, Federal Reserve Bank, and other restricted stock (30,203 ) 19,220
Payments to the FDIC on loss sharing agreements —
(2,049 )
Purchases of bank premises and equipment (1,725 ) (3,343 )
Proceeds from sales of other real estate owned 1,680
419
Acquisition of Disbursements business, net —
(17,000 )
Net Cash Used In Investing Activities (1,267,428 ) (507,409 )
Cash Flows from Financing Activities
Net increase in deposits 293,301
1,479,471
Net increase (decrease) in short-term borrowed funds from the FHLB 593,543
(663,600 )
Net increase (decrease) in federal funds purchased 64,000
(18,000 )
Proceeds from long-term FHLB borrowings —
75,000
Net proceeds from issuance of long-term debt 98,564
—
Net proceeds from issuance of preferred stock —
161,980
        Preferred stock dividends paid (10,844 ) (5,450 )
        Exercise of warrants 557
1,121
        Payments of employee taxes withheld from share-based awards (4,923 ) (702 )
        Proceeds from issuance of common stock 2,112
7,269
Net Cash Provided By Financing Activities 1,036,310
1,037,089
Net (Decrease) Increase in Cash and Cash Equivalents (45,229 ) 995
Cash and Cash Equivalents – Beginning 264,709
264,593
Cash and Cash Equivalents – Ending $ 219,480
$ 265,588

(continued)

Supplementary Cash Flows Information
Interest paid $ 70,706
$ 50,410
Income taxes paid 31,545
40,966
Non-cash items:
Transfer of loans to other real estate owned $ 83
$ 605
Transfer of loans held for investment to loans held for sale 150,638
—


	Six Months Ended June 30,
	2021		2020
Cash Flows from Operating Activities
Net income from continuing operations	$	135,972	$	33,429
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Provision (benefit) for credit losses on loans and leases	372		52,732
Depreciation and amortization	10,735		14,319

Share-based compensation expense	7,645		7,278
Deferred taxes	3,494		(28,104)
Net amortization (accretion) of investment securities premiums and discounts	449		(364)
Unrealized (gain) loss on investment securities	(2,720)		178
(Gain) loss on sale of investment securities	(25,378)		(8,328)
Loss on sale of foreign subsidiaries	2,840		0

Unrealized (gain) loss on derivatives	(2,098)		5,304
Loss on cash flow hedge derivative terminations	24,467		0
Settlement of terminated cash flow hedge derivatives	(27,156)		0
(Gain) loss on sale of leased assets under lessor operating leases	132		0
Fair value adjustment on loans held for sale	(1,115)		1,450
(Gain) loss on sale of SBA and other loans	(4,256)		(426)
Origination of loans held for sale	(28,894)		(22,730)
Proceeds from the sale of loans held for sale	29,110		21,745

Amortization (accretion) of fair value discounts and premiums	(771)		(1,137)


Earnings on investment in bank-owned life insurance	(4,444)		(3,519)
(Increase) decrease in accrued interest receivable and other assets	55,839		(113,857)
Increase (decrease) in accrued interest payable and other liabilities	115,102		81,835
Net Cash Provided By Continuing Operating Activities	289,325		39,805
Cash Flows from Investing Activities
Proceeds from maturities, calls and principal repayments of investment securities	172,750		78,485
Proceed from sales of foreign subsidiaries	3,765		0
Proceeds from sales of investment securities available for sale	407,587		109,207
Purchases of investment securities available for sale	(890,186)		(280,410)
Origination of mortgage warehouse loans	(31,399,228)		(23,573,962)
Proceeds from repayments of mortgage warehouse loans	32,162,462		23,033,058
Net (increase) decrease in loans and leases, excluding mortgage warehouse loans	(1,304,356)		(4,515,097)
Proceeds from sales of loans and leases	130,501		0
Purchase of loans	(737,336)		(211,096)
Purchases of bank-owned life insurance	(46,462)		0
Proceeds from bank-owned life insurance	1,999		0
Net proceeds from sale of (purchases of) FHLB, Federal Reserve Bank, and other restricted stock	31,473		(6,809)

Purchases of bank premises and equipment	(312)		(165)
Proceeds from sales of other real estate owned	45		77
Proceeds from sales of leased assets under lessor operating leases	6,106		0
Purchases of leased assets under lessor operating leases	(8,625)		(9,011)
Net Cash Used In Continuing Investing Activities	(1,469,817)		(5,375,723)
Cash Flows from Financing Activities
Net increase in deposits	2,564,010		2,316,939

Net increase (decrease) in short-term borrowed funds from the FHLB	(850,000)		0

Net increase (decrease) in federal funds purchased	(250,000)		(538,000)
Net increase (decrease) in borrowed funds from FRB PPP liquidity facility	(549,151)		4,419,967





Preferred stock dividends paid	(6,746)		(7,229)


Payments of employee taxes withheld from share-based awards	(2,294)		(1,067)
Proceeds from issuance of common stock	7,815		410
Proceeds from sale of non-controlling interest in BMT	26,795		0
Net Cash Provided By Continuing Financing Activities	940,429		6,191,020
Net Increase (Decrease) in Cash and Cash Equivalents From Continuing Operations	$	(240,063)	$	855,102

	(continued)

	Six Months Ended June 30,
	2021		2020
Discontinued Operations:
Net Cash Used In Operating Activities	$	(22,791)	$	(329)
Net Cash Provided By Investing Activities	0		52

Net Increase (Decrease) in Cash and Cash Equivalents From Discontinued Operations	(22,791)		(277)
Net Increase (Decrease) in Cash and Cash Equivalents	(262,854)		854,825
Cash and Cash Equivalents – Beginning	693,354		212,505
Cash and Cash Equivalents – Ending	$	430,500	$	1,067,330






Non-cash Operating and Investing Activities:
Transfer of loans to other real estate owned	$	0	$	31
Distribution of investment in BM Technologies common stock	32,983		0
Transfer of loans held for investment to held for sale	27,824		19,050
Transfer of loans held for sale to held for investment	55,684		0
Unsettled sales of investment securities	0		33,615
Unsettled purchases of investment securities	10,000		0

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF THE BUSINESS

Customers Bancorp, Inc. ~~(the “Bancorp” or “Customers~~(“Customers Bancorp”) is a bank holding company engaged in banking activities through its wholly owned subsidiary, Customers Bank ~~(the “Bank”~~("the Bank”), collectively referred to as “Customers” herein. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Customers Bancorp ~~Inc.~~ and its wholly owned subsidiaries, ~~Customers~~the Bank, and non-bank subsidiaries, serve residents and businesses in Southeastern Pennsylvania (Bucks, Berks, Chester, Philadelphia and Delaware Counties); Rye Brook, New York (Westchester County); Hamilton, New Jersey (Mercer County); Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire (Rockingham County); Manhattan and Melville, New York; Washington, D.C.; Chicago, Illinois; Dallas, Texas; Orlando, Florida; and nationally for certain loan and deposit products. The Bank has 1412 full-service branches and provides commercial banking products, primarily loans and deposits. In addition, Customers Bank also administratively supports loan and other financial products, including equipment finance leases, to customers through its limited-purpose offices in Boston, ~~Massachusetts,~~Massachusetts; Providence, Rhode ~~Island,~~Island; Portsmouth, New ~~Hampshire,~~Hampshire; Manhattan and Melville, New ~~York,~~York; Philadelphia and ~~Philadelphia, Pennsylvania.~~Lancaster, Pennsylvania; Chicago, Illinois; Dallas, Texas and Orlando, Florida. The Bank also ~~provides liquidity to residential mortgage originators~~serves specialty niche businesses nationwide, ~~through~~including its commercial loans to mortgage banking businesses, commercial equipment financing, SBA lending, specialty lending and consumer loans through relationships with fintech companies.

~~Through BankMobile, a division of Customers~~The Bank Customers offers state of the art high tech digital banking services to consumers, students, and the "under banked" nationwide. The combination of the BankMobile technology software platform with the Vibe Student Checking and Refund Management Disbursement Services business (the "Disbursement business") acquired from Higher One Holdings, Inc. and Higher One, Inc. (together, "Higher One") in June 2016 propelled BankMobile to one of the largest mobile banking services in the United States by number of customers. Customers has announced its intent to spin-off BankMobile to Customers’ shareholders through a tax-free spin-off/merger transaction. Accordingly, the assets and liabilities of BankMobile will not be reported separately as held for sale, and its operating results and associated cash flows will not be reported as discontinued operations, until execution of the spin-off/merger transaction and will be considered held and used for all periods presented. Previously reported held-for-sale balances in the consolidated balance sheet as of December 31, 2016, and corresponding operating results and cash flows for the periods presented, have been reclassified to conform with the current period consolidated financial statement presentation. See NOTE 3 TAX-FREE SPIN-OFF AND MERGER.

~~Customers~~ is subject to regulation of the Pennsylvania Department of Banking and Securities and the Federal Reserve Bank and is periodically examined by those regulatory authorities. Customers Bancorp ~~has~~ made certain equity investments through its wholly owned subsidiaries CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which were sold in June 2021. See NOTE 6 – INVESTMENT SECURITIES for additional information.

NOTE 2 ~~- ACQUISITION ACTIVITY~~

On June 15, 2016, Customers completed the acquisition of substantially all of the assets and the assumption of certain liabilities of the Disbursement business from Higher One. The acquisition was completed pursuant to the terms of an Asset Purchase Agreement (the "Purchase Agreement") dated as of December 15, 2015 between Customers and Higher One. Under the terms of the Purchase Agreement, Customers also acquired all existing relationships with vendors and educational institutions, and all intellectual property and assumed normal business related liabilities. In conjunction with the acquisition, Customers hired approximately 225 Higher One employees primarily located in New Haven, Connecticut that manage the Disbursement business and serve the Disbursement business customers.

The transaction contemplates aggregate guaranteed payments to Higher One of $42 million. The aggregate purchase price payable by Customers is $37 million in cash, with the payments to be made as follows: (i) $17 million in cash paid upon the closing of the acquisition, (ii) $10 million in cash upon the first anniversary of the closing and (iii) $10 million in cash paid upon the second anniversary of the closing. In accordance with the terms of the agreement, $10 million was paid to Higher One in June 2017. In addition, concurrently with the closing, the parties entered into a Transition Services Agreement pursuant to which Higher One provided certain transition services to Customers through June 30, 2017. As consideration for these services, Customers paid Higher One an additional $5 million in cash. Customers also will be required to make additional payments to Higher One if, during the three years following the closing, revenues from the acquired Disbursement business exceed $75 million in a year. The potential payment is equal to 35% of the amount the Disbursement business related revenue exceeds $75 million in each year. As of September 30, 2017, Customers has not recorded a liability for any additional contingent consideration payable under the Purchase Agreement.

As specified in the Purchase Agreement, the payments of $10 million payable to Higher One upon each of the first and second anniversary of the transaction closing were placed into an escrow account with a third party. The escrow account with $10 million and $20 million, respectively, as of September 30, 2017 and December 31, 2016 in aggregate restricted cash and the corresponding obligation to pay Higher One pursuant to the terms of the Purchase Agreement have been assigned to BankMobile and are included with "Cash and cash equivalents" and "Accrued interest payable and other liabilities" on the September 30, 2017 and December 31, 2016 consolidated balance sheets. For more information regarding Customers' plans for BankMobile and the presentation of BankMobile within the consolidated financial statements, see NOTE 3 ~~- TAX-FREE SPIN-OFF AND MERGER.~~

~~The assets acquired and liabilities assumed were initially presented at their estimated fair values based on a preliminary~~

~~allocation of the purchase price. In many cases, the determination of these fair values required management to make estimates~~

~~about discount rates, future expected cash flows, market conditions and other future events that were highly subjective and~~

~~subject to change. The fair value estimates were considered preliminary and subject to change for up to one year after the~~

closing date of the acquisition as additional information became available. Based on a preliminary purchase price allocation, Customers recorded $4.3 million in goodwill as a result of the acquisition. At December 31, 2016, Customers recorded adjustments to the estimated fair values of prepaid expenses and other liabilities, which resulted in a $1.0 million increase in goodwill. The adjusted amount of goodwill of $5.3 million reflects the excess purchase price over the estimated fair value of

the net assets acquired. The goodwill recorded is deductible for tax purposes. The purchase price allocation was considered final as of June 30, 2017. The following table summarizes the final adjusted amounts recognized for assets acquired and liabilities assumed:

(amounts in thousands)
Fair value of assets acquired:
Developed software $ 27,400
Other intangible assets 9,300
Accounts receivable 2,784
Prepaid expenses 418
Fixed assets, net 229
Total assets acquired 40,131

Fair value of liabilities assumed:
Other liabilities 5,735
Deferred revenue 2,655
Total liabilities assumed 8,390

Net assets acquired $ 31,741

Transaction cash consideration (1) $ 37,000

Goodwill recognized $ 5,259

(1) Includes $10 million payable to Higher One upon each of the first and second anniversary of the transaction closing, which has been placed into an escrow account with a third party (aggregate amount of $20 million at December 31, 2016). Customers paid the first $10 million due to Higher One in June 2017.

The fair value for the developed software was estimated based on expected revenue attributable to the software utilizing a discounted cash flow methodology giving consideration to potential obsolescence. The developed software is being amortized over ten years based on the estimated economic benefits received. The fair values for the other intangible assets represent the value of existing student and university relationships and a non-compete agreement with Higher One based on estimated retention rates and discounted cash flows. Other intangible assets are being amortized over an estimated life ranging from four to twenty years. Because BankMobile met the criteria to be classified as held for sale at December 31, 2016, the acquired assets were not depreciated or amortized during first quarter 2017 and second quarter 2017. The reclassification of the acquired assets as held and used as of September 30, 2017 resulted in depreciation and amortization expense for the developed software, other intangible assets, and fixed assets totaling $3.5 million in third quarter 2017. The acquired assets were reclassified to held and used at their carrying amounts, adjusted for depreciation and amortization for the periods they were classified as held for sale, which was lower than their estimated fair values as of September 30, 2017.

~~NOTE 3 – TAX-FREE SPIN-OFF AND MERGER~~

In third quarter 2017, Customers decided that the best strategy for its shareholders for divesting BankMobile was to spin-off BankMobile to Customers’ shareholders through a spin-off/merger transaction. The tax-free spin-off is expected to be followed by a merger of Customers' BankMobile Technologies, Inc. subsidiary ("BMT") into Clearwater Florida based Flagship Community Bank ("Flagship"), with Customers' shareholders receiving shares of Flagship common stock in exchange for shares of BMT they receive in the spin-off. Flagship is expected to separately purchase BankMobile deposits directly from Customers for cash. Following completion of the spin-off and merger and other transactions contemplated in a purchase and sale agreement between Customers and Flagship, Customers' shareholders would receive collectively more than 50% of Flagship common stock, valued at approximately $110 million. The common stock of the merged entities, to be called BankMobile, is expected to be listed on a national securities exchange after completion of the transactions. Customers believes the transactions will be treated as a tax-free exchange for both Customers' shareholders and Customers. Customers expects to execute an Amended and Restated Purchase and Assumption Agreement and Plan of Merger (the “Amended Agreement”) with Flagship to effect the spin-off and merger and Flagship’s purchase of BankMobile deposits from Customers. Customers expects that the Amended Agreement will provide that completion of the transactions will be subject to the receipt of all necessary regulatory approvals, certain Flagship shareholder approvals, successful raising of capital by Flagship, and other customary closing conditions. Customers expects the transaction to close in mid-2018.

At December 31, 2016, BankMobile met the criteria to be classified as held for sale, and accordingly the assets and liabilities of BankMobile were presented as “Assets held for sale,” “Non-interest bearing deposits held for sale,” and “Other liabilities held for sale” and BankMobile’s operating results and associated cash flows were presented as “Discontinued operations”. However, with the third quarter 2017 spin-off/merger decision, generally accepted accounting principles require that assets, liabilities, operating results, and cash flows associated with a business to be disposed of through a spin-off/merger transaction not be reported as held for sale or discontinued operations until execution of the spin-off/merger transaction. Accordingly, BankMobile's assets, liabilities, operating results and cash flows will not be reported separately as held for sale or discontinued operations at September 30, 2017 and December 31, 2016 and for the three and nine month periods ended September 30, 2017 and 2016 and instead will be reported as held and used. As a result, Customers measured the business at the lower of its (i) carrying amount before it was classified as held for sale, adjusted for depreciation and amortization expense that would have been recognized had the business been continuously classified as held and used, or (ii) fair value at the date the decision not to sell was made. Customers recorded a charge of $4.2 million in third quarter 2017 relating to the amount of depreciation and amortization expense that would have been recorded had the assets been continuously classified as held and used.

Prior reported December 31, 2016 assets held for sale, non-interest bearing deposits held for sale and other liabilities held for sale have been reclassified to conform with the current period presentation as summarized below. Amounts previously reported as discontinued operations have also been reclassified to conform with the current period presentation within the accompanying consolidated financial statements as summarized below. Customers will continue reporting the Community Business Banking and BankMobile segment results. See NOTE 14 - BUSINESS SEGMENTS.

The following summarizes the effect of the reclassification from held for sale classification to held and used classification on the previously reported consolidated balance sheet as of December 31, 2016 and the previously reported consolidated statements of income for the the three and nine months ended September 30, 2016:

December 31, 2016 As Previously Reported Effect of Reclassification From Held For Sale to Held and Used December 31, 2016 After Reclassification
(amounts in thousands)
ASSETS
Cash and cash equivalents $ 244,709
$ 20,000
$ 264,709
Loans receivable 6,142,390
12,247
6,154,637
Bank premises and equipment, net 12,259
510
12,769
Goodwill and other intangibles 3,639
13,982
17,621
Assets held for sale 79,271
(79,271 ) —
Other assets 70,099
32,532
102,631
LIABILITIES
Demand, non-interest bearing deposits $ 512,664
$ 453,394
$ 966,058
Interest bearing deposits 6,334,316
3,401
6,337,717
Non-interest bearing deposits held for sale 453,394
(453,394 ) —
Other liabilities held for sale 31,403
(31,403 ) —
Accrued interest payable and other liabilities 47,381
28,002
75,383

Three Months Ended September 30, 2016 Effect of Reclassification From Held For Sale to Held and Used Three Months Ended September 30, 2016
As Previously Reported After Reclassification
Interest income $ 84,212
$ —
$ 84,212
Interest expense 19,622
5
19,627
Net interest income 64,590
(5 ) 64,585
Provision for loan losses (161 ) 249
88
Non-interest income 11,121
16,365
27,486
Non-interest expenses 36,750
19,468
56,218
Income from continuing operations before income taxes 39,122
(3,357 ) 35,765
Provision for income taxes 15,834
(1,276 ) 14,558
Net income from continuing operations 23,288
(2,081 ) 21,207
Loss from discontinued operations before income taxes (3,357 ) 3,357
—
Income tax benefit from discontinued operations (1,276 ) 1,276
—
Net loss from discontinued operations (2,081 )
2,081

—
Net income 21,207

—

21,207
Preferred stock dividend 2,552
—
2,552
Net income available to common shareholders $ 18,655
$ —
$ 18,655

Nine Months Ended September 30, 2016 Effect of Reclassification From Held For Sale to Held and Used Nine Months Ended September 30, 2016
As Previously Reported After Reclassification
Interest income $ 238,931
$ —
$ 238,931
Interest expense 53,548
13
53,561
Net interest income 185,383
(13 ) 185,370
Provision for loan losses 2,605
249
2,854
Non-interest income 22,241
18,996
41,237
Non-interest expenses 100,706
27,600
128,306
Income from continuing operations before income taxes 104,313
(8,866 ) 95,447
Provision for income taxes 39,942
(3,370 ) 36,572
Net income from continuing operations 64,371
(5,496 ) 58,875
Loss from discontinued operations before income taxes (8,865 ) 8,865
—
Income tax benefit from discontinued operations (3,369 ) 3,369
—
Net loss from discontinued operations (5,496 ) 5,496
—
Net income 58,875
—
58,875
Preferred stock dividend 5,900
—
5,900
Net income available to common shareholders $ 52,975
$ —
$ 52,975

~~NOTE 4~~ — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation

The interim unaudited consolidated financial statements ~~of Customers Bancorp and subsidiaries~~ have been prepared in conformity with U.S. GAAP and pursuant to the rules and regulations of the SEC. These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the financial position and the results of operations and cash flows of Customers Bancorp and subsidiaries for the interim periods presented. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted from these interim unaudited consolidated financial statements as permitted by SEC rules and regulations. The December 31, ~~2016~~2020 consolidated balance sheet presented in this report has been derived from Customers Bancorp’s audited ~~2016~~2020 consolidated financial statements. Management believes that the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for the periods presented. These interim unaudited consolidated financial statements should be read in conjunction with the ~~2016~~2020 consolidated financial statements of Customers Bancorp and subsidiaries included in Customers' Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 filed with the SEC on March ~~8, 2017. That~~1, 2021 (the "2020 Form 10-K"). The 2020 Form 10-K describes Customers Bancorp’s significant accounting policies, which include its policies on Principles of Consolidation; Cash and Cash Equivalents and Statements of Cash Flows; Restrictions on Cash and Amounts due from Banks; Business Combinations; Investment Securities; Loan Accounting Framework; ~~Allowance~~Loans Held for ~~Loan Losses;~~Sale and Loans at Fair Value; Loans Receivable - Mortgage Warehouse, at Fair Value; Loans Receivable, PPP; Loans and Leases Receivable; PCD Loans and Leases; ACL; Goodwill and ~~other~~Other Intangible Assets; ~~Investments in~~ FHLB, Federal Reserve Bank, and ~~other restricted stock;~~ Other ~~Real Estate Owned; FDIC Loss Sharing Receivable and Clawback Liability; Bank-Owned Life Insurance;~~Restricted Stock; OREO; BOLI; Bank Premises and Equipment; Lessor and Lessee Operating Leases; Treasury Stock; Income Taxes; Share-Based Compensation; ~~Segments;~~Transfer of Financial Assets; Derivative Instruments and Hedging; Comprehensive ~~Income;~~Income (Loss); EPS; and ~~Earnings per Share. Certain~~Loss Contingencies. There have been no material changes to Customers Bancorp's significant accounting policies noted above for the three and six months ended June 30, 2021.

Table of Contents

On January 4, 2021, Customers Bancorp completed the previously announced divestiture of BankMobile Technologies, Inc., the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC, pursuant to an Agreement and Plan of Merger, dated August 6, 2020, by and among MFAC, MFAC Merger Sub Inc., BMT, Customers Bank, the sole stockholder of BMT, and Customers Bancorp, the parent bank holding company of Customers Bank (as amended on November 2, 2020 and December 8, 2020). Following the completion of the divestiture of BMT, BankMobile's serviced deposits and loans and the related net interest income have been combined with Customers’ financial condition and the results of operations as a single reportable segment. BMT's historical financial results for periods prior to the divestiture are reflected in Customers’ consolidated financial statements as discontinued operations. The assets and liabilities of BMT have been presented as "Assets of discontinued operations" and "Liabilities of discontinued operations" on the consolidated balance sheet at December 31, 2020. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying consolidated financial statements and prior period amounts ~~have been reclassified to conform to the current period presentation. Results for interim periods are not necessarily indicative of those that may be expected for the fiscal year.~~

~~Reclassifications~~

As described in NOTE 3 - TAX-FREE SPIN-OFF AND MERGER, as of September 30, 2017, Customers reclassified BankMobile, a segment previously classified as held for sale to held and used, as it no longer met the held-for-sale criteria. Certain prior period amounts and note disclosures (including NOTE 9 and NOTE 12) have been reclassified to conform with the current period presentation. ~~Except~~See NOTE 3 – DISCONTINUED OPERATIONS for additional information.

Accounting and Reporting Considerations related to COVID-19

On March 27, 2020, the CARES Act was signed into law and contained substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic and stimulate the economy. The CARES Act includes the SBA's PPP designed to aid small-and medium-sized businesses through federally guaranteed loans distributed through banks. Customers is a participant in the PPP. Section 4013 of the CARES Act also gives entities temporary relief from the accounting and disclosure requirements for TDRs under ASC 310-40 in certain situations. On December 27, 2020, the CAA was signed into law, which extended and expanded various relief provisions of the CARES Act.

Accounting for PPP Loans

In April 2020, Customers began originating loans to qualified small businesses under the PPP administered by the SBA. The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00% and terms of two or five years, if not forgiven, in whole or in part. Payments are deferred for the first six months of the loan. The loans are 100% guaranteed by the SBA. The SBA pays the originating bank a processing fee ranging from 1% to 5% based on the size of the loan. On December 27, 2020, the CAA was signed into law, including Division N, Title III, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which provides $284 billion in additional funding for the SBA's PPP for small businesses affected by the COVID-19 pandemic. On March 11, 2021, the American Rescue Plan Act of 2021 was enacted expanding eligibility for first and second round of PPP loans and revising the exclusions from payroll costs for purposes of loan forgiveness. The second round of PPP loans have the same general loan terms as the first round, and a processing fee of up to $2,500 per loan of less than $50,000, and 1% to 3% for loans greater than $50,000. Customers classified the PPP loans as held for investment and these ~~reclassifications, there~~loans are carried at amortized cost and interest income is recognized using the interest method. The origination fees, net of direct origination costs, are deferred and recognized as an adjustment to the yield of the related loans over their contractual life using the interest method. As PPP is newly created, Customers does not have historical prepayment data to accurately estimate principal prepayments and therefore has elected to not estimate prepayments as a policy election. No ACL has been recognized for PPP loans as these loans are 100% guaranteed by the SBA. See NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES for additional information.

Loan Modifications

As mentioned above, Section 4013 of the CARES Act, as amended by the CAA, gives entities temporary relief from the accounting and disclosure requirements for TDRs. In addition, on April 7, 2020, certain regulatory banking agencies issued an interagency statement that offers practical expedients for evaluating whether loan modifications in response to the COVID-19 pandemic are TDRs. To qualify for TDR accounting and disclosure relief under the CARES Act, as amended by the CAA, the applicable loan must not have been ~~no material changes to Customers' significant accounting policies~~more than 30 days past due as ~~disclosed in Customers' Annual Report on Form 10-K for the year ended~~of December 31, ~~2016.~~2019, and the modification must be executed during the period beginning on March 1, 2020, and ending on the earlier of January 1, 2022, or the date that is 60 days after the termination date of the national emergency declared by the president on March 13, 2020, under the National Emergencies Act related to the outbreak of COVID-19. The CARES Act applies to modifications made as a result of COVID-19 including: forbearance agreements, interest rate modifications, repayment plans, and other arrangements to defer or delay payment of principal or interest. The interagency statement does not require the modification to be completed within a certain time period if it is related to COVID-19 and can be provided to borrowers either individually or as part of a loan modification program. Moreover, the interagency statement applies to short-term modifications (e.g. not more than six months deferral) including payment deferrals, fee waivers, extensions of repayment terms, or other insignificant payment delays as a result of COVID-19.

Table of Contents

~~Presented below are recently issued~~Customers applied Section 4013 of the CARES Act and the interagency statement in connection with applicable modifications. For modifications that qualify under either the CARES Act or the interagency statement, TDR accounting ~~standards~~and reporting is suspended. These modifications generally involve principal and/or interest payment deferrals for a period of 90 days at a time and can be extended to six months or longer for modifications that ~~Customers has adopted~~qualified under the Section 4013 of the CARES Act if requested by the borrower as ~~well~~long as ~~those that~~ the ~~Financial Accounting Standards Board (“FASB”) has issued but are~~reason is still related to COVID-19. These modified loans would not ~~yet effective~~also be reported as past due or ~~that Customers has not yet adopted.~~nonaccrual during the deferral period. See NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES for additional information.

Recently Issued Accounting Standards

~~Accounting Standards Adopted in 2017~~

~~Since January 1, 2017,~~Presented below are recently issued accounting standards that Customers has adopted.

Standard

Summary of Guidance

Effects on Financial Statements

ASU 2020-04,

Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting

Issued March 2020

• Provides optional guidance for a limited period of time to ease the potential burden in accounting for (or derecognizing the effects of) reference rate reform on financial reporting. Specifically, the amendments provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. These relate only to those contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

• Effective as of March 12, 2020 and can be adopted anytime during the period of January 1, 2020 through December 31, 2022.

• Customers adopted this guidance during adoption period for certain optional expedients.

• The adoption of this guidance did not have a material impact on Customers' financial condition, results of operations and consolidated financial statements.

• As of June 30, 2021, Customers has not yet elected to apply optional expedients for

certain contract modifications. However, we plan to elect additional optional expedients in the future, which are not expected to have a material impact on Customers' financial condition, results of operations and consolidated financial statements.

ASU 2021-01,

Reference Rate Reform (Topic 848) - Scope

Issued January 2021

• Clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition, including derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

• Effective as of March 12, 2020 and can be adopted anytime during the period of January 1, 2020 through December 31, 2022.

• Customers adopted this guidance during adoption period for certain optional expedients.

• The adoption of this guidance did not have a material impact on Customers' financial condition, results of operations and consolidated financial statements.

• As of June 30, 2021, Customers has not yet elected to apply optional expedients for

certain contract modifications. We plan to elect additional optional expedients in the future, which are not expected to have a material impact on Customers' financial condition, results of operations and consolidated financial statements.

NOTE 3 – DISCONTINUED OPERATIONS

On January 4, 2021, Customers Bancorp completed the ~~following FASB Accounting Standard Updates (“ASUs”)~~previously announced divestiture of BMT, the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., ~~none~~an indirect wholly-owned subsidiary of ~~which had a material impact~~MFAC, pursuant to ~~Customers’ consolidated~~an Agreement and Plan of Merger, dated August 6, 2020, by and among MFAC, MFAC Merger Sub Inc., BMT, Customers Bank, the sole stockholder of BMT, and Customers Bancorp, the parent bank holding company for Customers Bank (as amended on November 2, 2020 and December 8, 2020). Following the completion of the divestiture of BMT, BankMobile's serviced deposits and loans and the related net interest income have been combined with Customers' financial ~~statements:~~

~~Customers adopted ASU 2016-05,~~ ~~Derivatives~~condition and ~~Hedging: Effect~~the results of ~~Derivative Contract Novations on Existing Hedge Accounting Relationships,~~ on a prospective basis. This ASU clarifies that a change in the counterparties to a derivative contract (i.e., a novation), in and of itself, does not require the de-designation of a hedging relationship provided that all the other hedge accounting criteria continue to be met.

~~Customers also adopted ASU 2016-06,~~ ~~Contingent Put and Call Options in Debt Instruments~~. This ASU clarifies that a contingency of put or call exercise does not need to be evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis of hybrid financial instruments. In other words, a contingent put or call option embedded in a debt instrument would be evaluated for possible separate accountingoperations as a ~~derivative instrument without regard to the nature~~single reportable segment.

Customers received cash consideration of $23.1 million upon closing of the exercise contingency. However, as required under the existing guidance, companies will still need to evaluate the other relevant embedded derivative guidance, such as whether the payoff from the contingent put or call option is adjusted based on changesdivestiture and $3.7 million of additional cash consideration in an index other than interest rates or credit risk, and whether the debt involves a substantial premium or discount. As the adoption did not result in any significant impact to Customers’ consolidated financial statements, it did not result in a modified retrospective application.

~~Customers also adopted ASU 2016-07,~~ ~~Simplifying the Transition to the Equity Method of Accounting,~~ ~~on a prospective basis. This ASU eliminates the requirement for the retrospective use~~May 2021. Upon closing of the ~~equity method~~divestiture, the holders of accounting as a result of an increase in the level of ownership interest or degree of influence of an investor. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of

~~the investor’s previously~~Customers Bancorp's common stock who held ~~interest and adopt the equity method of accounting~~their shares as of the ~~date the investment becomes qualified~~close of business on December 18, 2020 became entitled to receive an aggregate of 4,876,387 shares of BM Technologies' common stock. Customers distributed 0.15389 shares of BM Technologies common stock for ~~the equity method~~each share of ~~accounting.~~

Customers ~~also adopted ASU 2016-17,~~ ~~Consolidation - Interests Held Through Related Parties that are Under Common Control. This ASU amends the guidance included in ASU 2015-02,~~ ~~Consolidation: Amendments to Consolidation Analysis~~ ~~which Customers adopted in first quarter 2016. This ASU makes a narrow amendment that requires that a single decision maker considers indirect economic interests in an entity~~Bancorp's common stock held through related parties that are under common control on a proportionate basis when determining whether it is the primary beneficiary of that VIE. Prior to this amendment, indirect interests held through related parties that are under common control were to be considered equivalentas of the single decision maker’s direct interests in their entirety which could result in a single decision maker consolidating the VIE. As the adoption did not result in any significant impact to Customers’ consolidated financial statements, it did not result in a full or modified retrospective application.

~~Accounting Standards Issued But Not Yet Adopted~~

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities, which amends the existing hedge accounting model and expands an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges~~close of ~~interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change~~business on December 18, 2020 as special dividends. Certain team members of BMT also received 1,348,748 restricted shares of BM Technologies' common stock in the ~~fair value~~form of ~~a hedging instrument to be presented in the same income statement line as the hedged item.~~severance payments. The ~~guidance also changes certain documentation and assessment requirements and modifies the accounting for components excluded~~total stock consideration from the ~~assessment~~divestiture that were distributed to holders of ~~hedge effectiveness. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption permitted.~~ Customers ~~plans to adopt this ASU by January 1, 2018. Adoption of this new guidance must be applied on a modified retrospective approach. While Customers continues to assess all potential impacts~~Bancorp's common stock and certain BMT team members represented 52% of the ~~standard, Customers does not currently expect~~outstanding common stock of BM Technologies at the ~~adoption~~closing date of ~~this ASU to have a significant impact on its financial condition, results~~the divestiture.

The sale of ~~operations and consolidated financial statements.~~

~~In July 2017, the FASB issued ASU 2017-11,~~ ~~Accounting for Certain Financial Instruments with Down Round Features~~, which will change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) would no longer beBMT was accounted for as a ~~derivative liability at fair value~~sale of non-controlling interest and the merger between BMT and MFAC was accounted for as a ~~result~~reverse recapitalization as BMT was considered to be the accounting acquirer. Upon closing of the ~~existence~~transaction, Customers had no remaining investment in BM Technologies.

Table of ~~a down round feature. For freestanding equity-classified~~Contents

BMT's historical financial ~~instruments,~~results for periods prior to the ~~amendments require entities to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders~~divestiture are reflected in basic earnings per share ("EPS"). For public business entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Customers currently does not have any equity-linked financial instruments (or embedded features) with down round features, accordingly Customers does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations andBancorp’s consolidated financial statements ~~however, Customers will continue to evaluate~~as discontinued operations. The assets and liabilities of BMT have been presented as "Assets of discontinued operations" and "Liabilities of discontinued operations" on the ~~potential impact through~~consolidated balance sheet at December 31, 2020. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the ~~adoption date.~~

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation - Stock Compensation: Scope of Modification Accounting~~, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification in Accounting Standards Codification (“ASC”) 718. Under this ASU, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award as equity or a liability changes as a result of the change in terms or conditions. This ASU does not change the accounting for modifications under ASC 718. The ASU will be effective for Customers for its first reporting period beginning after December 15, 2017, with early adoption permitted. Adoption of this new guidance must be applied prospectively to an award modified on or after the adoption date. Customers generally does not modify the terms of conditions of its share-based payment awards, accordingly Customers does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations andaccompanying consolidated financial statements ~~however, Customers will continue~~and prior period amounts have been reclassified to ~~evaluate~~conform with the ~~potential impact through the adoption date.~~current period presentation.

~~In March 2017, the FASB issued ASU 2017-08,~~ ~~Receivables-Nonrefundable Fees and Other Costs:~~ ~~Premium Amortization on Purchased Callable Debt Securities,~~ ~~which requires that premiums for certain callable debt securities held be amortized~~The following summarized financial information related to their earliest call date. This ASU does not affect the accounting for securities purchased at a discount. This ASU will be effective for Customers for its first reporting period beginning after December 15, 2018, with earlier adoption permitted. Adoption of this new guidance must be applied on a modified retrospective approach. Customers currentlyBMT has ~~an immaterial amount of callable debt securities purchased with premiums, accordingly Customers does not expect the adoption of this ASU to have a significant~~

~~impact on its financial condition, results of~~been segregated from continuing operations and ~~consolidated financial statements, however, Customers will continue to evaluate~~reported as discontinued operations for the ~~potential impact through the adoption date.~~periods presented.


	Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	2021		2020		2021		2020
Discontinued operations:




Non-interest income	$	0	$	16,254	$	0	$	32,327
Non-interest expense	0		19,444		20,354		42,238
Loss from discontinued operations before income taxes	0		(3,190)		(20,354)		(9,911)
Income tax expense (benefit)	0		(932)		17,682		(2,299)
Net loss from discontinued operations	$	0	$	(2,258)	$	(38,036)	$	(7,612)

~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Clarifying the Scope~~The assets and liabilities of ~~Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,~~ ~~which clarifies the scope and application of the accounting guidance~~discontinued operations on the ~~sale~~consolidated balance sheet as of ~~nonfinancial assets to non-customers, including partial sales. This ASU defines an in-substance nonfinancial asset, in part,~~December 31, 2020 were as a financial asset promised to a counterparty in a contract if substantially all of the fair value of the assets (recognized and unrecognized) that are promised to the counterparty in the contract is concentrated in nonfinancial assets. If substantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in nonfinancial assets, then all of the financial assets promised to the counterparty are in substance nonfinancial assets within the scope of Subtopic 610-20. This ASU also unifies the guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing the sales of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint ventures. This ASU will be effective for Customers for its first reporting period beginning after December 15, 2017, with early adoption permitted. The adoption of this new guidance must be applied on a full or modified retrospective basis. Customers does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations and consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~, which will simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test that requires an entity to determine the implied fair value of its goodwill through a hypothetical purchase price allocation. Instead, under this ASU, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. All other goodwill impairment guidance will remain largely unchanged. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. Entities will also be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU is effective for Customers for its first reporting period beginning after December 15, 2019. Early adoption is permitted for impairment tests performed after January 1, 2017. Customers expects to early adopt this ASU upon its next annual goodwill impairment test in 2017 and does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations and consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Clarifying the Definition of a Business~~, which narrows the definition of a business and clarifies that to be considered a business, the fair value of gross assets acquired (or disposed of) should not be concentrated in a single identifiable asset or a group of similar identifiable assets. In addition, to be considered a business, an acquisition would have to include an input and a substantive process that together will significantly contribute to the ability to create an output. Also, the amendments narrow the definition of the term “output” so that it is consistent with how outputs are defined in ASC Topic 606, ~~Revenue from Contracts with Customers~~. This ASU is effective for Customers for its first reporting period beginning after December 15, 2017. Adoption of this new guidance must be applied on a prospective basis. Customers does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations and consolidated financial statements.

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows: Restricted Cash~~, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for Customers for its first reporting period beginning after December 15, 2017, with early adoption permitted. Customers does not expect the adoption to this ASU to have a significant impact on the presentation of its statement of cash flows.

~~In October 2016, the FASB issued ASU 2016-16-Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~, which requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This eliminates the current exception for all intra-entity transfers of an asset other than inventory that requires deferral of the tax effects until the asset is sold to a third party or otherwise recovered through use.

This ASU is effective for Customers for its first reporting period beginning after December 15, 2017, with early adoption permitted. Customers does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations and consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which aims to reduce the existing diversity in practice with regards to the following specific items in the Statement of Cash Flows:~~

follows:


1.(amounts in thousands)			~~Cash payments for debt prepayment or extinguishment costs will be classified in financing activities.~~						December 31, 2020

Carrying amounts of assets included as part of discontinued operations:
2.Cash and cash equivalents	~~Upon settlement~~	$	2,989
Premises and equipment, net		401
Goodwill and other intangibles		10,329
Other assets		48,336
Total assets of zero-coupon bonds and bonds with insignificant cash coupons, the portion of the payment attributable to imputed interest will be classified as an operating activity, while the portion of the payment attributable to principal will be classified as a financing activity.discontinued operations		$	62,055


3.Carrying amounts of liabilities included as part of discontinued operations:			Cash paid by an acquirer soon after a business combination (i.e. approximately three months or less) for the settlement of a contingent consideration liability will be classified in investing activities. Payments made thereafter should be separated between financing activities and operating activities. Cash payments up to the amount of the contingent consideration liability recognized at the acquisition date will be classified in financing activities; any excess will be classified in operating activities.


4.Borrowings from Customers Bank			Cash proceeds received from the settlement of insurance claims will be classified on the basis of the related insurance coverage (i.e., the nature of the loss). Cash proceeds from lump-sum settlements will be classified based on the nature of each loss component included in the settlement.

			$	21,000
5.Accrued interest payable and other liabilities			Cash proceeds received from the settlement of bank-owned life insurance (BOLI) policies will be classified as cash inflows from investing activities. Cash payments for premiums on BOLI may be classified as cash outflows for investing, operating, or a combination of both.

			18,704
6.			~~A transferor’s beneficial interest obtained in a securitization~~Total liabilities of ~~financial assets will be disclosed as a non-cash activity, and cash received from beneficial interests will be classified in investing activities.~~discontinued operations


7.$	~~Distributions received from equity method investees will be classified using either a cumulative earnings approach or a look-through approach as an accounting policy election.~~39,704

Table of the standard. Customers is also substantially complete with its review of the related contracts and has also completed its evaluation of certain costs related to these revenue streams to determine whether such costs should be presented as expenses or contra-revenue (i.e., gross vs. net). Customers' overall assessment suggests that adoption of this ASU will not materially change its current method and timing of recognizing revenue for these revenue streams. Customers, however, is still evaluating the ASU’s expanded disclosure requirements. As provided above, Customers current assessment is that the adoption of this ASU will not have a significant impact to its financial condition, results of operations and consolidated financial statements.Contents

NOTE 54 — EARNINGS (LOSS) PER SHARE

The following are the components and results of Customers' earnings (loss) per common share calculations for the periods presented.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(amounts in thousands, except share and per share data)
Net income available to common shareholders $ 4,139
$ 18,655
$ 46,378
$ 52,975

Weighted-average number of common shares outstanding - basic 30,739,671
27,367,551
30,597,314
27,131,960
Share-based compensation plans 1,754,480
2,205,291
2,004,917
2,119,717
Warrants 18,541
124,365
24,392
243,531
Weighted-average number of common shares - diluted 32,512,692
29,697,207
32,626,623
29,495,208

Basic earnings per common share $ 0.13
$ 0.68
$ 1.52
$ 1.95
Diluted earnings per common share $ 0.13
$ 0.63
$ 1.42
$ 1.80


	Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands, except share and per share data)	2021		2020		2021		2020
Net income from continuing operations available to common shareholders	$	58,042	$	21,395	$	129,282	$	26,233
Net loss from discontinued operations	0		(2,258)		(38,036)		(7,612)
Net income available to common shareholders	$	58,042	$	19,137	$	91,246	$	18,621

Weighted-average number of common shares outstanding – basic	32,279,625		31,477,591		32,082,878		31,434,371
Share-based compensation plans	1,461,843		148,180		1,211,197		191,298

Weighted-average number of common shares – diluted	33,741,468		31,625,771		33,294,075		31,625,669

Basic earnings (loss) per common share from continuing operations	$	1.80	$	0.68	$	4.03	$	0.83
Basic earnings (loss) per common share from discontinued operations	0		(0.07)		(1.19)		(0.24)
Basic earnings (loss) per common share	1.80		0.61		2.84		0.59

Diluted earnings (loss) per common share from continuing operations	$	1.72	$	0.68	$	3.88	$	0.83
Diluted earnings (loss) per common share from discontinued operations	0		(0.07)		(1.14)		(0.24)
Diluted earnings (loss) per common share	1.72		0.61		2.74		0.59

The following ~~is a summary of~~are securities that could potentially dilute basic earnings per common share in future periods that were not included in the computation of diluted earnings per common share because either the performance conditions for certain of the share-based compensation awards have not been met or to do so would have been anti-dilutive for the periods presented.


	Three Months Ended June 30,		Six Months Ended June 30,
	2021	2020	2021	2020
Share-based compensation awards	711,000	3,813,959	463,145	3,674,506

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Anti-dilutive securities:
Share-based compensation awards 409,225
616,995
409,225
616,995
Warrants 52,242
52,242
52,242
52,242
Total anti-dilutive securities 461,467
669,237
461,467
669,237

Table of Contents

NOTE 65 — CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT ~~(1)~~

The following tables present the changes in accumulated other comprehensive income (loss) by component for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020. Amounts in parentheses indicate reductions to AOCI.


	Three Months Ended June 30, 2021
(amounts in thousands)	Unrealized Gains (Losses) on Available for Sale Securities (1)		Unrealized Gains (Losses) on Cash Flow Hedges (2)		Total
Balance - March 31, 2021	$	6,169	$	(778)	$	5,391



Unrealized gains (losses) arising during period, before tax	592		6		598
Income tax effect	(154)		(2)		(156)
Other comprehensive income (loss) before reclassifications	438		4		442
Reclassification adjustments for (gains) losses included in net income, before tax	(1,812)		1,046		(766)
Income tax effect	471		(272)		199
Amounts reclassified from accumulated other comprehensive income (loss) to net income	(1,341)		774		(567)
Net current-period other comprehensive income (loss)	(903)		778		(125)
Balance - June 30, 2021	$	5,266	$	0	$	5,266


	Three Months Ended June 30, 2020

(amounts in thousands)	Unrealized Gains (Losses) on Available for Sale Securities (1)		Unrealized Gains (Losses) on Cash Flow Hedges (2)		Total
Balance - March 31, 2020	$	4,614	$	(34,789)	$	(30,175)



Unrealized gains (losses) arising during period, before tax	35,315		(6,369)		28,946
Income tax effect	(9,182)		1,684		(7,498)
Other comprehensive income (loss) before reclassifications	26,133		(4,685)		21,448
Reclassification adjustments for (gains) losses included in net income, before tax	(4,353)		2,718		(1,635)
Income tax effect	1,131		(734)		397
Amounts reclassified from accumulated other comprehensive income (loss) to net income	(3,222)		1,984		(1,238)
Net current-period other comprehensive income (loss)	22,911		(2,701)		20,210
Balance - June 30, 2020	$	27,525	$	(37,490)	$	(9,965)

(1)Reclassification amounts for AFS debt securities are reported as gain or loss on sale of investment securities on the consolidated statements of income.

(2)Reclassification amounts for cash flow hedges are reported as interest expense for the applicable hedged items or loss on cash flow hedge derivative terminations on the consolidated statements of income.


	Six Months Ended June 30, 2021
(amounts in thousands)	Unrealized Gains (Losses) Available for Sale Securities (1)		Unrealized Gains (Losses) on Cash Flow Hedges (2)		Total
Balance - December 31, 2020	$	23,312	$	(29,076)	$	(5,764)



Unrealized gains (losses) arising during period, before tax	992		12,321		13,313
Income tax effect	(258)		(3,204)		(3,462)
Other comprehensive income (loss) before reclassifications	734		9,117		9,851
Reclassification adjustments for (gains) losses included in net income, before tax	(25,378)		26,972		1,594
Income tax effect	6,598		(7,013)		(415)
Amounts reclassified from accumulated other comprehensive income (loss) to net income	(18,780)		19,959		1,179
Net current-period other comprehensive income (loss)	(18,046)		29,076		11,030
Balance - June 30, 2021	$	5,266	$	0	$	5,266

Table of Contents

Three Months Ended September 30, 2017
(amounts in thousands) Unrealized Gains (Losses) on Available-For-Sale Securities Unrealized
Loss on
Cash Flow Hedges Total
Balance - June 30, 2017 $ 6,822
$ (1,458 ) $ 5,364
Other comprehensive income (loss) before reclassifications (2,177 ) 104
(2,073 )
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2) (3,263 ) 349
(2,914 )
Net current-period other comprehensive (loss) income (5,440 ) 453
(4,987 )
Balance - September 30, 2017 $ 1,382
$ (1,005 ) $ 377


	Six Months Ended June 30, 2020
(amounts in thousands)	Unrealized Gains (Losses) on Available for Sale Securities (1)		Unrealized Gains (Losses) on Cash Flow Hedges (2)		Total
Balance - December 31, 2019	$	14,287	$	(15,537)	$	(1,250)



Unrealized gains (losses) arising during period, before tax	26,217		(34,066)		(7,849)
Income tax effect	(6,816)		9,035		2,219
Other comprehensive income (loss) before reclassifications	19,401		(25,031)		(5,630)
Reclassification adjustments for (gains) losses included in net income, before tax	(8,328)		4,196		(4,132)
Income tax effect	2,165		(1,118)		1,047
Amounts reclassified from accumulated other comprehensive income (loss) to net income	(6,163)		3,078		(3,085)
Net current-period other comprehensive income	13,238		(21,953)		(8,715)
Balance - June 30, 2020	$	27,525	$	(37,490)	$	(9,965)

(1)Reclassification amounts for AFS debt securities are reported as gain or loss on sale of investment securities on the consolidated statements of income.

Nine Months Ended September 30, 2017
(amounts in thousands) Unrealized Gains (Losses) on Available-For-Sale Securities Unrealized
Loss on
Cash Flow Hedges Total
Balance - December 31, 2016 $ (2,681 ) $ (2,211 ) $ (4,892 )
Other comprehensive income (loss) before reclassifications 9,268
(115 ) 9,153
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2) (5,205 ) 1,321
(3,884 )
Net current-period other comprehensive income 4,063
1,206
5,269
Balance - September 30, 2017 $ 1,382
$ (1,005 ) $ 377


~~(1)~~	~~All amounts are presented net of tax. Amounts in parentheses indicate reductions to accumulated other comprehensive income.~~


~~(2)~~	Reclassification amounts for available-for-sale securities are reported as gain on sale of investment securities on the consolidated statements of income. Reclassification amounts for cash flow hedges are reported as interest expense on FHLB advances on the consolidated statements of income.

Three Months Ended September 30, 2016
Available-for-sale-securities
(amounts in thousands) Unrealized Gains Foreign Currency Items Total Unrealized Gains Unrealized Loss on Cash Flow Hedge Total
Balance - June 30, 2016 $ 4,895
$ (768 ) $ 4,127
$ (4,554 ) $ (427 )
Other comprehensive income (loss) before reclassifications 15
190
205
556
761
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2) 1
—
1
439
440
Net current-period other comprehensive income 16
190
206
995
1,201
Balance - September 30, 2016 $ 4,911
$ (578 ) $ 4,333
$ (3,559 ) $ 774

Nine Months Ended September 30, 2016
Available-for-sale-securities
(amounts in thousands) Unrealized Gains (Losses) Foreign Currency Items Total Unrealized Gains (Losses) Unrealized Loss on Cash Flow Hedge Total
Balance - December 31, 2015 $ (4,602 ) $ (584 ) $ (5,186 ) $ (2,798 ) $ (7,984 )
Other comprehensive income (loss) before reclassifications 9,529
6
9,535
(1,577 ) 7,958
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2) (16 ) —
(16 ) 816
800
Net current-period other comprehensive income (loss) 9,513
6
9,519
(761 ) 8,758
Balance - September 30, 2016 $ 4,911
$ (578 ) $ 4,333
$ (3,559 ) $ 774


~~(1)~~	~~All amounts are presented net of tax. Amounts in parentheses indicate reductions to accumulated other comprehensive income.~~


~~(2)~~	Reclassification amounts for available-for-sale securities are reported as gain (loss) on sale of investment securities on the consolidated statements of income. Reclassification amounts for cash flow hedges are reported as interest expense on FHLB advances on the consolidated statements of income.

NOTE 76 — INVESTMENT SECURITIES

The amortized cost and ~~approximate~~ fair value of investment securities as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 are summarized in the tables below:


	June 30, 2021 (1)
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale debt securities:
Asset-backed securities	$	319,682	$	3,649	$	(377)	$	322,954
U.S. government agencies securities	20,000		114		0		20,114
Agency-guaranteed residential mortgage-backed securities	10,620		0		(265)		10,355
Agency-guaranteed commercial mortgage-backed securities	2,206		0		(1)		2,205
Agency-guaranteed residential collateralized mortgage obligations	81,007		813		(62)		81,758
Agency-guaranteed commercial collateralized mortgage obligations	144,593		0		(1,752)		142,841
Collateralized loan obligations	162,960		148		(181)		162,927
Commercial mortgage-backed securities	23,054		33		0		23,087
Corporate notes (2)	345,909		4,974		(462)		350,421
Private label collateralized mortgage obligations	401,949		922		(1,295)		401,576
State and political subdivision debt securities (3)	8,543		11		0		8,554

Available for sale debt securities	$	1,520,523	$	10,664	$	(4,395)	$	1,526,792

Table of Contents

September 30, 2017

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
(amounts in thousands)
Available for Sale:
Agency-guaranteed residential mortgage-backed securities $ 197,606
$ 521
$ (1,800 ) $ 196,327
Agency-guaranteed commercial real estate mortgage-backed securities 337,683
2,843
(418 ) 340,108
Corporate notes (1) 44,958
1,119
—
46,077
Equity securities (2) 2,311
—
—
2,311
$ 582,558
$ 4,483
$ (2,218 ) $ 584,823


~~(1)~~	~~Includes subordinated debt issued by other bank holding companies.~~


~~(2)~~	~~Includes equity securities issued by a foreign entity.~~


	December 31, 2020 (1)
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale debt securities:
Asset-backed securities	$	372,640	$	4,515	$	(10)	$	377,145
U.S. government agencies securities	20,000		34		0		20,034
Agency-guaranteed residential mortgage-backed securities	61,178		1,913		0		63,091

Agency-guaranteed residential collateralized mortgage obligations	139,985		916		(60)		140,841
Agency-guaranteed commercial collateralized mortgage obligations	20,965		0		(39)		20,926
Collateralized loan obligations	32,367		0		0		32,367
Corporate notes (2)	372,764		24,144		(164)		396,744
Private label collateralized mortgage obligations	136,943		423		(374)		136,992
State and political subdivision debt securities (3)	17,346		945		0		18,291
Available for sale debt securities	$	1,174,188	$	32,890	$	(647)	1,206,431

Equity securities (4)							3,854
Total investment securities, at fair value							$	1,210,285

(1)Accrued interest on AFS debt securities totaled $5.0 million and $4.2 million at June 30, 2021 and December 31, 2020, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

(2)Includes corporate securities issued by domestic bank holding companies.

December 31, 2016

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
(amounts in thousands)
Available for Sale:
Agency-guaranteed residential mortgage-backed securities $ 233,002
$ 918
$ (2,657 ) $ 231,263
Agency-guaranteed commercial real estate mortgage-backed securities 204,689
—
(2,872 ) 201,817
Corporate notes (1) 44,932
401
(185 ) 45,148
Equity securities (2) 15,246
—
—
15,246
$ 497,869
$ 1,319
$ (5,714 ) $ 493,474
(3)Includes both taxable and non-taxable municipal securities.


~~(1)~~	~~Includes subordinated debt issued by other bank holding companies.~~


~~(2)~~	~~Includes equity securities issued by a foreign entity.~~

~~The following table presents proceeds~~(4)Includes equity securities issued by a foreign entity.

During the three and six months ended June 30, 2021, Customers recognized unrealized gains of $1.7 million and $2.7 million, respectively, on its equity securities. During the three and six months ended June 30, 2020, Customers recognized unrealized gains of $1.2 million and unrealized losses of $0.2 million, respectively, on its equity securities. These unrealized gains and losses are reported as unrealized gain (loss) on investment securities within non-interest income on the consolidated statements of income. In June 2021, Customers sold all of the outstanding shares in CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which held the equity securities issued by a foreign entity, for $3.8 million, and recognized $2.8 million in loss on sale of foreign subsidiaries within non-interest income on the consolidated statement of income.

Proceeds from the sale of ~~available-for-sale investment~~AFS securities were $53.7 million and ~~gross gains and gross losses realized on those sales~~$407.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021, respectively. Proceeds from the sale of AFS securities were $109.2 million during the three and ~~2016:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(amounts in thousands)
Proceeds from sale of available-for-sale securities $ 554,540
$ 5
$ 698,451
$ 2,853
Gross gains $ 5,349
$ —
$ 8,532
$ 26
Gross losses —
(1 ) —
(1 )
Net gains (losses) $ 5,349
$ (1 ) $ 8,532
$ 25

six months ended June 30, 2020. Realized gains from the sale of AFS debt securities were $1.8 million and $25.4 million for the three and six months ended June 30, 2021, respectively. Realized gains from the sale of AFS debt securities were $4.4 million and $8.3 million for the three and six months ended June 30, 2020, respectively. These gains (losses) were determined using the specific identification method and were reported as gain (loss) on sale of investment securities ~~included in~~within non-interest income on the consolidated statements of income.

Table of Contents

The following table ~~presents available-for-sale~~shows debt securities by stated maturity. Debt securities backed by mortgages and other assets have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay and, therefore, these debt securities are classified separately with no specific maturity date:


	June 30, 2021
(amounts in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	4,901	$	5,032
Due after one year through five years	211,508		212,586
Due after five years through ten years	154,043		157,219
Due after ten years	4,000		4,252
Asset-backed securities	319,682		322,954
Collateralized loan obligations	162,960		162,927
Commercial mortgage-backed securities	23,054		23,087
Agency-guaranteed residential mortgage-backed securities	10,620		10,355
Agency-guaranteed commercial mortgage-backed securities	2,206		2,205
Agency-guaranteed residential collateralized mortgage obligations	81,007		81,758
Agency-guaranteed commercial collateralized mortgage obligations	144,593		142,841
Private label collateralized mortgage obligations	401,949		401,576


Total debt securities	$	1,520,523	$	1,526,792

September 30, 2017

Amortized
Cost

Fair
Value
(amounts in thousands)
Due in one year or less $ —
$ —
Due after one year through five years —
—
Due after five years through ten years 42,958
43,854
Due after ten years 2,000
2,223
Agency-guaranteed residential mortgage-backed securities 197,606
196,327
Agency-guaranteed commercial real estate mortgage-backed securities 337,683
340,108
Total debt securities $ 580,247
$ 582,512

Gross unrealized losses and fair value of Customers' ~~investments~~AFS debt securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~September~~June 30, ~~2017 and December 31, 2016~~2021 were as follows:

September 30, 2017
Less Than 12 Months 12 Months or More Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
(amounts in thousands)
Available for Sale:
Agency-guaranteed residential mortgage-backed securities $ 54,525
$ (279 ) $ 45,682
$ (1,521 ) $ 100,207
$ (1,800 )
Agency-guaranteed commercial real estate mortgage-backed securities 105,044
(418 ) —
—
105,044
(418 )
Total $ 159,569
$ (697 ) $ 45,682
$ (1,521 ) $ 205,251
$ (2,218 )

December 31, 2016
Less Than 12 Months 12 Months or More Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
(amounts in thousands)
Available for Sale:
Agency-guaranteed residential mortgage-backed securities $ 87,433
$ (1,330 ) $ 30,592
$ (1,327 ) $ 118,025
$ (2,657 )
Agency-guaranteed commercial real estate mortgage-backed securities 201,817
(2,872 ) —
—
201,817
(2,872 )
Corporate notes (1) 9,747
(185 ) —
—
9,747
(185 )
Total $ 298,997
$ (4,387 ) $ 30,592
$ (1,327 ) $ 329,589
$ (5,714 )


~~(1)~~	~~Includes subordinated debt issued by other bank holding companies.~~



	June 30, 2021
	Less Than 12 Months				12 Months or More				Total
(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale debt securities:
Asset-backed securities	$	61,515	$	(377)	$	0	$	0	$	61,515	$	(377)
Agency-guaranteed residential mortgage-backed securities	10,355		(265)		0		0		10,355		(265)
Agency-guaranteed commercial mortgage-backed securities	2,205		(1)		0		0		2,205		(1)
Agency-guaranteed residential collateralized mortgage obligations	18,158		(62)		0		0		18,158		(62)
Agency-guaranteed commercial collateralized mortgage obligations	142,841		(1,752)		0		0		142,841		(1,752)
Collateralized loan obligations	101,555		(181)		0		0		101,555		(181)
Corporate notes	67,230		(462)		0		0		67,230		(462)
Private label collateralized mortgage obligations	157,470		(1,295)		0		0		157,470		(1,295)

Total	$	561,329	$	(4,395)	$	0	$	0	$	561,329	$	(4,395)

At ~~September~~June 30, ~~2017,~~2021, there were ~~sixteen available-for-sale investment~~38 AFS debt securities with unrealized losses in the less-than-twelve-month category and ~~eleven available-for-sale investment~~0 AFS debt securities with unrealized losses in the twelve-month-or-more category. The unrealized losses ~~on the mortgage-backed securities are guaranteed by government-sponsored entities and primarily relate~~were principally due to changes in market interest ~~rates.~~rates that resulted in a negative impact on the respective securities' fair value. All amounts related to these securities are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell ~~these~~any of the 38 securities, and it is not more likely than not that Customers will be required to sell any of the 38 securities before recovery of the amortized cost basis. At December 31, 2020, there were 16 AFS debt securities in an unrealized loss position.

At September 30, 2017, management evaluated its equity holdings issued by Religare Enterprises, Ltd. ("Religare") for other-than-temporary impairment. Because management no longer has the intent to hold these securities until a recovery in fair value, Customers recorded an other-than-temporary impairment loss of $8.3 million and $12.9 million, respectively, for the three and nine months ended September 30, 2017 for the full amount of the decline in fair value below the cost basis established at June 30, ~~2017~~2021 and December 31, 2016. The fair value of the equity securities at September 30, 2017 of $2.3 million became the new cost basis of the securities. Because of the change in disposition strategy for BankMobile at September 30, 2017, Customers did not record a deferred tax asset for the other-than-temporary impairment loss recorded in third quarter 2017. In addition, Customers reversed $4.6 million of previously recorded deferred tax assets in third quarter 2017 as the tax-free spin-off/merger strategy for BankMobile does not result in capital gains that could be used to offset any capital losses resulting from the disposition of the Religare equity securities.

~~At September 30, 2017 and December 31, 2016,~~2020, Customers Bank had pledged investment securities aggregating ~~$127.6~~$16.0 million and ~~$231.3~~$18.8 million in fair value, respectively, as collateral ~~against its borrowings~~ primarily ~~with the FHLB and~~for an unused line of credit with another financial institution. These counterparties do not have the ability to sell or repledge these securities.

Table of Contents

At June 30, 2021 and December 31, 2020, no securities holding of any one issuer, other than the U.S. government and its agencies, amounted to greater than 10% of shareholders' equity.

NOTE 87 – LOANS HELD FOR SALE

The composition of loans held for sale as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 was as follows:



(amounts in thousands)	June 30, 2021		December 31, 2020
Commercial loans:


Commercial and industrial loans, at lower of cost or fair value	$	0	$	55,683
Commercial real estate non-owner occupied loans, at lower of cost or fair value	0		17,251
Total commercial loans held for sale	0		72,934
Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value	507		643
Residential mortgage loans, at fair value	6,074		5,509
Installment loans, at lower of cost or fair value	27,959		0
Total consumer loans held for sale	34,540		6,152
Loans held for sale	$	34,540	$	79,086

September 30, 2017 December 31, 2016
(amounts in thousands)
Commercial loans:
Mortgage warehouse loans, at fair value $ 1,961,248
$ 2,116,815
Multi-family loans at lower of cost or fair value 150,217
—
Total commercial loans held for sale 2,111,465
2,116,815
Consumer loans:
Residential mortgage loans, at fair value 1,828
695
Loans held for sale $ 2,113,293
$ 2,117,510

~~Commercial~~Total loans held for sale ~~consists~~as of June 30, 2021 and December 31, 2020 included NPLs of $0.5 million and $18.5 million, respectively.

NOTE 8 — LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

The following table presents loans and leases receivable as of June 30, 2021 and December 31, 2020.


(amounts in thousands)	June 30, 2021		December 31, 2020
Loans and leases receivable, mortgage warehouse, at fair value	$	2,855,284	$	3,616,432
Loans receivable, PPP	6,305,056		4,561,365
Loans receivable:
Commercial:
Multi-family	1,497,485		1,761,301
Commercial and industrial (1)	2,360,656		2,289,441
Commercial real estate owner occupied	653,649		572,338
Commercial real estate non-owner occupied	1,206,646		1,196,564
Construction	179,198		140,905
Total commercial loans and leases receivable	5,897,634		5,960,549
Consumer:
Residential real estate	266,911		317,170
Manufactured housing	57,904		62,243
Installment	1,549,693		1,235,406
Total consumer loans receivable	1,874,508		1,614,819
Loans and leases receivable (2)	7,772,142		7,575,368

Allowance for credit losses on loans and leases	(125,436)		(144,176)
Total loans and leases receivable, net of allowance for credit losses on loans and leases	$	16,807,046	$	15,608,989

(1)Includes direct finance equipment leases of $129.0 million and $108.0 million at June 30, 2021 and December 31, 2020, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(223.1) million and $(54.6) million at June 30, 2021 and December 31, 2020, respectively.

Table of Contents

Customers' total loans and leases receivable portfolio includes loans receivable which are reported at fair value based on an election made to account for these loans at fair value and loans and leases receivable which are predominately reported at their outstanding unpaid principal balance, net of charge-offs and deferred costs and fees and unamortized premiums and discounts and are evaluated for impairment. The total amount of accrued interest recorded for total loans was $85.4 million and $76.6 million at June 30, 2021 and December 31, 2020, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At June 30, 2021 and December 31, 2020, there were $36.6 million and $59.5 million of individually evaluated loans that were collateral-dependent, respectively. Substantially all individually evaluated loans are collateral-dependent and consisted primarily of commercial and industrial, commercial real estate, and residential real estate loans. Collateral-dependent commercial and industrial loans were secured by accounts receivable, inventory and equipment; collateral-dependent commercial real estate loans were secured by commercial real estate assets; and residential real estate loans were secured by residential real estate assets.

Loans receivable, PPP

On March 27, 2020, the CARES Act was signed into law and created funding for a new product called the PPP. The PPP is administered by the SBA and is intended to assist organizations with payroll related expenses. Customers had $6.3 billion and $4.6 billion of PPP loans outstanding as of June 30, 2021 and December 31, 2020, respectively, which are fully guaranteed by the SBA and earn a fixed interest rate of 1.00%. Customers recognized interest income, including origination fees, of $41.1 million and $79.9 million for the three and six months ended June 30, 2021, respectively. Customers recognized interest income, including origination fees, of $11.7 million for the three and six months ended June 30, 2020.

PPP loans include an embedded credit enhancement from the SBA, which guarantees 100% of the principal and interest owed by the borrower. As a result, the PPP loans do not have an ACL and are therefore excluded from ACL-related disclosures.

Loans receivable, mortgage warehouse, at fair value

Mortgage warehouse loans consist of commercial loans to mortgage ~~companies (i.e., mortgage warehouse loans).~~companies. These mortgage warehouse lending transactions are subject to master repurchase ~~agreements~~agreements. As a result of the contractual provisions, for accounting purposes, control of the underlying mortgage loan has not transferred and the rewards and risks of the mortgage loans are not assumed by Customers. The mortgage warehouse loans are designated as loans held for ~~sale~~investment and reported at fair value based on an election made to account for the loans at fair value. Pursuant to the agreements, Customers funds the pipelines for these mortgage lenders by sending payments directly to the closing agents for funded mortgage loans ~~(i.e., the purchase event)~~ and receives proceeds directly from third party investors when the underlying mortgage loans are sold into the secondary ~~market (i.e., the sale event).~~market. The fair value of the mortgage warehouse loans is estimated as the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The interest rates on these loans are variable, and the lending transactions are short-term, with an average life ~~of 21~~under 30 days from purchase to sale. The primary goal of these lending transactions is to provide liquidity to mortgage companies.

~~Effective~~At June 30, 2017, Customers Bank transferred $150.8 million of multi-family loans from loans receivable (held for investment) to loans held for sale. Customers Bank transferred these loans at their carrying value, which was lower than the estimated fair value at the time of transfer. At September 30, 2017, the estimated fair value of these loans was higher than their carrying value. Accordingly, a lower of cost or market value adjustment was not recorded in third quarter 2017.

Effective December 31, 2016, Customers Bank transferred $25.1 million of multi-family loans from held for sale to loans receivable (held for investment) because the Bank no longer has the intent to sell these loans. Customers Bank transferred these loans at their carrying value, which was lower than the estimated fair value at the time of transfer.

~~NOTE 9 — LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES~~

~~The following table presents loans receivable as of September 30, 2017~~2021 and December 31, ~~2016. BankMobile~~2020, all of Customers' commercial mortgage warehouse loans ~~receivable previously~~were current in terms of payment. As these loans are reported ~~as held for sale~~at their fair value, they do not have ~~been reclassified as held~~an ACL and ~~used to conform with the current period presentation.~~are therefore excluded from ACL-related disclosures.

September 30, 2017 December 31, 2016
(amounts in thousands)
Commercial:
Multi-family $ 3,618,989
$ 3,214,999
Commercial and industrial (including owner occupied commercial real estate) 1,601,789
1,382,343
Commercial real estate non-owner occupied 1,237,849
1,193,715
Construction 73,203
64,789
Total commercial loans 6,531,830
5,855,846
Consumer:
Residential real estate 435,188
193,502
Manufactured housing 92,938
101,730
Other 3,819
3,483
Total consumer loans 531,945
298,715
Total loans receivable 7,063,775
6,154,561
Deferred (fees)/costs and unamortized (discounts)/premiums, net (2,437 ) 76
Allowance for loan losses (38,314 ) (37,315 )
Loans receivable, net of allowance for loan losses $ 7,023,024
$ 6,117,322

Loans and leases receivable

The following tables summarize loans and leases receivable by loan and lease type and performance status as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016:~~2020:


	June 30, 2021
(amounts in thousands)	30-59 Days past due (1)		60-89 Days past due (1)		90 Days or more past due (1)		Total past due (1)		Loans and leases not past due (2)		Total loans and leases (3)
Multi-family	$	0	$	3,355	$	15,004	$	18,359	$	1,479,126	$	1,497,485
Commercial and industrial	4		1,318		6,415		7,737		2,352,919		2,360,656

Commercial real estate owner occupied	0		0		1,684		1,684		651,965		653,649
Commercial real estate non-owner occupied	0		12		0		12		1,206,634		1,206,646
Construction	0		0		0		0		179,198		179,198
Residential real estate	56		679		5,029		5,764		261,147		266,911
Manufactured housing	1,387		237		5,171		6,795		51,109		57,904
Installment	5,966		2,154		2,728		10,848		1,538,845		1,549,693
Total	$	7,413	$	7,755	$	36,031	$	51,199	$	7,720,943	$	7,772,142

Table of Contents

September 30, 2017

30-89 Days
Past Due (1)

90 Days
Or More
Past Due(1)

Total Past
Due (1)

Non-
Accrual
Current (2)
Purchased-
Credit-
Impaired
Loans (3)

Total
Loans (4)
(amounts in thousands)
Multi-family $ —
$ —
$ —
$ —
$ 3,617,062
$ 1,927
$ 3,618,989
Commercial and industrial —
—
—
20,423
1,093,997
802
1,115,222
Commercial real estate - owner occupied —
—
—
2,949
472,832
10,786
486,567
Commercial real estate - non-owner occupied —
—
—
184
1,232,212
5,453
1,237,849
Construction —
—
—
—
73,203
—
73,203
Residential real estate 1,607
—
1,607
4,269
423,551
5,761
435,188
Manufactured housing (5) 2,937
2,505
5,442
1,959
82,896
2,641
92,938
Other consumer 67
—
67
58
3,474
220
3,819
Total $ 4,611
$ 2,505
$ 7,116
$ 29,842
$ 6,999,227
$ 27,590
$ 7,063,775

December 31, 2016

30-89 Days
Past Due (1)

90 Days
Or More
Past Due(1)

Total Past
Due (1)

Non-
Accrual
Current (2)
Purchased-
Credit-
Impaired
Loans (3)

Total
Loans (4)
(amounts in thousands)
Multi-family $ 12,573
$ —
$ 12,573
$ —
$ 3,200,322
$ 2,104
$ 3,214,999
Commercial and industrial 350
—
350
8,443
978,881
1,037
988,711
Commercial real estate - owner occupied 137
—
137
2,039
379,227
12,229
393,632
Commercial real estate - non-owner occupied —
—
—
2,057
1,185,331
6,327
1,193,715
Construction —
—
—
—
64,789
—
64,789
Residential real estate 4,417
—
4,417
2,959
178,559
7,567
193,502
Manufactured housing (5) 3,761
2,813
6,574
2,236
89,850
3,070
101,730
Other consumer 12
—
12
58
3,177
236
3,483
Total $ 21,250
$ 2,813
$ 24,063
$ 17,792
$ 6,080,136
$ 32,570
$ 6,154,561


~~(1)~~	~~Includes past due loans that are accruing interest because collection is considered probable.~~


~~(2)~~	~~Loans where next payment due is less than 30 days from the report date.~~

~~(3)~~

Purchased-credit-impaired loans aggregated into a pool are accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, and the past due status of the pools, or that of the individual loans within the pools, is not meaningful. Because of the credit impaired nature of the loans, the loans are recorded at a discount reflecting estimated future cash flows and the Bank recognizes interest income on each pool of loans reflecting the estimated yield and passage of time. Such loans are considered to be performing. Purchased-credit-impaired loans that are not in pools accrete interest when the timing and amount of their expected cash flows are reasonably estimable, and are reported as performing loans.


~~(4)~~	~~Amounts exclude deferred costs and fees, unamortized premiums and discounts, and the allowance for loan losses.~~


~~(5)~~	Manufactured housing loans purchased in 2010 are subject to cash reserves held at the Bank that are used to fund past-due payments when the loan becomes 90 days or more delinquent. Subsequent purchases are subject to varying provisions in the event of borrowers’ delinquencies.


	December 31, 2020
(amounts in thousands)	30-59 Days past due (1)		60-89 Days past due (1)		90 Days or more past due (1)		Total past due (1)		Loans and leases not past due (2)		Total loans and leases (3)
Multi-family	$	4,193	$	5,224	$	14,907	$	24,324	$	1,736,977	$	1,761,301
Commercial and industrial	2,257		1,274		3,079		6,610		2,282,831		2,289,441

Commercial real estate owner occupied	864		1,324		2,370		4,558		567,780		572,338
Commercial real estate non-owner occupied	0		60		2,356		2,416		1,194,148		1,196,564
Construction	0		0		0		0		140,905		140,905
Residential real estate	6,640		1,827		1,856		10,323		306,847		317,170
Manufactured housing	1,518		673		1,951		4,142		58,101		62,243
Installment	6,161		3,430		81		9,672		1,225,734		1,235,406
Total	$	21,633	$	13,812	$	26,600	$	62,045	$	7,513,323	$	7,575,368

~~As of September~~(1)Includes past due loans and leases that are accruing interest because collection is considered probable.

(2)Loans and leases where next payment due is less than 30 ~~2017~~days from the report date. The June 30, 2021 and December 31, ~~2016, the Bank had $0.3 million~~2020 tables exclude PPP loans of $6.3 billion and ~~$0.5 million,~~$4.6 billion, respectively, which are all current as of ~~residential real estate held in other real estate owned. As of September~~June 30, ~~2017~~2021 and December 31, ~~2016, the Bank had initiated foreclosure proceedings~~2020.

(3)Includes PCD loans of ~~$1.5~~$11.7 million and ~~$0.4~~$13.4 million ~~respectively,~~at June 30, 2021 and December 31, 2020, respectively.

Nonaccrual Loans and Leases

The following table presents the amortized cost of loans and leases held for investment on nonaccrual status.


	June 30, 2021 (1)						December 31, 2020 (1)
(amounts in thousands)	Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans		Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans
Multi-family	$	21,595	$	0	$	21,595	$	18,800	$	2,928	$	21,728
Commercial and industrial	6,486		231		6,717		6,384		2,069		8,453

Commercial real estate owner occupied	2,688		0		2,688		3,411		0		3,411
Commercial real estate non-owner occupied	0		0		0		2,356		0		2,356

Residential real estate	8,991		0		8,991		9,911		0		9,911
Manufactured housing	0		3,239		3,239		0		2,969		2,969
Installment	0		2,728		2,728		0		3,211		3,211
Total	$	39,760	$	6,198	$	45,958	$	40,862	$	11,177	$	52,039

(1) Presented at amortized cost basis.

Interest income recognized on nonaccrual loans ~~secured by residential real estate.~~was insignificant for the three and six months ended June 30, 2021 and 2020. Accrued interest reversed when the loans went to nonaccrual status was insignificant during the three and six months ended June 30, 2021 and 2020, respectively.

Table of Contents

Allowance for ~~loan~~credit losses on loans and leases

The changes in the ~~allowance for loan losses~~ACL on loans and leases for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016 and the loans and allowance for loan losses by loan class based on impairment evaluation method as of September 30, 2017 and December 31, 2016 were as follows. The amounts~~2020 are presented for the provision for loan losses below do not include the effect of changes to estimated benefits resulting from the FDIC loss share arrangements for the covered loans for periods prior to the termination of the FDIC loss sharing arrangements.

Three Months Ended
September 30, 2017
Multi-family Commercial and Industrial Commercial Real Estate Owner Occupied Commercial
Real Estate Non-Owner Occupied Construction Residential
Real Estate Manufactured
Housing Other Consumer Total
(amounts in thousands)
Ending Balance,
June 30, 2017
$ 12,028
$ 11,585
$ 2,976
$ 7,786
$ 716
$ 2,995
$ 268
$ 104
$ 38,458
Charge-offs —
(2,032 ) —
(77 ) —
(120 ) —
(356 ) (2,585 )
Recoveries —
54
—
—
27
7
—
1
89
Provision for loan losses 668
966
262
(53 ) 104
72
(77 ) 410
2,352
Ending Balance,
September 30, 2017
$ 12,696
$ 10,573
$ 3,238
$ 7,656
$ 847
$ 2,954
$ 191
$ 159
$ 38,314
Nine Months Ended
September 30, 2017

Ending Balance,
December 31, 2016
$ 11,602
$ 11,050
$ 2,183
$ 7,894
$ 840
$ 3,342
$ 286
$ 118
$ 37,315
Charge-offs —
(4,079 ) —
(485 ) —
(410 ) —
(602 ) (5,576 )
Recoveries —
337
9
—
157
34
—
101
638
Provision for loan losses 1,094
3,265
1,046
247
(150 ) (12 ) (95 ) 542
5,937
Ending Balance,
September 30, 2017
$ 12,696
$ 10,573
$ 3,238
$ 7,656
$ 847
$ 2,954
$ 191
$ 159
$ 38,314

As of September 30, 2017
Loans:
Individually evaluated for impairment $ —
$ 20,493
$ 2,950
$ 184
$ —
$ 8,178
$ 10,340
$ 56
$ 42,201
Collectively evaluated for impairment 3,617,062
1,093,927
472,831
1,232,212
73,203
421,249
79,957
3,543
6,993,984
Loans acquired with credit deterioration 1,927
802
10,786
5,453
—
5,761
2,641
220
27,590
$ 3,618,989
$ 1,115,222
$ 486,567
$ 1,237,849
$ 73,203
$ 435,188
$ 92,938
$ 3,819
$ 7,063,775
Allowance for loan losses:
Individually evaluated for impairment $ —
$ 625
$ 740
$ —
$ —
$ 142
$ 5
$ 15
$ 1,527
Collectively evaluated for impairment 12,696
9,462
2,481
4,732
847
2,222
83
93
32,616
Loans acquired with credit deterioration —
486
17
2,924
—
590
103
51
4,171
$ 12,696
$ 10,573
$ 3,238
$ 7,656
$ 847
$ 2,954
$ 191
$ 159
$ 38,314

Three Months Ended
September 30, 2016
Multi-family Commercial and Industrial Commercial Real Estate Owner Occupied Commercial
Real Estate Non-Owner Occupied Construction Residential
Real Estate Manufactured
Housing Other Consumer Total
(amounts in thousands)
Ending Balance,
June 30, 2016
$ 12,368
$ 10,370
$ 1,582
$ 8,483
$ 1,209
$ 3,535
$ 440
$ 110
$ 38,097
Charge-offs —
(237 ) —
(140 ) —
(43 ) —
(246 ) (666 )
Recoveries —
62
—
—
8
298
—
10
378
Provision for loan losses (695 ) 832
305
3
(168 ) (411 ) (18 ) 240
88
Ending Balance,
September 30, 2016
$ 11,673
$ 11,027
$ 1,887
$ 8,346
$ 1,049
$ 3,379
$ 422
$ 114
$ 37,897
Nine Months Ended
September 30, 2016

Ending Balance,
December 31, 2015
$ 12,016
$ 8,864
$ 1,348
$ 8,420
$ 1,074
$ 3,298
$ 494
$ 133
$ 35,647
Charge-offs —
(774 ) —
(140 ) —
(456 ) —
(478 ) (1,848 )
Recoveries —
173
—
8
465
299
—
10
955
Provision for loan losses (343 ) 2,764
539
58
(490 ) 238
(72 ) 449
3,143
Ending Balance,
September 30, 2016
$ 11,673
$ 11,027
$ 1,887
$ 8,346
$ 1,049
$ 3,379
$ 422
$ 114
$ 37,897
As of December 31, 2016
Loans:
Individually evaluated for impairment $ —
$ 8,516
$ 2,050
$ 2,151
$ —
$ 6,972
$ 9,665
$ 57
$ 29,411
Collectively evaluated for impairment 3,212,895
979,158
379,353
1,185,237
64,789
178,963
88,995
3,190
6,092,580
Loans acquired with credit deterioration 2,104
1,037
12,229
6,327
—
7,567
3,070
236
32,570
$ 3,214,999
$ 988,711
$ 393,632
$ 1,193,715
$ 64,789
$ 193,502
$ 101,730
$ 3,483
$ 6,154,561
Allowance for loan losses:
Individually evaluated for impairment $ —
$ 1,024
$ 287
$ 14
$ —
$ 35
$ —
$ —
$ 1,360
Collectively evaluated for impairment 11,602
9,686
1,896
4,626
772
2,414
88
60
31,144
Loans acquired with credit deterioration —
340
—
3,254
68
893
198
58
4,811
$ 11,602
$ 11,050
$ 2,183
$ 7,894
$ 840
$ 3,342
$ 286
$ 118
$ 37,315

Certain manufactured housing loans were purchased in August 2010. A portion of the purchase price may be used to reimburse the Bank under the specified terms in the purchase agreement for defaults of the underlying borrower and other specified items. At September 30, 2017 and December 31, 2016, funds available for reimbursement, if necessary, were $0.7 million and $1.0 million, respectively. Each quarter, these funds are evaluated to determine if they would be sufficient to absorb the probable incurred losses within the manufactured housing portfolio.

~~Impaired Loans - Individually Evaluated for Impairment~~

The following tables present the recorded investment (net of charge-offs), unpaid principal balance, and related allowance by loan type for impaired loans that were individually evaluated for impairment as of September 30, 2017 and December 31, 2016 and the average recorded investment and interest income recognized for the three and nine months ended September 30, 2017 and 2016. Purchased-credit-impaired loans are considered to be performing and are not included in the tables below.


(amounts in thousands)	Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Three Months Ended June 30, 2021
Ending Balance, March 31, 2021	$	8,026	$	7,503	$	5,935	$	11,621	$	4,103	$	3,209	$	4,800	$	83,539	$	128,736

Charge-offs	0		(2)		(1)		0		0		0		0		(7,958)		(7,961)
Recoveries	0		285		2		59		114		12		0		898		1,370
Provision (benefit) for credit losses	(2,998)		341		(1,472)		(4,306)		(1,574)		(922)		(428)		14,650		3,291
Ending Balance, June 30, 2021	$	5,028	$	8,127	$	4,464	$	7,374	$	2,643	$	2,299	$	4,372	$	91,129	$	125,436
Six Months Ended June 30, 2021
Ending Balance, December 31, 2020	$	12,620	$	12,239	$	9,512	$	19,452	$	5,871	$	3,977	$	5,190	$	75,315	$	144,176
Charge-offs	(1,132)		(637)		(142)		0		0		(50)		0		(20,645)		(22,606)
Recoveries	0		545		9		69		119		22		0		2,730		3,494
Provision (benefit) for credit losses	(6,460)		(4,020)		(4,915)		(12,147)		(3,347)		(1,650)		(818)		33,729		372
Ending Balance, June 30, 2021	$	5,028	$	8,127	$	4,464	$	7,374	$	2,643	$	2,299	$	4,372	$	91,129	$	125,436


(amounts in thousands)	Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Three Months Ended June 30, 2020
Ending Balance, March 31, 2020	$	8,750	$	18,806	$	8,527	$	18,530	$	1,934	$	4,180	$	4,987	$	83,569	$	149,283

Charge-offs	0		(20)		0		(2,801)		0		0		0		(8,304)		(11,125)
Recoveries	0		25		2		0		113		26		0		635		801
Provision (benefit) for credit losses	5,947		(6,509)		2,876		10,764		3,250		344		1,027		3,247		20,946
Ending Balance, June 30, 2020	$	14,697	$	12,302	$	11,405	$	26,493	$	5,297	$	4,550	$	6,014	$	79,147	$	159,905
Six Months Ended June 30, 2020
Ending Balance, December 31, 2019	$	6,157	$	15,556	$	2,235	$	6,243	$	1,262	$	3,218	$	1,060	$	20,648	$	56,379
Cumulative effect of change in accounting principle - CECL	2,171		759		5,773		7,918		(98)		1,518		3,802		57,986		79,829
Charge-offs	0		(117)		0		(15,598)		0		0		0		(14,550)		(30,265)

Recoveries	0		79		5		0		116		55		0		975		1,230
Provision (benefit) for credit losses	6,369		(3,975)		3,392		27,930		4,017		(241)		1,152		14,088		52,732
Ending Balance, June 30, 2020	$	14,697	$	12,302	$	11,405	$	26,493	$	5,297	$	4,550	$	6,014	$	79,147	$	159,905

At June 30, 2021, the ACL was $125.4 million, a decrease of $18.8 million from the December 31, 2020 balance of $144.2 million. The decrease resulted primarily from a decrease in provision for credit losses from continuing improvement in macroeconomic forecasts. The increase in ACL for the installment portfolio is mainly due to loan portfolio growth.

September 30, 2017
Three Months Ended
September 30, 2017

Nine Months Ended
September 30, 2017

Recorded
Investment
Net of
Charge offs

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized
(amounts in thousands)
With no related allowance recorded:
Commercial and industrial $ 19,433
$ 22,354
$ —
$ 13,345
$ 354
$ 8,796
$ 450
Commercial real estate owner occupied 1,669
1,936
—
1,744
15
1,589
18
Commercial real estate non-owner occupied 184
428
—
184
91
989
93
Other consumer 32
32
—
44
—
50
—
Residential real estate 7,457
7,664
—
5,228
125
4,865
126
Manufactured housing 10,340
10,340
—
10,243
164
10,038
457
With an allowance recorded:
Commercial and industrial 1,060
1,331
625
1,963
—
5,400
22
Commercial real estate owner occupied 1,281
1,281
740
1,056
1
950
3
Commercial real estate non-owner occupied —
—
—
51
—
94
—
Other consumer 24
24
15
12
—
6
—
Residential real estate 721
741
142
2,862
—
2,729
84
Manufactured housing —
—
5
114
—
108
8
Total $ 42,201
$ 46,131
$ 1,527
$ 36,846
$ 750
$ 35,614
$ 1,261

Table of Contents

December 31, 2016
Three Months Ended
September 30, 2016

Nine Months Ended
September 30, 2016

Recorded
Investment
Net of
Charge offs

Unpaid
Principal
Balance

Related
Allowance

Average
Recorded
Investment

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized
(amounts in thousands)
With no related allowance recorded:
Multi-family $ —
$ —
$ —
$ 2,080
$ 38
$ 1,205
$ 38
Commercial and industrial 2,396
3,430
—
21,859
406
18,681
879
Commercial real estate owner occupied 1,210
1,210
—
10,182
201
9,651
403
Commercial real estate non-owner occupied 2,002
2,114
—
7,983
118
6,081
133
Other consumer 57
57
—
43
—
45
—
Residential real estate 6,682
6,749
—
3,835
39
4,039
83
Manufactured housing 9,665
9,665
—
8,971
9
8,785
290
With an allowance recorded:
Multi-family —
—
—
383
5
290
15
Commercial and industrial 6,120
6,120
1,024
7,561
43
7,256
155
Commercial real estate - owner occupied 840
840
287
—
—
6
—
Commercial real estate non-owner occupied 149
204
14
328
2
438
6
Other consumer —
—
—
—
—
36
—
Residential real estate 290
303
35
300
—
421
—
Total $ 29,411
$ 30,692
$ 1,360
$ 63,525
$ 861
$ 56,934
$ 2,002

Troubled Debt Restructurings

At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, there were ~~$20.8~~$16.8 million and ~~$16.4~~$16.1 million, respectively, in loans reported as ~~troubled debt restructurings (“TDRs”).~~TDRs. TDRs are reported as impaired loans in the ~~calendar year~~quarter of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent ~~years,~~quarters, a TDR may be returned to accrual status if it satisfies a minimum ~~six-month~~ performance requirement of six months, however, it will remain classified as impaired. Generally, the Bank requires sustained performance for nine months before returning a TDR to accrual status. Customers had 0 lease receivables that had been restructured as a TDR as of June 30, 2021 and December 31, 2020, respectively.

~~Modification~~Section 4013 of ~~purchased-credit-impaired loans that are accounted for within loan pools in accordance with~~the CARES Act, as amended by the CAA, gives entities temporary relief from the accounting ~~standards~~and disclosure requirements for ~~purchased-credit-impaired loans do not result~~TDRs. In addition, on April 7, 2020, certain regulatory banking agencies issued an interagency statement that offers practical expedients for evaluating whether loan modifications in response to the ~~removal of these loans from~~COVID-19 pandemic are TDRs. For COVID-19 related loan modifications which met the ~~pool even if~~loan modification criteria under either the ~~modifications would otherwise be considered a TDR. Accordingly, as each pool is accounted~~CARES Act or the criteria specified by the regulatory agencies, Customers elected to suspend TDR accounting for ~~as a single asset with a single composite interest rate~~such loan modifications. At June 30, 2021, commercial and ~~an aggregate expectation of cash flows, modifications of loans within such pools are not considered TDRs.~~consumer deferments related to COVID-19 were $89.8 million and $8.4 million, respectively. At December 31, 2020, commercial and consumer deferments related to COVID-19 were $202.1 million and $16.4 million, respectively.

The following table presents loans modified in a ~~troubled debt restructuring~~TDR by type of concession for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020. There were no0 modifications that involved forgiveness of ~~debt.~~

Three Months Ended
September 30, 2017

Three Months Ended
September 30, 2016
Number
of Loans Recorded
Investment Number
of Loans Recorded
Investment
(dollars in thousands)
Extensions of maturity 1
$ 60
—
$ —
Interest-rate reductions 3
122
10
533
Total 4
$ 182
10
$ 533

Nine Months Ended
September 30, 2017

Nine Months Ended
September 30, 2016
Number
of Loans Recorded
Investment Number
of Loans Recorded
Investment
(dollars in thousands)
Extensions of maturity 4
$ 6,263
3
$ 1,995
Interest-rate reductions 32
1,297
49
1,932
Total 36
$ 7,560
52
$ 3,927

~~The following table provides, by loan type, the number of loans modified in troubled~~ debt ~~restructurings, and the related recorded investment, during~~for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~

2020.

Three Months Ended
September 30, 2017

Three Months Ended
September 30, 2016
Number
of Loans Recorded
Investment Number
of Loans Recorded
Investment
(dollars in thousands)
Commercial and industrial —
$ —
—
$ —
Manufactured housing 4
182
10
533
Residential real estate —
—
—
—
Total loans 4
$ 182
10
$ 533


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment		Number of loans	Recorded investment		Number of loans	Recorded investment
Extensions of maturity	0	$	0	2	$	140	0	$	0	6	$	385
Interest-rate reductions	4	157		20	843		12	341		32	1,373
Other (1)	99	1,141		0	0		119	1,682		0	0
Total	103	$	1,298	22	$	983	131	$	2,023	38	$	1,758

Nine Months Ended
September 30, 2017

Nine Months Ended
September 30, 2016
Number
of Loans Recorded
Investment Number
of Loans Recorded
Investment
(dollars in thousands)
Commercial and industrial 3
$ 6,203
1
$ 76
Commercial real estate non-owner occupied —
—
1
1,844
Manufactured housing 33
1,357
47
1,716
Residential real estate —
—
3
291
Total loans 36
$ 7,560
52
$ 3,927

(1) Other includes covenant modifications, forbearance, loans discharged under Chapter 7 bankruptcy, or other concessions.

As of ~~September~~June 30, ~~2017, except for one commercial~~2021 and ~~industrial loan with an outstanding commitment of $2.3 million,~~December 31, 2020, there were ~~no other~~0 commitments to lend additional funds to debtors whose loans have been modified in TDRs. ~~There were no commitments to lend additional funds to debtors whose~~

The following table presents, by loan type, the number of loans ~~have been~~ modified in TDRs ~~at December 31, 2016.~~

~~As of September 30, 2017, ten manufactured housing loans totaling $0.5 million that were modified in TDRs~~and the related recorded investment, for which there was a payment default within ~~the past~~ twelve months ~~defaulted on payments. As of September 30, 2016, five manufactured housing loans totaling $0.1 million, that were modified in TDRs within~~following the ~~past twelve months, defaulted on payments.~~modification:


	June 30, 2021			June 30, 2020
(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment
Manufactured housing	7	$	189	0	$	0

Commercial real estate owner occupied	0	0		1	958
Residential real estate	1	43		4	313
Installment	15	247		0	0
Total loans	23	$	479	5	$	1,271

Loans modified in ~~troubled debt restructurings~~TDRs are evaluated for impairment. The nature and extent of impairment of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of allowance for loan losses. There was no allowance recorded as a result of TDR modifications during the three months ended September 30, 2017. For the nine months ended September 30, 2017, there was one allowance recorded resulting from TDR modifications, totaling $1 thousand for one manufactured housing loan. There was one specific allowance totaling $29 thousand for one commercial real estate non-owner occupied loan resulting from TDR modifications during the three and nine months ended September 30, 2016.

ACL.

Purchased ~~Credit Impaired~~Credit-Deteriorated Loans

~~The changes in accretable yield related to purchased-credit-impaired loans~~Customers adopted ASC 326 Financial Instruments - Credit Losses ("ASC 326") using the prospective transition approach for ~~the three~~financial assets purchased with credit deterioration that were previously classified as PCI and ~~nine months ended September 30, 2017 and 2016 were as follows:~~

Three Months Ended September 30,
2017 2016
(amounts in thousands)
Accretable yield balance as of June 30, $ 9,006
$ 11,165
Accretion to interest income (368 ) (460 )
Reclassification from nonaccretable difference and disposals, net (276 ) 107
Accretable yield balance as of September 30, $ 8,362
$ 10,812

Nine Months Ended September 30,
2017 2016
(amounts in thousands)
Accretable yield balance as of December 31, $ 10,202
$ 12,947
Accretion to interest income (1,326 ) (1,429 )
Reclassification from nonaccretable difference and disposals, net (514 ) (706 )
Accretable yield balance as of September 30, $ 8,362
$ 10,812

~~Allowance~~accounted for ~~Loan Losses and the FDIC Loss Sharing Receivable and Clawback Liability~~

Losses incurred on covered loans were eligible for partial reimbursement by the FDIC. Subsequent to the purchase date, the expected cash flows on the covered loans were subject to evaluation. Decreases in the present value of expected cash flows on the covered loans were recognized by increasing the allowance for loan losses with a related charge to the provision for loan losses. At the same time, the FDIC indemnification asset was increased reflecting an estimated future collection from the FDIC, which was recorded as a reduction to the provision for loan losses. If the expected cash flows on the covered loans increased such that a previously recorded impairment could be reversed, the Bank recorded a reduction in the allowance for loan losses (with a related credit to the provision for loan losses) accompanied by a reduction in the FDIC receivable balance (with a related charge to the provision for loan losses). Increases in expected cash flows on covered loans and decreases in expected cash flows from the FDIC loss sharing receivable, when there were no previously recorded impairments, were considered together and recognized over the remaining life of the loans as interest income. Decreases in the valuations of other real estate owned covered by the loss sharing agreements were recorded net of the estimated FDIC receivable as an increase to other real estate owned expense (a component of non-interest expense).

~~On July 11, 2016, Customers entered into an agreement to terminate all existing rights and obligations pursuant to the loss sharing agreements~~under ASC 310-30. In accordance with the ~~FDIC. In connection with~~standard, Customers did not reassess whether PCI assets met the termination agreement, Customers paid the FDIC $1.4 million as final payment under these agreements. The negotiated settlement amount was based on net losses incurred on the covered assets through September 30, 2015, adjusted for cash payments to and receipts from the FDIC as partcriteria of the December 31, 2015 and March 31, 2016 certifications. Consequently, loans and other real estate owned previously reported as covered assets pursuant to the loss sharing agreements were no longer presented as coveredPCD assets as of the date of adoption. As of June 30, ~~2016.~~

~~The following table presents changes in~~2021 and December 31, 2020, the ~~allowance for loan losses~~amortized cost basis of PCD assets amounted to $11.7 million and ~~the FDIC loss sharing receivable, including the effects of the estimated clawback liability and the termination agreement, for the three and nine months ended September 30, 2017 and 2016.~~$13.4 million, respectively.

Allowance for Loan Losses
Three Months Ended September 30,
(amounts in thousands) 2017 2016
Ending balance as of June 30, $ 38,458
$ 38,097
Provision for loan losses (1) 2,352
88
Charge-offs (2,585 ) (666 )
Recoveries 89
378
Ending balance as of September 30, $ 38,314
$ 37,897

Table of Contents

FDIC Loss Sharing Receivable/
Clawback Liability
Three Months Ended September 30,
(amounts in thousands) 2017 2016
Ending balance as of June 30, $ —
$ (1,381 )
Cash payments to the FDIC —
1,381
Ending balance as of September 30, $ —
$ —

(1) Provision for loan losses $ 2,352
$ 88
Net amount reported as provision for loan losses $ 2,352
$ 88

Allowance for Loan Losses
Nine Months Ended September 30,
(amounts in thousands) 2017 2016
Ending balance as of December 31, $ 37,315
$ 35,647
Provision for loan losses (1) 5,937
3,143
Charge-offs (5,576 ) (1,848 )
Recoveries 638
955
Ending balance as of September 30, $ 38,314
$ 37,897

FDIC Loss Sharing Receivable/
Clawback Liability
Nine Months Ended September 30,
(amounts in thousands) 2017 2016
Ending balance as of December 31, $ —
$ (2,083 )
Increased estimated cash flows (2) —
289
Other activity, net (a) —
(255 )
Cash payments to the FDIC —
2,049
Ending balance as of September 30, $ —
$ —

(1) Provision for loan losses $ 5,937
$ 3,143
(2) Effect attributable to FDIC loss share arrangements —
(289 )
Net amount reported as provision for loan losses $ 5,937
$ 2,854

~~(a) Includes external costs, such as legal fees, real estate taxes, and appraisal expenses, which qualified for reimbursement under the FDIC loss sharing agreements.~~

Credit Quality Indicators

The ACL represents management's estimate of expected losses in Customers' loans and leases receivable portfolio, excluding commercial mortgage warehouse loans reported at fair value pursuant to a fair value option election and PPP loans receivable. Multi-family, commercial and industrial, owner occupied commercial real estate, non-owner occupied commercial real estate, ~~construction,~~ and ~~residential real estate~~construction loans are rated based on an internally assigned risk rating system which is assigned at the time of loan origination and reviewed on a periodic, or on an “as needed” basis. ~~Manufactured~~Residential real estate loans, manufactured housing and ~~other consumer~~installment loans are evaluated based on the payment activity of the loan.

To facilitate the monitoring of credit quality within the multi-family, commercial and industrial, owner occupied commercial real estate, non-owner occupied commercial real estate, and construction loan portfolios, and ~~residential real estate classes, and for purposes of analyzing historical loss rates used~~as an input in the ~~determination of the allowance for loan losses~~ACL lifetime loss rate model for the ~~respective~~commercial and industrial loan portfolio, ~~class,~~ the Bank utilizes the following categories of risk ratings: pass/satisfactory (includes risk rating 1 through 6), special mention, substandard, doubtful, and loss. The risk rating categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass/satisfactory ratings, which are

assigned to those borrowers who do not have identified potential or well-defined weaknesses and for whom there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on a quarterly basis during the month preceding the end of the calendar quarter. While assigning risk ratings involves judgment, the risk-rating process allows management to identify riskier credits in a timely manner and allocate the appropriate resources to manage those ~~loans.~~

loans and leases. The 2020 Form 10-K describes Customers Bancorp’s risk rating ~~grades are defined as follows:~~

~~“1” –~~ ~~Pass~~/~~Excellent~~

Loans rated 1 represent a credit extension of the highest quality. The borrower’s historic (at least five years) cash flows manifest extremely large and stable margins of coverage. Balance sheets are conservative, well capitalized, and liquid. After considering debt service for proposed and existing debt, projected cash flows continue to be strong and provide ample coverage. The borrower typically reflects broad geographic and product diversification and has access to alternative financial markets.

~~“2” –~~ ~~Pass~~/~~Superior~~

Loans rated 2 are those for which the borrower has a strong financial condition, balance sheet, operations, cash flow, debt capacity and coverage with ratios better than industry norms. The borrowers of these loans exhibit a limited leverage position, are virtually immune to local economies, and are in stable growing industries. The management team is well respected and the company has ready access to public markets.

~~“3” –~~ ~~Pass~~/~~Strong~~

Loans rated 3 are those loans for which the borrowers have above average financial condition and flexibility; more than satisfactory debt service coverage; balance sheet and operating ratios are consistent with or better than industry peers; operate in industries with little risk; move in diversified markets; and are experienced and competent in their industry. These borrowers’ access to capital markets is limited mostly to private sources, often secured, but the borrower typically has access to a wide range of refinancing alternatives.

~~“4” –~~ ~~Pass~~/~~Good~~

Loans rated 4 have a sound primary and secondary source of repayment. The borrower may have access to alternative sources of financing, but sources are not as widely available as they are to a higher grade borrower. These loans carry a normal level of risk, with very low loss exposure. The borrower has the ability to perform according to the terms of the credit facility. The margins of cash flow coverage are satisfactory but vulnerable to more rapid deterioration than the higher quality loans.

~~“5” –~~ ~~Satisfactory~~

Loans rated 5 are extended to borrowers who are determined to be a reasonable credit risk and demonstrate the ability to repay the debt from normal business operations. Risk factors may include reliability of margins and cash flows, liquidity, dependence on a single product or industry, cyclical trends, depth of management, or limited access to alternative financing sources. The borrower’s historical financial information may indicate erratic performance, but current trends are positive and the quality of financial information is adequate, but is not as detailed and sophisticated as information found on higher grade loans. If adverse circumstances arise, the impact on the borrower may be significant.

~~“6” –~~ ~~Satisfactory~~/~~Bankable with Care~~

Loans rated 6 are those for which the borrower has higher than normal credit risk; however, cash flow and asset values are generally intact. These borrowers may exhibit declining financial characteristics, with increasing leverage and decreasing liquidity and may have limited resources and access to financial alternatives. Signs of weakness in these borrowers may include delinquent taxes, trade slowness and eroding profit margins.

~~“7” –~~ ~~Special Mention~~

Loans rated Special Mention are credit facilities that may have potential developing weaknesses and deserve extra attention from the account manager and other management personnel. In the event potential weaknesses are not corrected or mitigated, deterioration in the ability of the borrower to repay the debt in the future may occur. This grade is not assigned to loans that

bear certain peculiar risks normally associated with the type of financing involved, unless circumstances have caused the risk to increase to a level higher than would have been acceptable when the credit was originally approved. Loans where significant actual, not potential, weaknesses or problems are clearly evident are graded in the category below.

~~“8” –~~ ~~Substandard~~

Loans are classified Substandard when the loans are inadequately protected by the current sound worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the company will sustain some loss if the weaknesses are not corrected.

~~“9” –~~ ~~Doubtful~~

The Bank assigns a doubtful rating to loans that have all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to the advantage of and strengthen the credit quality of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceeding, capital injection, perfecting liens on additional collateral or refinancing plans.

~~“10” –~~ ~~Loss~~

The Bank assigns a loss rating to loans considered uncollectible and of such little value that their continuance as an active asset is not warranted. Amounts classified as loss are immediately charged off.grades.

Risk ratings are not established for certain consumer loans, including residential real estate, home equity, manufactured housing, and installment loans, mainly because these portfolios consist of a larger number of homogeneous loans with smaller balances. Instead, these portfolios are evaluated for risk mainly based upon aggregate payment history through the monitoring of delinquency levels and trends and are classified as performing and non-performing.

The following tables present the credit ratings of loans and leases receivable as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016.~~2020.

Table of Contents

September 30, 2017
Multi-family
Commercial
and
Industrial

Commercial
Real Estate Owner Occupied
Commercial Real Estate Non-Owner Occupied Construction
Residential
Real Estate
Manufactured Housing Other Consumer Total
(amounts in thousands)
Pass/Satisfactory $ 3,577,304
$ 1,080,797
$ 468,389
$ 1,212,945
$ 73,203
$ 431,364
$ —
$ —
$ 6,844,002
Special Mention 36,604
8,663
9,716
22,008
—
—
—
—
76,991
Substandard 5,081
25,762
8,462
2,896
—
3,824
—
—
46,025
Performing (1) —
—
—
—
—
—
85,537
3,694
89,231
Non-performing (2) —
—
—
—
—
—
7,401
125
7,526
Total $ 3,618,989
$ 1,115,222
$ 486,567
$ 1,237,849
$ 73,203
$ 435,188
$ 92,938
$ 3,819
$ 7,063,775


	Term Loans Amortized Cost Basis by Origination Year as of June 30, 2021
(amounts in thousands)	2021		2020		2019		2018		2017		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total






Multi-family loans:
Pass	$	89,905	$	135,133	$	23,427	$	243,767	$	378,768	$	534,970	$	0	$	0	$	1,405,970
Special mention	0		0		0		0		12,100		8,979		0		0		21,079
Substandard	0		0		0		0		41,560		28,876		0		0		70,436
Doubtful	0		0		0		0		0		0		0		0		0
Total multi-family loans	$	89,905	$	135,133	$	23,427	$	243,767	$	432,428	$	572,825	$	0	$	0	$	1,497,485
Commercial and industrial loans and leases:
Pass	$	433,908	$	417,713	$	320,158	$	102,737	$	101,552	$	102,040	$	780,892	$	0	$	2,259,000
Special mention	18,883		4,335		6,364		214		0		234		14,333		0		44,363
Substandard	0		10,192		7,462		17,570		7,163		7,584		7,322		0		57,293
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial and industrial loans and leases	$	452,791	$	432,240	$	333,984	$	120,521	$	108,715	$	109,858	$	802,547	$	0	$	2,360,656
Commercial real estate owner occupied loans:
Pass	$	121,180	$	83,122	$	164,925	$	60,990	$	60,542	$	122,010	$	672	$	0	$	613,441
Special mention	0		0		0		320		2,072		588		0		0		2,980
Substandard	0		0		7,087		9,538		9,012		11,591		0		0		37,228
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial real estate owner occupied loans	$	121,180	$	83,122	$	172,012	$	70,848	$	71,626	$	134,189	$	672	$	0	$	653,649






Commercial real estate non-owner occupied:
Pass	$	92,285	$	158,983	$	95,875	$	68,193	$	115,452	$	395,022	$	0	$	0	$	925,810
Special mention	0		21,925		11,229		22,002		99,469		43,573		0		0		198,198
Substandard	0		0		0		23,494		20,611		38,533		0		0		82,638
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial real estate non-owner occupied loans	$	92,285	$	180,908	$	107,104	$	113,689	$	235,532	$	477,128	$	0	$	0	$	1,206,646
Construction:
Pass	$	3,311	$	36,135	$	122,833	$	4,895	$	0	$	9,565	$	949	$	0	$	177,688
Special mention	0		1,510		0		0		0		0		0		0		1,510
Substandard	0		0		0		0		0		0		0		0		0
Doubtful	0		0		0		0		0		0		0		0		0
Total construction loans	$	3,311	$	37,645	$	122,833	$	4,895	$	0	$	9,565	$	949	$	0	$	179,198
Total commercial loans and leases receivable	$	759,472	$	869,048	$	759,360	$	553,720	$	848,301	$	1,303,565	$	804,168	$	0	$	5,897,634
Residential real estate loans:
Performing	$	2,961	$	10,493	$	14,089	$	11,887	$	6,861	$	95,687	$	116,081	$	0	$	258,059
Non-performing	0		0		97		900		777		4,768		2,310		0		8,852
Total residential real estate loans	$	2,961	$	10,493	$	14,186	$	12,787	$	7,638	$	100,455	$	118,391	$	0	$	266,911
Manufactured housing loans:
Performing	$	0	$	0	$	296	$	385	$	76	$	52,180	$	0	$	0	$	52,937
Non-performing	0		0		0		0		0		4,967		0		0		4,967
Total manufactured housing loans	$	0	$	0	$	296	$	385	$	76	$	57,147	$	0	$	0	$	57,904
Installment loans:
Performing	$	515,870	$	444,610	$	509,216	$	73,677	$	2,668	$	1,167	$	0	$	0	$	1,547,208
Non-performing	6		594		1,609		219		7		50		0		0		2,485
Total installment loans	$	515,876	$	445,204	$	510,825	$	73,896	$	2,675	$	1,217	$	0	$	0	$	1,549,693
Total consumer loans	$	518,837	$	455,697	$	525,307	$	87,068	$	10,389	$	158,819	$	118,391	$	0	$	1,874,508
Loans and leases receivable	$	1,278,309	$	1,324,745	$	1,284,667	$	640,788	$	858,690	$	1,462,384	$	922,559	$	0	$	7,772,142

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December 31, 2016
Multi-family Commercial
and
Industrial Commercial
Real Estate Owner Occupied Commercial Real Estate Non-Owner Occupied Construction Residential
Real Estate Manufactured
Housing Other Consumer Total
(amounts in thousands)
Pass/Satisfactory $ 3,198,290
$ 954,846
$ 375,919
$ 1,175,850
$ 50,291
$ 189,919
$ —
$ —
$ 5,945,115
Special Mention —
19,552
12,065
10,824
14,498
—
—
—
56,939
Substandard 16,709
14,313
5,648
7,041
—
3,583
—
—
47,294
Performing (1) —
—
—
—
—
—
92,920
3,413
96,333
Non-performing (2) —
—
—
—
—
—
8,810
70
8,880
Total $ 3,214,999
$ 988,711
$ 393,632
$ 1,193,715
$ 64,789
$ 193,502
$ 101,730
$ 3,483
$ 6,154,561


	Term Loans Amortized Cost Basis by Origination Year as of December 31, 2020
(amounts in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total






Multi-family loans:
Pass	$	150,835	$	23,716	$	299,319	$	535,510	$	227,296	$	420,809	$	0	$	0	$	1,657,485
Special mention	0		0		0		20,901		10,394		26,708		0		0		58,003
Substandard	0		0		0		34,197		8,256		3,360		0		0		45,813
Doubtful	0		0		0		0		0		0		0		0		0
Total multi-family loans	$	150,835	$	23,716	$	299,319	$	590,608	$	245,946	$	450,877	$	0	$	0	$	1,761,301
Commercial and industrial loans and leases:
Pass	$	729,270	$	373,050	$	141,943	$	116,793	$	45,367	$	71,502	$	717,007	$	0	$	2,194,932
Special mention	13,200		1,117		436		113		516		21		17,524		0		32,927
Substandard	9,968		6,890		19,065		5,901		8,318		2,722		8,718		0		61,582
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial and industrial loans and leases	$	752,438	$	381,057	$	161,444	$	122,807	$	54,201	$	74,245	$	743,249	$	0	$	2,289,441
Commercial real estate owner occupied loans:
Pass	$	82,343	$	168,977	$	72,615	$	70,642	$	46,510	$	91,798	$	741	$	0	$	533,626
Special mention	0		4,464		0		9,056		0		555		0		0		14,075
Substandard	0		2,848		9,499		342		2,231		9,717		0		0		24,637
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial real estate owner occupied loans	$	82,343	$	176,289	$	82,114	$	80,040	$	48,741	$	102,070	$	741	$	0	$	572,338
Commercial real estate non-owner occupied:
Pass	$	143,231	$	105,430	$	97,882	$	157,835	$	155,168	$	313,559	$	0	$	0	$	973,105
Special mention	39,994		0		0		66,745		24,218		14,613		0		0		145,570
Substandard	0		0		17,741		20,611		366		39,171		0		0		77,889
Doubtful	0		0		0		0		0		0		0		0		0
Total commercial real estate non-owner occupied loans	$	183,225	$	105,430	$	115,623	$	245,191	$	179,752	$	367,343	$	0	$	0	$	1,196,564
Construction:
Pass	$	19,932	$	105,466	$	4,954	$	0	$	9,700	$	0	$	853	$	0	$	140,905
Special mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0		0
Doubtful	0		0		0		0		0		0		0		0		0
Total construction loans	$	19,932	$	105,466	$	4,954	$	0	$	9,700	$	0	$	853	$	0	$	140,905
Total commercial loans and leases receivable	$	1,188,773	$	791,958	$	663,454	$	1,038,646	$	538,340	$	994,535	$	744,843	$	0	$	5,960,549
Residential real estate loans:
Performing	$	6,708	$	13,617	$	6,810	$	10,850	$	38,143	$	69,496	$	161,576	$	0	$	307,200
Non-performing	0		0		160		785		1,350		4,395		3,280		0		9,970
Total residential real estate loans	$	6,708	$	13,617	$	6,970	$	11,635	$	39,493	$	73,891	$	164,856	$	0	$	317,170
Manufactured housing loans:
Performing	$	0	$	295	$	609	$	76	$	41	$	56,837	$	0	$	0	$	57,858
Non-performing	0		0		0		0		0		4,385		0		0		4,385
Total manufactured housing loans	$	0	$	295	$	609	$	76	$	41	$	61,222	$	0	$	0	$	62,243
Installment loans:
Performing	$	319,453	$	791,235	$	114,988	$	4,736	$	514	$	1,204	$	0	$	0	$	1,232,130
Non-performing	305		2,326		485		41		2		117		0		0		3,276
Total installment loans	$	319,758	$	793,561	$	115,473	$	4,777	$	516	$	1,321	$	0	$	0	$	1,235,406
Total consumer loans	$	326,466	$	807,473	$	123,052	$	16,488	$	40,050	$	136,434	$	164,856	$	0	$	1,614,819
Loans and leases receivable	$	1,515,239	$	1,599,431	$	786,506	$	1,055,134	$	578,390	$	1,130,969	$	909,699	$	0	$	7,575,368


~~(1)~~	~~Includes consumer and other installment loans not subject to risk ratings.~~


~~(2)~~	~~Includes loans that are past due and still accruing interest and loans on nonaccrual status.~~

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Loan Purchases and Sales

~~In first quarter 2017, Customers purchased $174.2 million~~Purchases and sales of ~~thirty-year fixed-rate residential mortgage~~ loans ~~from Florida-based Everbank.~~were as follows for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	2021		2020		2021		2020
Purchases (1)

Loans receivable, PPP	$	460,456	$	0	$	621,487	$	0



Residential real estate	0		0		0		495

Installment (2)	0		18,008		115,849		209,768
Total	$	460,456	$	18,008	$	737,336	$	210,263
Sales (3)
Multi-family	$	19,443	$	0	$	19,443	$	0
Commercial and industrial	10,059		0		28,990		0
Commercial real estate owner occupied	4,461		0		6,698		0
Commercial real estate non-owner occupied	0		0		18,366		0

Residential real estate	11,623		0		28,186		0

Installment	28,818		0		28,818		1,822
Total	$	74,404	$	0	$	130,501	$	1,822

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 102.0% and 98.5% of loans ~~outstanding. In second quarter 2017, Customers purchased an additional $90.0 million of thirty-year fixed-rate residential mortgage loans from Everbank.~~outstanding for the three months ended June 30, 2021 and 2020, respectively. The purchase price was ~~101.0%~~103.0% and 100.4% of loans ~~outstanding. There were no~~outstanding for the six months ended June 30, 2021 and 2020, respectively.

(2)Installment loan purchases ~~during~~for the three and six months ended June 30, 2021 and 2020 consist of third-party originated unsecured consumer loans. None of the loans are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

(3)Amounts reported in the above table are the unpaid principal balance at time of sale. For the three months ended ~~September~~June 30, ~~2017~~2021 and ~~during the three or nine months ended September 30, 2016.~~

~~In first quarter 2017, Customers sold $94.9~~2020, loan sales resulted in net gains of $2.2 million ~~of multi-family loans for $95.4~~and $0.3 million, ~~resulting~~respectively, included in a gain (loss) on sale of ~~$0.5~~SBA and other loans and mortgage banking income in the consolidated statement of income (loss). For the six months ended June 30, 2021 and 2020, loan sales resulted in net gains of $4.3 million and ~~$8.7~~$0.4 million, of Small Business Administration (SBA) loans resulting in a gain on sale of $0.8 million. In second quarter 2017, Customers sold $7.0 million of SBA loans resulting in a gain on sale of $0.6 million. In third quarter 2017, Customers sold $11.0 million of SBA loans resulting in a gain on sale of $1.1 million. In first quarter 2016, Customers sold $6.9 million of SBA loans resulting in a gain on sale of $0.6 million. In second quarter 2016, Customers sold one commercial loan amounting to $5.7 million resulting in a loss on sale of $0.1 million and $3.6 million of SBA loans resulting in a gain on sale of $0.4 million. There were no loan sales during the third quarter 2016.respectively.

~~None of these purchases and sales during the nine months ended September 30, 2017 and 2016 materially affected the credit profile of Customers’ related loan portfolio.~~

Loans Pledged as Collateral

Customers has pledged eligible real estate and commercial and industrial loans, including PPP loans as collateral for ~~potential~~ borrowings from the ~~Federal Home Loan Bank of Pittsburgh ("FHLB")~~FHLB and FRB in the amount of ~~$5.5~~$7.1 billion and $8.5 billion at ~~September~~June 30, ~~2017, compared to $4.8 billion at~~2021 and December 31, ~~2016.~~2020, respectively. PPP loans of $3.9 billion and $4.6 billion were pledged to the FRB in accordance with borrowing from the PPPLF at June 30, 2021 and December 31, 2020, respectively.

NOTE 9 — LEASES

Lessee

Customers has operating leases for its branches, LPOs, and administrative offices, with remaining lease terms ranging between 2 months and 6 years. These operating leases comprise substantially all of Customers' obligations in which Customers is the lessee. Most lease agreements consist of initial lease terms ranging between 1 and 5 years, with options to renew the leases or extend the term up to 15 years at Customers' sole discretion. Some operating leases include variable lease payments that are based on an index or rate, such as the CPI. Variable lease payments are not included in the liability or right of use asset and are recognized in the period in which the obligation for those payments are incurred. Customers' operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, Customers does not have any commitments that would meet the definition of a finance lease.

As most of Customers' operating leases do not provide an implicit rate, Customers utilized its incremental borrowing rate based on the information available at either the adoption of ASC 842, Leases or the commencement date of the lease, whichever was later, when determining the present value of lease payments.

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The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding balance sheet location:


(amounts in thousands)	Classification	June 30, 2021		December 31, 2020
ASSETS
Operating lease ROU assets (1)	Other assets	$	15,555	$	16,578
LIABILITIES
Operating lease liabilities (1)	Other liabilities	$	16,923	$	18,005

(1) Excludes operating leases of BMT included in assets and liabilities of discontinued operations.

The following table summarizes operating lease cost and its corresponding income statement location for the periods presented:


		Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	Classification	2021		2020		2021		2020
Operating lease cost (1)(2)	Occupancy expenses	$	1,130	$	1,198	$	2,247	$	2,403

(1) There were 0 variable lease costs for the three and six months ended June 30, 2021 and 2020, and sublease income for operating leases is immaterial.

(2) Excludes operating lease costs of BMT included in loss from discontinued operations in the consolidated statement of income.

Maturities of non-cancelable operating lease liabilities were as follows at June 30, 2021:


(amounts in thousands)	June 30, 2021
2021	$	2,826
2022	5,097
2023	4,208
2024	3,177
2025	2,047
Thereafter	1,465
Total minimum payments	18,820
Less: interest	1,897
Present value of lease liabilities	$	16,923

Customers does not have leases where it is involved with the construction or design of an underlying asset. Customers has no legally binding minimum lease payments for leases signed but not yet commenced as of June 30, 2021. Cash paid pursuant to the operating lease liability was $1.4 million and $2.5 million for the three and six months ended June 30, 2021, respectively. Cash paid pursuant to the operating lease liability was $1.5 million and $3.0 million for the three and six months ended June 30, 2020, respectively. These payments were reported as cash flows used in operating activities in the statement of cash flows.

The following table summarizes the weighted average remaining lease term and discount rate for Customers' operating leases at June 30, 2021 and December 31, 2020:

(amounts in thousands)

June 30, 2021

December 31, 2020

Weighted average remaining lease term (years)

Operating leases (1)

4.1 years

4.7 years

Weighted average discount rate

Operating leases (1)

2.67

2.90

(1) Excludes operating leases of BMT included in assets and liabilities of discontinued operations.

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Equipment Lessor

CCF is a wholly-owned subsidiary of Customers Bank and is referred to as the Equipment Finance Group. CCF is primarily focused on originating equipment operating and direct finance equipment leases for a broad range of asset classes. It services vendors, dealers, independent finance companies, bank-owned leasing companies and strategic direct customers in the plastics, packaging, machine tool, construction, transportation and franchise markets. Lease terms typically range from 24 months to 120 months. CCF offers the following lease products: Capital Lease, Purchase Upon Termination, TRAC, Split-TRAC, and FMV. Direct finance equipment leases are included in commercial and industrial loans and leases receivable.

The estimated residual values for direct finance and operating leases are established by utilizing internally developed analyses, external studies, and/or third-party appraisals to establish a residual position. For the direct finance leases, only Customers' Split-TRAC leases have residual risk and the unguaranteed portions are typically nominal. Expected credit losses on direct financing leases and the related estimated residual values are included in the allowance for credit losses on loans and leases.

Leased assets under operating leases are carried at amortized cost net of accumulated depreciation and any impairment charges and are presented in other assets. The depreciation expense of the leased assets is recognized on a straight-line basis over the contractual term of the leases up to the expected residual value. The expected residual value and, accordingly, the monthly depreciation expense, may change throughout the term of the lease. Operating lease rental income for leased assets is recognized in commercial lease income on a straight-line basis over the lease term. Customers periodically reviews its operating leased assets for impairment. An impairment loss is recognized if the carrying amount of the operating leased asset exceeds its fair value and is not recoverable. The carrying amount of operating leased assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value upon the eventual disposition of the equipment.

The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at June 30, 2021 and December 31, 2020:


(amounts in thousands)	Classification	June 30, 2021		December 31, 2020
ASSETS
Direct financing leases
Lease receivables	Loans and leases receivable	$	122,372	$	104,982
Guaranteed residual assets	Loans and leases receivable	11,261		12,988
Unguaranteed residual assets	Loans and leases receivable	4,846		1,229
Deferred initial direct costs	Loans and leases receivable	503		560
Unearned income	Loans and leases receivable	(9,489)		(11,175)
Net investment in direct financing leases		$	129,493	$	108,584

Operating leases
Investment in operating leases	Other assets	$	138,359	$	131,791
Accumulated depreciation	Other assets	(35,568)		(28,919)
Deferred initial direct costs	Other assets	1,021		996
Net investment in operating leases		103,812		103,868
Total lease assets		$	233,305	$	212,452

COVID-19 Impact on Leases

Customers granted concessions to lessees as a result of the business impact of the COVID-19 pandemic. At June 30, 2021, the book values of finance and operating leases with payment deferments were $28.1 million and $8.1 million, respectively. At December 31, 2020, the book values of finance and operating leases with payment deferments were $30.4 million and $15.2 million, respectively. The concessions did not have a material impact on interest income from leases for the three and six months ended June 30, 2021 and 2020. Additionally, Customers did not receive any concessions on its operating leases in which Customers is the lessee.

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NOTE 10 - BORROWINGS

Short-term debt

InShort-term debt at June ~~2017,~~ 30, 2021 and December 31, 2020 was as follows:


	June 30, 2021				December 31, 2020
(dollars in thousands)	Amount		Rate		Amount		Rate

FHLB advances	$	0	0	%	$	850,000	1.19	%
Federal funds purchased	0		0	%	250,000		0.09	%
Total short-term debt	$	0			$	1,100,000

The following is a summary of additional information relating to Customers' short-term debt:



(dollars in thousands)	June 30, 2021 (1)			December 31, 2020 (2)

FHLB advances
Maximum outstanding at any month end	$	850,000		$	910,000
Average balance during the period	500,273			809,788
Weighted-average interest rate during the period	2.48		%	2.31		%
Federal funds purchased
Maximum outstanding at any month end	365,000			842,000
Average balance during the period	44,171			239,481
Weighted-average interest rate during the period	0.07		%	0.19		%

(1) For the six months ended June 30, 2021.

(2) For the year ended December 31, 2020.

At June 30, 2021 and December 31, 2020, Customers Bank had aggregate availability under federal funds lines totaling $1.3 billion and $924.0 million, respectively.

Long-term debt

FHLB and FRB advances

Long-term FHLB and FRB advances at June 30, 2021 and December 31, 2020 were as follows:



	June 30, 2021				December 31, 2020
(dollars in thousands)	Amount		Rate		Amount		Rate


FRB PPP Liquidity Facility advances	$	3,865,865	0.35	%	$	4,415,016	0.35	%
Total long-term FHLB and FRB advances	$	3,865,865			$	4,415,016

Beginning in second quarter 2020, Customers began participating in the PPPLF, in which Federal Reserve Banks extend non-recourse loans to institutions that are eligible to make PPP loans. Only PPP loans that are guaranteed by the SBA under the PPP, with respect to both principal and interest that are originated or purchased by an eligible institution, may be pledged as collateral to the Federal Reserve Banks.

The maximum borrowing capacity with the FHLB and FRB at June 30, 2021 and December 31, 2020 was as follows:



(amounts in thousands)	June 30, 2021		December 31, 2020
Total maximum borrowing capacity with the FHLB	$	2,387,172	$	2,729,516
Total maximum borrowing capacity with the FRB (1)	197,894		223,299
Qualifying loans serving as collateral against FHLB and FRB advances (1)	3,156,850		3,363,364

(1) Amounts reported in the above table exclude borrowings under the PPPLF, which are limited to the face value of the loans originated under the PPP. At June 30, 2021, Customers had $3.9 billion of borrowings under the PPPLF, with a borrowing capacity of up to $6.3 billion, which is the face value of the qualifying loans Customers has originated or purchased and outstanding under the PPP. At December 31, 2020, Customers had $4.4 billion of borrowings under the PPPLF.

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Senior and Subordinated Debt

Long-term senior notes and subordinated debt at June 30, 2021 and December 31, 2020 were as follows:


		June 30, 2021		December 31, 2020
(dollars in thousands)
Issued by	Ranking	Amount		Amount		Rate		Issued Amount		Date Issued	Maturity	Price
Customers Bancorp	Senior	$	24,612	$	24,552	4.500	%	$	25,000	September 2019	September 2024	100.000	%
Customers Bancorp	Senior	99,629		99,485		3.950	%	100,000		June 2017	June 2022	99.775	%

Total other borrowings		$	124,241	$	124,037

Customers Bancorp	Subordinated (1)(2)	$	72,313	$	72,222	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Subordinated (1)(3)	109,221		109,172		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt		$	181,534	$	181,394

(1)The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.

(2)Customers Bancorp ~~issued $100 million~~has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of ~~senior~~the principal balance at certain times on or after December 30, 2029.

(3)The subordinated notes ~~at 99.775% of face value. The price to purchasers represents a yield-to-maturity of 4.0% on the~~will bear an annual fixed ~~coupon~~ rate of ~~3.95%. The senior~~6.125% until June 26, 2024. From June 26, 2024 until maturity, the notes ~~mature in June 2022.~~

~~The net proceeds~~will bear an annual interest rate equal to ~~Customers after deducting~~ the ~~underwriting discount and estimated offering expenses were approximately $98.6 million. The net proceeds were contributed to~~three-month LIBOR plus 344.3 basis points. Customers Bank ~~for purposes~~has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of ~~its working capital needs and~~ the ~~funding of its organic growth.~~principal balance at certain times on or after June 26, 2024.

NOTE 11 — REGULATORY CAPITAL

The Bank and the Bancorp are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can result in certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on Customers' financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and the Bancorp must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under the regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

In first quarter 2020, U.S federal banking regulatory agencies permitted banking organizations to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 31, 2020, the U.S. federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows banking organizations to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. Customers has elected to adopt the interim final rule, which is reflected in the regulatory capital data presented below.

In April 2020, the U.S. federal banking regulatory agencies issued an interim final rule that permits banks to exclude the impact of participating in the SBA PPP program in their regulatory capital ratios. Specifically, PPP loans are zero percent risk weighted and a bank can exclude all PPP loans pledged as collateral to the PPPLF from its average total consolidated assets for purposes of calculating the Tier 1 capital to average assets ratio (i.e. leverage ratio). Customers applied this regulatory guidance in the calculation of its regulatory capital ratios presented below.

Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Bancorp to maintain minimum amounts and ratios (set forth in the following table) of common equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the Bank and the Bancorp satisfied all capital requirements to which they were subject.

The Dodd-Frank Act required the Federal Reserve Bank to establish minimum consolidated capital requirements for bank holding companies that are as stringent as those required for insured depositary subsidiaries. In 2013, the federal banking agencies approved rules that implemented the Dodd-Frank requirements and certain other regulatory capital reforms effective January 1, 2015, that (i) introduced a new capital ratio pursuant to the prompt corrective action provisions, the common equity tier 1 capital to risk weighted assets ratio, (ii) increased the adequately capitalized and well capitalized thresholds for the Tier 1

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risk based capital ratios to 6% and 8%, respectively, (iii) changed the treatment of certain capital components for determining Tier 1 and Tier 2 capital, and (iv) changed the risk weighting of certain assets and off-balance sheet items in determining risk weighted assets.

Generally, to ~~be considered~~comply with the regulatory definition of adequately capitalized, or well capitalized, respectively, or to comply with the Basel III capital requirements, an institution must at least maintain the common equity Tier 1, Tier 1 and total ~~risk based~~risk-based capital ratios and the Tier 1 leverage ratio in excess of the related minimum ratios as set forth in the following table:

Actual For Capital Adequacy Purposes (Minimum Plus Capital Buffer)
To Be Well Capitalized Under
Prompt Corrective Action
Provisions
(amounts in thousands) Amount Ratio Amount Ratio Amount Ratio
As of September 30, 2017:
Common equity Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc. $ 677,976
8.284 % $ 470,603
5.750 % N/A
N/A
Customers Bank $ 1,009,380
12.342 % $ 470,242
5.750 % $ 531,578
6.500 %
Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc. $ 895,447
10.941 % $ 593,369
7.250 % N/A
N/A
Customers Bank $ 1,009,380
12.342 % $ 592,914
7.250 % $ 654,250
8.000 %
Total capital (to risk weighted assets)
Customers Bancorp, Inc. $ 1,014,784
12.399 % $ 757,057
9.250 % N/A
N/A
Customers Bank $ 1,156,766
14.145 % $ 756,477
9.250 % $ 817,813
10.000 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc. $ 895,447
8.355 % $ 428,709
4.000 % N/A
N/A
Customers Bank $ 1,009,380
9.434 % $ 427,963
4.000 % $ 534,954
5.000 %
As of December 31, 2016:
Common equity Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc. $ 628,139
8.487 % $ 379,306
5.125 % N/A
N/A
Customers Bank $ 857,421
11.626 % $ 377,973
5.125 % $ 479,380
6.500 %
Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc. $ 844,755
11.414 % $ 490,322
6.625 % N/A
N/A
Customers Bank $ 857,421
11.626 % $ 488,599
6.625 % $ 590,006
8.000 %
Total capital (to risk weighted assets)
Customers Bancorp, Inc. $ 966,097
13.053 % $ 638,343
8.625 % N/A
N/A
Customers Bank $ 1,003,609
13.608 % $ 636,101
8.625 % $ 737,508
10.000 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc. $ 844,755
9.067 % $ 372,652
4.000 % N/A
N/A
Customers Bank $ 857,421
9.233 % $ 371,466
4.000 % $ 464,333
5.000 %


					Minimum Capital Levels to be Classified as:
	Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant
(amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2021:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,082,396	9.560	%	$	509,472	4.500	%	N/A		N/A		$	792,512	7.000	%
Customers Bank	$	1,403,324	12.395	%	$	509,460	4.500	%	$	735,886	6.500	%	$	792,493	7.000	%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,299,867	11.481	%	$	679,296	6.000	%	N/A		N/A		$	962,337	8.500	%
Customers Bank	$	1,403,324	12.395	%	$	679,279	6.000	%	$	905,706	8.000	%	$	962,313	8.500	%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,502,069	13.267	%	$	905,729	8.000	%	N/A		N/A		$	1,188,769	10.500	%
Customers Bank	$	1,559,161	13.772	%	$	905,706	8.000	%	$	1,132,132	10.000	%	$	1,188,739	10.500	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	1,299,867	8.389	%	$	619,832	4.000	%	N/A		N/A		$	619,832	4.000	%
Customers Bank	$	1,403,324	9.070	%	$	618,871	4.000	%	$	773,589	5.000	%	$	618,871	4.000	%
As of December 31, 2020:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	954,839	8.079	%	$	531,844	4.500	%	N/A		N/A		$	827,312	7.000	%
Customers Bank	$	1,254,082	10.615	%	$	531,639	4.500	%	$	767,923	6.500	%	$	826,994	7.000	%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,172,310	9.919	%	$	709,125	6.000	%	N/A		N/A		$	1,004,594	8.500	%
Customers Bank	$	1,254,082	10.615	%	$	708,852	6.000	%	$	945,136	8.000	%	$	1,004,207	8.500	%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,401,119	11.855	%	$	945,500	8.000	%	N/A		N/A		$	1,240,969	10.500	%
Customers Bank	$	1,424,791	12.060	%	$	945,136	8.000	%	$	1,181,421	10.000	%	$	1,240,492	10.500	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	1,172,310	8.597	%	$	545,485	4.000	%	N/A		N/A		$	545,485	4.000	%
Customers Bank	$	1,254,082	9.208	%	$	544,758	4.000	%	$	680,947	5.000	%	$	544,758	4.000	%

The ~~risk-based capital rules adopted effective January 1, 2015~~Basel III Capital Rules require that ~~banks and holding companies~~we maintain a "capital conservation buffer" of 250 basis points in excess of the "minimum capital ratio." The minimum capital ratio is equal to the prompt corrective action adequately capitalized threshold ratio. The2.500% capital conservation buffer ~~is being phased in over four years beginning on January~~with respect to each of CET1, Tier 1 ~~2016,~~and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a ~~maximum~~conservation buffer of ~~0.625% of risk weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter.~~

~~Effective January 1, 2017, the capital level required to avoid limitation on elective distributions applicable to the Bancorp and the Bank were as follows:~~

~~(i) a common equity Tier 1 capital ratio of 5.750%;~~

~~(ii) a Tier 1 Risk based capital ratio of 7.250%; and~~

~~(iii) a Total Risk based capital ratio of 9.250%.~~

~~Failure to maintain~~less than the required ~~capital conservation buffer will result in~~amount is subject to limitations on capital distributions, including dividend payments and onstock repurchases, and certain discretionary ~~bonuses~~bonus payments to executive officers.

NOTE 12 — DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Customers uses fair value measurements to record fair value adjustments to certain assets and liabilities and to disclose the fair value of its financial instruments. ASC ~~Topic~~ 825, Financial Instruments, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For Customers, as for most financial institutions, the majority of its assets and liabilities are considered to be financial instruments. Many of these ~~financial~~ instruments lack an available trading market as characterized by a willing buyer and a willing seller engaging in an exchange transaction. For fair value disclosure purposes, Customers utilized certain fair value measurement criteria under ASC ~~Topic~~ 820, Fair Value Measurements and Disclosures("ASC 820"), as explained below.

In accordance with ASC 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for Customers' various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

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The fair value guidance provides a consistent definition of fair value, focusing on an exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

The fair value guidance also establishes a fair value hierarchy and describes the following three levels used to classify fair value measurements.

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require adjustments to inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following methods and assumptions were used to estimate the fair values of Customers' financial instruments as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016:~~2020:

~~Cash and cash equivalents:~~

~~The carrying amounts reported~~Financial Instruments Recorded at Fair Value on the balance sheet for cash and cash equivalents approximate those assets’ fair values. These assets are classified as Level 1 fair values, based upon the lowest level of input that is significant to the fair value measurements.a Recurring Basis

Investment securities:

The fair values of ~~investment~~equity securities, ~~available for sale~~AFS debt securities and debt securities reported at fair value based on a fair value option election are determined by obtaining quoted market prices on nationally recognized and foreign securities exchanges (Level 1), quoted prices in markets that are not active (Level 2), matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or internally and externally developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3). These assets are classified as Level 1, 2 or 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

The carrying amount of investments in FHLB, Federal Reserve Bank, and other restricted stock approximates fair value, and considers the limited marketability of such securities. These assets are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Loans held for sale - ~~Consumer residential~~Residential mortgage ~~loans:~~loans (fair value option):

~~The Bank~~Customers generally estimates the fair values of residential mortgage loans held for sale based on commitments on hand from investors within the secondary market for loans with similar characteristics. These assets are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Loans ~~held for sale~~receivable - Commercial mortgage warehouse ~~loans:~~loans (fair value option):

The fair value of commercial mortgage warehouse loans is the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The loan is used by mortgage companies as short-term bridge financing between the funding of the mortgage loans and the finalization of the sale of the loans to an investor. Changes in fair value are not generally expected to be recognized because at inception of the transaction the underlying mortgage loans have already been sold to an approved investor. Additionally, the interest rate is variable, and the transaction is short-term, with an average life of 21under 30 days from purchase to sale. These assets are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.

~~Loans held for sale - Multifamily loans:~~Derivatives (assets and liabilities):

The fair values of ~~multi-family loans held~~interest rate swaps, interest rate caps and credit derivatives are determined using models that incorporate readily observable market data into a market standard methodology. This methodology nets the discounted future cash receipts and the discounted expected cash payments. The discounted variable cash receipts and payments are based on expectations of future interest rates derived from observable market interest rate curves. In addition, fair value is adjusted for ~~sale are estimated using pricing indications from letters~~the effect of ~~intent with third party investors, recent sale transactions within the secondary markets~~nonperformance risk by incorporating credit valuation adjustments for ~~loans with similar characteristics, non-binding indicative bids from brokers, or estimates made by management considering current market rates~~Customers and ~~terms.~~its counterparties. These assets and liabilities are ~~included~~classified as Level 32 fair values, based upon the lowest level of input that is significant to the fair value measurements.

~~Loans receivable, net~~

Table of ~~allowance for loan losses:~~Contents

The fair values of ~~loans held for investment~~the residential mortgage loan commitments are derived from the estimated ~~using discounted cash flows and market rates at~~fair values that can be generated when the ~~balance sheet date that reflect the credit and interest rate-risk inherent~~underlying mortgage loan is sold in the ~~loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments~~secondary market. Customers generally uses commitments on hand from third party investors to estimate an exit price and ~~prepayments~~adjusts for the probability of ~~principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are~~the commitment being exercised based on ~~carrying values.~~Customers' internal experience (i.e., pull-through rate). These assets and liabilities are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

~~Impaired~~Derivative assets and liabilities are presented in "Other assets" and "Accrued interest payable and other liabilities" on the consolidated balance sheet.

The following information should not be interpreted as an estimate of Customers' fair value in its entirety because fair value calculations are only provided for a limited portion of Customers' assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making these estimates, comparisons between Customers' disclosures and those of other companies may not be meaningful.

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis

Collateral-dependent loans:

~~Impaired~~Collateral-dependent loans are those loans that are accounted for under ASC ~~310,~~ ~~Receivables~~,326 in which the Bank has measured impairment generally based on the fair value of the loan’s collateral or ~~discounted cash flow~~DCF analysis. Fair value is generally determined based upon independent third-party appraisals of the properties that collateralize the loans, ~~or discounted cash flows~~DCF based upon the expected ~~proceeds.~~proceeds, sales agreements or letters of intent with third parties. These assets are generally classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Other real estate owned:

The fair value of ~~other real estate owned ("OREO")~~OREO is determined by using appraisals, which may be discounted based on management’s review and changes in market conditions or sales agreements with third parties. All appraisals must be performed in accordance with the Uniform Standards of Professional Appraisal Practice. Appraisals are certified to the Bank and performed by appraisers on the Bank’s approved list of appraisers. Evaluations are completed by a person independent of management. The content of the appraisal depends on the complexity of the property. Appraisals are completed on a “retail value” and an “as is value”. These assets are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

~~Deposit liabilities:~~

The fair values disclosed for interest and non-interest bearing checking, passbook savings and money market deposit accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). These liabilities are classified as Level 1 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. These liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.

~~Federal funds purchased:~~

For these short-term instruments, the carrying amount is considered a reasonable estimate of fair value. These liabilities are classified as Level 1 fair values, based upon the lowest level of input that is significant to the fair value measurements.

~~Borrowings:~~

Borrowings consist of long-term and short-term FHLB advances, 5-year senior unsecured notes, and subordinated debt. For overnight borrowings, the carrying amounts are considered reasonable estimates of fair value and are classified as Level 1 fair value measurements. Fair values of all other FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. The prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. Fair values of privately placed subordinated and senior unsecured debt are estimated by a third-party financial adviser using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit-risk characteristics, terms and remaining maturity. These liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements. The $63 million senior unsecured notes issued during third quarter 2013 are traded on The New York Stock Exchange, and their price can be obtained daily. This fair value measurement is classified as Level 1.

~~Derivatives (Assets and Liabilities):~~

The fair values of interest rate swaps and credit derivatives are determined using models that incorporate readily observable market data into a market standard methodology. This methodology nets the discounted future cash receipts and the discounted expected cash payments. The discounted variable cash receipts and payments are based on expectations of future interest rates derived from observable market interest rate curves. In addition, fair value is adjusted for the effect of nonperformance risk by incorporating credit valuation adjustments for the Bank and its counterparties. These assets and liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.

The fair values of the residential mortgage loan commitments are derived from the estimated fair values that can be generated when the underlying mortgage loan is sold in the secondary market. The Bank generally uses commitments on hand from third- party investors to estimate an exit price and adjusts for the probability of the commitment being exercised based on the Bank’s internal experience (i.e., pull-through rate). These assets and liabilities are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

~~Derivative assets and liabilities are presented in "Other assets" and "Accrued interest payable and other liabilities" on the consolidated balance sheet.~~

~~Off-balance-sheet financial instruments:~~

~~The fair values of unused commitments to lend and standby letters of credit are considered to be the same as their contractual amounts.~~

The following information should not be interpreted as an estimate of Customers' fair value in its entirety because fair value calculations are only provided for a limited portion of Customers' assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making these estimates, comparisons between Customer’s disclosures and those of other companies may not be meaningful.

The estimated fair values of Customers' financial instruments at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 were as follows. ~~BankMobile assets and liabilities previously reported as held for sale have been reclassified as held and used to conform with the current period presentation.~~


					Fair Value Measurements at June 30, 2021
(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	430,500	$	430,500	$	430,500	$	0	$	0
Debt securities, available for sale	1,526,792		1,526,792		0		1,526,792		0


Loans held for sale	34,540		34,540		0		34,033		507

Total loans and leases receivable, net of allowance for credit losses on loans and leases	16,807,046		16,680,386		0		2,855,284		13,825,102
FHLB, Federal Reserve Bank and other restricted stock	39,895		39,895		0		39,895		0
Derivatives	38,289		38,289		0		37,988		301

Liabilities:
Deposits	$	13,873,939	$	13,874,284	$	13,246,789	$	627,495	$	0

FRB PPP Liquidity Facility	3,865,865		3,865,865		0		3,865,865		0



Other borrowings	124,240		130,576		0		130,576		0
Subordinated debt	181,534		198,904		0		198,904		0
Derivatives	38,756		38,756		0		38,756		0

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Fair Value Measurements at September 30, 2017

Carrying
Amount

Estimated
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2)
Significant
Unobservable
Inputs
(Level 3)
(amounts in thousands)
Assets:
Cash and cash equivalents $ 219,480
$ 219,480
$ 219,480
$ —
$ —
Investment securities, available for sale 584,823
584,823
2,311
582,512
—
Loans held for sale 2,113,293
2,113,473
—
1,963,076
150,397
Loans receivable, net of allowance for loan losses 7,023,024
7,020,487
—
—
7,020,487
FHLB, Federal Reserve Bank and other restricted stock 98,611
98,611
—
98,611
—
Derivatives 10,447
10,447
—
10,344
103
Liabilities:
Deposits $ 7,597,076
$ 7,596,324
$ 5,296,636
$ 2,299,688
$ —
Federal funds purchased 147,000
147,000
147,000
—
—
FHLB advances 1,462,343
1,462,245
727,343
734,902
—
Other borrowings 186,258
194,157
65,704
128,453
—
Subordinated debt 108,856
115,500
—
115,500
—
Derivatives 12,092
12,092
—
12,092
—


					Fair Value Measurements at December 31, 2020
(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	693,354	$	693,354	$	693,354	$	0	$	0
Debt securities, available for sale	1,206,431		1,206,431		0		1,206,431		0

Equity securities	3,854		3,854		3,854		0		0
Loans held for sale	79,086		79,086		0		78,443		643

Total loans and leases receivable, net of allowance for credit losses on loans and leases	15,608,989		16,222,202		0		3,616,432		12,605,770
FHLB, Federal Reserve Bank and other restricted stock	71,368		71,368		0		71,368		0
Derivatives	54,223		54,223		0		54,023		200

Liabilities:
Deposits	$	11,309,929	$	11,312,494	$	10,657,998	$	654,496	$	0

FRB PPP Liquidity Facility	4,415,016		4,415,016		0		4,415,016		0
Federal funds purchased	250,000		250,000		250,000		0		0
FHLB advances	850,000		852,442		0		852,442		0
Other borrowings	124,037		129,120		0		129,120		0
Subordinated debt	181,394		193,119		0		193,119		0
Derivatives	98,164		98,164		0		98,164		0

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Fair Value Measurements at December 31, 2016

Carrying
Amount

Estimated
Fair Value
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2)
Significant
Unobservable
Inputs
(Level 3)
(amounts in thousands)
Assets:
Cash and cash equivalents $ 264,709
$ 264,709
$ 264,709
$ —
$ —
Investment securities, available for sale 493,474
493,474
15,246
478,228
—
Loans held for sale 2,117,510
2,117,510
—
2,117,510
—
Loans receivable, net of allowance for loan losses 6,117,322
6,162,020
—
—
6,162,020
FHLB, Federal Reserve Bank and other restricted stock 68,408
68,408
—
68,408
—
Derivatives 10,864
10,864
—
10,819
45
Liabilities:
Deposits $ 7,303,775
$ 7,303,663
$ 4,472,013
$ 2,831,650
$ —
Federal funds purchased 83,000
83,000
83,000
—
—
FHLB advances 868,800
869,049
688,800
180,249
—
Other borrowings 87,123
91,761
66,261
25,500
—
Subordinated debt 108,783
111,375
—
111,375
—
Derivatives 14,172
14,172
—
14,172
—

For financial assets and liabilities measured at fair value on a recurring and nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 were as follows:


	June 30, 2021
	Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Measured at Fair Value on a Recurring Basis:
Assets
Available for sale debt securities:
Asset-backed securities	$	0	$	322,954	$	0	$	322,954
U.S. government agencies securities	0		20,114		0		20,114
Agency-guaranteed residential mortgage-backed securities	0		10,355		0		10,355
Agency-guaranteed commercial mortgage-backed securities	0		2,205		0		2,205
Agency-guaranteed residential collateralized mortgage obligations	0		81,758		0		81,758
Agency-guaranteed commercial collateralized mortgage obligations	0		142,841		0		142,841
Commercial mortgage-backed securities	0		23,087		0		23,087
Collateralized loan obligations	0		162,927		0		162,927
Corporate notes	0		350,421		0		350,421
Private label collateralized mortgage obligations	0		401,576		0		401,576
State and political subdivision debt securities	0		8,554		0		8,554


Derivatives	0		37,988		301		38,289
Loans held for sale – fair value option	0		6,074		0		6,074
Loans receivable, mortgage warehouse – fair value option	0		2,855,284		0		2,855,284
Total assets – recurring fair value measurements	$	0	$	4,426,138	$	301	$	4,426,439
Liabilities
Derivatives	$	0	$	38,756	$	0	$	38,756
Measured at Fair Value on a Nonrecurring Basis:
Assets

Loans held for sale	$	0	$	27,959	$	0	$	27,959
Collateral-dependent loans	0		0		5,323		5,323

Total assets – nonrecurring fair value measurements	$	0	$	27,959	$	5,323	$	33,282

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	September 30, 2017
	Fair Value Measurements at the End of the Reporting Period Using									December 31, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)									(amounts in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Measured at Fair Value on a Recurring Basis:									Measured at Fair Value on a Recurring Basis:
Assets									Assets
Available-for-sale securities:
Agency-guaranteed residential mortgage-backed securities	$	—	$	196,327	$	—	$	196,327
Agency guaranteed commercial mortgage-backed securities	—		340,108		—		340,108
Available for sale debt securities:									Available for sale debt securities:
Asset-backed securities									Asset-backed securities	$	0	$	377,145	$	0	$	377,145
U.S. government agencies securities									U.S. government agencies securities	0		20,034		0		20,034
Agency-guaranteed residential mortgage–backed securities									Agency-guaranteed residential mortgage–backed securities	0		63,091		0		63,091

Agency-guaranteed residential collateralized mortgage obligations									Agency-guaranteed residential collateralized mortgage obligations	0		140,841		0		140,841
Agency-guaranteed commercial collateralized mortgage obligations									Agency-guaranteed commercial collateralized mortgage obligations	0		20,926		0		20,926
Collateralized loan obligations									Collateralized loan obligations	0		32,367		0		32,367
Corporate notes	—		46,077		—		46,077		Corporate notes	0		396,744		0		396,744
Private label collateralized mortgage obligations									Private label collateralized mortgage obligations	0		136,992		0		136,992
State and political subdivision debt securities									State and political subdivision debt securities	0		18,291		0		18,291

Equity securities	2,311		—		—		2,311		Equity securities	3,854		0		0		3,854
Derivatives	—		10,344		103		10,447		Derivatives	0		54,023		200		54,223
Loans held for sale – fair value option	—		1,963,076		—		1,963,076		Loans held for sale – fair value option	0		5,509		0		5,509
Total assets - recurring fair value measurements	$	2,311	$	2,555,932	$	103	$	2,558,346
Loans receivable, mortgage warehouse – fair value option									Loans receivable, mortgage warehouse – fair value option	0		3,616,432		0		3,616,432
Total assets – recurring fair value measurements									Total assets – recurring fair value measurements	$	3,854	$	4,882,395	$	200	$	4,886,449
Liabilities									Liabilities
Derivatives	$	—	$	12,092	$	—	$	12,092	Derivatives	$	0	$	98,164	$	0	$	98,164
Measured at Fair Value on a Nonrecurring Basis:									Measured at Fair Value on a Nonrecurring Basis:
Assets									Assets
Impaired loans, net of reserves of $1,527	$	—	$	—	$	2,976	$	2,976

Loans held for sale									Loans held for sale	$	0	$	55,683	$	0	$	55,683
Collateral-dependent loans									Collateral-dependent loans	0		17,251		3,867		21,118
Other real estate owned	—		—		782		782		Other real estate owned	0		0		35		35
Total assets - nonrecurring fair value measurements	$	—	$	—	$	3,758	$	3,758
Total assets – nonrecurring fair value measurements									Total assets – nonrecurring fair value measurements	$	0	$	72,934	$	3,902	$	76,836

December 31, 2016
Fair Value Measurements at the End of the Reporting Period Using
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total
(amounts in thousands)
Measured at Fair Value on a Recurring Basis:
Assets
Available-for-sale securities:
Agency-guaranteed residential mortgage-backed securities $ —
$ 231,263
$ —
$ 231,263
Agency-guaranteed commercial mortgage-backed securities —
201,817
—
201,817
Corporate notes —
45,148
—
45,148
Equity securities 15,246
—
—
15,246
Derivatives —
10,819
45
10,864
Loans held for sale – fair value option —
2,117,510
—
2,117,510
Total assets - recurring fair value measurements $ 15,246
$ 2,606,557
$ 45
$ 2,621,848
Liabilities
Derivatives $ —
$ 14,172
$ —
$ 14,172
Measured at Fair Value on a Nonrecurring Basis:
Assets
Impaired loans, net of reserves of $1,360 $ —
$ —
$ 6,527
$ 6,527
Other real estate owned —
—
2,731
2,731
Total assets - nonrecurring fair value measurements $ —
$ —
$ 9,258
$ 9,258

The changes in ~~Level~~residential mortgage loan commitments (Level 3 ~~assets~~assets) measured at fair value on a recurring basis for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 are summarized ~~as follows.~~in the tables below. Additional information about residential mortgage loan commitments can be found in NOTE 13 - ~~DERIVATIVES~~DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.


	Residential Mortgage Loan Commitments
	Three Months Ended June 30,
(amounts in thousands)	2021		2020
Balance at March 31	$	196	$	215
Issuances	301		52
Settlements	(196)		(215)
Balance at June 30	$	301	$	52

Table of Contents


	Residential Mortgage Loan Commitments
	Three Months Ended September 30,							Residential Mortgage Loan Commitments
	2017			2016				Six Months Ended June 30,
(amounts in thousands)							(amounts in thousands)	2021		2020
Balance at June 30	$	102		$	157
Balance at December 31							Balance at December 31	$	200	$	79
Issuances	103			85			Issuances	497		267
Settlements	(102		)	(157		)	Settlements	(396)		(294)
Balance at September 30	$	103		$	85
Balance at June 30							Balance at June 30	$	301	$	52

Residential Mortgage Loan Commitments
Nine Months Ended September 30,
2017 2016
(amounts in thousands)
Balance at December 31 $ 45
$ 45
Issuances 300
315
Settlements (242 ) (275 )
Balance at September 30 $ 103
$ 85

~~Customers' policy is to recognize transfers between fair value levels when events or circumstances warrant transfers.~~ There were no transfers between levels during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~

2020.

The following table summarizes financial assets and financial liabilities measured at fair value as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 on a recurring and nonrecurring basis for which Customers utilized Level 3 inputs to measure fair value. The unobservable Level 3 inputs noted below contain a level of uncertainty that may differ from what is realized in an immediate settlement of the assets. Therefore, Customers may realize a value higher or lower than the current estimated fair value of the assets.

Quantitative Information about Level 3 Fair Value Measurements
September 30, 2017
Fair Value
Estimate
Valuation Technique Unobservable Input
Range (Weighted
Average) (4)
(amounts in thousands)
Impaired loans $ 2,976
Collateral appraisal (1) Liquidation expenses (2) (8)%
Other real estate owned 782
Collateral appraisal (1) Liquidation expenses (2) (8)%
Residential mortgage loan commitments 103
Adjusted market bid Pull-through rate 90%

Quantitative Information about Level 3 Fair Value Measurements
December 31, 2016
Fair Value
Estimate
Valuation Technique Unobservable Input
Range (Weighted
Average) (4)
(amounts in thousands)
Impaired loans $ 1,431
Collateral appraisal (1) Liquidation expenses (2) (8)%
Impaired loans 5,096
Discounted cash flow Projected cash flows (3) 4 times EBITDA
Other real estate owned 2,731
Collateral appraisal (1) Liquidation expenses (2) (8)%
Residential mortgage loan commitments 45
Adjusted market bid Pull-through rate 90%

~~(1)~~

~~Obtained from approved independent appraisers. Appraisals are current and~~Quantitative Information about Level 3 Fair Value Measurements

(amounts in ~~compliance with credit policy. The Bank does not generally discount appraisals.~~thousands)

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range

(Weighted Average) (4)

June 30, 2021

~~(2)~~Collateral-dependent loans – real estate

~~Fair value is adjusted for estimated costs to sell based on a percentage of the value as determined by the appraisal.~~$

4,456

Collateral appraisal (1)

Liquidation expenses (2)

8% - 26%

(10%)

~~(3)~~Collateral-dependent loans – commercial and industrial

~~Projected cash flows of the business derived using EBITDA multiple based on management's best estimate.~~867

Collateral appraisal (1)

Business asset valuation (3)

Liquidation expenses (2)

Business asset valuation adjustments (4)

8% - 8%

(8%)

19% - 40%

(21%)

~~(4)~~

~~Presented as a percentage of the value determined by appraisal for impaired~~

Residential mortgage loan commitments

301

Adjusted market bid

Pull-through rate

75% - 95%

(85%)

December 31, 2016
Derivative Assets Derivative Liabilities
Balance Sheet Balance Sheet
Location Fair Value Location Fair Value
(amounts in thousands)
Derivatives designated as cash flow hedges:
     Interest rate swaps Other assets $ —
Other liabilities $ 3,624
          Total $ —
$ 3,624
Derivatives not designated as hedging instruments:
     Interest rate swaps Other assets $ 10,683
Other liabilities $ 10,537
     Credit contracts Other assets 136
Other liabilities 11
     Residential mortgage loan commitments Other assets 45
Other liabilities —
          Total $ 10,864
$ 10,548

Table of Contents

Effect of Derivative Instruments on Comprehensive Income

The following ~~tables present~~table presents the effect of Customers' derivative financial instruments on comprehensive income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020.


	Amount of Gain (Loss) Recognized in OCI on Derivatives (1)				Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	Three Months Ended June 30,					Three Months Ended June 30,
(amounts in thousands)	2021		2020			2021		2020
Derivatives in cash flow hedging relationships:
Interest rate swaps	$	4	$	(4,685)	Interest expense	$	(1,046)	$	(2,718)

Three Months Ended September 30, 2017
Income Statement Location
Amount of Income (Loss)
Recognized in Earnings
(amounts in thousands)
Derivatives not designated as hedging instruments:
Interest rate swaps Other non-interest income $ 91
Credit contracts Other non-interest income (6 )
Residential mortgage loan commitments Mortgage banking income 1
Total $ 86

Three Months Ended September 30, 2016
Income Statement Location
Amount of Income (Loss)
Recognized in Earnings
(amounts in thousands)
Derivatives not designated as hedging instruments:
Interest rate swaps Other non-interest income $ 1,737
Credit contracts Other non-interest income (15 )
Residential mortgage loan commitments Mortgage banking income (71 )
Total $ 1,651

Nine Months Ended September 30, 2017
Income Statement Location
Amount of Income (Loss)
Recognized in Earnings
(amounts in thousands)
Derivatives not designated as hedging instruments:
Interest rate swaps Other non-interest income $ 429
Credit contracts Other non-interest income (5 )
Residential mortgage loan commitments Mortgage banking income 58
Total $ 482

Nine Months Ended September 30, 2016
Income Statement Location
Amount of Income
Recognized in Earnings
(amounts in thousands)
Derivatives not designated as hedging instruments:
Interest rate swaps Other non-interest income $ 1,250
Credit contracts Other non-interest income 257
Residential mortgage loan commitments Mortgage banking income 41
Total $ 1,548

Three Months Ended September 30, 2017

Amount of Gain
Recognized in OCI on
Derivatives (Effective Portion) (1)

Location of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
(amounts in thousands)
Derivatives in cash flow hedging relationships:
Interest rate swaps $ 104
Interest expense $ (572 )

Three Months Ended September 30, 2016

Amount of Gain
Recognized in OCI on
Derivatives (Effective Portion) (1)

Location of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)

Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
(amounts in thousands)
Derivatives in cash flow hedging relationships:
Interest rate swaps $ 556
Interest expense $ (703 )

Nine Months Ended September 30, 2017
Amount of Loss
Recognized in OCI on
Derivatives (Effective Portion) (1) Location of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion) Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
(amounts in thousands)
Derivative in cash flow hedging relationships:
Interest rate swaps $ (115 ) Interest expense $ (2,166 )


	Nine Months Ended September 30, 2016								Amount of Gain (Loss) Recognized in OCI on Derivatives (1)				Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	Amount of Loss Recognized in OCI on Derivatives (Effective Portion) (1)			Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)				Six Months Ended June 30,					Six Months Ended June 30,
(amounts in thousands)								(amounts in thousands)	2021		2020			2021		2020
Derivative in cash flow hedging relationships:
Derivatives in cash flow hedging relationships:								Derivatives in cash flow hedging relationships:
Interest rate swaps	$	(1,577	)	Interest expense	$	(1,306	)	Interest rate swaps	$	9,117	$	(25,031)	Interest expense	$	(2,505)	$	(4,196)
									0		0		Other non-interest income	(24,467)		0
Total								Total	$	9,117	$	(25,031)		$	(26,972)	$	(4,196)

(1) Amounts presented are net of taxes. See NOTE 65 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) for the total effect on other comprehensive income (loss) from derivatives designated as cash flow hedges for the periods presented.

Credit-risk-related Contingent Features

By entering into derivative contracts, Customers is exposed to credit risk. The credit risk associated with derivatives executed with customers is the same as that involved in extending the related loans and is subject to the same standard credit policies. To mitigate the credit-risk exposure to major derivative dealer counterparties, Customers only enters into agreements with those counterparties that maintain credit ratings of high ~~quality.~~quality or with central clearing parties.

Agreements with major derivative dealer counterparties contain provisions whereby default on any of Customers' indebtedness would be considered a default on its derivative obligations. Customers also has entered into agreements that contain provisions under which the counterparty could require Customers to settle its obligations if Customers fails to maintain its status as a well/adequately capitalized institution. As of ~~September~~June 30, ~~2017,~~2021, the fair value of derivatives in a net liability position (which includes accrued interest but excludes any adjustment for nonperformance-risk) related to these agreements was ~~$7.3~~$37.5 million. In addition, Customers, which has ~~minimum~~ collateral posting thresholds with certain of these counterparties, ~~and at September 30, 2017~~ had posted ~~$8.3~~$35.6 million of cash as ~~collateral.~~collateral at June 30, 2021. Customers records cash posted as collateral with these counterparties, except with a central clearing party, as a reduction in the outstanding balance of cash and cash equivalents and an increase in the balance of other assets.

Table of Contents

Disclosures about Offsetting Assets and Liabilities

The following tables present derivative instruments that are subject to enforceable master netting arrangements. Customers' interest rate swaps and interest rate caps with institutional counterparties are subject to master netting arrangements and are included in the table below. Interest rate swaps and interest rate caps with commercial banking customers and residential mortgage loan commitments are not subject to master netting arrangements and are excluded from the table below. Customers has not made a policy election to offset its derivative positions.


	Gross Amounts Recognized on the Consolidated Balance Sheets				Gross Amounts Not Offset in the Consolidated Balance Sheet
(amounts in thousands)			Financial Instruments	Cash Collateral Received/(Posted)	Net Amount
June 30, 2021
Interest rate derivative assets with institutional counterparties	$	0			$	0	$	0	$	0

Interest rate derivative liabilities with institutional counterparties	$	35,590			$	0	$	(35,590)	$	0

~~Offsetting of Financial Assets and Derivative Assets~~


	Gross Amounts Recognized on the Consolidated Balance Sheets				Gross Amounts Not Offset in the Consolidated Balance Sheet
(amounts in thousands)			Financial Instruments	Cash Collateral Received/(Posted)	Net Amount
December 31, 2020
Interest rate derivative assets with institutional counterparties	$	199			$	0	$	0	$	199

Interest rate derivative liabilities with institutional counterparties	$	97,641			$	0	$	(97,641)	$	0

~~At September 30, 2017~~

Gross
Amount of
Recognized
Assets

Gross
Amounts
Offset in the
Consolidated
Balance
Sheet

Net
Amounts of
Assets
Presented
in the
Consolidated
Balance
Sheet

Gross Amounts
Not Offset in the
Consolidated
Balance Sheet

Net
Amount

Financial
Instruments

Cash
Collateral
Received

(amounts in thousands)
Description
Interest rate swap derivatives with institutional counterparties $ 4,190
$ —
$ 4,190
$ —
$ 1,900
$ 2,290

~~Offsetting of Financial Liabilities and Derivative Liabilities~~

~~At September 30, 2017~~

Gross
Amount of
Recognized
Liabilities

Gross
Amounts
Offset in the
Consolidated
Balance
Sheet

Net
Amounts of
Liabilities
Presented
in the
Consolidated
Balance
Sheet
Gross Amounts
Not Offset in the
Consolidated
Balance Sheet

Financial
Instruments

Cash
Collateral
Pledged

Net
Amount
(amounts in thousands)
Description
Interest rate swap derivatives with institutional counterparties $ 8,400
$ —
$ 8,400
$ —
$ 8,262
$ 138

~~Offsetting of Financial Assets and Derivative Assets~~

~~At December 31, 2016~~

Gross
Amount of
Recognized
Assets

Gross
Amounts
Offset in the
Consolidated
Balance
Sheet

Net
Amounts of
Assets
Presented
in the
Consolidated
Balance
Sheet
Gross Amounts
Not Offset in the
Consolidated
Balance Sheet
Net
Amount

Financial
Instruments

Cash
Collateral
Received

(amounts in thousands)
Description
Interest rate swap derivatives with institutional counterparties $ 4,723
$ —
$ 4,723
$ —
$ —
$ 4,723

~~Offsetting of Financial Liabilities and Derivative Liabilities~~

~~At December 31, 2016~~

Gross
Amount of
Recognized
Liabilities

Gross
Amounts
Offset in the
Consolidated
Balance
Sheet

Net
Amounts of
Liabilities
Presented
in the
Consolidated
Balance
Sheet
Gross Amounts
Not Offset in the
Consolidated
Balance Sheet
Net
Amount

Financial
Instruments

Cash
Collateral
Pledged

(amounts in thousands)
Description
Interest rate swap derivatives with institutional counterparties $ 9,825
$ —
$ 9,825
$ —
$ 4,472
$ 5,353

NOTE 14 — ~~BUSINESS SEGMENTS~~LOSS CONTINGENCIES

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the consolidated financial statements that are not currently accrued for. However, in light of the uncertainties inherent in these matters, it is possible that the ultimate resolution may have a material adverse effect on Customers’ results of operations for a particular period, and future changes in circumstances or additional information could result in accruals or resolution in excess of established accruals, which could adversely affect Customers’ results of operations, potentially materially.

United States Department of Education Matter

In third quarter 2018, Customers ~~has historically operated under one business segment, "Community Banking." However,~~received a Final Program Review Determination ("FPRD") letter dated September 5, 2018 from the ED regarding a focused program review of Higher One's/Customers Bank's administration, as a third party servicer, of the programs authorized pursuant to Title IV of the Higher Education Act of 1965. The ED program review covered the award years beginning in 2013 through the FPRD issuance date, including the time period when Higher One was acting as the third party servicer prior to Customers' acquisition of the Disbursement business on June 15, 2016. The FPRD determined that, with respect to students enrolled at specified partner institutions, Higher One/Customers did not provide convenient fee-free access to ATMs or bank branch offices in such locations as required by the ED’s cash management regulations. Those regulations, which were in effect during the period covered by the program review and were revised during that period, seek, among other purposes, to ensure that students can make fee-free cash withdrawals. The FPRD determined that students incurred prohibited costs in accessing Title IV credit balance funds, and the FPRD classifies those costs as financial liabilities of Customers. The FPRD also requires Customers to take prospective action to increase ATM access for students at certain of its partner institutions. Customers disagreed with the FPRD and appealed the asserted financial liabilities of $6.5 million, and a request for review has been submitted to trigger an administrative process before the ED’s Office of Hearing and Appeals.

Table of Contents

On March 26, 2020, the ED and Customers filed a Joint Motion to Dismiss with Prejudice (the "Joint Motion") with the United States Department of Education. The Joint Motion states that the ED and Customers reached an agreement that resolves the liabilities at issue in the appeal. The Joint Motion was granted on April 27, 2020. As part of the settlement, the liabilities assessed in the FPRD were reduced to $3.0 million (the "settlement amount"). Customers had previously recorded a liability in the amount of $1.0 million during third quarter ~~2016, Customers revised~~2019 and increased its ~~segment financial reporting~~liability by an additional $1.0 million in first quarter 2020. The remaining $1.0 million is expected to ~~reflect~~be funded from funds in an escrow account set-up at the ~~manner in which its chief operating decision makers (our Chief Executive Officer and Board~~time of ~~Directors) have begun allocating resources and assessing performance subsequent to~~ Customers' acquisition of the Disbursement business from Higher One in 2016.

Specialty’s Café Bakery, Inc. Matter

On May 27, 2020, the appointed Chapter 7 Trustee for Specialty’s Café Bakery, Inc. (“Debtor”) filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code in the United Stated Bankruptcy Court for the Central District of California. On October 28, 2020, the Trustee, as plaintiff, filed her amended adversary complaint (“Adversary Complaint”) against Customers Bank and the ~~combination~~SBA seeking to avoid and recover for the benefit of ~~that business~~the Debtor’s estate and its creditors the payment made by the Debtor to Customers Bank in the amount of $8.1 million in satisfaction of a Payroll Protection Program loan made by Customers Bank to the Debtor (the “PPP Loan Payment”). The Trustee seeks to avoid and recover the entire PPP Loan Payment from the Bank under the authority provided in 11 U.S.C. §547 and §550, which together permit a trustee of a bankruptcy debtor to avoid and recover, for a more equitable distribution among all creditors, certain transfers made within ninety (90) days before the filing of the bankruptcy petition. The Bank intends to vigorously defend itself against the Trustee’s Adversary Complaint and is currently unable to reasonably determine the likelihood of loss nor estimate a possible range of loss.

NOTE 15 – SUBSEQUENT EVENTS

On July 28, 2021, Customers' board of directors approved a plan to redeem $ 82.5 million, or all of our outstanding shares of Series C Preferred Stock and Series D Preferred Stock. On August 6, 2021, Customers Bancorp completed an underwritten public offering of $100 million in aggregate principal amount of its 2.875% Fixed-to-Floating Rate Senior Notes due 2031 (the “Notes”). The price to the public was 100% of the principal amount of the Notes. The Company estimates the net proceeds from the sale of the Notes, after deducting discounts and commissions and estimated offering expenses payable by the Company, will be approximately $98.7 million. The Company intends to use the net proceeds from the offering to fund the redemption of all of the Company's outstanding Series C Preferred Stock and Series D Preferred Stock. The Company intends to use any remaining proceeds following the redemptions for general corporate purposes, which may include working capital, repaying indebtedness and providing capital to the Bank. The amounts the Company actually expends for any purpose may vary significantly depending upon numerous factors, including assessments of potential market opportunities and competitive developments. The offering of the Notes was made pursuant to the Company’s effective shelf registration statement on Form S-3 previously filed by the Company with the ~~BankMobile technology platform late in second quarter 2016.~~

Management has determined that Customers' operations consist of two reportable segments - Community Business Banking and BankMobile. Each segment generates revenues, manages risk, and offers distinct products and services to targeted customers through different delivery channels. The strategy, marketing, and analysis of these segments vary considerably.

The Community Business Banking segment is delivered predominately to commercial customers in Southeastern Pennsylvania, New York, New Jersey, Massachusetts, Rhode Island and New Hampshire through a single point of contact business model and provides liquidity to residential mortgage originators nationwide through commercial loans to mortgage companies. Lending and deposit gathering activities are focused primarily on privately held businesses, high net worth families, selected commercial real estate lending, and commercial mortgage companies. Revenues are generated primarily through net interest income (the difference between interest earned on loans, investments, and other interest earning assets and interest paid on deposits and other borrowed funds) and other non-interest income, such as mortgage warehouse transactional fees and bank owned life insurance.

The BankMobile segment provides state of the art high tech digital banking and disbursement services to consumers, students, and the "under banked" nationwide. BankMobile, as a division of Customers Bank, is a full service banking platform that is accessible to customers anywhere and anytime through the customer's smartphone or other web-enabled device. Revenues are currently being generated primarily through interchange and card revenue, deposit and wire transfer fees and university fees. The majority of revenue and expenses for BankMobile are a result of the Disbursement business acquisition.

The following tables present the operating results for Customers' reportable business segments for the three and nine months ended September 30, 2017 and 2016. Customers has presented the financial information and disclosures for prior periods to reflect the segment disclosures as if they had been in effect for the periods presented. The segment financial results include directly attributable revenues and expenses. Corporate overhead costs are assigned to the Community Business Banking segment as those expenses are expected to continue following the planned spin-off of BankMobile. Similarly, the preferred stock dividends have been allocated in their entirety to the Community Business Banking segment. The tax benefit assigned to BankMobile was based on an estimated effective tax rate of 37.25% for 2017 and 38% for 2016.

BankMobile, previously presented as discontinued operations in the financial statements due to Customers' stated intent to sell the business, was reclassified as held and used at September 30, 2017. As of September 30, 2017, Customers has decided to spin off BankMobile to Customers’ shareholders through a spin-off/merger transaction which is currently being negotiated. For more information on BankMobile's reclassification, see NOTE 3 - TAX-FREE SPIN-OFF AND MERGER.

SEC.

Three Months Ended September 30, 2017
Community Business Banking BankMobile Consolidated
Interest income $ 95,585
$ 2,700
⁽¹
⁾
$ 98,285
Interest expense 30,250
16

30,266
Net interest income 65,335
2,684
68,019
Provision for loan losses 1,874
478
2,352
Non-interest income 4,190
13,836
18,026
Non-interest expense 33,990
27,050

61,040
Income (loss) before income tax expense (benefit) 33,661
(11,008 ) 22,653
Income tax expense (benefit) 18,999
(4,100 ) 14,899
Net income (loss) 14,662
(6,908 ) 7,754
Preferred stock dividends 3,615
—
3,615
Net income (loss) available to common shareholders $ 11,047
$ (6,908 ) $ 4,139

Three Months Ended September 30, 2016
Community Business Banking BankMobile Consolidated
Interest income $ 82,828
$ 1,384
⁽¹
⁾
$ 84,212
Interest expense 19,620
7
19,627
Net interest income 63,208
1,377
64,585
Provision for loan losses (162 ) 250
88
Non-interest income 11,121
16,365
27,486
Non-interest expense
36,864
19,354
56,218
Income (loss) before income tax expense (benefit) 37,627
(1,862 ) 35,765
Income tax expense (benefit) 15,266
(708 ) 14,558
Net income (loss) 22,361
(1,154 ) 21,207
Preferred stock dividends 2,552
—
2,552
Net income (loss) available to common shareholders $ 19,809
$ (1,154 ) $ 18,655

~~(1) - Amounts reported include funds transfer pricing~~Table of $2.7 million and 1.4 million for the three months ended September 30, 2017 and 2016, respectively, credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.Contents

Nine Months Ended September 30, 2017
Community Business Banking BankMobile Consolidated
Interest income $ 265,524
$ 9,708
⁽¹
⁾
$ 275,232
Interest expense 76,134
55
76,189
Net interest income 189,390
9,653
199,043
Provision for loan losses 5,459
478
5,937
Non-interest income 16,587
42,583
59,170
Non-interest expense 94,704
66,114
160,818
Income before income tax expense (benefit) 105,814
(14,356 ) 91,458
Income tax expense (benefit) 39,584
(5,348 ) 34,236
Net income (loss) 66,230
(9,008 ) 57,222
Preferred stock dividends 10,844
—
10,844
Net income (loss) available to common shareholders $ 55,386
$ (9,008 ) $ 46,378

As of September 30, 2017
Goodwill and other intangibles $ 3,632
$ 12,972
$ 16,604
Total assets $ 10,405,452
$ 66,377
⁽²
⁾
$ 10,471,829
Total deposits $ 6,815,994
$ 781,082
$ 7,597,076

Nine Months Ended September 30, 2016
Community Business Banking BankMobile Consolidated
Interest income $ 234,513
$ 4,418
⁽¹
⁾
$ 238,931
Interest expense 53,539
22
53,561
Net interest income 180,974
4,396
185,370
Provision for loan losses 2,605
249
2,854
Non-interest income 22,241
18,996
41,237
Non-interest expense 101,053
27,253
128,306
Income (loss) before income tax expense (benefit) 99,557
(4,110 ) 95,447
Income tax expense (benefit) 38,134
(1,562 ) 36,572
Net income (loss) 61,423
(2,548 ) 58,875
Preferred stock dividends 5,900
—
5,900
Net income (loss) available to common shareholders $ 55,523
$ (2,548 ) $ 52,975

As of September 30, 2016
Goodwill and other intangibles $ 3,642
$ 13,282
$ 16,924
Total assets $ 9,532,281
$ 70,329
⁽²
⁾
$ 9,602,610
Total deposits $ 6,855,788
$ 533,182
$ 7,388,970

(1) - Amounts reported include funds transfer pricing of $9.7 million and $4.4 million for the nine months ended September 30, 2017 and 2016, respectively, credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.

~~(2) - Amounts reported exclude intra company receivables.~~

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations

Cautionary Note Regarding Forward-Looking Statements

This report and all attachments hereto, as well as other written or oral communications made from time to time by us, may contain forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements ~~relate~~include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events ~~or future predictions, including events or predictions relating to future~~and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and are generally identifiable by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “plan,” “intend,” or “anticipate” or the negative thereof or comparable terminology. Forward-looking statements reflect numerous assumptions, estimates and forecasts as to future events. No assurance can be given that the assumptions, estimates and forecasts underlyingexpectations expressed in such forward-looking statements, ~~will accurately reflect future conditions,~~including: the adverse impact on the U.S. economy, including the markets in which we operate, of the coronavirus outbreak, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; and the effects of changes in accounting standards or policies. Customers Bancorp, Inc. cautions that ~~any guidance, goals, targets or projected results will be realized. The assumptions, estimates~~the foregoing factors are not exclusive, and ~~forecasts underlying~~neither such factors nor any such forward-looking ~~statements involve judgments with respect to, among other things,~~statement takes into account the impact of any future economic, competitive, regulatory and financial market conditions and future business decisions, which may not be realized and which are inherently subject to significant business, economic, competitive and regulatory uncertainties and known and unknown risks, including the risks described under “Risk Factors” in Customers Bancorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “2016 Form 10-K”), as such factors may be updated from time to time in our filings with the SEC, including our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Our actual results may differ materially from those reflected in the forward-looking statements. You are cautioned not to place undue reliance on anyevents. All forward-looking statements ~~we make, which~~and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. ~~We do~~For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2020, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake ~~any obligation~~ to ~~release publicly or otherwise provide any revisions to~~update any forward-looking ~~statements we~~statement whether written or oral, that may ~~make, including any forward-looking financial information,~~be made from time to ~~reflect events~~time by Customers Bancorp, Inc. or ~~circumstances occurring after the date hereof~~by or ~~to reflect the occurrence~~on behalf of ~~unanticipated events,~~Customers Bank, except as may be required under applicable law.

Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the "Bancorp" or "Customers Bancorp"), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the "Bank"), collectively referred to as "Customers" herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers' financial condition and results of operations as of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2021. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers' ~~2016~~2020 Form 10-K.

Overview

Like most financial institutions, Customers derives the majority of its income from interest it receives on its interest-earning assets, such as loans, leases and investments. Customers' primary source of funds for making these loans, leases and investments are its deposits and borrowings, on which it pays interest. Consequently, one of the key measures of Customers' success is the amount of its net interest income, or the difference between the interest income on its interest-earning assets and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. Another key measure is the difference between the interest income generated by interest earning assets and the interest expense on interest-bearing liabilities, relative to the amount of average interest earning assets, which is referred to as net interest margin.

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On January 4, 2021, Customers Bancorp completed the previously announced divestiture of BankMobile Technologies, Inc., the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC, pursuant to an Agreement and Plan of Merger, dated August 6, 2020, by and among MFAC, MFAC Merger Sub Inc., BMT, Customers Bank, the sole stockholder of BMT, and Customers Bancorp, the parent bank holding company for Customers Bank (as amended on November 2, 2020 and December 8, 2020). In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” Following the completion of the divestiture of BMT, BankMobile's serviced deposits and loans and the related net interest income have been combined with Customers’ financial condition and the results of operations as a single reportable segment. BMT's historical financial results for periods prior to the divestiture are reflected in Customers’ consolidated financial statements as discontinued operations. The assets and liabilities of BMT have been presented as "Assets of discontinued operations" and "Liabilities of discontinued operations" on the consolidated balance sheet at December 31, 2020. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation. For additional information refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements.

There is credit risk inherent in loans and leases requiring Customers to maintain an ACL to absorb credit losses on existing loans and leases that may become uncollectible. Customers maintains this allowance by charging a provision for credit losses on loan and lease losses against its operating earnings. Customers has included a detailed discussion of this process, as well as several tables describing its ACL, in "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" and "NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' unaudited consolidated financial statements.

Impact of COVID-19

In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization. The spread of COVID-19 has created a global public health crisis that has resulted in unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that Customers serves. Governmental responses during the pandemic have included orders closing businesses not deemed essential and directing individuals to restrict their movements, observe social distancing and shelter in place. These actions, together with responses to the pandemic by businesses and individuals, have resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses that have led to a loss of revenues and a rapid increase in unemployment, material decreases in oil and gas prices and in business valuations, disrupted global supply chains, market downturns and volatility, changes in consumer behavior related to pandemic fears, related emergency response legislation and an expectation that Federal Reserve policy will maintain a low interest rate environment for the foreseeable future.

Customers has taken deliberate actions to ensure that it has the necessary balance sheet strength to serve its clients and communities, including increases in liquidity and reserves supported by a strong capital position. Customers' business and consumer customers are experiencing varying degrees of financial distress, which is expected to continue in the coming months. In order to protect the health of its customers and team members, and to comply with applicable government directives, Customers has modified its business practices, including restricting team member travel, directing team members to work from home insofar as is possible and implementing its business continuity plans and protocols to the extent necessary. Customers also has made donations that have resulted in more than $1 million, either directly or indirectly, to communities in its footprint for urgent basic needs and has been re-targeting existing sponsorship and grants to non-profit organizations to support COVID-19 related activities.

On March 27, 2020, the CARES Act was signed into law. It contains substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act includes the SBA's PPP, a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans are intended to guarantee an eight-week or 24-week period of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills. On April 16, 2020, the SBA announced that all available funds had been exhausted and applications were no longer being accepted. On April 22, 2020, an additional $310 billion of funds for the PPP was signed into law. On August 8, 2020, the SBA announced that the PPP was closed and no longer accepting PPP applications from participating lenders. On December 27, 2020, the CAA was signed into law, including Division N, Title III, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which provides $284 billion in additional funding for the SBA's PPP for small businesses affected by the COVID-19 pandemic. The CAA provides small businesses who received an initial PPP loan and experienced a 25% reduction in gross receipts to request a second PPP loan of up to $2.0 million. On January 11, 2021, the SBA reopened the PPP program to small business and non-profit organizations that did not receive a loan through the initial PPP phase. On March 11, 2021, the American Rescue Plan Act of 2021 was enacted expanding eligibility for first and second round of PPP loans and revising the exclusions from payroll costs for purposes of loan forgiveness. The PPP ended on May 31, 2021. As of June 30, 2021, Customers has helped thousands of small businesses by originating approximately $9.5 billion in PPP loans directly or through fintech partnerships.

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In response to the COVID-19 pandemic, Customers has also implemented a short-term loan modification program to provide temporary payment relief to certain of its borrowers who meet the program's qualifications. This program allows for a deferral of payments for a maximum of 90 days at a time. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date of the existing loan. As of June 30, 2021, total commercial deferments declined to $89.8 million, or 0.8% of total loans and leases, excluding PPP loans, from a peak of $1.2 billion and total consumer deferments declined to $8.4 million, or 0.1% of total loans and leases, excluding PPP loans, from a peak of $108 million. Customers had no pending commercial loan deferment requests as of June 30, 2021. As of December 31, 2020, total commercial deferments were $202.1 million, or 1.8% of total loans and leases, excluding PPP loans. Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the following reconciliation schedule.



(dollars in thousands)	June 30, 2021			December 31, 2020
Loans held for sale (GAAP)	$	34,540		$	79,086
Loans receivable, mortgage warehouse, at fair value (GAAP)	2,855,284			3,616,432
Loans and leases receivable (GAAP)	14,077,198			12,136,733
Total loans and leases receivable (GAAP)	16,967,022			15,832,251
Less: Loans receivable, PPP	6,305,056			4,561,365
Total loans and leases, excluding PPP (Non-GAAP)	$	10,661,966		$	11,270,886

Commercial deferments (GAAP)	$	89,800		$	202,100
Consumer deferments (GAAP)	8,400			16,400
Total deferments (GAAP)	$	98,200		$	218,500

Commercial deferments to total loans and leases, excluding PPP (Non-GAAP)	0.8		%	1.8		%
Consumer deferments to total loans and leases, excluding PPP (Non-GAAP)	0.1		%	0.1		%
Total deferments to total loans and leases, excluding PPP (Non-GAAP)	0.9		%	1.9		%

The FRB has taken a range of actions to support the flow of credit to households and businesses. For example, on March 15, 2020, the FRB reduced the target range for the federal funds rate to 0.00% to 0.25% and announced that it would increase its holdings of U.S. Treasury securities and agency mortgage-backed securities and begin purchasing agency commercial mortgage-backed securities. The FRB has also encouraged depository institutions to borrow from the discount window and has lowered the primary credit rate for such borrowing by 150 basis points while extending the term of such loans up to 90 days. Reserve requirements have been reduced to zero as of March 26, 2020. The FRB has also established, or has taken steps to establish, a range of facilities and programs to support the U.S. economy and U.S. marketplace participants in response to economic disruptions associated with COVID-19, including among others, Main Street Lending facilities to purchase loan participations, under specified conditions, from banks lending to small and medium U.S. businesses and the PPPLF, which was created to bolster the effectiveness of the PPP by taking loans as collateral at face value. Customers has been participating in these facilities and programs, and it may participate in some or all of these facilities or programs, including as a lender, agent, or intermediary on behalf of clients or customers at various times in the future. As of June 30, 2021 and December 31, 2020, Customers had $3.9 billion and $4.4 billion in borrowings from the PPPLF, respectively.

Significant uncertainties as to future economic conditions exist, and Customers has taken deliberate actions in response, including higher levels of on-balance sheet liquidity and maintaining strong capital ratios. Additionally, the economic pressures, coupled with the implementation of an expected lifetime loss methodology for determining our provision for credit losses as required by CECL have contributed to an increased provision for credit losses on loans and leases and off-balance sheet credit exposures in 2020. Customers continues to monitor the impact of COVID-19 closely, as well as any effects that may result from the CARES Act, the CAA and the American Rescue Plan Act of 2021; however, the extent to which the COVID-19 pandemic will impact Customers' operations and financial results during the remainder of 2021 is highly uncertain.

New Accounting Pronouncements

For information about the impact that recently adopted or issued accounting guidance will have on us, please refer to "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' unaudited consolidated financial statements.

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Critical Accounting Policies

Customers has adopted various accounting policies that govern the application of ~~accounting principles generally accepted in the United States of America~~U.S. GAAP and that are consistent with general practices within the banking industry in the preparation of its consolidated financial statements. Customers' significant accounting policies are described in ~~“NOTE 4~~"NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF ~~PRESENTATION”~~PRESENTATION" in Customers' audited consolidated financial statements included in its ~~2016~~2020 Form 10-K and updated in this ~~report on~~ Form 10-Q for the quarterly period ended ~~September~~June 30, ~~2017.~~2021 in "NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" in Customers' unaudited consolidated financial statements.

Certain accounting policies may involve significant judgments and assumptions by Customers that have a material impact on the carrying value of certain ~~assets and liabilities.~~assets. Customers considers these accounting policies to be critical accounting policies. The judgment and assumptions used are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions management makes, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of Customers' ~~assets~~assets.

The critical accounting policy that is both important to the portrayal of Customers' financial condition and ~~liabilities~~results of operations and requires complex, subjective judgments is the ACL. This critical accounting policy and material estimate, along with the related disclosures, are reviewed by Customers' Audit Committee of the Board of Directors.

Allowance for Credit Losses

Customers' ACL at June 30, 2021 represents Customers' current estimate of the lifetime credit losses expected from its loan and lease portfolio and its unfunded lending-related commitments that are not unconditionally cancellable. Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans and leases' expected remaining term.

Customers uses external sources in the creation of its forecasts, including current economic conditions and forecasts for macroeconomic variables over its reasonable and supportable forecast period (e.g., GDP growth rate, unemployment rate, BBB spread, commercial real estate and home price index). After the reasonable and supportable forecast period, which ranges from two to five years, the models revert the forecasted macroeconomic variables to their historical long-term trends, without specific predictions for the economy, over the expected life of the pool, while also incorporating prepayment assumptions into its lifetime loss rates. Internal factors that impact the quarterly allowance estimate include the level of outstanding balances, portfolio performance and assigned risk ratings. Significant loan/borrower attributes utilized in the models include property type, initial loan to value, assigned risk ratings, delinquency status, origination date, maturity date, initial FICO scores, and borrower state.

The ACL may be affected materially by a variety of qualitative factors that Customers considers to reflect its current judgement of various events and risks that are not measured in our statistical procedures, including uncertainty related to the economic forecasts used in the modeled credit loss estimates, nature and volume of loan and lease portfolio, credit underwriting policy exceptions, peer comparison, industry data, and model and data limitations. The qualitative allowance for economic forecast risk is further informed by multiple alternative scenarios to arrive at a composite scenario supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to changes, sometimes materially and rapidly. Customers recognizes that this approach may not be suitable in certain economic environments such that additional analysis may be performed at management's discretion. Due in part to its subjectivity, the qualitative evaluation may be materially impacted during periods of economic uncertainty and late breaking events that could lead to revision of reserves to reflect management's best estimate of expected credit losses.

The ACL is established in accordance with our ACL policy. The ACL Committee, which includes the Bank's Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Chief Lending Officer, and Chief Credit Officer, among others, reviews the adequacy of the ACL each quarter, together with Customers' risk management team. The ACL policy, significant judgements and the related disclosures are reviewed by Customers' Audit Committee of the Board of Directors.

The net decrease in our estimated ACL as of June 30, 2021 as compared to our December 31, 2020 estimate was primarily attributable to the continuing improvement in macroeconomic forecasts affecting the commercial loan portfolio. The increase in ACL in our installment loan portfolio is mainly due to loan growth. There was a $3.3 million and $0.4 million provision for credit losses on loans and leases for the three and six months ended June 30, 2021, respectively, resulting in an ACL ending balance of $126.5 million ($125.4 million for loans and leases and $1.1 million for unfunded lending-related commitments) as of June 30, 2021.

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To determine the ACL as of June 30, 2021, Customers utilized Moody's June 2021 Baseline forecast to generate its modelled expected losses by loan portfolio in order to reflect management's reasonable expectations of current and future economic conditions. The Baseline forecast at June 2021 assumed continued improvement in forecasts of macroeconomic conditions compared to the first quarter forecasts of macroeconomic conditions used by Customers; the Federal Reserve maintaining a target range for the fed funds rate at 0.00% to 0.25% into 2023; the tapering of quantitative easing not beginning until 2022; an improving U.S. economy from $1.9 trillion of stimulus from the federal government enacted in March 2021 and a federal spending legislation on infrastructure and social benefits in the second half of 2021; and the acceleration in consumer prices is expected to be transitory along with the U.S. labor supply constraints. Customers continues to monitor the impact of the COVID-19 pandemic and related policy measures on the economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody's. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers' modelling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around new infections, hospitalizations and COVID-19 deaths diminish more slowly than the Baseline projections, leading to a much slower re-opening of the economy. Under this scenario, as an example, the unemployment rate is estimated at 6.9% and 9.0% at the end of 2021 and 2022, respectively. These numbers represent a 1.5% and 5.2% higher unemployment estimate than Baseline scenario projections of 5.4% and 3.7%, respectively for the same time periods. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modeled results. This would result in an incremental quantitative impact to the ACL of approximately $49.7 million. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

There is no certainty that Customers' ACL will be appropriate over time to cover losses in our portfolio as economic and market conditions may ultimately differ from our reasonable and supportable forecast. Additionally, events adversely affecting specific customers, industries, or Customers' markets, such as the current COVID-19 pandemic, could severely impact our current expectations. If the credit quality of Customers' customer base materially deteriorates or the risk profile of a market, industry, or group of customers changes materially, Customers' net income and capital could be materially adversely affected which, in turn could have a material adverse effect on Customers' financial condition and results of operations. The extent to which the current COVID-19 pandemic has and will continue to negatively impact Customers' businesses, financial condition, liquidity and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time.

For more information, see "NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to the unaudited consolidated financial statements.

~~Third Quarter Events~~

Table of ~~Note~~Contents

Results of Operations

The following table sets forth the condensed statements of income for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30,				QTD				Six Months Ended June 30,				YTD
(dollars in thousands)	2021		2020		Change		% Change		2021		2020		Change		% Change
Net interest income	$	138,757	$	91,982	$	46,775	50.9	%	$	271,488	$	173,302	$	98,186	56.7	%
Provision for credit losses on loans and leases	3,291		20,946		(17,655)		(84.3)	%	372		52,732		(52,360)		(99.3)	%
Total non-interest income	16,822		11,711		5,111		43.6	%	35,290		22,871		12,419		54.3	%
Total non-interest expense	70,823		49,791		21,032		42.2	%	132,750		98,758		33,992		34.4	%
Income before income tax expense	81,465		32,956		48,509		147.2	%	173,656		44,683		128,973		288.6	%
Income tax expense	20,124		7,980		12,144		152.2	%	37,684		11,254		26,430		234.8	%
Net income from continuing operations	61,341		24,976		36,365		145.6	%	135,972		33,429		102,543		306.7	%
Loss from discontinued operations before income tax expense	—		(3,190)		3,190		(100.0)	%	(20,354)		(9,911)		(10,443)		105.4	%
Income tax expense (benefit) from discontinued operations	—		(932)		932		(100.0)	%	17,682		(2,299)		19,981		(869.1)	%
Net loss from discontinued operations	—		(2,258)		2,258		(100.0)	%	(38,036)		(7,612)		(30,424)		399.7	%
Net income	61,341		22,718		38,623		170.0	%	97,936		25,817		72,119		279.3	%
Preferred stock dividends	3,299		3,581		(282)		(7.9)	%	6,690		7,196		(506)		(7.0)	%
Net income available to common shareholders	$	58,042	$	19,137	$	38,905	203.3	%	$	91,246	$	18,621	$	72,625	390.0	%

Customers reported net income available to common shareholders of ~~$4.1~~$58.0 million or $0.13 per fully diluted common share for third quarter 2017. The reported results were impacted by several notable charges in third quarter 2017. First, Customers' previously-announced strategic decision to spin-off its BankMobile business directly to Customers’ shareholders, to be followed by a merger of BankMobile into Flagship Community Bank rather than sell the business directly to a third party resulted in including BankMobile segment results as part of the continuing Customers’ business rather than as discontinued operations. The reclassification as part of the continuing business resulted in the capture of depreciation and amortization expense not recognized during the period the related assets were classified as held for sale ($4.2 million pre-tax, or $0.08 per diluted share). In addition, Customers' decision to spin-off and then merge the BankMobile business eliminated Customers’ tax strategy to offset capital losses on disposition of the Religare common stock with capital gains from the sale of BankMobile. Customers’ decision to pursue the spin-off and merger reduced earnings by $7.7 million after tax ($0.24 per diluted share) in the third quarter due to the reversal of $4.6 million of previously recognized deferred tax assets, and inability to recognize deferred tax benefits of $3.1 million for the third quarter 2017 impairment charge of $8.3 million ($0.16 per diluted share), equal to the third quarter 2017 decrease in market value of Customers’ investment in Religare.

Asset quality remained exceptional with non-performing loans of $29.8 million, or 0.33% of total loans, and total non-performing assets (non-performing loans and other real estate owned) only 0.30% of total assets at September 30, 2017, reflecting Customers' conservative lending practices and continued focus on credit risk management. Customers' level of non-performing loans at September 30, 2017 remained well below industry average non-performing loans of 1.42% and Customers' peer group non-performing loans of 0.88%. Customers' capital ratios at the holding company and its bank subsidiary continue to exceed the “well-capitalized” threshold established by regulation at the Bank and exceed the applicable Basel III regulatory threshold ratios for the Bancorp and the Bank at September 30, 2017. Customers Bancorp's Tier 1 leverage ratio was 8.36%, and its total risk-based capital ratio was 12.40% at September 30, 2017.

Customers ended the quarter with $10.5 billion in total assets, stable asset quality trends, and stronger capital. Customers expects to strategically reduce assets below $10 billion as of December 31, 2017 to eliminate the risk of not receiving full interchange fees by qualifying for the small issuer exemption under the Durbin Amendment to the Dodd Frank legislation.

~~Results of Operations~~

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

~~Net income available to common shareholders decreased $14.5 million, or 77.8%, to $4.1~~$91.2 million for the three and six months ended ~~September~~June 30, ~~2017 when~~2021, respectively, compared to net income available to common shareholders of ~~$18.7~~$19.1 million and $18.6 million for the three and six months ended ~~September 30, 2016. The decreased net income available to common shareholders primarily resulted from certain notable third quarter 2017 charges totaling $15.6 million including:~~

Change in BankMobile disposition strategy ($10.4 million after tax). As further described under the "Third Quarter Events of Note" above, Customers' reclassification of BankMobile as part of the continuing business resulted in the capture of depreciation and amortization expense not recognized during the period the related assets were classified as held for sale ($4.2 million pre-tax and $2.6 million after tax). In addition, Customers' decision to spin-off and then merge the BankMobile business eliminated Customers’ tax strategy to offset capital losses on disposition of the Religare common stock with capital gains from the sale of BankMobile, reducing earnings by $7.7 million after tax in third quarter 2017.

Religare investment impairment charge of $8.3 million ($5.2 million after tax). Customers recorded an other-than-temporary impairment loss of $8.3 million for three months ended September 30, 2017 for the full amount of the decline in fair value of the Religare investment below the cost basis established at June 30, ~~2017.~~

~~Other contributors~~2020, respectively. Factors contributing to the ~~decrease~~change in net income available to common shareholders ~~included~~for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 were as follows.

Net interest income

Net interest income increased $46.8 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 as average interest-earning assets increased by $4.7 billion, and NIM increased by 33 basis point to 2.98% for the three months ended June 30, 2021 from 2.65% for the three months ended June 30, 2020. The increase in interest-earning assets was driven by increases in the origination of the latest round of PPP loans, commercial loans to mortgage companies, commercial and industrial loans and leases, investment securities and installment loans, offset in part by a decrease in multi-family loans. There was also PPP loan forgiveness from the first two rounds which accelerated the recognition of net deferred loan origination fees that contributed to the NIM increase. The shift in the mix of interest-earning assets and interest-bearing liabilities in a lower interest rate environment drove an 11 basis point decline in the yield on interest-earning assets and a 50 basis point decline in the cost of interest-bearing liabilities for the three months ended June 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities was $6.3 billion ($6.1 billion average balance) of PPP loans yielding 2.69% and related PPPLF borrowings of $3.9 billion ($3.9 billion average balance) costing 0.35%. Customers' total cost of funds, including non-interest bearing deposits was 0.54% and 0.99% for the three months ended June 30, 2021 and 2020, respectively.

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Net interest income increased $98.2 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 as average interest-earning assets increased by $5.8 billion, and NIM increased by 19 basis point to 2.99% for the six months ended June 30, 2021 from 2.80% for the six months ended June 30, 2020. The increase in interest-earning assets was driven by increases in the origination of PPP loans, commercial loans to mortgage companies, investment securities, commercial and industrial loans and leases and installment loans, offset in part by decreases in multi-family loans. The shift in the mix of interest-earning assets and interest-bearing liabilities in a lower interest rate environment drove a 48 basis point decline in the yield on interest-earning assets and a 80 basis point decline in the cost of interest-bearing liabilities for the six months ended June 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities was $6.3 billion ($5.4 billion average balance) of PPP loans yielding 3.00% and related PPPLF borrowings of $3.9 billion ($3.9 billion average balance) costing 0.35%. There was also PPP loan forgiveness from the first two rounds which accelerated the recognition of net deferred loan origination fees that contributed to the NIM increase. Customers' total cost of funds, including non-interest bearing deposits was 0.61% and 1.30% for the six months ended June 30, 2021 and 2020, respectively.

Provision for credit losses on loans and leases

The $17.7 million decrease in the provision for ~~loan~~credit losses for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, reflects the continuing improvement in macroeconomic forecasts since the beginning of ~~$2.3~~COVID-19 pandemic in first quarter 2020. Upon adoption of the CECL standard on January 1, 2020, the ACL for loans and leases and off-balance sheet credit exposures increased by $79.8 million ~~primarily as a result of growth~~and $3.4 million, respectively. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the ~~loan portfolio~~consolidated balance sheet and ~~provisions~~the related provision is presented as part of other non-interest expense on ~~impaired~~the consolidated income statement. The ACL on loans and ~~increases~~leases held for investment represented 1.18% of total loans and leases receivable, excluding PPP loans (non-GAAP measure, please refer to the non-GAAP reconciliation within Loans and Leases - Asset Quality), at June 30, 2021, compared to 2.20% at June 30, 2020. Net charge-offs for the three months ended June 30, 2021 were $6.6 million, or 16 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $10.3 million, or 32 basis points on an annualized basis, for the three months ended June 30, 2020. The decrease in net charge-offs for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, was primarily due to a charge-off of $2.8 million for one commercial real estate collateral dependent loan during the three months ended June 30, 2020.

The $52.4 million decrease in the provision for credit losses for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, reflects the continuing improvement in macroeconomic forecasts since the beginning of COVID-19 pandemic in first quarter 2020. Net charge-offs for the six months ended June 30, 2021 were $19.1 million, or 24 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $29.0 million, or 52 basis points on an annualized basis, for the six months ended June 30, 2020. The decrease in net charge-offs for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, was primarily due to a charge-off of $12.8 million for one commercial real estate collateral dependent loan during the six months ended June 30, 2020.

Non-interest income

The $5.1 million increase in non-interest ~~expenses~~income for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from increases of ~~$4.8~~$3.7 million ~~primarily driven by increases~~ in ~~salaries~~unrealized gain (loss) on derivatives, $1.9 million in gain (loss) on sale of SBA and ~~employee benefits~~other loans, $1.2 million in other non-interest income, $1.0 million in bank-owned life insurance, $0.8 million in commercial lease income, $0.7 million in mortgage warehouse transactional fees and ~~technology-related expenses, including core process system and conversion costs and noncapitalizable software development costs.~~$0.5 million in unrealized gain (loss) on investment securities. These increases were offset in part by ~~increased gains~~a $2.8 million loss from the sale of foreign subsidiaries and a decrease of $2.5 million in gain (loss) on sale of investment securities.

The $12.4 million increase in non-interest income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from increases of $17.1 million in gain (loss) on sale of investment securities, $7.4 million in unrealized gain (loss) on derivatives, $3.4 million in gain (loss) on sale of ~~$5.4~~SBA and other loans, $3.0 million in mortgage warehouse transactional fees, $2.9 million in unrealized gain (loss) on investment securities, $2.4 million in other non-interest income, $1.7 million in commercial lease income and an$0.9 million in bank-owned life insurance. These increases were offset in part by $24.5 million of loss on cash flow hedge derivative terminations and $2.8 million of loss on sale of foreign subsidiaries for the six months ended June 30, 2021.

Non-interest expense

The $21.0 million increase in ~~net interest income of $3.4 million.~~

~~Net interest income of $68.0 million increased $3.4 million, or 5.3%,~~non-interest expense for the three months ended ~~September~~June 30, ~~2017 when~~2021 compared to ~~net interest income~~the three months ended June 30, 2020 primarily resulted from increases of ~~$64.6~~$8.5 million in technology, communication and bank operations, $5.3 million in professional services, $4.8 million in salaries and employee benefits, $3.3 million in other non-interest expense and $0.8 million in commercial lease depreciation. These increases were offset in part by a decrease of $1.7 million in loan workout expenses for the three months ended ~~September~~June 30, ~~2016. This increase resulted primarily from an~~2021 compared to the three months ended June 30, 2020.

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The $34.0 million increase in non-interest expense for the ~~average balance~~six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from increases of ~~interest-earning assets of $1.2 billion for third quarter 2017,~~$18.0 million in technology, communication and bank operations, $8.3 million in salaries and employee benefits, $8.0 million in professional services and $1.6 million in commercial lease depreciation. These increases were offset in part by a 21decrease of $2.3 million in loan workout expenses for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Income tax expense

Customers' effective tax rate from continuing operations was 24.7% for the three months ended June 30, 2021 compared to 24.2% for the three months ended June 30, 2020. The increase in the effective tax rate primarily resulted from an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes.

Customers' effective tax rate from continuing operations was 21.7% for the six months ended June 30, 2021 compared to 25.2% for the six months ended June 30, 2020. The decrease in the effective tax rate primarily resulted from an increase in investment tax credits in 2021 and the recording of net discrete tax benefits associated with the divestiture of BMT and the recognition of a deferred tax asset related to the outside basis ~~point decline~~difference of foreign subsidiaries for the six months ended June 30, 2021, offset in part by an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes.

Net loss from discontinued operations

On January 4, 2021, Customers Bancorp completed the previously announced divestiture of BMT, the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC, pursuant to an Agreement and Plan of Merger, dated August 6, 2020, by and among Megalith, MFAC Merger Sub Inc., BMT, Customers Bank, the sole stockholder of BMT, and Customers Bancorp, the parent bank holding company for Customers Bank (as amended on November 2, 2020 and December 8, 2020). In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” Following the completion of the divestiture of BMT, BankMobile's serviced deposits and loans and the related net interest ~~margin (tax-equivalent)~~income have been combined with Customers' financial condition and the results of operations as a single reportable segment.

BMT's historical financial results for periods prior to ~~2.62%~~the divestiture are reflected in Customers Bancorp’s consolidated financial statements as discontinued operations. The assets and liabilities of BMT have been presented as "Assets of discontinued operations" and "Liabilities of discontinued operations" on the consolidated balance sheet at December 31, 2020. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation.

Customers had no loss from discontinued operations, net of income taxes for ~~third quarter 2017 from 2.83% for third quarter 2016.~~

~~The provision for loan losses of $2.4 million increased~~the three months ended June 30, 2021 compared to $2.3 million for the three months ended ~~September~~June 30, ~~2017 when~~2020. The $2.3 million decrease was a result of the divestiture of BMT during the three months ended March 31, 2021.

Customers' loss from discontinued operations, net of income taxes was $38.0 million for the six months ended June 30, 2021 compared to $7.6 million for the ~~provision~~six months ended June 30, 2020. The $30.4 million increase primarily resulted from restricted stock awards of BM Technologies' common stock granted to certain team members of BMT and the effect of the divestiture being treated as a taxable asset sale for ~~loan losses of $0.1~~tax purposes, offset in part by a tax benefit related to the restricted stock awards during the three months ended March 31, 2021. See "NOTE 3 – DISCONTINUED OPERATIONS" to the unaudited consolidated financial statements for additional information.

Preferred stock dividends

Preferred stock dividends were $3.3 million and $3.6 million for the three months ended ~~September~~June 30, ~~2016. The third quarter 2017 provision expense included provisions of $1.4~~2021 and 2020, respectively. Preferred stock dividends were $6.7 million ~~for loan portfolio growth~~ and ~~reserves of $0.8 million for impaired loans.~~

~~Non-interest income of $18.0 million decreased $9.5 million, or 34.4%, for the three months ended September 30, 2017 when compared to non-interest income of $27.5~~$7.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2016. This decrease was primarily the result of an $8.3 million other-than-temporary impairment loss related~~2021 and 2020, respectively. There were no changes to the Religare investment, decreases in other non-interest income of $2.4 million, due to a $2.2 million recovery of a previously recorded loss in third quarter 2016, decreases in interchange and card revenue and deposit fees of $2.0 million and $1.6 million, respectively, driven by lower business volumes in BankMobile Disbursements. These decreases were offset in part by increased gains on sales of investment securities of $5.4 million.

Non-interest expense of $61.0 million increased $4.8 million, or 8.6%, for the three months ended September 30, 2017 when compared to non-interest expense of $56.2 million for the three months ended September 30, 2016. This increase resulted primarily from increases in salaries and employee benefits of $2.1 million, driven primarily by salary increases as the average number of full-time equivalent employees remained relatively consistent over the past year, and increases in technology, communications and bank operations and other expenses of $1.9 million and $0.9 million, respectively, driven by technology enhancements and the capture of depreciation and amortization expenses related to BankMobile due to the reclassification of BankMobile as held and used as of September 30, 2017.

Income tax expense of $14.9 million increased $0.3 million, or 2.3%, for the three months ended September 30, 2017 when compared to income tax expense of $14.6 million for the three months ended September 30, 2016. The increase in income tax expense was driven primarily by the elimination of deferred tax benefits from other-than-temporary impairment losses on investment securities totaling $7.7 million, offset in part by a decrease in pre-tax income of $13.1 million in third quarter 2017 compared to third quarter 2016.

~~Preferred stock dividends of $3.6 million~~ increased $1.1 million, or 41.7%, for the three months ended September 30, 2017 when compared to preferred stock dividends of $2.6 million for the three months ended September 30, 2016. This increase was the resultamount of preferred stock ~~issuances aggregating $85.0 million in September 2016 with dividends~~outstanding during the three and six months ended June 30, 2021 and 2020.

On June 15, 2020, the Series C Preferred Stock became floating at ~~6.00%~~three-month LIBOR plus 5.300%, compared to a fixed rate of 7.00%. On March 15, 2021, the Series D Preferred Stock became floating at three-month LIBOR plus 5.09%, compared to a fixed rate of 6.50%. On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%.

~~Net Interest Income~~

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NET INTEREST INCOME

Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers' earnings.

The following table summarizes Customers' net interest income, ~~and~~ related interest spread, ~~and~~net interest margin ~~for the periods indicated.~~

Three Months Ended September 30,
2017 2016

Average
Balance

Interest
Income or
Expense

Average
Yield or
Cost (%)

Average
Balance

Interest
Income or
Expense

Average
Yield or
Cost (%)
(dollars in thousands)
Assets
Interest-earning deposits $ 280,845
$ 923
1.30 % $ 237,753
$ 326
0.55 %
Investment securities (A) 1,017,065
7,307
2.87 % 534,333
3,528
2.64 %
Loans:
Commercial loans to mortgage companies 1,956,587
21,099
4.28 % 2,142,986
18,990
3.53 %
Multifamily loans 3,639,566
33,301
3.63 % 3,283,007
31,373
3.80 %
Commercial and industrial 1,476,083
15,792
4.24 % 1,193,906
11,887
3.96 %
Non-owner occupied commercial real estate 1,294,996
12,706
3.89 % 1,236,054
12,295
3.96 %
All other loans 561,911
5,842
4.12 % 385,511
4,554
4.70 %
Total loans (B) 8,929,143

88,740
3.94 % 8,241,464

79,099
3.82 %
Other interest-earning assets 125,341
1,315
4.16 % 90,010
1,259
5.56 %
Total interest-earning assets 10,352,394

98,285
3.77 % 9,103,560

84,212
3.68 %
Non-interest-earning assets 389,797
336,013

Total assets $ 10,742,191
$ 9,439,573

Liabilities
Interest checking accounts $ 351,422
708
0.80 % $ 202,645
278
0.55 %
Money market deposit accounts 3,427,682
9,866
1.14 % 3,115,076
5,200
0.66 %
Other savings accounts 40,310
29
0.28 % 36,516
22
0.24 %
Certificates of deposit 2,361,069
7,778
1.31 % 2,796,028
7,509
1.07 %
Total interest-bearing deposits 6,180,483
18,381
1.18 % 6,150,265
13,009
0.84 %
Borrowings 2,414,086
11,885
1.96 % 1,586,262
6,618
1.66 %
Total interest-bearing liabilities 8,594,569
30,266
1.40 % 7,736,527
19,627
1.01 %
Non-interest-bearing deposits 1,158,911
863,435

Total deposits and borrowings 9,753,480
1.23 % 8,599,962
0.91 %
Other non-interest-bearing liabilities 66,220
129,208

Total liabilities 9,819,700
8,729,170

Shareholders’ Equity 922,491
710,403

Total liabilities and shareholders’ equity $ 10,742,191
$ 9,439,573

Net interest earnings 68,019
64,585

Tax-equivalent adjustment (C) 203
96

Net interest earnings $ 68,222
$ 64,681

Interest spread 2.54 % 2.77 %
Net interest margin 2.61 % 2.82 %
Net interest margin tax equivalent (C) 2.62 % 2.83 %


~~(A)~~	~~For presentation in this table, average balances~~ and ~~the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.~~


~~(B)~~	~~Includes non-accrual loans, the effect of which is to reduce the yield earned on loans, and deferred loan fees.~~


~~(C)~~	~~Non-GAAP tax-equivalent basis, using a 35% statutory tax rate to approximate interest income as a taxable asset.~~

~~The following table presents~~ the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing ~~liabilities.~~liabilities for the three and six months ended June 30, 2021 and 2020. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

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Three Months Ended September 30,
2017 vs. 2016

Increase (Decrease) due
to Change in

Rate Volume Total
(amounts in thousands)
Interest income
Interest-earning deposits $ 528
$ 69
$ 597
Investment securities 335
3,444
3,779
Loans:
Commercial loans to mortgage companies 3,853
(1,744 ) 2,109
Multifamily loans (1,440 ) 3,368
1,928
Commercial and industrial 908
2,997
3,905
Non-owner occupied commercial real estate (195 ) 606
411
All other loans (610 ) 1,898
1,288
Total loans 2,516

7,125

9,641
Other interest-earning assets (365 ) 421
56
Total interest income 3,014

11,059

14,073
Interest expense
Interest checking accounts 167
263
430
Money market deposit accounts 4,095
571
4,666
Other savings accounts 4
3
7
Certificates of deposit 1,539
(1,270 ) 269
Total interest-bearing deposits 5,805
(433 ) 5,372
Borrowings 1,337
3,930
5,267
Total interest expense 7,142
3,497
10,639
Net interest income $ (4,128 ) $ 7,562
$ 3,434


	Three Months Ended June 30,												Three Months Ended June 30,
	2021						2020						2021 vs. 2020
(dollars in thousands)	Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Due to rate		Due to volume		Total
Assets
Interest-earning deposits	$	646,342	$	188	0.12	%	$	384,622	$	113	0.12	%	$	—	$	75	$	75
Investment securities (1)	1,512,644		8,327		2.20	%	705,389		6,155		3.49	%	(2,900)		5,072		2,172
Loans and leases:
Commercial loans to mortgage companies	2,737,629		21,069		3.09	%	2,456,067		17,740		2.91	%	1,166		2,163		3,329
Multi-family loans	1,551,370		15,013		3.88	%	2,009,847		19,345		3.87	%	50		(4,382)		(4,332)
Commercial and industrial loans and leases (2)	2,878,045		25,786		3.59	%	2,460,060		24,775		4.05	%	(2,977)		3,988		1,011
PPP loans	6,133,184		41,137		2.69	%	2,754,920		11,706		1.71	%	9,374		20,057		29,431
Non-owner occupied commercial real estate loans	1,368,695		13,187		3.86	%	1,392,131		13,179		3.81	%	199		(191)		8
Residential mortgages	346,284		3,127		3.62	%	429,609		3,771		3.53	%	95		(739)		(644)
Installment loans	1,467,595		34,289		9.37	%	1,288,999		27,931		8.72	%	2,224		4,134		6,358
Total loans and leases (3)	16,482,802		153,608		3.74	%	12,791,633		118,447		3.72	%	10,131		25,030		35,161
Other interest-earning assets	57,208		758		5.32	%	98,377		503		2.06	%	536		(281)		255
Total interest-earning assets	18,698,996		162,881		3.49	%	13,980,021		125,218		3.60	%	7,767		29,896		37,663
Non-interest-earning assets	607,952						616,683
Assets of discontinued operations	—						78,880
Total assets	$	19,306,948					$	14,675,584
Liabilities
Interest checking accounts	$	3,503,242	6,653		0.76	%	$	2,482,222	4,605		0.75	%	64		1,984		2,048
Money market deposit accounts	4,859,614		5,650		0.47	%	3,034,457		6,449		0.85	%	(3,639)		2,840		(799)
Other savings accounts	1,456,777		2,076		0.57	%	1,177,554		5,677		1.94	%	(4,718)		1,117		(3,601)
Certificates of deposit	658,698		1,274		0.78	%	1,734,062		6,507		1.51	%	(2,293)		(2,940)		(5,233)
Total interest-bearing deposits (4)	10,478,331		15,653		0.60	%	8,428,295		23,238		1.11	%	(10,586)		3,001		(7,585)
FRB PPP liquidity facility	3,858,733		3,367		0.35	%	942,258		822		0.35	%	—		2,545		2,545
Borrowings	531,757		5,104		3.85	%	2,282,761		9,176		1.62	%	6,468		(10,540)		(4,072)
Total interest-bearing liabilities	14,868,821		24,124		0.65	%	11,653,314		33,236		1.15	%	(4,118)		(4,994)		(9,112)
Non-interest-bearing deposits (4)	2,889,781						1,890,955
Total deposits and borrowings	17,758,602				0.54	%	13,544,269				0.99	%
Other non-interest-bearing liabilities	328,251						88,913
Liabilities of discontinued operations	—						53,268
Total liabilities	18,086,853						13,686,450
Shareholders' equity	1,220,095						989,134
Total liabilities and shareholders' equity	$	19,306,948					$	14,675,584
Net interest income			138,757						91,982				$	11,885	$	34,890	$	46,775
Tax-equivalent adjustment (5)			289						225
Net interest earnings			$	139,046					$	92,207
Interest spread					2.95	%					2.61	%
Net interest margin					2.98	%					2.65	%
Net interest margin tax equivalent (5)					2.98	%					2.65	%
Net interest margin tax equivalent, excluding PPP loans (6)					3.30	%					2.97	%

(1)For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

~~Net~~(2)Includes owner occupied commercial real estate loans.

(3)Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(4)Total costs of deposits (including interest ~~income~~bearing and non-interest-bearing) were 0.47% and 0.91% for the three months ended ~~September~~June 30, ~~2017 was $68.0 million,~~2021 and 2020, respectively.

(5)Non-GAAP tax-equivalent basis, using an ~~increase~~estimated marginal tax rate of ~~$3.4 million, or 5.3%, from~~26% for the three months ended June 30, 2021 and 2020, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

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(6)Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended June 30, 2021 and 2020, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of ~~$64.6~~these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

Net interest income increased $46.8 million for the three months ended ~~September~~June 30, ~~2016,~~2021 compared to the three months ended June 30, 2020 as average interest-earning assets increased by $4.7 billion, primarily related to PPP loan originations and ~~security balances increased $1.2 billion. Net interest margin (tax equivalent) narrowed~~increases in investment securities, installment loans, commercial and industrial loans and commercial loans to mortgage companies, partially offset by ~~21 basis points~~a decrease in multi-family loans as the loan mix improved year-over-year. The commercial loans to ~~2.62% for third quarter 2017 compared~~mortgage companies trend has been a function of greater refinance activity due to 2.83% for third quarter 2016. The net interest margin (tax equivalent) compression largely resulted from a $1.4 million reduction in prepayment penalties in the multi-family portfolio. Net interest margin (tax equivalent) was also impacted by Customers Bancorp's issuance of $100 million principal amount of 3.95% senior notes on June 30, 2017 and a one-time interest expense adjustment of approximately $0.3 million.

Interest expense on total interest-bearing deposits increased $5.4 million in third quarter 2017 compared to third quarter 2016. The increase was mainly driven by the average rate on interest-bearing deposits, which increased 34 basis points for third quarter 2017 compared to third quarter 2016, reflecting highersharply lower interest rates, ~~offered~~an increase in home purchase volumes, and market share gains from other banks.

The NIM increased by ~~Customers on its money market deposit accounts and certificates of deposits in order~~33 basis point to ~~remain competitive and attract new and retain existing deposit customers. Deposit volumes remained relatively stable, as average interest-bearing deposits increased $30.2 million~~2.98% for the three months ended ~~September~~June 30, ~~2017 compared to average interest-bearing deposits~~2021 from 2.65% for the three months ended ~~September~~June 30, ~~2016.~~

~~Interest expense on borrowings increased $5.3 million in third quarter 2017 compared to third quarter 2016. This increase was primarily driven by a higher average~~2020 resulting from the Federal Reserve interest rate ~~on borrowings, which increased 30~~cuts of 225 basis points ~~for third quarter 2017 compared to third quarter 2016, primarily as a result of an increase~~beginning in August 2019, and the shift in the ~~borrowing rate for short term advances, including FHLB advances~~mix of interest-earning assets and ~~federal funds purchased, and an increase~~interest-bearing liabilities drove a 11 basis point decline in the ~~outstanding balance~~yield on interest-earning assets and a 50 basis point decline in the cost of ~~senior note borrowings.~~

~~Provision for Loan Losses~~

~~The provision for loan losses of $2.4 million increased by $2.3 million~~interest-bearing liabilities for the three months ended ~~September~~June 30, ~~2017,~~2021 compared to the three months ended June 30, 2020. The largest shift in the mix of interest-earning assets and interest-bearing liabilities was $6.3 billion ($6.1 billion average balance) of PPP loans yielding 2.69% and related PPPLF borrowings of $3.9 billion ($3.9 billion average balance) costing 0.35%. There was also PPP loan forgiveness from the first two rounds which accelerated the recognition of net deferred loan origination fees that contributed to the NIM increase. Customers' total cost of funds, including non-interest bearing deposits was 0.54% and 0.99% for the three months ended June 30, 2021 and 2020, respectively.

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	Six Months Ended June 30,												Six Months Ended June 30,
	2021						2020						2021 vs. 2020
(dollars in thousands)	Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Due to rate		Due to volume		Total
Assets
Interest-earning deposits	$	910,362	$	490	0.11	%	$	578,435	$	2,974	1.03	%	$	(3,577)	$	1,093	$	(2,484)
Investment securities (1)	1,435,529		16,306		2.27	%	635,838		11,132		3.50	%	(4,932)		10,106		5,174
Loans and leases:
Commercial loans to mortgage companies	2,928,802		44,860		3.09	%	2,148,863		35,254		3.30	%	(2,375)		11,981		9,606
Multi-family loans	1,619,891		30,861		3.84	%	2,111,853		41,712		3.97	%	(1,337)		(9,514)		(10,851)
Commercial and industrial loans and leases (2)	2,863,268		53,637		3.78	%	2,460,435		53,513		4.37	%	(7,835)		7,959		124
PPP loans	5,382,370		79,969		3.00	%	1,377,460		11,706		1.71	%	14,063		54,200		68,263
Non-owner occupied commercial real estate loans	1,358,871		25,981		3.86	%	1,363,795		27,616		4.07	%	(1,528)		(107)		(1,635)
Residential mortgages	359,815		6,612		3.71	%	437,782		8,171		3.75	%	(88)		(1,471)		(1,559)
Installment loans	1,396,126		63,805		9.22	%	1,274,024		56,555		8.93	%	1,835		5,415		7,250
Total loans and leases (3)	15,909,143		305,725		3.88	%	11,174,212		234,527		4.22	%	2,735		68,463		71,198
Other interest-earning assets	68,521		1,475		4.34	%	89,890		1,928		4.31	%	13		(466)		(453)
Total interest-earning assets	18,323,555		323,996		3.56	%	12,478,375		250,561		4.04	%	(5,761)		79,196		73,435
Non-interest-earning assets	594,936						565,304
Assets of discontinued operations	—						80,816
Total assets	$	18,918,491					$	13,124,495
Liabilities
Interest checking accounts	$	3,099,725	12,252		0.80	%	$	1,888,160	9,221		0.98	%	(1,946)		4,977		3,031
Money market deposit accounts	4,648,942		11,709		0.51	%	3,335,006		22,662		1.37	%	(17,698)		6,745		(10,953)
Other savings accounts	1,435,681		4,477		0.63	%	1,159,479		11,483		1.99	%	(9,238)		2,232		(7,006)
Certificates of deposit	662,447		2,873		0.87	%	1,629,416		14,225		1.76	%	(5,223)		(6,129)		(11,352)
Total interest-bearing deposits (4)	9,846,795		31,311		0.64	%	8,012,061		57,591		1.45	%	(34,105)		7,825		(26,280)
FRB PPP liquidity facility	3,899,996		6,769		0.35	%	471,129		822		0.35	%	—		5,947		5,947
Borrowings	850,024		14,428		3.42	%	1,756,080		18,846		2.16	%	7,955		(12,373)		(4,418)
Total interest-bearing liabilities	14,596,815		52,508		0.72	%	10,239,270		77,259		1.52	%	(26,150)		1,399		(24,751)
Non-interest-bearing deposits (4)	2,855,019						1,732,163
Total deposits and borrowings	17,451,834				0.61	%	11,971,433				1.30	%
Other non-interest-bearing liabilities	288,246						92,218
Liabilities of discontinued operations	—						53,600
Total liabilities	17,740,080						12,117,251
Shareholders' equity	1,178,411						1,007,244
Total liabilities and shareholders' equity	$	18,918,491					$	13,124,495
Net interest income			271,488						173,302				$	20,389	$	77,797	$	98,186
Tax-equivalent adjustment (5)			581						430
Net interest earnings			$	272,069					$	173,732
Interest spread					2.96	%					2.74	%
Net interest margin					2.99	%					2.79	%
Net interest margin tax equivalent (5)					2.99	%					2.80	%
Net interest margin tax equivalent, excluding PPP loans (6)					3.14	%					2.98	%

(2)Includes owner occupied commercial real estate loans.

(3)Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(4)Total costs of deposits (including interest bearing and non-interest-bearing) were 0.50% and 1.19% for the six months ended June 30, 2021 and 2020, respectively.

(5)Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the six months ended June 30, 2021 and 2020, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

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(6)Non-GAAP tax-equivalent basis, as described in note (5) for the six months ended June 30, 2021 and 2020, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

Net interest income increased $98.2 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 as average interest-earning assets increased by $5.8 billion, primarily related to PPP loan originations, increases in commercial loans to mortgage companies, investment securities, commercial and industrial loans, and installment loans, partially offset by a decrease in multi-family loans as the loan mix improved year-over-year. The commercial loans to mortgage companies trend has been a function of greater refinance activity due to sharply lower interest rates, an increase in home purchase volumes, and market share gains from other banks.

The NIM increased by 19 basis point to 2.99% for the six months ended June 30, 2021 from 2.80% for the six months ended June 30, 2020 resulting from the Federal Reserve interest rate cuts of 225 basis points beginning in August 2019, and the shift in the mix of interest-earning assets and interest-bearing liabilities drove a 48 basis point decline in the yield on interest-earning assets and a 80 basis point decline in the cost of interest-bearing liabilities for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The largest shift in the mix of interest-earning assets and interest-bearing liabilities was $6.3 billion ($5.4 billion average balance) of PPP loans yielding 3.00% and related PPPLF borrowings of $3.9 billion ($3.9 billion average balance) costing 0.35%. There was also PPP loan forgiveness from the first two rounds which accelerated the recognition of net deferred loan origination fees that contributed to the NIM increase. Customers' total cost of funds, including non-interest bearing deposits was 0.61% and 1.30% for the six months ended June 30, 2021 and 2020, respectively.

Customers' net interest margin tables contain non-GAAP financial measures calculated using non-GAAP amounts. These measures include net interest margin tax equivalent and net interest margin tax equivalent, excluding PPP loans. Management uses these non-GAAP measures to present the current period presentation to historical periods in prior filings. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

A reconciliation of net interest margin tax equivalent and net interest margin tax equivalent, excluding PPP loans for the three and six months ended June 30, 2021 and 2020 is set forth below.


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2021			2020			2021			2020
Net interest income (GAAP)	$	138,757		$	91,982		$	271,488		$	173,302
Tax-equivalent adjustment	289			225			581			430
Net interest income tax equivalent (Non-GAAP)	139,046			92,207			272,069			173,732
Loans receivable, PPP net interest income	(35,785)			(9,308)			(70,627)			(9,308)
Net interest income tax equivalent, excluding PPP loans (Non-GAAP)	$	103,261		$	82,899		$	201,442		$	164,424

Average total interest-earning assets (GAAP)	$	18,698,996		$	13,980,021		$	18,323,555		$	12,478,375
Average PPP loans	(6,133,184)			(2,754,920)			(5,382,370)			(1,377,460)
Adjusted average total interest-earning assets (Non-GAAP)	$	12,565,812		$	11,225,101		$	12,941,185		$	11,100,915

Net interest margin (GAAP)	2.98		%	2.65		%	2.99		%	2.79		%
Net interest margin tax equivalent (Non-GAAP)	2.98		%	2.65		%	2.99		%	2.80		%
Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)	3.30		%	2.97		%	3.14		%	2.98		%

PROVISION FOR CREDIT LOSSES ON LOANS AND LEASES

The provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management’s assessment of expected lifetime losses in the loan and lease portfolio at the balance sheet date. During first quarter 2020, Customers adopted ASC 326. Upon adoption, the ACL for loans and leases and lending-related unfunded commitments increased by $79.8 million and $3.4 million, respectively, with the after-tax cumulative effect recorded to retained earnings.

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Customers recorded a provision for credit losses during the three months ended June 30, 2021, which resulted primarily from an increase in provision for consumer installment loans from continued growth, offset by a benefit or release of the reserve for the commercial loans from continued improvement in forecasts of macroeconomic conditions. Customers recorded a provision for credit losses of $3.3 million and $0.1 million for loans and leases and lending-related commitments, respectively, for the ~~same period in 2016. The~~three months ended June 30, 2021. Customers recorded $20.9 million of provision for ~~loan~~credit losses for loans and leases and a credit or release of ~~$2.4 million in third quarter 2017 included provisions~~the reserve of ~~$1.4~~$0.4 million for ~~loan~~lending-related commitments, respectively, for the three months ended June 30, 2020. The decrease resulted primarily from the impact of reserve build for the COVID-19 pandemic, portfolio growth, and ~~reserves~~net-charge-offs for the three months ended June 30, 2020. Net charge-offs for the three months ended June 30, 2021 were $6.6 million, or 16 basis points of ~~$0.8~~average loans and leases on an annualized basis, primarily due to $8.0 million of charge-offs for consumer installment loans consistent with the loan growth. Net charge-offs for the three months ended June 30, 2020 were $10.3 million, or 32 basis points of average loans and leases on an annualized basis, primarily due to a partial charge off of $2.8 million for ~~impaired loans. In third quarter 2016,~~one commercial real estate collateral dependent loan and $8.3 million of charge-offs for consumer installment loans consistent with the loan growth.

Customers recorded $0.4 million of provision for credit losses for loans and leases and $1.2 million of credit or release of the reserve for lending-related commitments, respectively, for the six months ended June 30, 2021. Customers recorded $52.7 million and $0.4 million of provision for credit losses for loans and leases and lending-related commitments, respectively, for the six months ended June 30, 2020. Net charge-offs for the six months ended June 30, 2021 were $19.1 million, or 24 basis points of average loans and leases on an annualized basis, primarily due to $20.6 million of charge-offs for consumer installment loans consistent with the loan ~~losses~~growth. Net charge-offs for the six months ended June 30, 2020 were $29.0 million, or 52 basis points of ~~$0.1~~average loans and leases on an annualized basis, primarily due to partial charge offs totaling $15.6 million ~~was~~for two commercial real estate collateral dependent loans and $14.6 million of charge-offs for consumer installment loans consistent with the ~~result of minimal~~ loan ~~growth during the quarter, as planned, as well as exceptional asset quality.~~growth.

For more information about the provision and ~~allowance for loan losses~~ACL and our loss experience, see “Credit Risk” and “Asset Quality” herein.

~~Non-Interest Income~~

NON-INTEREST INCOME

The table below presents the components of non-interest income for the three and six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020.


	Three Months Ended June 30,				QTD				Six Months Ended June 30,				YTD
(dollars in thousands)	2021		2020		Change		% Change		2021		2020		Change		% Change
Interchange and card revenue	$	84	$	193	$	(109)	(56.5)	%	$	169	$	463	$	(294)	(63.5)	%
Deposit fees	891		502		389		77.5	%	1,754		1,054		700		66.4	%
Commercial lease income	5,311		4,508		803		17.8	%	10,516		8,776		1,740		19.8	%
Bank-owned life insurance	2,765		1,757		1,008		57.4	%	4,444		3,519		925		26.3	%
Mortgage warehouse transactional fees	3,265		2,582		683		26.5	%	7,512		4,533		2,979		65.7	%
Gain (loss) on sale of SBA and other loans	1,900		23		1,877		8,160.9	%	3,475		34		3,441		10,120.6	%
Mortgage banking income	386		38		348		915.8	%	849		334		515		154.2	%

Gain (loss) on sale of investment securities	1,812		4,353		(2,541)		(58.4)	%	25,378		8,328		17,050		204.7	%
Unrealized gain (loss) on investment securities	1,746		1,200		546		45.5	%	2,720		(178)		2,898		(1,628.1)	%
Loss on sale of foreign subsidiaries	(2,840)		—		(2,840)		NM		(2,840)		—		(2,840)		NM
Unrealized gain (loss) on derivatives	(439)		(4,158)		3,719		(89.4)	%	2,098		(5,304)		7,402		(139.6)	%
Loss on cash flow hedge derivative terminations	—		—		—		NM		(24,467)		—		(24,467)		NM
Other	1,941		713		1,228		172.2	%	3,682		1,312		2,370		180.6	%
Total non-interest income	$	16,822	$	11,711	$	5,111	43.6	%	$	35,290	$	22,871	$	12,419	54.3	%

Commercial lease income

Commercial lease income represents income earned on commercial operating leases originated by Customers' Equipment Finance Group in which Customers is the lessor. The $0.8 million increase in commercial lease income for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from the continued growth of Customers' equipment finance business.

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Three Months Ended September 30,
2017 2016
(amounts in thousands)
Interchange and card revenue $ 9,570
$ 11,547
Gain (loss) on sale of investment securities 5,349
(1 )
Deposit fees 2,659
4,218
Mortgage warehouse transactional fees 2,396
3,080
Bank-owned life insurance 1,672
1,386
Gain on sale of SBA and other loans 1,144
1,206
Mortgage banking income 257
287
Impairment loss on investment securities (8,349 ) —
Other 3,328
5,763
Total non-interest income $ 18,026
$ 27,486
The $1.7 million increase in commercial lease income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from the continued growth of Customers' equipment finance business.

~~Non-interest~~Bank-owned life insurance

Bank-owned life insurance income ~~decreased $9.5~~represents income earned on life insurance policies owned by Customers including an increase in cash surrender value of the policies and any benefits paid by insurance carriers under the policies. The $1.0 million increase in bank-owned life insurance income for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 resulted from the increase in cash surrender value of existing and new policies and benefits paid by insurance carriers under the policies.

The $0.9 million increase in commercial lease income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 resulted from the increase in cash surrender value of existing and new policies purchased and benefits paid by insurance carrier under the policies.

Mortgage warehouse transactional fees

The $0.7 million increase in mortgage warehouse transactional fees for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from a continued increase in refinancing activity driven by the decline in market interest rates that began in March 2020.

The $3.0 million increase in mortgage warehouse transactional fees for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from a continued increase in refinancing activity driven by the decline in market interest rates that began in March 2020.

Gain (loss) on sale of SBA and other loans

The $1.9 million increase in gain on sale of SBA and other loans for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 reflects an increase in sales of $14.5 million of SBA loans and $28.8 million of installment loans during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

The $3.4 million increase in gain on sale of SBA and other loans for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 reflects an increase in sales of $35.7 million of SBA loans and $28.8 million of installment loans during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Gain (loss) on sale of investment securities

The $2.5 million decrease in gain on sale of investment securities for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 reflects the gains realized from the sale of $53.7 million in AFS debt securities during the three months ended June 30, 2021 compared to $109.2 million during the three months ended ~~September~~June 30, ~~2017 to $18.0~~2020.

The $17.1 million increase in gain on sale of investment securities for the six months ended June 30, 2021 compared to ~~$27.5 million for~~ the ~~three~~six months ended ~~September~~June 30, 2016. This decrease was primarily due to an $8.3 million other-than-temporary-impairment loss on equity securities, a decrease in other non-interest income of $2.4 million due to a $2.2 million recovery of a previously recorded loss in third quarter 2016, decreases in interchange and card revenue and deposit fees of $2.0 million and $1.6 million, respectively, driven by lower business volumes in BankMobile Disbursements, and a decrease in mortgage warehouse transactional fees of $0.7 million driven by a reduction in2020 reflects the ~~volume of warehouse transactions. These decreases were offset in part by increases in~~ gains realized from the sale of $407.6 million in AFS debt securities during the six months ended June 30, 2021 compared to $109.2 million during the six months ended June 30, 2020.

Unrealized gain (loss) on investment securities

The $0.5 million increase in unrealized gain (loss) on investment securities for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 reflects an increase in the unrealized gain of ~~$5.4~~equity securities issued by a foreign entity that were held by CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd. for the three months ended June 30, 2021.

The $2.9 million increase in unrealized gain (loss) on investment securities for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 reflects an increase in the unrealized gain of equity securities issued by a foreign entity that were held by CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd. for the six months ended June 30, 2021.

Loss on sale of foreign subsidiaries

The $2.8 million increase in loss on sale of foreign subsidiaries for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 reflects the realized loss from the sale of CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which held the equity securities issued by a foreign entity. Customers sold all outstanding shares in CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd. for $3.8 million in June 2021.

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The $2.8 million increase in loss on sale of foreign subsidiaries for the six months ended June 30, 2021 compared to the three months ended June 30, 2020 reflects the realized loss from the sale of CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which held the equity securities issued by a foreign entity in June 2021.

Unrealized gain (loss) on derivatives

The $3.7 million increase in unrealized gain (loss) on derivatives for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from increases of $4.0 million in credit valuation adjustment and credit derivatives due to changes in market interest rates, partially offset by $0.3 million decrease in interest rate swap fees.

The $7.4 million increase in unrealized gain (loss) on derivatives for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from increases of $8.4 million in credit valuation adjustment and credit derivatives due to changes in market interest rates, partially offset by $1.0 million decrease in interest rate swap fees.

Loss on cash flow hedge derivative terminations

The $24.5 million increase in loss on cash flow hedge derivative terminations for the six months ended June 30, 2021 compared to six months ended June 30, 2020 reflects the early terminations of derivatives designated in cash flow hedging relationships and reclassification of the realized losses from accumulated other comprehensive income to earnings because the hedged forecasted transactions were no longer probable of occurring.

Other non-interest income

The $1.2 million increase in other non-interest income for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from ~~bank-owned life insurance policies~~a market value adjustment loss of ~~$0.3 million.~~$1.5 million on a commercial real estate loan held for sale during the three months ended June 30, 2020.

The $2.4 million increase in other non-interest income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from an increase of $0.8 million in gain from the sales of commercial lease assets and a market value adjustment loss of $1.5 million on a commercial real estate loan held for sale during the six months ended June 30, 2020.

~~Non-Interest Expense~~

NON-INTEREST EXPENSE

The table below presents the components of non-interest expense for the three and six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020.


	Three Months Ended June 30,				QTD				Six Months Ended June 30,				YTD
(dollars in thousands)	2021		2020		Change		% Change		2021		2020		Change		% Change
Salaries and employee benefits	$	28,023	$	23,192	$	4,831	20.8	%	$	51,994	$	43,716	$	8,278	18.9	%
Technology, communication and bank operations	19,618		11,103		8,515		76.7	%	39,606		21,642		17,964		83.0	%
Professional services	8,234		2,974		5,260		176.9	%	14,523		6,519		8,004		122.8	%
Occupancy	2,482		2,639		(157)		(5.9)	%	5,103		5,252		(149)		(2.8)	%
Commercial lease depreciation	4,415		3,643		772		21.2	%	8,706		7,070		1,636		23.1	%
FDIC assessments, non-income taxes and regulatory fees	2,602		2,368		234		9.9	%	5,321		5,235		86		1.6	%
Merger and acquisition related expenses	—		—		—		—	%	418		—		418		NM
Loan workout	102		1,808		(1,706)		(94.4)	%	(159)		2,175		(2,334)		(107.3)	%
Advertising and promotion	313		372		(59)		(15.9)	%	874		1,795		(921)		(51.3)	%
Other	5,034		1,692		3,342		197.5	%	6,364		5,354		1,010		18.9	%
Total non-interest expense	$	70,823	$	49,791	$	21,032	42.2	%	$	132,750	$	98,758	$	33,992	34.4	%

Salaries and employee benefits

Three Months Ended September 30,
2017 2016
(amounts in thousands)
Salaries and employee benefits $ 24,807
$ 22,681
Technology, communication and bank operations 14,401
12,525
Professional services 7,403
7,006
Occupancy 2,857
2,450
FDIC assessments, taxes, and regulatory fees 2,475
2,726
Provision for operating losses 1,509
1,406
Loan workout 915
592
Other real estate owned 445
1,192
Advertising and promotion 404
591
Acquisition related expenses —
144
Other 5,824
4,905
Total non-interest expense $ 61,040
$ 56,218

~~Non-interest expense was $61.0~~The $4.8 million increase in salaries and employee benefits for the three months ended ~~September~~June 30, ~~2017, an increase of $4.8 million from non-interest expense of $56.2 million for~~2021 compared to the three months ended ~~September~~June 30, ~~2016.~~

Salaries and employee benefits, which represent the largest component of non-interest expense, increased $2.1 million, or 9.4%, to $24.8 million for the three months ended September 30, 2017 from $22.7 million for the three months ended September 30, 2016. The increase was primarily attributable to increases in salaries as the average number of full-time equivalent employees remained relatively consistent over the past year.

Technology, communication and bank operations expenses increased by $1.9 million, or 15.0%, to $14.4 million for the three months ended September 30, 2017 from $12.5 million for the three months ended September 30, 2016. The increase was primarily attributable to increased core processing system expenses and non-capitalizable software development costs of $2.0 million and $1.5 million, respectively, as well as the recapture of $3.2 million of depreciation expense in third quarter 2017 related to BankMobile for the period it was classified as held for sale. These increases were offset in part by a $3.9 million one-time expense in third quarter 2016 for technology-related services.

~~Income Taxes~~

Income tax expense increased $0.3 million for the three months ended September 30, 2017 to $14.9 million, compared to $14.6 million in the same period of 2016. This increase was driven primarily by the elimination of deferred tax benefits from other-than-temporary impairment losses on investment securities totaling $7.7 million, offset in part by a decrease in pre-tax income of $13.1 million in third quarter 2017 compared to third quarter 2016.

~~Preferred Stock Dividends~~

Preferred stock dividends of $3.6 million increased $1.1 million, or 41.7%, for the three months ended September 30, 2017 when compared to preferred stock dividends of $2.6 million for the three months ended September 30, 2016. This increase was the result of preferred stock issuances totaling $85.0 million issued in September 2016 with dividends at 6.00%.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

Net income available to common shareholders decreased $6.6 million, or 12.5%, to $46.4 million for the nine months ended September 30, 2017 when compared to net income available to common shareholders of $53.0 million for the nine months ended September 30, 2016. The decreased net income available to common shareholders2020 primarily resulted from an increase in ~~non-interest expense of $32.5 million,~~average full-time equivalent team members needed for future growth, annual merit increases, an increase in ~~preferred stock dividends~~incentive accruals tied to Customers' overall performance, increase in stock-based compensation related to new awards, and compensation expense associated with an executive's retirement and other one-time benefits.

Table of ~~$4.9~~Contents

The $8.3 million increase in salaries and employee benefits for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from an increase in average full-time equivalent team members needed for future growth, annual merit increases, increase in incentive accruals tied to Customers' overall performance, increase in stock-based compensation related to new awards and compensation expense associated with an executive's retirement and other one-time benefits.

Technology, communication, and bank operations

The $8.5 million increase in technology, communication, and bank operations expense for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from increases in deposit servicing fees and interchange maintenance fees paid to BM Technologies, the successor entity to BMT that was divested on January 4, 2021, due to higher deposits and debit card transactions.

The $18.0 million increase in technology, communication, and bank operations expense for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from increases in deposit servicing fees and interchange maintenance fees paid to BM Technologies, the successor entity to BMT that was divested on January 4, 2021, due to higher deposits and debit card transactions. See "NOTE 3 – DISCONTINUED OPERATIONS" to the unaudited consolidated financial statements for additional information.

Professional services

The $5.3 million increase in professional services for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was primarily due to outside professional services used to support the PPP forgiveness process and our participation in the latest round of PPP.

The $8.0 million increase in professional services for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to outside professional services used to support the PPP forgiveness process and our participation in the latest round of PPP.

Commercial lease depreciation

The $0.8 million increase in commercial lease depreciation for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor.

The $1.6 million increase in commercial lease depreciation for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor.

Loan workout

The $1.7 million decrease in loan workout for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from expenses incurred for two commercial relationships during the three months ended June 30, 2020.

The $2.3 million decrease in loan workout for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from expenses incurred for two commercial relationships during the six months ended June 30, 2020.

Other non-interest expense

The $3.3 million increase in other non-interest expense for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily resulted from increases in expenses related to the participation in the latest round of PPP, consumer installment servicing, and other miscellaneous expenses. The provision or addition to the reserve for ~~loan losses~~unfunded commitments for the three months ended June 30, 2021 was $0.1 million, compared to a credit or release of ~~$3.1 million.~~the reserve for unfunded commitments of $0.4 million during the three months ended June 30, 2020.

The $1.0 million increase in other non-interest expense for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from increases in expenses related to the participation in the latest round of PPP, consumer installment servicing, and other miscellaneous expenses. These increases were offset by a credit or release of the reserve for unfunded commitments of $1.2 million during the six months ended June 30, 2021 compared to a provision or addition to the reserve for unfunded commitments of $0.4 million during the six months ended June 30, 2020.

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INCOME TAXES

The table below presents income tax expense and the effective tax rate for the three and six months ended June 30, 2021 and 2020.


	Three Months Ended June 30,						QTD				Six Months Ended June 30,						YTD
(dollars in thousands)	2021			2020			Change		% Change		2021			2020			Change		% Change
Income before income tax expense	$	81,465		$	32,956		$	48,509	147.2	%	$	173,656		$	44,683		$	128,973	288.6	%
Income tax expense	20,124			7,980			12,144		152.2	%	37,684			11,254			26,430		234.8	%
Effective tax rate	24.70		%	24.21		%					21.70		%	25.19		%

The $12.1 million increase in income tax expense for the three months ended June 30, 2021, when compared to the same period in the prior year, primarily resulted from an increase in pre-tax income. The increase in the effective tax rate for the three months ended June 30, 2021, when compared to the same period in the prior year, primarily resulted from an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes.

The $26.4 million increase in income tax expense for the six months ended June 30, 2021, when compared to the same period in the prior year, primarily resulted from an increase in pre-tax income. The decrease in the effective tax rate for the six months ended June 30, 2021, when compared to the same period in the prior year, primarily resulted from an increase in investment tax credits in 2021 and the recording of net discrete tax benefits associated with the divestiture of BMT and the recognition of a deferred tax asset related to the outside basis difference of foreign subsidiaries, offset in part by an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes.

NET LOSS FROM DISCONTINUED OPERATIONS

On January 4, 2021, Customers Bancorp completed the previously announced divestiture of BMT, the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC, pursuant to an Agreement and Plan of Merger, dated August 6, 2020, by and among Megalith, MFAC Merger Sub Inc., BMT, Customers Bank, the sole stockholder of BMT, and Customers Bancorp, the parent bank holding company for Customers Bank (as amended on November 2, 2020 and December 8, 2020). In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” Following the completion of the divestiture of BMT, BankMobile's serviced deposits and loans and the related net interest income have been combined with Customers' financial condition and the results of ~~$13.7 million, largely reflecting the growth in interest earning assets over the past twelve months, an increase in non-interest income of $17.9 million largely~~operations as a ~~result of a full nine months of BankMobile Disbursements operations, and a decrease in income tax expense of $2.3 million.~~

Net interest income increased $13.7 million, or 7.4%, for the nine months ended September 30, 2017 to $199.0 million when compared to net interest income of $185.4 million for the nine months ended September 30, 2016. This increase resulted principally from an increase in the average balance of interest-earning assets of $1.1 billion offset in part by a 13 basis point decrease in the net interest margin (tax equivalent) to 2.71% for the first nine months of 2017 when compared to the first nine months of 2016.single reportable segment.

The provision for loan losses increased $3.1 million to $5.9 million for the nine months ended September 30, 2017 when compared to the provision for loan losses of $2.9 million for the same period in 2016. The provision for loan losses of $5.9 million included $2.3 million for loan portfolio growth and $3.9 million for impaired loans, offset in part by a $0.8 million release resulting from improved asset quality and lower incurred losses than previously estimated.

Non-interest income increased $17.9 million, or 43.5%, for the nine months ended September 30, 2017 to $59.2 million when compared to $41.2 million for the nine months ended September 30, 2016. The increase was primarily a result of an increase in interchange and card revenue of $17.9 million reflecting a full nine months of BankMobile Disbursements operations, an increase in gains on sales of investment securities of $8.5 million, an increase in deposit fees of $2.7 million, and increased bank-owned life insurance income of $1.7 million, offset in part by other-than-temporary impairment losses of $12.9 million related to the decline in market value of the Religare investment and a decrease in mortgage warehouse transactional fees of $1.6 million.

Non-interest expense increased $32.5 million, or 25.3%, for the nine months ended September 30, 2017 to $160.8 million when compared to non-interest expense of $128.3 million for the nine months ended September 30, 2016. The increase primarily resulted from increased BankMobile expenses of $38.9 million due to the acquisition of the Disbursements business in June 2016 compared to a full nine months of BankMobile Disbursements operations in 2017, offset in part by decreased FDIC assessments, taxes, and regulatory fees of $4.6 million and a one-time expense of $3.9 million in third quarter 2016 for technology-related services. The increased BankMobile expenses, largely the result of a full nine months of BankMobile Disbursements operations in 2017 and only three months in 2016, included $10.5 million of increased salaries and employee benefits, $17.0 million of increased technology, communications, and bank operations, $6.4 million of increased professional services, and $5.5 million of increased other operating expenses. Excluding the effect of BankMobile, non-interest expense decreased $6.3 million period over period as management continued its efforts to control expenses.

Income tax expense decreased $2.3 million for the nine months ended September 30, 2017 to $34.2 million when compared to income tax expense of $36.6 million for the same period of 2016. The decrease in income tax expense was driven primarily by a decrease in pre-tax income of $4.0 million in the first nine months of 2017 as well as the $4.6 million of tax benefits recognized for the increase in fair value of restricted stock units vesting and the exercise of stock options since the award date compared to $0.6 million for the the same period in 2016. Customers' effective tax rate decreased to 37.4% for the nine months ended September 30, 2017, compared to 38.3% for the same period of 2016.

Preferred stock dividends increased $4.9 million for the nine months ended September 30, 2017 to $10.8 million when compared to preferred stock dividends of $5.9 million in the same period of 2016. This increase was the result of preferred stock issuances totaling $142.5 million issued in April 2016 with dividends at 6.45% and in September 2016 with dividends at 6.00%.

~~Net Interest Income~~

Net interest income (the difference between the interest earned on loans, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers' earnings.

~~The following table summarizes Customers' net interest income and related spread and margin for the periods indicated.~~

Nine Months Ended September 30,
2017 2016
Average
Balance Interest
Income or
Expense Average
Yield or
Cost (%) Average
Balance Interest
Income or
Expense Average
Yield or
Cost
(amounts in thousands)
Assets
Interest-earning deposits $ 327,154
$ 2,446
1.00 % $ 211,971
$ 845
0.53 %
Investment securities (A) 971,710
21,017
2.88 % 548,921
10,875
2.64 %
Loans:
Commercial loans to mortgage companies 1,734,874
53,860
4.15 % 1,931,892
50,767
3.51 %
Multifamily loans 3,496,276
96,570
3.69 % 3,235,689
91,611
3.78 %
Commercial and industrial 1,402,650
44,034
4.20 % 1,127,622
33,626
3.98 %
Non-owner occupied commercial real estate 1,290,762
37,654
3.90 % 1,170,996
33,759
3.85 %
All other loans 515,567
16,590
4.30 % 399,202
14,356
4.80 %
Total loans (B) 8,440,129
248,708
3.94 % 7,865,401

224,119
3.81 %
Other interest-earning assets 102,590
3,061
3.99 % 90,911
3,092
4.54 %
Total interest earning assets 9,841,583

275,232
3.74 % 8,717,204

238,931
3.66 %
Non-interest-earning assets 367,595
305,326

Total assets $ 10,209,178
$ 9,022,530

Liabilities
Interest checking accounts $ 338,991
1,839
0.73 % $ 160,525
681
0.57 %
Money market deposit accounts 3,347,661
24,462
0.98 % 3,044,696
13,674
0.60 %
Other savings accounts 41,685
87
0.28 % 39,075
66
0.23 %
Certificates of deposit 2,489,970
22,546
1.21 % 2,556,935
19,944
1.04 %
Total interest-bearing deposits 6,218,307
48,934
1.05 % 5,801,231
34,365
0.79 %
Borrowings 1,836,654
27,255
1.98 % 1,693,455
19,196
1.51 %
Total interest-bearing liabilities 8,054,961
76,189
1.26 % 7,494,686
53,561
0.95 %
Non-interest-bearing deposits 1,185,062
800,358

Total deposits and borrowings 9,240,023
1.10 % 8,295,044
0.86 %
Other non-interest-bearing liabilities 72,622
76,774

Total liabilities 9,312,645
8,371,818

Shareholders’ Equity 896,533
650,712

Total liabilities and shareholders’ equity $ 10,209,178
$ 9,022,530

Net interest earnings 199,043
185,370

Tax-equivalent adjustment (C) 399
298

Net interest earnings $ 199,442
$ 185,668

Interest spread 2.64 % 2.80 %
Net interest margin 2.70 % 2.84 %
Net interest margin tax equivalent (C) 2.71 % 2.84 %


~~(A)~~	For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.


~~(B)~~	~~Includes non-accrual loans, the effect of which is to reduce the yield earned on loans, and deferred loan fees.~~


~~(C)~~	~~Non-GAAP tax-equivalent basis, using a 35% statutory tax rate to approximate interest income as a taxable asset.~~

~~The following table presents the dollar amount of changes in interest income and interest expense for the major categories of interest-earning~~ assets and ~~interest-bearing liabilities. Information is provided for each category~~liabilities of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregatedBMT have been ~~allocated proportionately to~~presented as "Assets of discontinued operations" and "Liabilities of discontinued operations" on the ~~change due to volume~~consolidated balance sheet at December 31, 2020. BMT's operating results and ~~the change due to rate.~~

Nine Months Ended September 30,
2017 vs. 2016
Increase (Decrease) due
to Change in
Rate Volume Total
(amounts in thousands)
Interest income
Interest-earning deposits $ 989
$ 612
$ 1,601
Investment securities 1,079
9,063
10,142
Loans:
Commercial loans to mortgage companies 8,621
(5,528 ) 3,093
Multifamily loans (2,213 ) 7,172
4,959
Commercial and industrial 1,879
8,529
10,408
Non-owner occupied commercial real estate 434
3,461
3,895
All other loans (1,616 ) 3,850
2,234
Total loans 7,105
17,484
24,589
Other interest-earning assets (402 ) 371
(31 )
Total interest income 8,771
27,530
36,301
Interest expense
Interest checking accounts 233
925
1,158
Money market deposit accounts 9,313
1,475
10,788
Other savings accounts 16
5
21
Certificates of deposit 3,138
(536 ) 2,602
Total interest-bearing deposits 12,700
1,869
14,569
Borrowings 6,333
1,726
8,059
Total interest expense 19,033
3,595
22,628
Net interest income $ (10,262 ) $ 23,935
$ 13,673

Net interest income for the nine months ended September 30, 2017 was $199.0 million, an increase of $13.7 million, or 7.4%, when compared to net interest income of $185.4 million for the nine months ended September 30, 2016. This increase was primarily driven by increased average loan and security balances of $1.0 billion.

Net interest margin (tax equivalent) narrowed by 13 basis points to 2.71% from the nine months ended September 30, 2016. The net interest margin compression largely resulted from a $1.6 million reduction in prepayment penalties in the multi-family portfolio during the nine months ended September 30, 2017 as compared to nine months ended September 30, 2016. Net interest margin (tax equivalent) was also impacted by Customers Bancorp's issuance of $100 million principal amount of 3.95% senior notes on June 30, 2017.

Interest expense on total interest-bearing deposits increased $14.6 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. This increase primarily resulted from increased deposit volume as average interest-bearing deposits for the nine months ended September 30, 2017 increased by $417.1 million when compared to average interest-bearing deposits for the nine months ended September 30, 2016. The average rate on interest-bearing deposits increased 26 basis points for the nine months ended September 30, 2017 compared to the nine months ended September 30,

2016, reflecting higher interest rates offered by Customers on its money market deposit accounts and certificates of deposits in order to remain competitive and attract new and retain existing deposit customers.

Interest expense on borrowings increased $8.1 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. This increase was driven by a 47 basis point increase in average rates for the period due primarily to higher rates on short term borrowings used to fund commercial loans to mortgage companies. This increase was also driven by increased volume as average borrowings increased by $143.2 million when compared to average borrowings for the nine months ended September 30, 2016.

~~Provision for Loan Losses~~

The provision for loan losses increased by $3.1 million to $5.9 million for the nine months ended September 30, 2017, compared to $2.9 million for the same period in 2016. The provision for loan losses of $5.9 million included $2.3 million for loan portfolio growth and $3.9 million for impaired loans, offset in part by a $0.8 million release resulting from improved asset quality and lower incurred losses than previously estimated. The provision for loan losses of $2.9 million for the nine months ended September 30, 2016 included provisions for loan portfolio growth and reserves on impaired loans of approximately $5.0 million, offset in part by increased estimatedassociated cash flows ~~expected~~have been presented as "Discontinued operations" within the accompanying unaudited consolidated financial statements and prior period amounts have been reclassified to ~~be collected on purchased credit-impaired loans, a reduction in~~conform with the ~~estimated amounts owed to the FDIC for previous FDIC assisted transactions, and other recoveries of approximately $2.1 million.~~

~~For more information about the provision and allowance for loan losses and our loss experience, see “Credit Risk” and “Asset Quality” herein.~~

~~Non-Interest Income~~current period presentation.

The table below presents the ~~components~~loss from discontinued operations, net of ~~non-interest~~ income taxes for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~2020.


	Three Months Ended June 30,				QTD				Six Months Ended June 30,				YTD
(dollars in thousands)	2021		2020		Change		% Change		2021		2020		Change		% Change
Loss from discontinued operations before income taxes	$	—	$	(3,190)	$	3,190	(100.0)	%	$	(20,354)	$	(9,911)	$	(10,443)	105.4	%
Income tax expense (benefit) from discontinued operations	—		(932)		932		(100.0)	%	17,682		(2,299)		19,981		(869.1)	%
Net loss from discontinued operations	$	—	$	(2,258)	$	2,258	(100.0)	%	$	(38,036)	$	(7,612)	$	(30,424)	399.7	%

Nine Months Ended September 30,
2017 2016
(amounts in thousands)
Interchange and card revenue $ 31,729
$ 13,806
Gain on sale of investment securities 8,532
25
Deposit fees 7,918
5,260
Mortgage warehouse transactional fees 7,139
8,702
Bank-owned life insurance 5,297
3,629
Gain on sale of SBA and other loans 3,045
2,135
Mortgage banking income 703
737
Impairment loss on investment securities (12,934 ) —
Other 7,741
6,943
Total non-interest income $ 59,170
$ 41,237

~~Non-interest~~Loss from discontinued operations, net of income ~~increased $17.9 million during the nine months ended September 30, 2017 to $59.2 million, compared to $41.2~~tax expense (benefit) decreased $2.3 million for the ~~nine~~three months ended ~~September~~June 30, ~~2016. This increase~~2021, when compared to the three months ended June 30, 2020 as the divestiture of BMT was ~~primarily~~completed on January 4, 2021.

Loss from discontinued operations increased $10.4 million for the six months ended June 30, 2021, when compared to the six months ended June 30, 2020 due to ~~a $17.9~~restricted stock awards in BM Technologies' common stock distributed to certain team members of BMT in the form of severance payments and compensation costs for the restricted stock units of Customers Bancorp previously granted to certain team members of BMT that vested upon completion of the divestiture on January 4, 2021.

Table of Contents

Income tax expense from discontinued operations increased $20.0 million ~~increase in interchange and card revenues reflecting a full nine~~for the six months ~~of BankMobile Disbursements business activity in 2017~~ended June 30, 2021, when compared to ~~three full~~the six months ~~in 2016, an $8.5 million increase in gains on~~ended June 30, 2020 resulting from the effect of the divestiture being treated as a taxable asset sale ~~of investment securities, an increase in deposit fees of $2.7 million, and increased income from bank-owned life insurance policies of $1.7 million,~~for tax purposes, offset in part by tax benefits related to the restricted stock awards in BM Technologies's common stock and vesting of restricted stock units of Customers Bancorp to certain team members of BMT.

In connection with the divestiture, Customers has also entered into various agreements with BM Technologies, including a ~~$12.9 million other-than-temporary-impairment loss on equity securities~~transition services agreement, software license agreement, deposit servicing agreement, non-competition agreement and ~~a decrease in mortgage warehouse transactional fees of $1.6 million driven by a reduction in the volume of warehouse transactions.~~

~~Non-Interest Expense~~

~~The table below presents the components of non-interest expense~~loan agreement for ~~the nine months ended September 30, 2017 and 2016.~~

Nine Months Ended September 30,
2017 2016
(amounts in thousands)
Salaries and employee benefits $ 69,569
$ 58,051
Technology, communication and bank operations 33,227
19,021
Professional services 21,142
13,213
Occupancy 8,228
7,248
FDIC assessments, taxes, and regulatory fees 6,615
11,191
Provision for operating losses 4,901
1,943
Loan workout 1,844
1,497
Advertising and promotion 1,108
1,178
Other real estate owned 550
1,663
Acquisition related expenses —
1,195
Other 13,634
12,106
Total non-interest expense $ 160,818
$ 128,306

~~Non-interest expense was $160.8 million for the nine months ended September 30, 2017, an increase of $32.5 million~~periods ranging from ~~non-interest expense of $128.3 million for the nine months ended September 30, 2016.~~

~~Salaries and employee benefits, which represent the largest component of non-interest expense, increased $11.5 million, or 19.8%,~~one to $69.6 million for the nine months ended September 30, 2017, reflecting salary increases as well as a higher average number of full-time equivalent employees, primarily resulting from a full year of BankMobile Disbursements operations.

Technology, communication and bank operations increased by $14.2 million, or 74.7%, to $33.2 million for the nine months ended September 30, 2017 from $19.0 million for the nine months ended September 30, 2016. This increase was primarily attributable to increases in core processing system and conversionten years. Customers incurred expenses of ~~$9.0 million, interchange expenses of $4.7 million, non-capitalizable software development costs of $3.4~~$14.3 million and ~~depreciation expense primarily driven by~~$27.9 million to BM Technologies under the ~~$3.2 catch-up adjustment recorded~~deposit servicing agreement included in third quarter 2017 for the period BankMobile was classified as held for sale. These increases were partially offset by a $3.9 million one-time expense in third quarter 2016 for technology-related services. The increased technology, communication and bank operations ~~expenses reflected a full nine months of BankMobile Disbursements activity in 2017 compared to~~within the income from continuing operations during the three ~~full months of activity for 2016.~~

~~Professional services expense increased by $7.9 million, or 60.0%, to $21.1 million for the nine~~and six months ended ~~September~~June 30, 2017 from $13.2 million for the nine months ended September 30, 2016. This increase was primarily driven by the transitional services agreement which was in effect for the twelve months following the acquisition of the Disbursement business from Higher One and ended in second quarter 2017 and increases in consulting and other professional services2021. Refer to ~~support a $10.5 billion bank.~~

FDIC assessments, taxes, and regulatory fees decreased by $4.6 million, or 40.9%, to $6.6 million for the nine months ended September 30, 2017 from $11.2 million for the nine months ended September 30, 2016. This decrease was primarily related to a lower insurance assessment charged by the FDIC as the FDIC's Deposit Insurance Fund reached a targeted ratio.

Provision for operating losses increased by $3.0 million, or 152.2%, to $4.9 million for the nine months ended September 30, 2017 from $1.9 million for the nine months ended September 30, 2016. The provision for operating losses represents Customers' estimated liability for losses resulting from fraud or theft-based transactions that have generally been disputed by deposit account holders mainly from its BankMobile Disbursements business but where such disputes have not been resolved as of the end of the reporting period. The reserve is based on historical rates of loss on such transactions. The increase is mainly attributable"NOTE 3 – DISCONTINUED OPERATIONS" to the ~~accrual~~unaudited consolidated financial statements for ~~the estimated liability for a full nine months of operations of the BankMobile Disbursements business in 2017.~~additional information.

~~Income Taxes~~

Income tax expense decreased $2.3 million for the nine months ended September 30, 2017 to $34.2 million when compared to income tax expense of $36.6 million for the same period of 2016. The decrease in income tax expense was driven primarily by a decrease in pre-tax income of $4.0 million in the first nine months of 2017. Customers' effective tax rate decreased to 37.4% for the nine months ended September 30, 2017, compared to 38.3% for the same period of 2016. The decrease in the effective tax rate was primarily driven by the lower taxable income as well as the $4.6 million of tax benefits recognized during the nine months ended September 30, 2017 for the increase in fair value of restricted stock units vesting and the exercise of stock options since the award date compared to $0.6 million for the the same period in 2016.

~~Preferred Stock Dividends~~

PREFERRED STOCK DIVIDENDS

Preferred stock dividends ~~increased $4.9~~were $3.3 million ~~in the nine months ended September 30, 2017 to $10.8 million, compared to $5.9~~and $3.6 million for the ~~nine~~three months ended ~~September~~June 30, ~~2016. This increase was~~2021 and 2020, respectively. There were no changes to the ~~result~~amount of preferred stock ~~issuances totaling $142.5~~outstanding during the three months ended June 30, 2021 and 2020.

Preferred stock dividends were $6.7 million ~~issued in April 2016 with dividends~~and $7.2 million for the six months ended June 30, 2021 and 2020, respectively. There were no changes to the amount of preferred stock outstanding during the six months ended June 30, 2021 and 2020.

On June 15, 2020, Series C Preferred Stock became floating at ~~6.45% and in September 2016 with dividends~~three-month LIBOR plus 5.30%, compared to a fixed rate of 7.00%. On March 15, 2021, Series D Preferred Stock became floating at ~~6.00%~~three-month LIBOR plus 5.09%, compared to a fixed rate of 6.50%. On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%.

Financial Condition

General

~~Customers crossed the $10 billion asset threshold during the second quarter of 2017 and continued to exceed $10 billion of~~Customers' total assets were $19.6 billion at ~~September~~June 30, ~~2017 with~~2021. This represented a $1.2 billion increase from total assets of ~~$10.5 billion.~~$18.4 billion at December 31, 2020. The increase in total assets was primarily driven by increases of $1.7 billion in PPP loans, $316.5 million in investment securities, and $196.8 million in loans and leases receivable, partially offset by decreases of $761.1 million in loans receivable, mortgage warehouse, at fair value and $262.9 million in cash and cash equivalents.

Total liabilities were $18.4 billion at June 30, 2021. This represented a $1.1 billion ~~or 11.6%,~~ increase from ~~total assets of $9.4~~$17.3 billion at December 31, 2016. The change in Customers' financial position occurred primarily as the result of an increase in total loans outstanding of $0.9 billion since December 31, 2016, or 10.9%, primarily driven by growth in multifamily, commercial and industrial loans, and consumer residential loans. Commercial loans held for investment increased $0.7 billion, or 11.5%, to $6.5 billion at September 30, 2017 compared to $5.9 billion at December 31, 2016, and consumer loans held for investment increased $233.2 million to $531.9 million at September 30, 2017 from $298.7 million at December 31, 2016.

Given the change in disposition strategy related to BankMobile as of September 30, 2017, Customers has decided to strategically reduce its total assets to below $10 billion as of December 31, 2017 in order to continue to qualify for the small issuer exemption rules of the Durbin Amendment to optimize interchange revenue through June 30, 2019. Customers plans to reduce total assets by approximately $500 million by year-end 2017 through normal seasonality of the mortgage warehouse business, which tends to decline in the winter months, selling multi-family and residential mortgage loans, and selling investment securities as needed. In addition, Customers expects to moderately grow its commercial and industrial loan portfolio while limiting growth in its multi-family loan portfolio by disciplined pricing.

~~Total liabilities were $9.6 billion at September 30, 2017. This represented a $1.0 billion, or 12.1%, increase from $8.5 billion at December 31, 2016.~~2020. The increase in total liabilities primarily resulted ~~primarily~~ from increases of $2.6 billion in total deposits and $186.7 million in accrued interest payable and other liabilities, partially offset by decreases of $850.0 million in FHLB ~~borrowings, which increased by $0.6 billion, or 68.3%, to $1.5 billion at September 30, 2017 from $0.9 billion at December 31, 2016, other borrowings, which increased $99.1~~advances, $549.2 million ~~or 113.8%, to $186.3~~in the PPPLF, and $250.0 million ~~at September 30, 2017 from $87.1 million at December 31, 2016 resulting from the issuance of the $100 million senior notes on June 30, 2017, and~~in federal funds purchased, which increased $64.0 million, or 77.1%, to $147.0 million at September 30, 2017 from $83.0 million at December 31, 2016. Overall deposits increased $293.3 million, or 4.0%, to $7.6 billion at September 30, 2017 from $7.3 billion at December 31, 2016.purchased.

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The following table ~~sets forth~~presents certain key condensed balance sheet data as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016:~~2020:


(dollars in thousands)	June 30, 2021		December 31, 2020		Change		% Change
Cash and cash equivalents	$	430,500	$	693,354	$	(262,854)	(37.9)	%
Investment securities, at fair value	1,526,792		1,210,285		316,507		26.2	%
Loans held for sale	34,540		79,086		(44,546)		(56.3)	%
Loans receivable, mortgage warehouse, at fair value	2,855,284		3,616,432		(761,148)		(21.0)	%
Loans receivable, PPP	6,305,056		4,561,365		1,743,691		38.2	%
Loans and leases receivable	7,772,142		7,575,368		196,774		2.6	%
Allowance for credit losses on loan and leases	(125,436)		(144,176)		18,740		(13.0)	%
Other assets	362,661		338,438		24,223		7.2	%
Assets of discontinued operations	—		62,055		(62,055)		(100.0)	%
Total assets	19,635,108		18,439,248		1,195,860		6.5	%
Total deposits	13,873,939		11,309,929		2,564,010		22.7	%

Federal funds purchased	—		250,000		(250,000)		(100.0)	%
FHLB advances	—		850,000		(850,000)		(100.0)	%
Other borrowings	124,240		124,037		203		0.2	%
Subordinated debt	181,534		181,394		140		0.1	%
FRB PPP liquidity facility	3,865,865		4,415,016		(549,151)		(12.4)	%
Accrued interest payable and other liabilities	338,801		152,082		186,719		122.8	%
Liabilities of discontinued operations	—		39,704		(39,704)		(100.0)	%
Total liabilities	18,384,379		17,322,162		1,062,217		6.1	%
Total shareholders’ equity	1,250,729		1,117,086		133,643		12.0	%
Total liabilities and shareholders’ equity	$	19,635,108	$	18,439,248	$	1,195,860	6.5	%

September 30,
2017 December 31,
2016
(amounts in thousands)
Cash and cash equivalents $ 219,480
$ 264,709
Investment securities available for sale, at fair value 584,823
493,474
Loans held for sale (includes $1,963,076 and $2,117,510, respectively, at fair value) 2,113,293
2,117,510
Loans receivable 7,061,338
6,154,637
Allowance for loan losses (38,314 ) (37,315 )
Total assets 10,471,829
9,382,736
Total deposits 7,597,076
7,303,775
Federal funds purchased 147,000
83,000
FHLB advances 1,462,343
868,800
Other borrowings 186,258
87,123
Subordinated debt 108,856
108,783
Total liabilities 9,561,187
8,526,864
Total shareholders’ equity 910,642
855,872
Total liabilities and shareholders’ equity 10,471,829
9,382,736

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and interest-earning deposits. Cash and due from banks consists mainly of vault cash and cash items in the process of collection. ~~These balances totaled $13.3~~Cash and due from banks were $36.8 million and $78.1 million at ~~September~~June 30, ~~2017. This represents a $24.2 million decrease from $37.5 million at~~2021 and December 31, ~~2016. These~~2020, respectively. Cash and due from banks balances vary from day to day, primarily due to variations in customers’ ~~deposits~~deposit activities with the Bank.

Interest-earning deposits consist of cash deposited at other banks, primarily the ~~Federal Reserve Bank of Philadelphia.~~FRB. Interest-earning deposits were ~~$206.2~~$393.7 million and ~~$227.2~~$615.3 million at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively.

~~Included~~ The balance of interest-earning deposits varies from day to day, depending on several factors, such as fluctuations in ~~the reported balances~~customers' deposits with Customers, payment of ~~cash~~checks drawn on customers' accounts and ~~cash equivalents at September 30, 2017~~strategic investment decisions made to maximize Customers' net interest income, while effectively managing interest-rate risk and liquidity. The decrease in interest-earning deposits since December 31, ~~2016 was $10.0 million and $20.0 million, respectively,~~2020 primarily resulted from the redeployment of ~~restricted~~excess cash ~~placed in escrow for payment to Higher One in connection with the acquisition of the Disbursement business.~~into interest-earning assets.

Investment Securities

The investment securities portfolio is an important source of interest income and liquidity. ~~At September 30, 2017, investments consisted~~It consists primarily of ~~residential and commercial real estate~~ mortgage-backed securities and collateralized mortgage obligations guaranteed by ~~an agency~~agencies of the United States government; United States government agencies securities; asset-backed securities; collateralized loan obligations; private label collateralized mortgage obligations and commercial mortgage-backed securities, state and political subdivision debt securities and corporate ~~notes and marketable equity securities.~~notes. In addition to generating revenue, the investment portfolio is maintained to manage interest-rate risk, provide liquidity, ~~and~~serve as collateral for other borrowings, and diversify the credit risk of interest-earning assets. The portfolio is structured to ~~maximize~~optimize net interest income given the changes in the economic environment, liquidity position and balance sheet mix.

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At ~~September~~June 30, ~~2017,~~2021, investment securities ~~were $584.8 million~~totaled $1.5 billion compared to ~~$493.5 million~~$1.2 billion at December 31, ~~2016, an increase of $91.3 million.~~2020. The increase ~~was~~in investment securities primarily resulted from the ~~result of~~ purchases of asset-backed securities, collateralized loan obligations, agency-guaranteed collateralized mortgage obligations and mortgage-backed securities, private label collateralized mortgage obligations, commercial mortgage-backed securities and corporate notes totaling $890.2 million, partially offset by the sale of ~~$796.6~~$407.6 million ~~during the nine months ended September 30, 2017, offset in part by sales~~of asset-backed securities, agency-guaranteed collateralized mortgage obligations and mortgage-backed securities, corporate notes, and maturities, calls and principal repayments totaling $172.8 million for the six months ended June 30, 2021.

For financial reporting purposes, AFS debt securities are carried at fair value. Unrealized gains and losses on AFS debt securities are included in other comprehensive income (loss) and reported as a separate component of ~~$698.5 million and impairment charges of $12.9 million. Customers held all~~shareholders’ equity, net of the ~~investment~~related tax effect. Changes in the fair value of marketable equity securities ~~sold~~and securities reported at fair value based on a fair value option election are recorded in ~~2017 for more than 90 days.~~non-interest income in the period in which they occur.

~~Loans~~

LOANS AND LEASES

Existing lending relationships are primarily with small and middle market businesses and individual consumers primarily in ~~Bucks,~~Southeastern Pennsylvania (Bucks, Berks, Chester, ~~Montgomery,~~Philadelphia and Delaware ~~and Philadelphia Counties, Pennsylvania; Camden and Mercer Counties, New Jersey; Westchester County and~~Counties); Rye Brook, New York ~~City,~~(Westchester County); Hamilton, New Jersey (Mercer County); Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire (Rockingham County); Manhattan and Melville, New York; Washington, D.C.; Chicago, Illinois; Dallas, Texas, and ~~the New England area.~~Orlando, Florida. The portfolio of loans to mortgage banking ~~companies~~businesses is ~~a nation-wide portfolio.~~nationwide. The loan portfolio consists primarily of loans to support mortgage banking companies’ funding needs, multi-family/commercial real estate and commercial and industrial loans. ~~The Bank~~Customers continues to focus on small and middle market business loans to grow its commercial lending efforts, ~~expand~~particularly its commercial and industrial loan and lease portfolio and its specialty mortgage ~~warehouse lending business, and expand its multi-family/commercial real estate~~ lending business. Customers also focuses its lending efforts on local-market mortgage and home equity lending and the origination and purchase of unsecured consumer loans (installment loans), including personal, student loan refinancing, and home improvement loans through arrangements with fintech companies and other market place lenders nationwide.

Commercial Lending

Customers' commercial lending is divided into ~~four~~five groups: Business Banking, Small and Middle Market Business Banking, ~~Multi-family~~Multi-Family and Commercial Real Estate Lending, ~~and~~ Mortgage Banking ~~Lending.~~Lending, and Equipment Finance. This grouping is designed to allow for ~~more effective~~greater resource deployment, higher standards of risk management, ~~stronger oversight of~~strong asset quality, ~~better management of interest rate~~lower interest-rate risk and higher productivity levels.

The commercial lending group focuses primarily on companies with annual revenues ranging from $1 million to $100 million, which typically have credit requirements between $0.5 million and $10 million.

As of June 30, 2021, Customers had $15.1 billion in commercial loans outstanding, totaling approximately 88.7% of its total loan and lease portfolio, which includes loans held for sale and loans receivable, mortgage warehouse, at fair value and PPP loans, compared to commercial loans outstanding of $14.2 billion, comprising approximately 89.8% of its total loan and lease portfolio at December 31, 2020. Included in the $15.1 billion and $14.2 billion in commercial loans outstanding as of June 30, 2021 and December 31, 2020, respectively, were $6.3 billion and $4.6 billion of PPP loans, respectively. The PPP loans are fully guaranteed by the SBA and earn a fixed interest rate of 1.00%.

The small and middle market business banking platform originates loans, including ~~Small Business Administration~~SBA loans, through the branch network sales force and a team of dedicated relationship managers. The support administration of this platform is centralized, including risk management, product management, marketing, performance tracking and overall strategy. Credit and sales training has been established for Customers' sales force, ensuring that it has small business experts in place providing appropriate financial solutions to the small business owners in its communities. AThe division approach focuses on industries that offer high asset quality and are deposit rich to drive profitability.

~~In 2009, Customers launched its~~Customers' lending to mortgage banking businesses ~~products, which~~ primarily provides financing to mortgage bankers for residential mortgage originations from loan closing until sale in the secondary market. Many providers of liquidity in this segment exited the business in 2009 during a period of market turmoil. Customers saw an opportunity to provide liquidity to this business segment at attractive ~~spreads. There was also the opportunity to attract escrow deposits and to~~spreads, generate fee income ~~in this business.~~

The goal of the mortgage banking business lending group is to provide liquidity to mortgage companies. These loans are primarily used by mortgage companies to fund their pipelines from closing of individual mortgage loans until their sale into the secondary market.and attract escrow deposits. The underlying residential loans are taken as collateral for ~~the Bank’s~~Customers' commercial loans to the mortgage companies. As of ~~September~~June 30, ~~2017,~~2021 and December 31, 2020, commercial loans ~~in the warehouse lending portfolio~~to mortgage banking businesses totaled ~~$2.0~~$2.9 billion and $3.6 billion, respectively, and are ~~designated~~reported as ~~held for sale.~~loans receivable, mortgage warehouse, at fair value on the consolidated balance sheet.

~~The goal~~

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Customers intends to continue to deemphasize its lower-yielding multi-family loan portfolio, and invest in high credit quality higher-yielding commercial and industrial loans with the ~~Bank’s~~multi-family run-off. Customers' multi-family lending group iscontinues to ~~build~~focus on retaining a portfolio of high-quality multi-family loans within ~~the Bank’s~~Customers' covered markets while ~~cross selling~~cross-selling other products and services. ~~This product~~These lending activities primarily ~~targets~~target the refinancing ~~existing~~of loans with other banks using conservative underwriting standards and ~~provides~~provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the multi-family property, plus an assignment of all leases related to such property. As of ~~September~~June 30, ~~2017, the Bank~~2021, Customers had multi-family loans of ~~$3.8~~$1.5 billion outstanding, ~~making up~~comprising approximately ~~41.1% of the Bank’s total loan portfolio, including loans held for sale, compared to $3.2 billion, or approximately 38.9%~~8.8% of the total loan and lease portfolio, ~~including loans held for sale,~~compared to $1.8 billion, or approximately 11.1% of the total loan and lease portfolio, at December 31, ~~2016.~~2020.

The Equipment Finance Group offers equipment financing and leasing products and services for a broad range of asset classes. It services vendors, dealers, independent finance companies, bank-owned leasing companies and strategic direct customers in the plastics, packaging, machine tool, construction, transportation and franchise markets. As of ~~September~~June 30, ~~2017,~~2021 and December 31, 2020, Customers had $310.0 million and $288.4 million, respectively, of equipment finance loans outstanding. As of June 30, 2021 and December 31, 2020, Customers had $129.0 million and $108.0 million of equipment finance leases, respectively. As of June 30, 2021 and December 31, 2020, Customers had $102.8 million and $102.9 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $35.6 million and $28.9 million, respectively.

On March 27, 2020, the ~~Bank~~CARES Act was signed into law and created funding for a new product called the PPP. The PPP is administered by the SBA and is intended to assist organizations with payroll related expenses. Customers, directly or through fintech partnerships, had ~~$8.6~~$6.3 billion ~~in commercial~~and $4.6 billion of PPP loans outstanding ~~totaling approximately 94.2%~~as of its total loan portfolio, which includes loans held for sale, compared to $8.0 billion commercial loans outstanding, composing approximately 96.4% of its loan portfolio, including loans held for sale, atJune 30, 2021 and December 31, ~~2016.~~2020, respectively, which are fully guaranteed by the SBA and earn a fixed interest rate of 1.00%. The average loan size of the PPP portfolio from the first two rounds is approximately $50 thousand, and less than $20 thousand from the latest round.

Consumer Lending

Customers provides unsecured consumer installment loans, residential mortgage, and home equity ~~and residential mortgage~~ loans to customers. ~~Underwriting standards for~~The installment loan portfolio consists largely of originated and purchased personal, student loan refinancing and home ~~equity lending~~improvement loans. None of the loans are ~~conservative and~~considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660. Customers has been selective in the consumer loans it has been purchasing. Home equity lending is offered to solidify customer relationships and grow relationship revenues in the long term. This lending is important in Customers' efforts to grow total relationship revenues for its consumer households. As of ~~September~~June 30, ~~2017, the Bank~~2021, Customers had ~~$533.8 million~~$1.9 billion in consumer loans outstanding, or ~~5.8%~~11.3% of the ~~Bank’s~~ total loan and lease portfolio, ~~which includes~~compared to $1.6 billion, or 10.3% of the total loan and lease portfolio, as of December 31, 2020.

Purchases and sales of loans ~~held~~were as follows for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	2021		2020		2021		2020
Purchases (1)

Loan receivable, PPP	$	460,456	$	—	$	621,487	$	—



Residential real estate	—		—		—		495

Installment (2)	—		18,008		115,849		209,768
Total	$	460,456	$	18,008	$	737,336	$	210,263
Sales (3)
Multi-family	$	19,443	$	—	$	19,443	$	—
Commercial and industrial	10,059		—		28,990		—
Commercial real estate owner occupied	4,461		—		6,698		—
Commercial real estate non-owner occupied	—		—		18,366		—

Residential real estate	11,623		—		28,186		—

Installment	28,818		—		28,818		1,822
Total	$	74,404	$	—	$	130,501	$	1,822

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 102.0% and 98.5% of the loans' unpaid principal balance during the three months ended June 30, 2021 and 2020, respectively. The purchase price was 103.0% and 100.4% of the loans' unpaid principal balance during the six months ended June 30, 2021 and 2020, respectively.

(2)Installment loan purchases for the three and six months ended June 30, 2021 and 2020 consist of third-party originated unsecured consumer loans. None of the loans are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

(3)Amounts reported in the above table are the unpaid principal balance at time of sale. ~~The Bank plans to expand its product offerings~~For the three months ended June 30, 2021 and 2020, loan sales resulted in ~~real estate secured consumer lending.~~net gains of $2.2 million and $0.3 million, respectively. For the six months ended June 30, 2021 and 2020, loan sales resulted in net gains of $4.3 million and $0.4 million, respectively.

~~Customers Bank has launched a community outreach program in Philadelphia to finance homeownership in urban communities. As part~~

Table of this program, the Bank is offering an “Affordable Mortgage Product." This community outreach program is penetrating the underserved population, especially in low and moderate income neighborhoods. As part of this commitment, a limited purpose office was opened in Progress Plaza, 1501 North Broad Street, Philadelphia, PA. The program includes homebuyer seminars that prepare potential homebuyers for homeownership by teaching money management and budgeting skills, including the financial responsibilities that come with having a mortgage and owning a home. The “Affordable Mortgage Product” is offered throughout Customers Bank’s assessment areas.Contents

Loans Held for Sale

The composition of loans held for sale as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 was as follows:


	September 30,		December 31,
	2017		2016
(amounts in thousands)					(amounts in thousands)	June 30, 2021		December 31, 2020
Commercial loans:					Commercial loans:
Mortgage warehouse loans, at fair value	$	1,961,248	$	2,116,815
Multi-family loans at lower of cost or fair value	150,217		—

Commercial and industrial loans, at lower of cost or fair value					Commercial and industrial loans, at lower of cost or fair value	$	—	$	55,683
Commercial real estate non-owner occupied loans, at lower of cost or fair value					Commercial real estate non-owner occupied loans, at lower of cost or fair value	—		17,251
Total commercial loans held for sale	2,111,465		2,116,815		Total commercial loans held for sale	—		72,934
Consumer Loans:
Consumer loans:					Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value					Home equity conversion mortgages, at lower of cost or fair value	507		643
Residential mortgage loans, at fair value	1,828		695		Residential mortgage loans, at fair value	6,074		5,509
Installment loans, at lower of cost or fair value					Installment loans, at lower of cost or fair value	27,959		—
Total consumer loans held for sale					Total consumer loans held for sale	34,540		6,152
Loans held for sale	$	2,113,293	$	2,117,510	Loans held for sale	$	34,540	$	79,086

At ~~September~~June 30, ~~2017,~~2021, loans held for sale totaled ~~$2.1 billion,~~$34.5 million, or ~~23.0%~~0.2% of the total loan and lease portfolio, and ~~$2.1 billion,~~$79.1 million, or ~~25.6%~~0.5% of the total loan and lease portfolio, at December 31, ~~2016.~~2020.

~~Mortgage warehouse loans~~Loans held for sale at September 30, 2017 decreased $155.6 million when compared to December 31, 2016. Mortgage warehouse loan balances are typically elevated during the summer months when home-purchasing activity is usually stronger. However, Customers expects that mortgage warehouse loan growth will moderate and return to more normal seasonal patterns as interest rates and the interest rate yield curve return to more normal levels and spreads.

~~Held-for-sale loans~~ are carried on the balance sheet at either fair value (due to the election of the fair value option) or at the lower of cost or fair value. An ~~allowance for loan losses~~ACL is not recorded on loans that are classified as held for sale.

Total Loans and Leases Receivable

~~Loans~~The composition of total loans and leases receivable (excluding loans held for sale)~~, net~~ was as follows:


(amounts in thousands)	June 30, 2021		December 31, 2020
Loans and leases receivable, mortgage warehouse, at fair value	$	2,855,284	$	3,616,432
Loans receivable, PPP	6,305,056		4,561,365
Loans receivable:
Commercial:
Multi-family	1,497,485		1,761,301
Commercial and industrial (1)	2,360,656		2,289,441
Commercial real estate owner occupied	653,649		572,338
Commercial real estate non-owner occupied	1,206,646		1,196,564
Construction	179,198		140,905
Total commercial loans and leases receivable	5,897,634		5,960,549
Consumer:
Residential real estate	266,911		317,170
Manufactured housing	57,904		62,243
Installment	1,549,693		1,235,406
Total consumer loans receivable	1,874,508		1,614,819
Loans and leases receivable (2)	7,772,142		7,575,368
Allowance for credit losses on loans and leases	(125,436)		(144,176)
Total loans and leases receivable, net of allowance for credit losses on loans and leases	$	16,807,046	$	15,608,989

(1)Includes direct finance equipment leases of ~~the allowance for loan losses, increased by $905.7~~$129.0 million ~~to $7.0 billion~~and $108.0 million at ~~September~~June 30, ~~2017 from $6.1 billion at December 31, 2016. Loans receivable as of September 30, 2017~~2021 and December 31, ~~2016 consisted~~2020, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(223.1) million and $(54.6) million at June 30, 2021 and December 31, 2020, respectively.

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Loans receivable, PPP

Loans receivable, mortgage warehouse, at fair value

The mortgage warehouse product line primarily provides financing to mortgage companies nationwide from the time of origination of the ~~following:~~underlying mortgage loans until the mortgage loans are sold into the secondary market. As a mortgage warehouse lender, Customers provides a form of financing to mortgage bankers by purchasing for resale the underlying residential mortgages on a short-term basis under a master repurchase agreement. These loans are reported as loans receivable, mortgage warehouse, at fair value on the consolidated balance sheets. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At June 30, 2021, all of Customers' commercial mortgage warehouse loans were current in terms of payment.

September 30, December 31,
2017 2016
(amounts in thousands)
Commercial:
Multi-family $ 3,618,989
$ 3,214,999
Commercial and industrial (including owner occupied commercial real estate) 1,601,789
1,382,343
Commercial real estate non-owner occupied 1,237,849
1,193,715
Construction 73,203
64,789
Total commercial loans 6,531,830
5,855,846
Consumer:
Residential real estate 435,188
193,502
Manufactured housing 92,938
101,730
Other 3,819
3,483
Total consumer loans 531,945
298,715
Total loans receivable 7,063,775
6,154,561
Deferred (fees)/costs and unamortized (discounts)/premiums, net (2,437 ) 76
Allowance for loan losses (38,314 ) (37,315 )
Loans receivable, net of allowance for loan losses $ 7,023,024
$ 6,117,322

Customers is subject to the risks associated with such lending, including, but not limited to, the risks of fraud, bankruptcy and default of the mortgage banker or of the underlying residential borrower, any of which could result in credit losses. Customers' mortgage warehouse lending team members monitor these mortgage originators by obtaining financial and other relevant information to reduce these risks during the lending period. Loans receivable, mortgage warehouse, at fair value totaled $2.9 billion and $3.6 billion at June 30, 2021 and December 31, 2020, respectively.

Credit Risk

Customers manages credit risk by maintaining diversification in its loan and lease portfolio, establishing and enforcing prudent underwriting standards ~~diligent~~and collection efforts, and continuous and periodic loan and lease classification reviews. Management also considers the effect of credit risk on financial performance by reviewing quarterly and maintaining an adequate ~~allowance for loan losses.~~ACL. Credit losses are ~~charged to the allowance for loan losses~~charged-off when they are identified, and provisions are added for current expected credit losses, to the ~~allowance for loan losses when and as appropriate.~~ACL at least quarterly. The ~~adequacy of the allowance for loan losses, maintained at a level to absorb~~ACL is estimated ~~incurred losses in the held-for-investment loan portfolio as of the last day of the reporting period, is evaluated~~ at least quarterly.

The provision for ~~loan~~credit losses on loans and leases was ~~$2.4~~$3.3 million and ~~$0.1~~$20.9 million for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016, respectively, and $5.9 million and $2.9 million for the nine months ended September 30, 2017 and 2016,~~2020, respectively. The ~~allowance for loan losses~~ACL maintained for loans and leases receivable ~~(excludes~~(excluding loans held for ~~sale)~~sale and loans receivable, mortgage warehouse, at fair value and PPP loans) was ~~$38.3~~$125.4 million, or ~~0.54%~~1.61% of loans and leases receivable, excluding PPP loans, at ~~September~~June 30, ~~2017~~2021 and ~~$37.3~~$144.2 million, or ~~0.61%~~1.90% of loans and leases receivable, at December 31, ~~2016.~~2020. Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedule below.

The decrease in the ACL resulted primarily from lower ACL for the commercial loan portfolio due to continued improvement in macroeconomic forecasts at June 30, 2021, as compared to the impact of reserve build for the COVID-19 pandemic at June 30, 2020, offset in part by the increase in ACL for the consumer installment loan portfolio due to loan growth. Net charge-offs were ~~$2.5~~$6.6 million for the three months ended ~~September~~June 30, ~~2017, an increase~~2021, a decrease of ~~$2.2~~$3.7 million compared to the same period in ~~2016. Net~~2020. Commercial real estate non-owner occupied charge-offs for the three months ended June 30, 2020 were attributable to partial charge-offs of two collateral dependent loans, which are not indicative of the overall commercial real estate portfolio. Installment charge-offs were ~~$4.9 million~~attributable to unsecured consumer installment loans originated or purchased through arrangements with fintech companies and other market place lenders, which increased for the ~~nine~~three months ended ~~September~~June 30, ~~2017, an increase of $4.0 million~~2021 compared to the same period in ~~2016. The increase in net charge-offs period over period was largely driven by~~2020 consistent with the ~~charge-off~~loan growth.

Table of ~~$1.6 million~~Contents

A reconciliation of the coverage of ACL for loans and ~~$1.8 million during~~leases held for investment to the ~~third quarter 2017~~ACL for loans and ~~second quarter 2017, respectively, related to two relationships in the commercial~~leases held for investment, excluding PPP loans as of June 30, 2021 and ~~industrial post-2009 originated loan portfolio.~~

December 31, 2020 are set forth below.


(dollars in thousands)	June 30, 2021			December 31, 2020
Loans and leases receivable (GAAP)	$	14,077,198		$	12,136,733
Less: Loans receivable, PPP	6,305,056			4,561,365
Loans and leases held for investment, excluding PPP (Non-GAAP)	$	7,772,142		$	7,575,368

ACL for loans and leases (GAAP)	$	125,436		$	144,176

Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP)	1.61		%	1.90		%

The ~~chart~~table below ~~depicts~~presents changes in ~~the Bank’s allowance for loan losses~~Customers' ACL for the periods indicated. The amounts presented for the provision for loan losses below do not include the effect of changes to estimated benefits resulting from the FDIC loss share arrangements for the covered loans for periods prior to the termination of the FDIC loss sharing agreements.

Analysis of the Allowance for Credit Losses on Loan ~~Losses~~and Leases


	Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	2021		2020		2021		2020
Balance at beginning of the period	$	128,736	$	149,283	$	144,176	$	56,379
Cumulative effect of change in accounting principle	—		—		—		79,829
Loan and lease charge-offs (1)
Multi-family	—		—		1,132		—
Commercial and industrial	2		20		637		117
Commercial real estate owner occupied	1		—		142		—
Commercial real estate non-owner occupied	—		2,801		—		15,598

Residential real estate	—		—		50		—
Installment	7,958		8,304		20,645		14,550
Total charge-offs	7,961		11,125		22,606		30,265
Loan and lease recoveries (1)

Commercial and industrial	285		25		545		79
Commercial real estate owner occupied	2		2		9		5
Commercial real estate non-owner occupied	59		—		69		—
Construction	114		113		119		116
Residential real estate	12		26		22		55
Installment	898		635		2,730		975
Total recoveries	1,370		801		3,494		1,230
Total net charge-offs	6,591		10,324		19,112		29,035
Provision for credit losses on loans and leases	3,291		20,946		372		52,732
Balance at the end of the period	$	125,436	$	159,905	$	125,436	$	159,905

(1)Charge-offs and recoveries on PCD loans that are accounted for in pools are recognized on a net basis when the pool matures.

Table of Contents

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(amounts in thousands)
Balance at the beginning of the period $ 38,458
$ 38,097
$ 37,315
$ 35,647
Loan charge-offs (1)
Commercial and industrial 2,032
237
4,079
774
Commercial real estate non-owner occupied 77
140
485
140
Residential real estate 120
43
410
456
Other consumer 356
246
602
478
Total Charge-offs 2,585
666
5,576
1,848
Loan recoveries (1)
Commercial and industrial 54
62
337
173
Commercial real estate owner occupied —
—
9
—
Commercial real estate non-owner occupied —
—
—
8
Construction 27
8
157
465
Residential real estate 7
298
34
299
Other consumer 1
10
101
10
Total Recoveries 89
378
638
955
Total net charge-offs 2,496
288
4,938
893
Provision for loan losses 2,352
88
5,937
3,143
Balance at the end of the period $ 38,314

$ 37,897
$ 38,314
$ 37,897


~~(1)~~	~~Charge-offs and recoveries on purchased-credit-impaired loans that are accounted for in pools are recognized on a net basis when the pool matures.~~

The ~~allowance for loan losses~~ACL is based on a quarterly evaluation of the loan and lease portfolio and is maintained at a level that management considers adequate to absorb ~~probable~~expected losses ~~incurred~~ as of the balance sheet date. All commercial loans, with the exception of PPP loans and commercial mortgage warehouse loans, which are reported at fair value, are assigned ~~credit risk~~internal credit-risk ratings, based upon an assessment of the borrower, the structure of the transaction and the available collateral and/or guarantees. All loans and leases are monitored regularly by the responsible officer, and the risk ratings are adjusted when considered appropriate. The risk assessment allows management to identify problem loans and leases timely. Management considers a variety of factors and recognizes the inherent risk of loss that always exists in the lending process. Management uses a disciplined methodology to estimate an appropriate level of ~~allowance for loan losses. See “Asset Quality”~~ACL. Refer to Critical Accounting Policies herein and "NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' unaudited consolidated financial statements, also, refer to "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' audited consolidated financial statements in its 2020 Form 10-K for further discussion ofon management's methodology for estimating the ~~allowance for loan losses.~~ACL.

Approximately ~~85%~~63% of ~~the Bank’s~~Customers' commercial real estate, commercial and residential construction, consumer residential and commercial and industrial loan types have real estate as collateral (collectively, “the real estate portfolio”)~~. The Bank’s lien position on the real estate collateral will vary on a loan-by-loan basis and will change as a result of changes~~, primarily in the ~~value~~form of ~~the collateral.~~a first lien position. Current appraisals providing current value estimates of the property are received when ~~the Bank’s~~Customers' credit group determines that the facts and circumstances have significantly changed since the date of the last appraisal, including that real estate values have deteriorated. The credit committee and loan officers review loans that are ~~fifteen~~15 or more days delinquent and all non-accrual loans on a periodic basis. In addition, loans where the loan officers have identified a “borrower of interest” are discussed to determine if additional analysis is necessary to apply the ~~risk rating~~risk-rating criteria properly. The risk ratings for the real estate loan portfolio are determined based upon the current information available, including but not limited to discussions with the borrower, updated financial information, economic conditions within the geographic area and other factors that may affect the cash flow of the loan. If a loan is ~~impaired and~~ individually evaluated for impairment, the collateral value or discounted cash flow ~~or loan market value~~ analysis is generally used to ~~estimate~~determine the ~~amount~~estimated fair value of ~~proceeds expected to be collected, and that estimated amount,~~the underlying collateral, net of estimated selling costs, ~~as applicable, is~~and compared to the outstanding loan balance to ~~estimate~~determine the amount of ~~impairment,~~reserve necessary, if any. Appraisals used in this evaluation process are typically less than two years aged. For loans where real estate is not the primary source of collateral, updated financial information is obtained, including accounts

receivable and inventory aging reports and relevant supplemental financial data to estimate the fair value of the loan, ~~and compared,~~ net of estimated selling costs, and compared to the outstanding loan balance to estimate the required ~~reserve, if any.~~reserve.

These impairment measurements are inherently subjective as they require material estimates, including, among others, estimates of property values in appraisals, the amounts and timing of expected future cash flows on individual loans, and general considerations for historical loss experience, economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios, all of which require judgment and may be susceptible to significant change over time and as a result of changing economic conditions or other factors. Pursuant to ASC ~~310-10-35 -~~ ~~Loan Impairment~~ ~~and ASC 310-40 -~~ ~~Troubled Debt Restructurings by Creditors,~~ ~~impaired~~326, individually assessed loans, consisting primarily of ~~loans placed on~~ non-accrual and restructured ~~under troubled debt restructurings~~ loans, ~~or charged-off to their net realizable value,~~ are considered in the methodology for determining the ~~allowance for loan losses. Impaired~~ACL. Individually assessed loans are generally evaluated based on the expected future cash flows ~~if principal is expected to come from the operation of such collateral~~ or the fair value of the underlying collateral (less estimated costs to sell) if principal repayment is expected to come from the operation or sale of such collateral. Shortfalls in the underlying collateral value for loans or leases determined to be collateral dependent are charged off immediately. Subsequent to an appraisal or other fair value estimate, management will assess whether there was a further decline in the value of the collateral based on changes in market conditions or property use that would require additional impairment to be recorded to reflect the particular situation, thereby increasing the ACL on loans and leases.

Asset Quality

Customers ~~divides its loan portfolio into two categories to analyze and understand loan activity and performance: loans that were originated and loans that were acquired. Customers further~~ segments the ~~originated~~loan and ~~acquired loan categories~~lease receivables by loan product or other characteristic generally defining a shared characteristic with other loans in the same group. Customers' originated loans were subject to the current underwriting standards that were put in place in 2009. Management believes this segmentation better reflects the risk in the portfolio and the various types of reserves that are available to absorb loan losses that may emerge in future periods. Credit lossesCharge-offs from originated and acquired loans and leases are absorbed by the ~~allowance for loan losses. Credit losses from acquired loans are absorbed~~ACL. Section 4013 of the CARES Act, as amended by the ~~allowance~~CAA, gives entities temporary relief from the accounting and disclosure requirements for TDRs. In addition, on April 7, 2020, certain regulatory banking agencies issued an interagency statement that offers practical expedients for evaluating whether loan ~~losses, nonaccretable difference fair value marks,~~modifications in response to the COVID-19 pandemic are TDRs. For COVID-19 related loan modifications which met the loan modification criteria under either the CARES Act, as amended, or the criteria specified by the regulatory agencies, Customers elected to suspend TDR accounting for such loan modifications. At June 30, 2021, commercial and ~~cash reserves. As described below, the allowance for loan losses is intended~~consumer deferments related to ~~absorb only those losses estimated~~COVID-19 were $89.8 million and $8.4 million, respectively. At December 31, 2020, commercial and consumer deferments related to ~~have been incurred after acquisition, whereas the fair value mark~~COVID-19 were $202.1 million and ~~cash reserves absorb losses estimated to have been embedded in the acquired loans at acquisition.~~$16.4 million, respectively. The schedule that follows includes both loans held for sale and loans held for investment. Customers had no pending commercial loan deferment requests as of June 30, 2021.

Table of Contents

Asset Quality at ~~September~~June 30, ~~2017~~2021


(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO (%)
Loan and Lease Type
Multi-family	$	1,497,485	$	1,475,890	$	—	$	—	$	21,595	$	—	$	21,595	1.44	%	1.44	%
Commercial & industrial	2,360,656		2,352,618		1,321		—		6,717		276		6,993		0.28	%	0.30	%
Commercial real estate owner occupied	653,649		650,961		—		—		2,688		—		2,688		0.41	%	0.41	%
Commercial real estate non-owner occupied	1,206,646		1,206,634		12		—		—		—		—		—	%	—	%
Construction	179,198		179,198		—		—		—		—		—		—	%	—	%
Total commercial loans and leases receivable	5,897,634		5,865,301		1,333		—		31,000		276		31,276		0.53	%	0.53	%
Residential	266,911		257,347		573		—		8,991		35		9,026		3.37	%	3.38	%
Manufactured housing	57,904		51,107		1,625		1,933		3,239		156		3,395		5.59	%	5.85	%
Installment	1,549,693		1,538,845		8,120		—		2,728		—		2,728		0.18	%	0.18	%
Total consumer loans receivable	1,874,508		1,847,299		10,318		1,933		14,958		191		15,149		0.80	%	0.81	%
Loans and leases receivable (1)	7,772,142		7,712,600		11,651		1,933		45,958		467		46,425		0.59	%	0.60	%
Loans receivable, PPP	6,305,056		6,305,056		—		—		—		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	2,855,284		2,855,284		—		—		—		—		—		—	%	—	%
Total loans held for sale	34,540		34,011		22		—		507		—		507		1.47	%	1.47	%
Total portfolio	$	16,967,022	$	16,906,951	$	11,673	$	1,933	$	46,465	$	467	$	46,932	0.27	%	0.28	%

Loan Type Total Loans Current
30-89
Days Past Due

90
Days or More Past Due and
Accruing

Non-
accrual/
NPL (a)

OREO
(b)

NPA
(a)+(b)

NPL
to
Loan
Type
(%)

NPA
to
Loans +
OREO
(%)
(amounts in thousands)
Originated Loans
Multi-Family $ 3,616,313
$ 3,616,313
$ —
$ —
$ —
$ —
$ —
— % — %
Commercial & Industrial (1) 1,507,395
1,484,400
—
—
22,995
—
22,995
1.53 % 1.53 %
Commercial Real Estate Non-Owner Occupied 1,215,099
1,215,099
—
—
—
—
—
— % — %
Residential 108,786
107,569
636
—
581
—
581
0.53 % 0.53 %
Construction 73,203
73,203
—
—
—
—
—
— % — %
Other consumer 1,450
1,437
13
—
—
—
—
— % — %
Total Originated Loans 6,522,246
6,498,021
649
—
23,576
—
23,576
0.36 % 0.36 %
Loans Acquired

Bank Acquisitions 153,772
147,172
1,352
941
4,307
782
5,089
2.80 % 3.29 %
Loan Purchases
387,757
379,026
2,984
3,788
1,959
277
2,236
0.51 % 0.58 %
Total Loans Acquired 541,529
526,198
4,336
4,729
6,266
1,059
7,325
1.16 % 1.35 %
Deferred fees and unamortized discounts, net (2,437 ) (2,437 ) —
—
—
—
—

Total Loans Receivable 7,061,338
7,021,782
4,985
4,729
29,842
1,059
30,901
0.42 % 0.44 %
Total Loans Held for Sale 2,113,293
2,113,293
—
—
—
—
—

Total Portfolio $ 9,174,631
$ 9,135,075
$ 4,985
$ 4,729
$ 29,842
$ 1,059
$ 30,901
0.33 % 0.34 %

~~(1) Commercial & industrial loans, including owner occupied commercial real estate loans.~~

Asset Quality at ~~September~~June 30, ~~2017~~2021 (continued)

Loan Type Total Loans NPL ALL
Cash
Reserve

Total
Credit
Reserves

Reserves
to Loans
(%)

Reserves
to NPLs
(%)
(amounts in thousands)
Originated Loans
Multi-Family $ 3,616,313
$ —
$ 12,696
$ —
$ 12,696
0.35 % — %
Commercial & Industrial (1) 1,507,395
22,995
13,084
—
13,084
0.87 % 56.90 %
Commercial Real Estate Non-Owner Occupied 1,215,099
—
4,665
—
4,665
0.38 % — %
Residential 108,786
581
2,130
—
2,130
1.96 % 366.61 %
Construction 73,203
—
847
—
847
1.16 % — %
Other consumer 1,450
—
59
—
59
4.07 % — %
Total Originated Loans 6,522,246
23,576
33,481
—
33,481
0.51 % 142.01 %
Loans Acquired

Bank Acquisitions 153,772
4,307
4,642
—
4,642
3.02 % 107.78 %
Loan Purchases
387,757
1,959
191
728
919
0.24 % 46.91 %
Total Loans Acquired 541,529
6,266
4,833
728
5,561
1.03 % 88.75 %
Deferred fees and unamortized discounts, net (2,437 ) —
—
—
—

Total Loans Receivable 7,061,338
29,842
38,314
728
39,042
0.55 % 130.83 %
Total Loans Held for Sale 2,113,293
—
—
—
—

Total Portfolio $ 9,174,631
$ 29,842
$ 38,314
$ 728
$ 39,042
0.43 % 130.83 %


(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)
Loan and Lease Type
Multi-family	$	1,497,485	$	21,595	$	5,028	0.34	%	23.28	%
Commercial & industrial	2,360,656		6,717		8,127		0.34	%	120.99	%
Commercial real estate owner occupied	653,649		2,688		4,464		0.68	%	166.07	%
Commercial real estate non-owner occupied	1,206,646		—		7,374		0.61	%	—	%
Construction	179,198		—		2,643		1.47	%	—	%
Total commercial loans and leases receivable	5,897,634		31,000		27,636		0.47	%	89.15	%
Residential	266,911		8,991		2,299		0.86	%	25.57	%
Manufactured housing	57,904		3,239		4,372		7.55	%	134.98	%
Installment	1,549,693		2,728		91,129		5.88	%	3,340.51	%
Total consumer loans receivable	1,874,508		14,958		97,800		5.22	%	653.83	%
Loans and leases receivable (1)	7,772,142		45,958		125,436		1.61	%	272.94	%
Loans receivable, PPP	6,305,056		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	2,855,284		—		—		—	%	—	%
Total loans held for sale	34,540		507		—		—	%	—	%
Total portfolio	$	16,967,022	$	46,465	$	125,436	0.74	%	269.96	%

(1) ~~Commercial & industrial~~Excluding loans ~~including owner occupied commercial real estate.~~receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedules that follow this table.

~~Originated Loans~~Customers' asset quality table contains non-GAAP financial measures which exclude loans receivable, PPP from their calculations. Management uses these non-GAAP measures to present the current period presentation to historical periods in prior filings. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

~~Post 2009 originated~~

Table of Contents

A reconciliation of loans ~~(excluding held-for-sale loans) totaled $6.5~~and leases receivable, excluding loans receivable, PPP and other related amounts, at June 30, 2021, are set forth below.


(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO (%)
Loans and leases receivable (GAAP)	$	16,967,022	$	16,906,951	$	11,673	$	1,933	$	46,465	$	467	$	46,932	0.27	%	0.28	%
Less: Loans receivable, PPP	6,305,056		6,305,056		—		—		—		—		—		—	%	—	%
Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	10,661,966	$	10,601,895	$	11,673	$	1,933	$	46,465	$	467	$	46,932	0.44	%	0.44	%


(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)
Loans and leases receivable (GAAP)	$	16,967,022	$	46,465	$	125,436	0.74	%	269.96	%
Less: Loans receivable, PPP	6,305,056		—		—		—	%	—	%
Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	10,661,966	$	46,465	$	125,436	1.18	%	269.96	%

The total loan and lease portfolio was $17.0 billion at June 30, 2021 compared to $15.8 billion at December 31, 2020, and $46.5 million, or ~~92.4%~~0.27% of loans and leases, were non-performing at June 30, 2021 compared to $70.5 million, or 0.45% of loans and leases, at December 31, 2020. The loan and lease portfolio was supported by an ACL of $125.4 million (269.96% of NPLs and 0.74% of total loans ~~receivable at September 30, 2017, compared to $5.8 billion, or 94.8%~~and leases) and $144.2 million (204.48% of NPLs and 0.91% of total loans ~~receivable~~and leases), at December 31, 2016. The management team adopted new underwriting standards that management believes better limits risks of loss in 2009 and have worked to monitor these standards. Only $23.6 million, or 0.36% of post 2009 originated loans were non-performing at SeptemberJune 30, 2017, compared to $10.5 million, or 0.18% of post 2009 loans, at December 31, 2016. The post 2009 loans were supported by an allowance for loan losses of $33.5 million (0.51% of post 2009 originated loans) and $31.8 million (0.55% of post 2009 originated loans), respectively, at September 30, 20172021 and December 31, ~~2016.~~2020, respectively.

~~Loans Acquired~~DEPOSITS

At September 30, 2017, total acquired loans were $0.5 billion, or 7.7% of total loans receivable, compared to $0.3 billion, or 5.2% of total loans receivable, at December 31, 2016. Non-performing acquired loans totaled $6.3 million and $7.3 million, respectively, at September 30, 2017 and December 31, 2016. When loans are acquired, they are recorded on the balance sheet at fair value. Acquired loans include purchased portfolios, FDIC assisted failed-bank acquisitions, and unassisted acquisitions. Of the manufactured housing loans purchased from Tammac prior to 2012, $53.1 million were supported by a $0.7 million cash reserve at September 30, 2017, compared to $57.6 million supported by a cash reserve of $1.0 million at December 31, 2016. The cash reserve was created as part of the purchase transaction to absorb losses and is maintained in a demand deposit account at the Bank. All current losses and delinquent interest are absorbed by this reserve. For the manufactured housing loans purchased in 2012, Tammac has an obligation to pay the Bank the full payoff amount of the defaulted loan, including any principal, unpaid interest, or advances on the loans, once the borrower vacates the property. At September 30, 2017, $32.8 million of these loans were outstanding, compared to $36.6 million at December 31, 2016.

Many of the acquired loans were purchased at a discount. The price paid considered management’s judgment as to the credit and interest rate risk inherent in the portfolio at the time of purchase. Every quarter, management reassesses the risk and adjusts the cash flow forecast to incorporate changes in the credit outlook. Generally, a decrease in forecasted cash flows for a purchased loan will result in a provision for loan losses, and absent charge-offs, an increase in the allowance for loan losses. Acquired loans have a significantly higher percentage of non-performing loans than loans originated after September 2009. Management acquired these loans with the expectation that non-performing loan levels would be elevated, and therefore incorporated that expectation into the price paid. Customers has assigned these loans to its Special Assets Group, a team that focuses on workouts for these acquired non-performing assets. Total acquired loans were supported by reserves (allowance for loan losses and cash reserves) of $5.6 million (1.03% of total acquired loans) and $6.5 million (2.03% of total acquired loans), respectively, at September 30, 2017 and December 31, 2016.

~~Deposits~~

~~The Bank~~ offers a variety of deposit accounts, including checking, savings, ~~money market deposit accounts (“MMDA”)~~MMDA, and time deposits. Deposits are ~~generally~~primarily obtained ~~primarily~~ from ~~our~~Customers' geographic service ~~area. Customers also acquires deposits~~area and nationwide through digital banking, our white label relationship, deposit brokers, listing services and other relationships.

The components of deposits were as follows at the dates indicated:


(dollars in thousands)	June 30, 2021		December 31, 2020		Change		% Change
Demand, non-interest bearing	$	2,699,869	$	2,356,998	$	342,871	14.5	%
Demand, interest bearing	4,206,355		2,384,691		1,821,664		76.4	%
Savings, including MMDA	6,340,565		5,916,309		424,256		7.2	%
Non-time deposits	13,246,789		10,657,998		2,588,791		24.3	%
Time, $100,000 and over	501,213		470,923		30,290		6.4	%
Time, other	125,937		181,008		(55,071)		(30.4)	%
Time deposits	627,150		651,931		(24,781)		(3.8)	%
Total deposits	$	13,873,939	$	11,309,929	$	2,564,010	22.7	%

Total deposits were ~~$7.6~~$13.9 billion at ~~September~~June 30, ~~2017,~~2021, an increase of ~~$0.3~~$2.6 billion, or ~~4.0%~~22.7%, from ~~$7.3~~$11.3 billion at December 31, ~~2016. Demand~~2020. Non-time deposits ~~were $1.8~~increased by $2.6 billion, or 24.3%, to $13.2 billion at ~~September~~June 30, ~~2017, compared to $1.3~~2021, from $10.7 billion at December 31, ~~2016, an~~2020. This increase primarily resulted from Customers' initiative to improve its net interest margin by expanding its sources of ~~$484.1 million, or 37.1%.~~lower-cost funding. These ~~amounts consist primarily of~~efforts led to increases in non-interest bearing demand ~~deposits.~~deposits of $342.9 million and interest bearing demand deposits of $1.8 billion. Savings, including MMDA ~~totaled $3.5~~increased $424.3 million, or 7.2%, to $6.3 billion at ~~September~~June 30, ~~2017, an increase of $340.5 million, or 10.8%,~~2021, from ~~$3.2~~$5.9 billion at December 31, ~~2016. This increase was primarily attributed to an increase in money market deposit accounts, including accounts held by municipalities. Total time~~2020. Time deposits ~~were $2.3 billion at September 30, 2017, a decrease of $531.3~~decreased $24.8 million, or ~~18.8%~~3.8%, to $627.2 million at June 30, 2021, from ~~$2.8 billion~~$651.9 million at December 31, ~~2016.~~ 2020.

At ~~September~~June 30, ~~2017,~~2021, the Bank had ~~$1.4~~$0.9 billion in state and municipal deposits to which ~~Customers has~~it had pledged $0.9 billion of available borrowing capacity through the FHLB to the depositor through a letter of credit arrangement. ~~State and municipal deposits under this program decreased $44.5 million, or 3.1% from December 31, 2016.~~

~~The components of deposits were as follows at the dates indicated:~~

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September 30,
2017 December 31,
2016
(amounts in thousands)
Demand $ 1,789,573
$ 1,305,455
Savings, including MMDA 3,507,063
3,166,558
Time, $100,000 and over 1,406,899
2,106,905
Time, other 893,541
724,857
Total deposits $ 7,597,076
$ 7,303,775
FHLB ADVANCES AND OTHER BORROWINGS

~~Borrowings~~

Borrowed funds from various sources are generally used to supplement deposit growth and meet other operating needs. Customers' borrowings ~~generally~~ include short-term and long-term advances from the FHLB, FRB, including from the PPPLF, federal funds purchased, senior unsecured notes and subordinated debt. Subordinated debt is also considered as Tier 2 capital for certain regulatory calculations. ~~As of September~~

Short-term debt

Short-term debt at June 30, ~~2017~~2021 and December 31, ~~2016, total outstanding~~2020 was as follows:


	June 30, 2021				December 31, 2020
(dollars in thousands)	Amount		Rate		Amount		Rate

FHLB advances	$	—	—	%	$	850,000	1.19	%
Federal funds purchased	—		—	%	250,000		0.09	%
Total short-term debt	$	—			$	1,100,000

During the three months ended June 30, 2021, Customers repaid FHLB advances and federal funds purchased due to sufficient liquidity.

Long-term debt

FHLB and FRB Advances

Long-term FHLB and FRB advances at June 30, 2021 and December 31, 2020 was as follows:



	June 30, 2021				December 31, 2020
(dollars in thousands)	Amount		Rate		Amount		Rate


FRB PPP Liquidity Facility advances	$	3,865,865	0.35	%	$	4,415,016	0.35	%
Total long-term FHLB and FRB advances	$	3,865,865			$	4,415,016

The maximum borrowing capacity with the FHLB and FRB at June 30, 2021 and December 31, 2020 was as follows:


(dollars in thousands)	June 30, 2021		December 31, 2020
Total maximum borrowing capacity with the FHLB	$	2,387,172	$	2,729,516
Total maximum borrowing capacity with the FRB (1)	197,894		223,299
Qualifying loans serving as collateral against FHLB and FRB advances (1)	3,156,850		3,363,364

(1) Amounts reported in the above table exclude borrowings under the PPPLF, which are limited to the face value of the loans originated under the PPP. At June 30, 2021, Customers had $3.9 billion of borrowings under the PPPLF, with a borrowing capacity of up to $6.3 billion, which is the remaining face value (following forgiveness) of the qualifying loans Customers has originated under the PPP. At December 31, 2020, Customers had $4.4 billion of borrowings under the PPPLF.

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Senior Notes and Subordinated Debt

Long-term senior notes and subordinated debt at June 30, 2021 and December 31, 2020 were $1.9 billion and $1.1 billion, respectively, which represented an increase of $0.8 billion, or 65.9%. This increase was primarily the result of an increase in investments and loans receivable increasing the needas follows:


		June 30, 2021		December 31, 2020
(dollars in thousands)
Issued by	Ranking	Amount		Amount		Rate		Issued Amount		Date Issued	Maturity	Price
Customers Bancorp	Senior	$	24,612	$	24,552	4.500	%	$	25,000	September 2019	September 2024	100.000	%
Customers Bancorp	Senior	99,629		99,485		3.950	%	100,000		June 2017	June 2022	99.775	%

Total other borrowings		$	124,241	$	124,037

Customers Bancorp	Subordinated (1)(2)	$	72,313	$	72,222	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Subordinated (1)(3)	109,221		109,172		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt		$	181,534	$	181,394

(1)The subordinated notes qualify as Tier 2 capital for ~~short-term borrowings. In June 2017,~~ regulatory capital purposes.

(3)The subordinated notes will bear an annual fixed rate of 6.125% until June 26, 2024. From June 26, 2024 until maturity, the notes will bear an annual interest rate equal to the three-month LIBOR plus 344.3 basis points. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at ~~99.775%~~a redemption price equal to 100% of ~~face value that will mature in~~the principal balance at certain times on or after June ~~2022. Customers will use~~26, 2024.

SHAREHOLDERS' EQUITY

The components of shareholders' equity were as follows at the net proceeds for general corporate purposes, which may include working capital and the funding of organic growth at Customers Bank. For more information about Customers' borrowings, refer to NOTE 10 - BORROWINGS.

~~Capital Adequacy and Shareholders’ Equity~~dates indicated:


(dollars in thousands)	June 30, 2021		December 31, 2020		Change		% Change
Preferred stock	$	217,471	$	217,471	$	—	—	%
Common stock	33,634		32,986		648		2.0	%
Additional paid in capital	519,294		455,592		63,702		14.0	%
Retained earnings	496,844		438,581		58,263		13.3	%
Accumulated other comprehensive income (loss), net	5,266		(5,764)		11,030		(191.4)	%
Treasury stock	(21,780)		(21,780)		—		—	%
Total shareholders' equity	$	1,250,729	$	1,117,086	$	133,643	12.0	%

Shareholders’ equity increased ~~$54.8~~$133.6 million, or 12.0%, to ~~$910.6 million~~$1.3 billion at ~~September~~June 30, ~~2017~~2021 when compared to shareholders' equity of ~~$855.9 million~~$1.1 billion at December 31, ~~2016, a 6.4%~~2020. The increase primarily resulted from increases of $63.7 million in ~~the first nine months of 2017. The primary components of the net increase were as follows:~~

~~net income of $57.2~~additional paid in capital, $58.3 million ~~for the nine months ended September 30, 2017;~~

in retained earnings, and $11.0 million in accumulated other comprehensive income (loss), net.

The increase in additional paid in capital resulted from the sale of ~~$5.3~~BMT that was accounted for as a sale of non-controlling interest and the merger between BMT and MFAC was accounted for as a reverse recapitalization of $31.9 million, ~~for~~merger related expense of $19.6 million in the ~~nine months ended September 30, 2017, arising primarily~~form of restricted stock awards in BM Technologies' common stock to certain team members of BMT, $7.9 million from ~~unrealized gains on available-for-sale securities;~~

share-based compensation expense, ~~of $4.5~~and $4.3 million ~~for~~from the ~~nine months ended September 30, 2017;~~

~~offset in part by preferred stock dividends of $10.8 million for the nine months ended September 30, 2017; and~~

issuance of common stock under share-based compensation arrangements for the six months ended June 30, 2021.

The increase in retained earnings resulted from net income of ~~$2.0~~$97.9 million, offset in part by $6.7 million in preferred stock dividends and $33.0 million of special dividends in connection with the divestiture of BMT. Upon closing of the divestiture, Customers received cash consideration of $23.1 million and holders of Customers common stock who held their Customers shares as of the close of business on December 18, 2020 became entitled to receive an aggregate of 4,876,387 shares of BM Technologies' common stock. Customers distributed 0.15389 shares of BM Technologies common stock for each share of Customers common stock held as of the close of business on December 18, 2020 as special dividends. No fractional shares of BMT common stock were issued; fractional share otherwise issuable were rounded to the nearest whole share. Customers received $3.7 million of additional cash consideration in May 2021.

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The increase in accumulated other comprehensive income (loss), net primarily resulted from an increase of $12.3 million and income tax effect of $3.2 million in the fair value of cash flow hedges due to changes in market interest rates and reclassification of $27.0 million in losses and income tax effect of $7.0 million from the termination of derivatives designated as cash flow hedges of forecasted transactions that are deemed no longer probable of occurring during the six months ended June 30, 2021, partially offset by reclassification of $25.4 million in gains and income tax effect of $6.6 million resulting from the sales of AFS debt securities during the six months ended June 30, 2021.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity for a financial institution is a measure of that institution’s ability to meet depositors’ needs for funds, to satisfy or fund loan and lease commitments, and for other operating purposes. Ensuring adequate liquidity is an objective of the asset/liability management process. Customers coordinates its management of liquidity with its interest rate sensitivity and capital position, and strives to maintain a strong liquidity position.

Customers' investment portfolio provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional funding. Customers' principal sources of funds are deposits, borrowings, principal and interest payments on loans and leases, other funds from operations, and proceeds from common and preferred stock issuances. Borrowing arrangements are maintained with the FHLB and the FRB to meet short-term liquidity needs. Longer-term borrowing arrangements are also maintained with the FHLB and FRB. As of June 30, 2021, Customers' borrowing capacity with the FHLB was $2.4 billion, and $0.9 billion of available capacity was utilized to collateralize state and municipal deposits. During the three months ended June 30, 2021, Customers repaid FHLB advances and federal funds purchased due to sufficient liquidity. As of December 31, 2020, Customers' borrowing capacity with the FHLB was $2.7 billion, of which $0.9 billion was utilized in borrowings and $1.2 billion of available capacity was utilized to collateralize state and municipal deposits. As of June 30, 2021 and December 31, 2020, Customers' borrowing capacity with the FRB was $197.9 million and $223.3 million, respectively.

On January 4, 2021, Customers Bancorp completed the previously announced divestiture of BMT. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation. The table below summarizes Customers' cash flows from continuing operations for the six months ended June 30, 2021 and 2020:


	Six Months Ended June 30,
(amounts in thousands)	2021		2020		Change		% Change
Net cash provided by (used in) continuing operating activities	$	289,325	$	39,805	$	249,520	626.9	%
Net cash provided by (used in) continuing investing activities	(1,469,817)		(5,375,723)		3,905,906		(72.7)	%
Net cash provided by (used in) continuing financing activities	940,429		6,191,020		(5,250,591)		(84.8)	%
Net increase (decrease) in cash and cash equivalents from continuing operations	$	(240,063)	$	855,102	$	(1,095,165)	(128.1)	%

Cash flows provided by (used in) continuing operating activities

Cash provided by continuing operating activities of $289.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2021 resulted from an increase in accrued interest payable and other liabilities of $115.1 million, net income from continuing operations of $136.0 million, a decrease of $55.8 million in accrued interest receivable and other assets, partially offset by net non-cash operating adjustments of $17.6 million.

Cash provided by continuing operating activities of $39.8 million for the six months ended June 30, 2020 resulted from an increase of $81.8 million in accrued interest payable and other liabilities, net income from continuing operations of $33.4 million, and net non-cash operating adjustments of $38.4 million, partially offset by an increase in accrued interest receivable and other assets of $113.8 million.

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Cash flows provided by (used in) continuing investing activities

Cash used in continuing investing activities of $1.5 billion for the six months ended June 30, 2021 primarily resulted from a net increase in loans and leases, excluding mortgage warehouse loans of $1.3 billion primarily from PPP loan originations, purchases of loans of $737.3 million, purchases of investment securities available for sale of $890.2 million and purchases of bank-owned life insurance of $46.5 million, partially offset by proceeds from net repayments of mortgage warehouse loans of $763.2 million, proceeds from sales of loans and leases of $130.5 million, proceeds from sales of investment securities available for sale of $407.6 million, proceeds from maturities, calls, and principal repayments of investment securities of $172.8 million and net proceeds from sale of FHLB, FRB, and other restricted stock of $31.5 million.

Cash used in continuing investing activities of $5.4 billion for the six months ended June 30, 2020 primarily resulted from a net increase in loans and leases, excluding mortgage warehouse loans of $4.5 billion primarily related to PPP loan originations, net originations of mortgage warehouse loans of $540.9 million, purchases of investment securities available for sale of $280.4 million, and purchases of loans of $211.1 million, partially offset by proceeds from sales of investment securities available for sale of $109.2 million and proceeds from maturities, calls and principal repayments of investment securities of $78.5 million.

Cash flows provided by (used in) continuing financing activities

Cash provided by continuing financing activities of $940.4 million for the six months ended June 30, 2021 primarily resulted from net increases in deposits of $2.6 billion, partially offset by decreases in short-term borrowed funds from the FHLB and federal funds purchased of $1.1 billion and a net decrease in long-term borrowed funds from the PPPLF of $549.2 million primarily from the forgiveness of PPP loans from the first two rounds.

Cash provided by continuing financing activities of $6.2 billion for the six months ended June 30, 2020 primarily resulted from net increases in long-term borrowed funds from the PPPLF of $4.4 billion primarily to finance the PPP loan originations, and deposits of $2.3 billion, partially offset by a net decrease in federal funds purchased of $538.0 million.

Cash flows from discontinued operations

The table below summarizes Customers' cash flows from discontinued operations for the six months ended June 30, 2021 and 2020:


	Six Months Ended June 30,
(amounts in thousands)	2021		2020		Change		% Change
Net cash provided by (used in) discontinued operating activities	$	(22,791)	$	(329)	$	(22,462)	6,827.4	%
Net cash provided by (used in) discontinued investing activities	—		52		(52)		(100.0)	%

Net increase (decrease) in cash and cash equivalents from discontinued operations	$	(22,791)	$	(277)	$	(22,514)	8,127.8	%

Cash flows provided by (used in) discontinued operating activities

Cash used in discontinued operating activities of $22.8 million for the six months ended June 30, 2021 resulted from a net loss of $38.0 million and a decrease in accrued interest payable and other liabilities of $40.7 million, offset in part by non-cash operating activities of $20.3 million and a decrease in other assets of $35.6 million.

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In connection with the divestiture, Customers has also entered into various agreements with BM Technologies, including a transition services agreement, software license agreement, deposit servicing agreement, non-competition agreement and loan agreement for periods ranging from one to ten years. For additional information refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements.

CAPITAL ADEQUACY

The Bank and Customers Bancorp are subject to various regulatory capital requirements ~~that are monitored~~administered by federal banking agencies. Failure to meet minimum capital requirements can ~~lead to supervisory~~result in certain mandatory, and possibly additional discretionary, actions by ~~regulators; any supervisory action~~regulators that, if undertaken, could have a direct material effect on Customers' financial ~~performance. At September 30, 2017,~~statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and Bancorp must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under the regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Bancorp to maintain minimum amounts and ratios (set forth in the following table) of common equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). At June 30, 2021 and December 31, 2020, the Bank and the Bancorp met all capital adequacy requirements to which they were subject. ~~Capital levels continue~~

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Generally, to ~~exceed~~comply with the ~~well-capitalized threshold established by regulation at~~regulatory definition of adequately capitalized, or well capitalized, respectively, or to comply with the ~~Bank and exceed the applicable~~ Basel III ~~regulatory thresholds for Customers Bancorp~~capital requirements, an institution must at least maintain the common equity Tier 1, Tier 1, and total risk-based capital ratios and the ~~Bank.~~

~~The capital~~Tier 1 leverage ratio in excess of the related minimum ratios ~~for~~set forth in the ~~Bank and the Bancorp at September 30, 2017 and December 31, 2016 were as follows:~~

Actual For Capital Adequacy Purposes (Minimum Plus Capital Buffer)
To Be Well Capitalized
Under
Prompt Corrective Action
Provisions
(amounts in thousands) Amount Ratio Amount Ratio Amount Ratio
As of September 30, 2017:
Common equity Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc. $ 677,976
8.284 % $ 470,603
5.750 % N/A
N/A
Customers Bank $ 1,009,380
12.342 % $ 470,242
5.750 % $ 531,578
6.500 %
Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc. $ 895,447
10.941 % $ 593,369
7.250 % N/A
N/A
Customers Bank $ 1,009,380
12.342 % $ 592,914
7.250 % $ 654,250
8.000 %
Total capital (to risk weighted assets)
Customers Bancorp, Inc. $ 1,014,784
12.399 % $ 757,057
9.250 % N/A
N/A
Customers Bank $ 1,156,766
14.145 % $ 756,477
9.250 % $ 817,813
10.000 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc. $ 895,447
8.355 % $ 428,709
4.000 % N/A
N/A
Customers Bank $ 1,009,380
9.434 % $ 427,963
4.000 % $ 534,954
5.000 %
As of December 31, 2016:
Common equity Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc. $ 628,139
8.487 % $ 379,306
5.125 % N/A
N/A
Customers Bank $ 857,421
11.626 % $ 377,973
5.125 % $ 479,380
6.500 %
Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc. $ 844,755
11.414 % $ 490,322
6.625 % N/A
N/A
Customers Bank $ 857,421
11.626 % $ 488,599
6.625 % $ 590,006
8.000 %
Total capital (to risk weighted assets)
Customers Bancorp, Inc. $ 966,097
13.053 % $ 638,343
8.625 % N/A
N/A
Customers Bank $ 1,003,609
13.608 % $ 636,101
8.625 % $ 737,508
10.000 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc. $ 844,755
9.067 % $ 372,652
4.000 % N/A
N/A
Customers Bank $ 857,421
9.233 % $ 371,466
4.000 % $ 464,333
5.000 %

following table:


					Minimum Capital Levels to be Classified as:
	Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2021:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,082,396	9.560	%	$	509,472	4.500	%	N/A		N/A		$	792,512	7.000	%
Customers Bank	$	1,403,324	12.395	%	$	509,460	4.500	%	$	735,886	6.500	%	$	792,493	7.000	%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,299,867	11.481	%	$	679,296	6.000	%	N/A		N/A		$	962,337	8.500	%
Customers Bank	$	1,403,324	12.395	%	$	679,279	6.000	%	$	905,706	8.000	%	$	962,313	8.500	%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,502,069	13.267	%	$	905,729	8.000	%	N/A		N/A		$	1,188,769	10.500	%
Customers Bank	$	1,559,161	13.772	%	$	905,706	8.000	%	$	1,132,132	10.000	%	$	1,188,739	10.500	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	1,299,867	8.389	%	$	619,832	4.000	%	N/A		N/A		$	619,832	4.000	%
Customers Bank	$	1,403,324	9.070	%	$	618,871	4.000	%	$	773,589	5.000	%	$	618,871	4.000	%
As of December 31, 2020:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	954,839	8.079	%	$	531,844	4.500	%	N/A		N/A		$	827,312	7.000	%
Customers Bank	$	1,254,082	10.615	%	$	531,639	4.500	%	$	767,923	6.500	%	$	826,994	7.000	%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,172,310	9.919	%	$	709,125	6.000	%	N/A		N/A		$	1,004,594	8.500	%
Customers Bank	$	1,254,082	10.615	%	$	708,852	6.000	%	$	945,136	8.000	%	$	1,004,207	8.500	%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,401,119	11.855	%	$	945,500	8.000	%	N/A		N/A		$	1,240,969	10.500	%
Customers Bank	$	1,424,791	12.060	%	$	945,136	8.000	%	$	1,181,421	10.000	%	$	1,240,492	10.500	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	1,172,310	8.597	%	$	545,485	4.000	%	N/A		N/A		$	545,485	4.000	%
Customers Bank	$	1,254,082	9.208	%	$	544,758	4.000	%	$	680,947	5.000	%	$	544,758	4.000	%

The capital ratios above reflect the capital requirements under "Basel III" adopted effective ~~during~~ first quarter 2015 and the capital conservation buffer ~~effective~~phased in beginning January 1, ~~2017.~~2016. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers. As of ~~September~~June 30, ~~2017,~~2021, the Bank and Customers Bancorp were in compliance with the Basel III requirements. See "NOTE 11 -– REGULATORY CAPITAL" to Customers' unaudited consolidated financial statements for additional discussion regarding regulatory capital requirements.

~~Off-Balance Sheet Arrangements~~

~~The Bank~~OFF-BALANCE SHEET ARRANGEMENTS

Customers is involved with financial instruments and other commitments with off-balance sheet risks. Financial instruments with off-balance sheet risks are incurred in the normal course of business to meet the financing needs of the Bank's customers. These financial instruments include commitments to extend credit, including unused portions of lines of credit, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the balance ~~sheets.~~sheet.

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With commitments to extend credit, ~~exposures~~exposure to credit loss in the event of non-performance by the other party to the financial instrument is represented by the contractual amount of those instruments. The same credit policies are used in making commitments and conditional obligations as for on-balance sheet instruments. Because they involve credit risk similar to extending a loan ~~commitments to extend credit~~and lease, these financial instruments are subject to the Bank’s credit policy and other underwriting standards.

As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the following off-balance sheet commitments, financial instruments and other arrangements were outstanding:

September 30, 2017 December 31, 2016
(amounts in thousands)
Commitments to fund loans $ 261,878
$ 244,784
Unfunded commitments to fund mortgage warehouse loans 1,385,192
1,230,596
Unfunded commitments under lines of credit 498,316
480,446
Letters of credit 38,842
40,223


(amounts in thousands)	June 30, 2021		December 31, 2020
Commitments to fund loans and leases	$	233,896	$	262,153
Unfunded commitments to fund mortgage warehouse loans	2,619,979		1,933,067
Unfunded commitments under lines of credit and credit cards	1,200,497		1,009,031
Letters of credit	24,299		27,166
Other unused commitments	1,061		1,842

Commitments to fund loans and leases, unfunded commitments to fund mortgage warehouse loans, unfunded commitments under lines of credit, ~~and~~ letters of credit, and credit cards are agreements to extend credit to or for the benefit of a customer in the ordinary course of the Bank's business.

Commitments to fund loans and leases and unfunded commitments under lines of credit may be obligations of the Bank as long as there is no violation of any condition established in the contract. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if the Bank deems it necessary upon extension of credit, is based upon management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

Mortgage warehouse loan commitments are agreements to fund the pipelines of mortgage banking businesses from closing of individual mortgage loans until their sale into the secondary market. Most of the individual mortgage loans are insured or guaranteed by the U.S. government through one of its programs such as FHA, VA, or are conventional loans eligible for sale to Fannie Mae and Freddie Mac. These commitments generally fluctuate monthly based on changes in interest rates, refinance activity, new home sales and laws and regulation.

Outstanding letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Letters of credit may obligate the Bank to fund draws under those letters of credit whether or not a customer continues to meet the conditions of the extension of credit. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan and lease facilities to customers.

~~Liquidity and Capital Resources~~

~~Liquidity~~Customers recognized a provision for ~~a financial institution is a measure~~credit losses on unfunded commitments of that institution’s ability to meet depositors’ needs for funds, to satisfy or fund loan commitments, and for other operating purposes. Ensuring adequate liquidity is an objective of the asset/liability management process. Customers coordinates its management of liquidity with its interest rate sensitivity and capital position, and strives to maintain a strong liquidity position.

Customers' investment portfolio provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional liquidity funding. Our principal sources of funds are deposits, proceeds from debt issuances, principal and interest payments on loans, other funds from operations, and proceeds from stock issuances. Borrowing arrangements are maintained with the Federal Home Loan Bank and the Federal Reserve Bank of Philadelphia to meet short-term liquidity needs. Longer-term borrowing arrangements are also maintained with the Federal Home Loan Bank. As of September 30, 2017, our borrowing capacity with the Federal Home Loan Bank was $4.7 billion, of which $1.5 billion was utilized in borrowings and $1.9 billion of available capacity was utilized to collateralize state and municipal deposits. As of December 31, 2016, our borrowing capacity with the Federal Home Loan Bank was $4.1 billion, of which $0.9 billion was utilized in borrowings and $1.7 billion of available capacity was utilized to collateralize state and municipal deposits. As of September 30, 2017 and December 31, 2016, our borrowing capacity with the Federal Reserve Bank of Philadelphia was $151.1$0.1 million and ~~$158.6 million, respectively.~~

~~Net cash flows provided by operating activities were $185.9~~a credit (benefit) to credit losses of $1.2 million during the ~~nine~~three and six months ended ~~September~~June 30, ~~2017, compared to net cash flows used~~2021 resulting in ~~operating activities~~an ACL of ~~$528.7~~$1.1 million ~~during the nine months ended September~~as of June 30, 2016. During the nine months ended September 30, 2017, proceeds from sales of loans held for sale exceeded originations of loans held for sale by $154.9 million. During the nine months ended September 30, 2016, originations of loans held for sale exceeded proceeds from sales of loans held for sale by $619.1 million.2021.

Investing activities used net cash flows of $1.3 billion during the nine months ended September 30, 2017, compared to net cash flows used in investing activities of $507.4 million during the nine months ended September 30, 2016. Purchases of investment securities available for sale totaled $796.6 million during the nine months ended September 30, 2017, compared to $5.0 million during the nine months ended September 30, 2016. Proceeds from sales of investment securities available for sale were $698.5 million for the nine month ended September 30, 2017, compared to $2.9 million during the nine months ended September 30, 2016. Purchases of loans held for investment and bank owned life insurance policies totaled $262.6 million and $90.0 million, respectively, for the nine months ended September 30, 2017, compared to no similar purchases during the nine months ended September 30, 2016. Proceeds from the sale of loans held for investment totaled $124.7 million during the nine months ended September 30, 2017, compared to $91.9 million during the nine months ended September 30, 2016. Cash flows used to fund new loans held for investment totaled $921.0 million and $641.1 million during the nine months ended September 30, 2017 and 2016, respectively.

Financing activities provided a net aggregate of $1.0 billion for each of the nine months ended September 30, 2017 and 2016. During the nine months ended September 30, 2017, increases in deposits provided net cash flows of $293.3 million, net increases in short-term borrowed funds provided $593.5 million, net increases in federal funds provided $64.0 million, proceeds from the issuance of five-year senior notes provided $98.6 million, payment of preferred stock dividends used $10.8 million, and net proceeds from the issuance of common stock provided $2.1 million. During the nine months ended September 30, 2016, increases in deposits provided $1.5 billion, net repayments of short-term borrowed funds used $663.6 million, net decrease in federal funds purchased used $18.0 million, net proceeds from long-term FHLB advances provided $75.0 million, net proceeds from the issuance of preferred stock provided $162.0 million, payment of preferred stock dividends used $5.5 million, and net proceeds from the issuance of common stock provided $7.3 million. These financing activities provided sufficient cash flows to support Customers' investing and operating activities.

Overall, based on our core deposit base and available sources of borrowed funds, management believes that Customers has adequate resources to meet its short-term and long-term cash requirements for the foreseeable future.

Effect of Government Monetary Policies

Our earnings are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans and leases, investments, and deposits, and their use may also affect rates charged on loans and leases or paid for deposits.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

The largest component of ~~our~~Customers' net income is net interest income, and the majority of ~~our~~its financial instruments are interest rate sensitive assets and liabilities with various term structures and maturities. One of the primary objectives of management is to ~~maximize~~optimize net interest income while minimizing interest rate risk. Interest rate risk is derived from timing differences in the repricing of assets and liabilities, loan prepayments, deposit withdrawals and differences in lending and funding rates. ~~Our Asset/Liability Committee~~Customers' asset/liability committee actively seeks to monitor and control the mix of interest rate sensitive assets and interest rate sensitive liabilities.

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~~We use~~Customers uses two complementary methods to analyze and measure interest rate sensitivity as part of the overall management of interest rate ~~risk. They~~risk; they are income ~~simulation~~scenario modeling and estimates of ~~economic value of equity.~~EVE. The combination of these two methods provides a reasonably comprehensive summary of the levels of interest rate risk of ~~our~~Customers' exposure to time factors and changes in interest rate environments.

Income ~~simulation~~scenario modeling is used to measure ~~our~~ interest rate sensitivity and manage ~~our~~ interest rate risk. Income ~~simulation~~scenario considers not only the impact of changing market interest rates upon forecasted net interest income but also other factors such as ~~yield curve~~yield-curve relationships, the volume and mix of assets and liabilities, customer preferences and general market conditions.

Through the use of income ~~simulation~~scenario modeling, ~~we have~~Customers has estimated the net interest income for the ~~period~~twelve months ending ~~September~~June 30, ~~2018,~~2022 and December 31, 2021, based upon the assets, liabilities and off-balance sheet financial instruments in existence at ~~September~~June 30, ~~2017. We have~~2021 and December 31, 2020. Customers has also estimated changes to that estimated net interest income based upon interest rates rising or falling immediately (“rate shocks”). For upward rate shocks modeling a rising rate environment at June 30, 2021, current market interest rates were increased immediately by 100, 200, and 300 basis points. ~~For downward rate shocks modeling a falling~~In the current interest rate environment, ~~current market~~particularly for short term rates, ~~were only decreased immediately by~~the Down 100 to Down 300 basis ~~points~~point scenarios are not shown due to the ~~limitations~~unrealistic and/or negative yield nature of the ~~current low interest rate environment that renders the Down 200 and Down 300 rate shocks impractical.~~results. The following table reflects the estimated percentage change in estimated net interest income for the ~~period~~twelve months ending ~~September~~June 30, ~~2018,~~2022 and December 31, 2021, resulting from changes in interest rates.

Net change in net interest income


	% Change
Rate Shocks	June 30, 2021	December 31, 2020
Up 3%	2.0%	(2.7)%
Up 2%	2.3%	(1.6)%
Up 1%	0.6%	(0.8)%



~~Rate Shocks~~	~~% Change~~
~~Up 3%~~	~~(8.2~~	)%
~~Up 2%~~	~~(3.0~~	)%
~~Up 1%~~	~~(0.3~~	)%
~~Down 1%~~	~~(2.4~~	)%

~~Economic Value of Equity (“EVE”)~~EVE estimates the discounted present value of asset and liability cash flows. Discount rates are based upon market prices for comparable assets and liabilities. Upward and downward rate shocks are used to measure volatility of EVE in relation to a constant rate environment. For upward rate shocks modeling a rising rate environment at June 30, 2021, current market interest rates were increased immediately by 100, 200, and 300 basis points. ~~For downward rate shocks modeling a falling rate environment, current market rates were only decreased immediately by 100 basis points due~~Due to the limitations of the current low interest rate environment, ~~that renders~~ the Down 100, 200 and ~~Down~~ 300 basis point rate shocks ~~impractical.~~are deemed impractical and not presented below. The downward rate shocks modeled will be revisited in the future if necessary and will be contingent upon additional Federal Reserve interest rate hikes. This method of measurement primarily evaluates the longer term repricing risks and options in Customers Bank’s balance sheet. The following table reflects the estimated EVE at risk and the ratio of EVE to EVE adjusted assets at ~~September~~June 30, ~~2017,~~2021 and December 31, 2020, resulting from shocks to interest rates.



~~Rate Shocks~~	~~From base~~
~~Up 3%~~	~~(30.9~~	)%
~~Up 2%~~	~~(18.7~~	)%
~~Up 1%~~	~~(8.3~~	)%
~~Down 1%~~	~~4.2~~	%


	From base
Rate Shocks	June 30, 2021	December 31, 2020
Up 3%	29.5%	(18.9)%
Up 2%	25.6%	(12.2)%
Up 1%	12.7%	(6.1)%

Management believes that the assumptions and combination of methods utilized in evaluating estimated net interest income are reasonable. However, the interest rate sensitivity of our assets, liabilities and off-balance sheet financial instruments, as well as the estimated effect of changes in interest rates on estimated net interest income, could vary substantially if different assumptions are used or actual experience differs from the assumptions used in the model.

Item 4. Controls and Procedures

(a) Management's Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, Customers Bancorp carried out an evaluation, under the supervision and with the participation of Customers Bancorp’s management, including Customers Bancorp’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Customers Bancorp’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Customers Bancorp’s disclosure controls and procedures were effective ~~at September~~as of June 30, ~~2017.~~2021.

(b)Changes in Internal Control Over Financial Reporting. During the quarter ended ~~September~~June 30, ~~2017,~~2021, there have been no changes in Customers ~~Bancorp’s~~Bancorp's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Customers ~~Bancorp’s~~Bancorp's internal control over financial reporting.

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The emergence of the COVID-19 pandemic during first quarter 2020 necessitated the execution of several Customers Bancorp contingency plans. Beginning in March 2020 and continuing through this filing date, Customers Bancorp had a substantial number of its team members working remotely under such contingency plans. The execution of these contingency plans have not materially affected, or are reasonably likely to materially affect, Customers' internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

~~There have been no material changes~~For information on Customers' legal proceedings, refer to “NOTE 14 – LOSS CONTINGENCIES” to the ~~legal proceedings disclosed within our 2016 Form 10-K, as supplemented and amended within our quarterly report on Form 10-Q for the quarter ended March 31, 2017.~~unaudited consolidated financial statements.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Risk Factors” included within the ~~2016~~2020 Form ~~10-K and our quarterly reports on Form 10-Q for the quarter ended March 31, 2017 ("the March 31, 2017 Quarterly Report") and for the quarter ended June 30, 2017 ("the June 30, 2017 Quarterly Report").~~10-K. There are no material changes from the risk factors included within the ~~2016~~2020 Form ~~10-K, March 31, 2017 Quarterly Report, and June 30, 2017 Quarterly Report other than the risks described below.~~10-K. The risks described within the ~~2016~~2020 Form 10-K ~~the March 31, 2017 Quarterly Report, the June 30, 2017 Quarterly Report and below~~ are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or operating results. See “Item 2 -– Management’s Discussion and Analysis of Financial Condition and Results of Operations -– Cautionary Note Regarding Forward-Looking Statements.”

~~We face a number of risks relating to our announced plans to dispose of BankMobile through a spin-off and merger.~~

We have announced our plans to dispose of our BankMobile business through a spin-off of BankMobile to our shareholders, to be followed by a merger of our BankMobile Technologies, Inc. subsidiary, which we refer to as BMT, into Flagship Community Bank, which we refer to as Flagship. While we currently expect to execute a definitive agreement with Flagship for this transaction, as of the date of filing of this Form 10-Q, a definitive agreement has not been executed. We expect that completion of the spin-off and merger will be subject to a number of conditions, including receipt of all necessary regulatory approvals, receipt by Flagship of shareholder approvals of certain matters relating to its acquisition of BMT, Flagship’s ability to raise approximately $100 million through the issuance of shares of its common stock, and other conditions. Certain of the conditions will not be within our control and we cannot guarantee you that we will enter into a definitive agreement or that we will be able to complete the spin-off and merger on the terms we have agreed to with Flagship, or at all.

Our announcement of the spin-off and merger and the steps we take to complete those transactions may adversely affect our business and the value of Customers and/or BankMobile. Uncertainty as to our ability to execute a definitive agreement or to complete the transactions and uncertainty as to the timing of the execution of a definitive agreement or the completion of the transactions may adversely affect analyst and shareholder views of our business and prospects, which could adversely affect our share price. These uncertainties also may adversely impact our relationships with our current and potential higher education institution customers and our BankMobile employees, and could result in the loss of customers and key employees. Because we cannot be certain of completing the spin-off and merger by July 1, 2018, we are also taking steps to reduce our assets below $10 billion at December 31, 2017 in order to eliminate the risk of not receiving full interchange fees, which would occur if we no longer qualified for the smaller issuer exemption from the Durbin Amendment for 2018.

Executing the spin-off and merger also may result in the diversion of management’s attention from Customers’ day-to-day operations generally, and the expenses we incur in executing the transactions may exceed our expectations, which may adversely affect our results of operations. In addition, even if we are successful in completing the spin-off and merger, it is possible that Customers and our shareholders may not receive the benefits we presently anticipate from these transactions.

~~If we are unable to reduce our total assets to below $10 billion as of December 31, 2017, our business and potential for future success could be materially adversely affected.~~

Under federal law and regulation, if our total assets exceed $10 billion as of December 31, 2017, we will no longer qualify as a small issuer of debit cards and we will not receive the optimal debit card processing fee. Failure to qualify for the small issuer exception would result in a significant reduction in interchange fee income beginning July 1, 2018 and could result in the BankMobile segment operating unprofitably or charging additional fees to students to replace the lost revenue. Customers plans to reduce total assets by approximately $500 million by year-end 2017 through normal seasonality of the mortgage warehouse business, which tends to decline in the winter months, selling multi-family and residential mortgage loans, and selling investment securities as needed. In addition, Customers expects to moderately grow its commercial and industrial loan portfolio while limiting growth in its multi-family loan portfolio by disciplined pricing. If Customers is unable to reduce total

~~assets to below $10 billion as of December 31, 2017, our financial condition and results of operations could be adversely affected.~~

~~The fair value of our investment securities can fluctuate due to market conditions. Adverse economic performance can lead to adverse security performance and other-than-temporary impairment.~~

As of September 30, 2017, the fair value of our investment securities portfolio was $584.8 million. We have historically followed a conservative investment strategy, with concentrations in securities that are backed by government sponsored enterprises. In the future, we may seek to increase yields through more aggressive strategies, which may include a greater percentage of corporate securities, structured credit products or non-agency mortgage backed securities. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets. Any of these factors, among others, such as a change in management's intent to hold the securities until recovery in fair value, could cause other-than-temporary impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could have a material adverse effect on us. The process for determining whether impairment of a security is other-than-temporary usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

As of September 30, 2017, management evaluated its equity holdings issued by Religare for other-than-temporary impairment. Because management no longer has the intent to hold these securities until a recovery in fair value, Customers recorded other-than-temporary impairment losses of $8.3 million in third quarter 2017, $2.9 million in second quarter 2017, $1.7 million in first quarter 2017, and $7.3 million in fourth quarter 2016 for the full amount of the decline in fair value below the cost basis. The fair value of the equity securities at September 30, 2017 of $2.3 million became the new cost basis of the securities.

~~We may suffer losses due to minority investments in other financial institutions or related companies.~~

From time to time, we may make or consider making minority investments in other financial institutions or technology companies in the financial services business. If we do so, we may not be able to influence the activities of companies in which we invest, and may suffer losses due to these activities. Investments in foreign companies could pose additional risks as a result of distance, language barriers and potential lack of information (for example, foreign institutions, including foreign financial institutions, may not be obligated to provide as much information regarding their operations as those in the United States). Our investment in Religare, which is a diversified financial services company in India, represents such an investment. In fourth quarter 2016, we announced our decision to exit our investment in Religare. As a result of that decision, we recorded an other-than-temporary impairment loss of $7.3 million in earnings in fourth quarter 2016 and adjusted our cost basis of the Religare securities to their estimated fair value of $15.2 million at December 31, 2016. In first quarter 2017, we recognized an other-than-temporary impairment loss of $1.7 million and adjusted our cost basis of the Religare securities to their estimated fair value of $13.5 million at March 31, 2017. In second quarter 2017, we recognized an other-than-temporary impairment loss of $2.9 million and adjusted our cost basis of the Religare securities to their estimated fair value of $10.7 million at June 30, 2017. In third quarter 2017, we recognized an other-than-temporary impairment loss of $8.3 million and adjusted our cost of the Religare equity securities to their estimated fair value of $2.3 million at September 30, 2017. To the extent we are unable to exit the Religare investment as planned, and pursuant to the terms contemplated, further declines in the market price per share of the Religare common stock and adverse changes in foreign currency exchange rates, may have an adverse effect on our financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~On November 26, 2013,~~ Issuer Purchases of Equity Securities

Customers ~~announced that the Board of Directors had authorized a stock repurchase plan in which the~~ Bancorp ~~could acquire up to 5% of its current outstanding~~did not purchase any shares at prices not to exceed a 20% premium over the then current book value. The repurchase program has no expiration date but may be suspended, modified or discontinued at any time, and the Bancorp has no obligation to repurchase any amount of its common stock ~~under the program.~~

~~During~~during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~ 2021 pursuant to an existing stock repurchase plan.

Dividends on Common Stock

Customers ~~did~~Bancorp historically has not ~~repurchase~~paid any cash dividends on its shares of ~~its shares. The maximum~~common stock and does not expect to do so in the foreseeable future.

Any future determination relating to our dividend policy will be made at the discretion of Customers Bancorp’s board of directors and will depend on a number of factors, including earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, ability to service any equity or debt obligations senior to our common stock, including obligations to pay dividends to the holders of Customers Bancorp's issued and outstanding shares ~~available~~of preferred stock and other factors deemed relevant by the Board of Directors.

In addition, as a bank holding company, Customers Bancorp is subject to general regulatory restrictions on the payment of cash dividends. Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which, depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends. Further, various federal and state statutory provisions limit the amount of dividends that bank subsidiaries can pay to their parent holding company without regulatory approval. Generally, subsidiaries are prohibited from paying dividends when doing so would cause them to fall below the regulatory minimum capital levels, and limits exist on paying dividends in excess of net income for specified periods.

Beginning January 1, 2015, the ability to pay dividends and the amounts that can be ~~purchased under~~paid will be limited to the ~~plan is 750,551 shares.~~extent the Bank's capital ratios do not exceed the minimum required levels plus 250 basis points, as these requirements were phased in through January 1, 2019.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~

None

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Item 6. Exhibits


Exhibit No.			Description

~~Exhibit~~ ~~No.~~2.1			~~Description~~ Asset Purchase Agreement dated as of December 15, 2015 by and among Customers Bancorp, Customers Bank, Higher One, Inc. and Higher One Holdings, Inc., incorporated by reference to Exhibit 2.3 to the Customers Bancorp Form 10-K filed with the SEC on February 26, 2016

2.2		*	Agreement and Plan of Merger by and between Megalith Financial Acquisition Corp., MFAC Merger Sub Inc., Customers Bank, and BankMobile Technologies, Inc., as the Company, incorporated by reference to Exhibit 2.1 to the Customers Bancorp 8-K filed with the SEC on August 6, 2020

2.3			First Amendment to Agreement and Plan Merger, dated November 2, 2020, by and among Megalith Financial Acquisition Corp., MFAC Merger Sub, Inc., Customers Bank, BankMobile Technologies, and Customers Bancorp, incorporated by reference to Exhibit 2.1 to the Customers Bancorp 8-K filed with the SEC on November 2, 2020

2.4			Second Amendment to Agreement and Plan Merger, dated December 8, 2020, by and among Megalith Financial Acquisition Corp., MFAC Merger Sub, Inc., Customers Bank, BankMobile Technologies, and Customers Bancorp, incorporated by reference to Exhibit 2.3 to the Customers Bancorp 8-K filed with the SEC on January 8, 2021

3.1			Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers ~~Bancorp’s~~Bancorp Form 8-K filed with the SEC on April 30, 2012

3.2			Amended and Restated Bylaws of Customers Bancorp, incorporated by reference to Exhibit 3.2 to the Customers ~~Bancorp’s~~Bancorp Form 8-K filed with the SEC on April 30, 2012

3.3			Articles of Amendment to the Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on July 2, 2012

3.4			Articles of Amendment to the Amended and Restated Articles of Incorporation of Customers Bancorp, Inc., incorporated by reference to Exhibit 3.1 to the Customers Bancorp’s Form 8-K filed with the SEC on June 3, 2019

3.5			Amendment to Amended and Restated Bylaws of Customers Bancorp, Inc., incorporated by reference to Exhibit 3.1 to the Customers Bancorp’s Form 8-K filed with the SEC on June 19, 2019

3.6			Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on May 18, 2015

~~3.5~~3.7			Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on January 29, 2016

~~3.6~~3.8			Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series E, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on April 28, 2016

~~3.7~~3.9			Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on September 16, 2016

4.1			Fourth Supplemental Indenture dated as of ~~July 30, 2013, by and~~August 6, 2021 between Customers Bancorp, Inc., as Issuer, and Wilmington Trust, National Association, as Trustee, incorporated by reference to Exhibit 4.1 to ~~the~~ Customers ~~Bancorp Form 8-K filed with the SEC on July 31, 2013~~

~~4.2~~	First Supplemental Indenture, dated as of July 30, 2013, by and between Customers Bancorp, Inc., as Issuer, and Wilmington Trust, National Association, as Trustee, incorporated by reference to Exhibit 4.2 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013

~~4.3~~	~~6.375% Global Note in aggregate principal amount of $55,000,000, incorporated by reference to Exhibit 4.3 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013~~

~~4.4~~	Amendment to First Supplemental Indenture, dated August 27, 2013, by and between Customers Bancorp, Inc. and Wilmington Trust Company, National Association, as trustee, incorporated by reference to Exhibit 4.1 to the Customers BancorpBancorp’s Form 8-K filed with the SEC on August ~~29, 2013~~6, 2021

~~4.5~~4.2			~~6.375% Global~~Form of 2.875% Senior Note ~~in aggregate principal amount of $8,250,000,~~due 2031, incorporated by reference to Exhibit 4.2 to the Customers Bancorp 8-K filed with the SEC on August 6, 2021

10.1			Supplemental Executive Retirement Plan of Andrew Bowman, incorporated by reference to Exhibit 10.1 to Customers Bancorp’s Form 8-K filed with the SEC on ~~August 29, 2013~~May 18, 2021

~~4.6~~10.2			Supplemental Executive Retirement Plan of Carla A. Leibold, incorporated by reference to Exhibit 10.2 to Customers Bancorp’s Form 8-K filed with the SEC on May 18, 2021

10.3			Supplemental Executive Retirement Plan of ~~Note Subscription~~Samvir Sidhu, incorporated by reference to Exhibit 10.2 to Customers Bancorp’s Form 8-K filed with the SEC on May 18, 2021

10.4			Letter Agreement, ~~(including form~~dated as of ~~Subordinated Note Certificate~~June 29, 2021, by and ~~Senior Note Certificate),~~between Customers Bancorp, Inc. and Richard A. Ehst, incorporated by reference to Exhibit 10.1 to ~~the~~ Customers ~~Bancorp Form 8-K filed with the SEC on June 26, 2014~~

~~4.7~~	~~Form of Warrant issued by Berkshire Bancorp, Inc., incorporated by reference to Exhibit 10.23 to the Customers Bancorp Form S-1/A filed with the SEC on April 25, 2012~~

~~4.8~~	Second Supplemental Indenture, dated as of June 30, 2017, by and between Customers Bancorp, Inc, as Issuer, and Wilmington Trust, National Association, As Trustee, incorporated by reference to Exhibit 4.1 to the Customers BancorpBancorp’s Form 8-K filed with the SEC on June 30, ~~2017~~2021













































31.1			Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)

31.2			Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)

32.1			Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

Table of Contents


32.2						Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002



101		The ~~Exhibits filed~~following financial statements from the Customers’ Annual Report on Form 10-Q as ~~part~~ of ~~this report are as follows:~~and for the year ended June 30, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.

~~101.INS~~104		Cover Page Interactive Data File - the cover page XBRL ~~Instance Document.~~tags are embedded within the Inline XBRL document

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

~~101.LAB~~101.DEF		XBRL Taxonomy Extension Definitions Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

~~101.DEF~~	~~XBRL Taxonomy Extension Definitions Linkbase Document.~~

* Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished to the SEC upon its request.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Customers Bancorp, Inc.

August 9, 2021		By:	/s/ Jay S. Sidhu
		Name:	Jay S. Sidhu
		Title:	Chairman and Chief Executive Officer (Principal Executive Officer)

		~~Customers Bancorp, Inc.~~

~~November 3, 2017~~	~~By:~~	~~/s/ Jay S. Sidhu~~
	~~Name:~~	~~Jay S. Sidhu~~
	~~Title:~~	~~Chairman and Chief Executive Officer~~ ~~(Principal Executive Officer)~~



~~November 3, 2017~~	~~By:~~	~~/s/ Robert E. Wahlman~~
	~~Name:~~	~~Robert E. Wahlman~~
	~~Title:~~	~~Chief Financial Officer~~ ~~(Principal Financial Officer)~~

~~Exhibit Index~~



~~Exhibit~~ ~~No.~~ August 9, 2021		By:	~~Description~~

~~3.1~~	~~Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers Bancorp’s Form 8-K filed with the SEC on April 30, 2012~~

~~3.2~~	~~Amended and Restated Bylaws of Customers Bancorp, incorporated by reference to Exhibit 3.2 to the Customers Bancorp’s Form 8-K filed with the SEC on April 30, 2012~~

~~3.3~~	Articles of Amendment to the Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on July 2, 2012

~~3.4~~	Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on May 18, 2015

~~3.5~~	Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on January 29, 2016

~~3.6~~	Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series E, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on April 28, 2016

~~3.7~~	Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on September 16, 2016

~~4.1~~	Indenture, dated as of July 30, 2013, by and between Customers Bancorp, Inc., as Issuer, and Wilmington Trust, National Association, as Trustee, incorporated by reference to Exhibit 4.1 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013

~~4.2~~	First Supplemental Indenture, dated as of July 30, 2013, by and between Customers Bancorp, Inc., as Issuer, and Wilmington Trust, National Association, as Trustee, incorporated by reference to Exhibit 4.2 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013

~~4.3~~	~~6.375% Global Note in aggregate principal amount of $55,000,000, incorporated by reference to Exhibit 4.3 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013~~

~~4.4~~	Amendment to First Supplemental Indenture, dated August 27, 2013, by and between Customers Bancorp, Inc. and Wilmington Trust Company, National Association, as trustee, incorporated by reference to Exhibit 4.1 to the Customers Bancorp Form 8-K filed with the SEC on August 29, 2013

~~4.5~~	~~6.375% Global Note in aggregate principal amount of $8,250,000, incorporated by reference to Exhibit 4.2 to the Customers Bancorp Form 8-K filed with the SEC on August 29, 2013~~

~~4.6~~	Form of Note Subscription Agreement (including form of Subordinated Note Certificate and Senior Note Certificate), incorporated by reference to Exhibit 10.1 to the Customers Bancorp Form 8-K filed with the SEC on June 26, 2014

~~4.7~~	~~Form of Warrant issued by Berkshire Bancorp, Inc., incorporated by reference to Exhibit 10.23 to the Customers Bancorp Form S-1/A filed with the SEC on April 25, 2012~~

~~4.8~~	Second Supplemental Indenture, dated as of June 30, 2017, by and between Customers Bancorp, Inc, as Issuer, and Wilmington Trust, National Association, As Trustee, incorporated by reference to Exhibit 4.1 to the Customers Bancorp Form 8-K filed with the SEC on June 30, 2017

~~31.1~~	~~Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)~~

~~31.2~~	~~Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)~~

~~32.1~~	~~Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002~~

~~32.2~~	~~Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002~~

/s/ Carla A. Leibold
		Name:		Carla A. Leibold
~~101~~		Title:	~~The Exhibits filed as part of this report are as follows:~~

~~101.INS~~	~~XBRL Instance Document.~~

~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document.~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document.~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document.~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document.~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definitions Linkbase Document.~~Chief Financial Officer (Principal Financial Officer)



x☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


¨☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the transition period from to .



	September 30, 2017			December 31, 2016
ASSETS
Cash and due from banks	$	13,318		$	37,485
Interest-earning deposits	206,162			227,224
Cash and cash equivalents	219,480			264,709
Investment securities available for sale, at fair value	584,823			493,474
Loans held for sale (includes $1,963,076 and $2,117,510, respectively, at fair value)	2,113,293			2,117,510
Loans receivable	7,061,338			6,154,637
Allowance for loan losses	(38,314		)	(37,315		)
Total loans receivable, net of allowance for loan losses	7,023,024			6,117,322
FHLB, Federal Reserve Bank, and other restricted stock	98,611			68,408
Accrued interest receivable	27,135			23,690
Bank premises and equipment, net	12,369			12,769
Bank-owned life insurance	255,683			161,494
Other real estate owned	1,059			3,108
Goodwill and other intangibles	16,604			17,621
Other assets	119,748			102,631
Total assets	$	10,471,829		$	9,382,736
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing	$	1,427,304		$	966,058
Interest-bearing	6,169,772			6,337,717
Total deposits	7,597,076			7,303,775
Federal funds purchased	147,000			83,000
FHLB advances	1,462,343			868,800
Other borrowings	186,258			87,123
Subordinated debt	108,856			108,783
Accrued interest payable and other liabilities	59,654			75,383
Total liabilities	9,561,187			8,526,864
Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 9,000,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016	217,471			217,471
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 31,317,892 and 30,820,177 shares issued as of September 30, 2017 and December 31, 2016; 30,787,632 and 30,289,917 shares outstanding as of September 30, 2017 and December 31, 2016	31,318			30,820
Additional paid in capital	429,633			427,008
Retained earnings	240,076			193,698
Accumulated other comprehensive income (loss), net	377			(4,892		)
Treasury stock, at cost (530,260 shares as of September 30, 2017 and December 31, 2016)	(8,233		)	(8,233		)
Total shareholders’ equity	910,642			855,872
Total liabilities and shareholders’ equity	$	10,471,829		$	9,382,736



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Interest income:
Loans receivable	$	67,107		$	60,362		$	195,605		$	173,847
Loans held for sale	21,633			18,737			53,103			50,272
Investment securities	7,307			3,528			21,017			10,875
Other	2,238			1,585			5,507			3,937
Total interest income	98,285			84,212			275,232			238,931
Interest expense:
Deposits	18,381			13,009			48,934			34,365
Other borrowings	3,168			1,642			6,767			4,867
FHLB advances	7,032			3,291			15,433			9,274
Subordinated debt	1,685			1,685			5,055			5,055
Total interest expense	30,266			19,627			76,189			53,561
Net interest income	68,019			64,585			199,043			185,370
Provision for loan losses	2,352			88			5,937			2,854
Net interest income after provision for loan losses	65,667			64,497			193,106			182,516
Non-interest income:
Interchange and card revenue	9,570			11,547			31,729			13,806
Gain (loss) on sale of investment securities	5,349			(1		)	8,532			25
Deposit fees	2,659			4,218			7,918			5,260
Mortgage warehouse transactional fees	2,396			3,080			7,139			8,702
Bank-owned life insurance	1,672			1,386			5,297			3,629
Gain on sale of SBA and other loans	1,144			1,206			3,045			2,135
Mortgage banking income	257			287			703			737
Impairment loss on investment securities	(8,349		)	—			(12,934		)	—
Other	3,328			5,763			7,741			6,943
Total non-interest income	18,026			27,486			59,170			41,237
Non-interest expense:
Salaries and employee benefits	24,807			22,681			69,569			58,051
Technology, communication and bank operations	14,401			12,525			33,227			19,021
Professional services	7,403			7,006			21,142			13,213
Occupancy	2,857			2,450			8,228			7,248
FDIC assessments, taxes, and regulatory fees	2,475			2,726			6,615			11,191
Provision for operating losses	1,509			1,406			4,901			1,943
Loan workout	915			592			1,844			1,497
Other real estate owned	445			1,192			550			1,663
Advertising and promotion	404			591			1,108			1,178
Acquisition related expenses	—			144			—			1,195
Other	5,824			4,905			13,634			12,106
Total non-interest expense	61,040			56,218			160,818			128,306
Income before income tax expense	22,653			35,765			91,458			95,447
Income tax expense	14,899			14,558			34,236			36,572
Net income	7,754			21,207			57,222			58,875
Preferred stock dividends	3,615			2,552			10,844			5,900
Net income available to common shareholders	$	4,139		$	18,655		$	46,378		$	52,975
Basic earnings per common share	$	0.13		$	0.68		$	1.52		$	1.95
Diluted earnings per common share	$	0.13		$	0.63		$	1.42		$	1.80



	Nine Months Ended September 30, 2017
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital			Retained Earnings			Accumulated Other Comprehensive Income/(Loss)			Treasury Stock			Total
Balance, December 31, 2016	9,000,000	$	217,471	30,289,917	$	30,820	$	427,008		$	193,698		$	(4,892	)	$	(8,233	)	$	855,872
Net income	—	—		—	—		—			57,222			—			—			57,222
Other comprehensive income	—	—		—	—		—			—			5,269			—			5,269
Preferred stock dividends	—	—		—	—		—			(10,844		)	—			—			(10,844		)
Share-based compensation expense	—	—		—	—		4,536			—			—			—			4,536
Exercise of warrants	—	—		50,387	50		507			—			—			—			557
Issuance of common stock under share-based compensation arrangements	—	—		447,328	448		(2,418		)	—			—			—			(1,970		)
Balance, September 30, 2017	9,000,000	$	217,471	30,787,632	$	31,318	$	429,633		$	240,076		$	377		$	(8,233	)	$	910,642

	Nine Months Ended September 30, 2016
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital			Retained Earnings			Accumulated Other Comprehensive Income/(Loss)			Treasury Stock			Total
Balance, December 31, 2015	2,300,000	$	55,569	26,901,801	$	27,432	$	362,607		$	124,511		$	(7,984	)	$	(8,233	)	$	553,902
Net income	—	—		—	—		—			58,875			—			—			58,875
Other comprehensive income	—	—		—	—		—			—			8,758			—			8,758
Issuance of common stock, net of offering costs of $217	—	—		226,677	227		5,450			—			—			—			5,677
Issuance of preferred stock, net of offering costs of $5,520	6,700,000	161,980		—	—		—			—			—			—			161,980
Preferred stock dividends	—	—		—	—		—			(5,900		)	—						(5,900		)
Share-based compensation expense	—	—		—	—		4,569			—			—			—			4,569
Exercise of warrants	—	—		259,851	259		862			—			—			—			1,121
Issuance of common stock under share-based compensation arrangements	—	—		155,888	156		673			—			—			—			829
Balance, September 30, 2016	9,000,000	$	217,549	27,544,217	$	28,074	$	374,161		$	177,486		$	774		$	(8,233	)	$	789,811



(amounts in thousands)
Fair value of assets acquired:
Developed software	$	27,400
Other intangible assets	9,300
Accounts receivable	2,784
Prepaid expenses	418
Fixed assets, net	229
Total assets acquired	40,131

Fair value of liabilities assumed:
Other liabilities	5,735
Deferred revenue	2,655
Total liabilities assumed	8,390

Net assets acquired	$	31,741

Transaction cash consideration (1)	$	37,000

Goodwill recognized	$	5,259



	December 31, 2016 As Previously Reported		Effect of Reclassification From Held For Sale to Held and Used			December 31, 2016 After Reclassification
(amounts in thousands)	December 31, 2016 As Previously Reported					December 31, 2016 After Reclassification
ASSETS
Cash and cash equivalents	$	244,709	$	20,000		$	264,709
Loans receivable	6,142,390		12,247			6,154,637
Bank premises and equipment, net	12,259		510			12,769
Goodwill and other intangibles	3,639		13,982			17,621
Assets held for sale	79,271		(79,271		)	—
Other assets	70,099		32,532			102,631
LIABILITIES
Demand, non-interest bearing deposits	$	512,664	$	453,394		$	966,058
Interest bearing deposits	6,334,316		3,401			6,337,717
Non-interest bearing deposits held for sale	453,394		(453,394		)	—
Other liabilities held for sale	31,403		(31,403		)	—
Accrued interest payable and other liabilities	47,381		28,002			75,383



	Three Months Ended September 30, 2016			Effect of Reclassification From Held For Sale to Held and Used			Three Months Ended September 30, 2016
	As Previously Reported						After Reclassification
Interest income	$	84,212		$	—		$	84,212
Interest expense	19,622			5			19,627
Net interest income	64,590			(5		)	64,585
Provision for loan losses	(161		)	249			88
Non-interest income	11,121			16,365			27,486
Non-interest expenses	36,750			19,468			56,218
Income from continuing operations before income taxes	39,122			(3,357		)	35,765
Provision for income taxes	15,834			(1,276		)	14,558
Net income from continuing operations	23,288			(2,081		)	21,207
Loss from discontinued operations before income taxes	(3,357		)	3,357			—
Income tax benefit from discontinued operations	(1,276		)	1,276			—
Net loss from discontinued operations	(2,081		)	2,081			—
Net income	21,207			—			21,207
Preferred stock dividend	2,552			—			2,552
Net income available to common shareholders	$	18,655		$	—		$	18,655



	Three Months Ended September 30, 2017
(amounts in thousands)	Unrealized Gains (Losses) on Available-For-Sale Securities			Unrealized Loss on Cash Flow Hedges			Total
Balance - June 30, 2017	$	6,822		$	(1,458	)	$	5,364
Other comprehensive income (loss) before reclassifications	(2,177		)	104			(2,073		)
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2)	(3,263		)	349			(2,914		)
Net current-period other comprehensive (loss) income	(5,440		)	453			(4,987		)
Balance - September 30, 2017	$	1,382		$	(1,005	)	$	377



	Three Months Ended September 30, 2016
	Available-for-sale-securities
(amounts in thousands)	Unrealized Gains		Foreign Currency Items			Total Unrealized Gains		Unrealized Loss on Cash Flow Hedge			Total
Balance - June 30, 2016	$	4,895	$	(768	)	$	4,127	$	(4,554	)	$	(427	)
Other comprehensive income (loss) before reclassifications	15		190			205		556			761
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2)	1		—			1		439			440
Net current-period other comprehensive income	16		190			206		995			1,201
Balance - September 30, 2016	$	4,911	$	(578	)	$	4,333	$	(3,559	)	$	774



	September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
(amounts in thousands)
Available for Sale:
Agency-guaranteed residential mortgage-backed securities	$	197,606	$	521	$	(1,800	)	$	196,327
Agency-guaranteed commercial real estate mortgage-backed securities	337,683		2,843		(418		)	340,108
Corporate notes (1)	44,958		1,119		—			46,077
Equity securities (2)	2,311		—		—			2,311
	$	582,558	$	4,483	$	(2,218	)	$	584,823



	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
(amounts in thousands)
Available for Sale:
Agency-guaranteed residential mortgage-backed securities	$	233,002	$	918	$	(2,657	)	$	231,263
Agency-guaranteed commercial real estate mortgage-backed securities	204,689		—		(2,872		)	201,817
Corporate notes (1)	44,932		401		(185		)	45,148
Equity securities (2)	15,246		—		—			15,246
	$	497,869	$	1,319	$	(5,714	)	$	493,474



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017		2016
(amounts in thousands)
Proceeds from sale of available-for-sale securities	$	554,540	$	5		$	698,451	$	2,853
Gross gains	$	5,349	$	—		$	8,532	$	26
Gross losses	—		(1		)	—		(1		)
Net gains (losses)	$	5,349	$	(1	)	$	8,532	$	25



	September 30, 2017
	30-89 Days Past Due (1)		90 Days Or More Past Due(1)		Total Past Due (1)		Non- Accrual		Current (2)		Purchased- Credit- Impaired Loans (3)		Total Loans (4)
(amounts in thousands)
Multi-family	$	—	$	—	$	—	$	—	$	3,617,062	$	1,927	$	3,618,989
Commercial and industrial	—		—		—		20,423		1,093,997		802		1,115,222
Commercial real estate - owner occupied	—		—		—		2,949		472,832		10,786		486,567
Commercial real estate - non-owner occupied	—		—		—		184		1,232,212		5,453		1,237,849
Construction	—		—		—		—		73,203		—		73,203
Residential real estate	1,607		—		1,607		4,269		423,551		5,761		435,188
Manufactured housing (5)	2,937		2,505		5,442		1,959		82,896		2,641		92,938
Other consumer	67		—		67		58		3,474		220		3,819
Total	$	4,611	$	2,505	$	7,116	$	29,842	$	6,999,227	$	27,590	$	7,063,775
	December 31, 2016
	30-89 Days Past Due (1)		90 Days Or More Past Due(1)		Total Past Due (1)		Non- Accrual		Current (2)		Purchased- Credit- Impaired Loans (3)		Total Loans (4)
(amounts in thousands)
Multi-family	$	12,573	$	—	$	12,573	$	—	$	3,200,322	$	2,104	$	3,214,999
Commercial and industrial	350		—		350		8,443		978,881		1,037		988,711
Commercial real estate - owner occupied	137		—		137		2,039		379,227		12,229		393,632
Commercial real estate - non-owner occupied	—		—		—		2,057		1,185,331		6,327		1,193,715
Construction	—		—		—		—		64,789		—		64,789
Residential real estate	4,417		—		4,417		2,959		178,559		7,567		193,502
Manufactured housing (5)	3,761		2,813		6,574		2,236		89,850		3,070		101,730
Other consumer	12		—		12		58		3,177		236		3,483
Total	$	21,250	$	2,813	$	24,063	$	17,792	$	6,080,136	$	32,570	$	6,154,561



Three Months Ended September 30, 2017	Multi-family		Commercial and Industrial			Commercial Real Estate Owner Occupied		Commercial Real Estate Non-Owner Occupied			Construction			Residential Real Estate			Manufactured Housing			Other Consumer			Total
(amounts in thousands)
Ending Balance, June 30, 2017	$	12,028	$	11,585		$	2,976	$	7,786		$	716		$	2,995		$	268		$	104		$	38,458
Charge-offs	—		(2,032		)	—		(77		)	—			(120		)	—			(356		)	(2,585		)
Recoveries	—		54			—		—			27			7			—			1			89
Provision for loan losses	668		966			262		(53		)	104			72			(77		)	410			2,352
Ending Balance, September 30, 2017	$	12,696	$	10,573		$	3,238	$	7,656		$	847		$	2,954		$	191		$	159		$	38,314
Nine Months Ended September 30, 2017
Ending Balance, December 31, 2016	$	11,602	$	11,050		$	2,183	$	7,894		$	840		$	3,342		$	286		$	118		$	37,315
Charge-offs	—		(4,079		)	—		(485		)	—			(410		)	—			(602		)	(5,576		)
Recoveries	—		337			9		—			157			34			—			101			638
Provision for loan losses	1,094		3,265			1,046		247			(150		)	(12		)	(95		)	542			5,937
Ending Balance, September 30, 2017	$	12,696	$	10,573		$	3,238	$	7,656		$	847		$	2,954		$	191		$	159		$	38,314

As of September 30, 2017
Loans:
Individually evaluated for impairment	$	—	$	20,493		$	2,950	$	184		$	—		$	8,178		$	10,340		$	56		$	42,201
Collectively evaluated for impairment	3,617,062		1,093,927			472,831		1,232,212			73,203			421,249			79,957			3,543			6,993,984
Loans acquired with credit deterioration	1,927		802			10,786		5,453			—			5,761			2,641			220			27,590
	$	3,618,989	$	1,115,222		$	486,567	$	1,237,849		$	73,203		$	435,188		$	92,938		$	3,819		$	7,063,775
Allowance for loan losses:
Individually evaluated for impairment	$	—	$	625		$	740	$	—		$	—		$	142		$	5		$	15		$	1,527
Collectively evaluated for impairment	12,696		9,462			2,481		4,732			847			2,222			83			93			32,616
Loans acquired with credit deterioration	—		486			17		2,924			—			590			103			51			4,171
	$	12,696	$	10,573		$	3,238	$	7,656		$	847		$	2,954		$	191		$	159		$	38,314



Three Months Ended September 30, 2016	Multi-family			Commercial and Industrial			Commercial Real Estate Owner Occupied		Commercial Real Estate Non-Owner Occupied			Construction			Residential Real Estate			Manufactured Housing			Other Consumer			Total
(amounts in thousands)
Ending Balance, June 30, 2016	$	12,368		$	10,370		$	1,582	$	8,483		$	1,209		$	3,535		$	440		$	110		$	38,097
Charge-offs	—			(237		)	—		(140		)	—			(43		)	—			(246		)	(666		)
Recoveries	—			62			—		—			8			298			—			10			378
Provision for loan losses	(695		)	832			305		3			(168		)	(411		)	(18		)	240			88
Ending Balance, September 30, 2016	$	11,673		$	11,027		$	1,887	$	8,346		$	1,049		$	3,379		$	422		$	114		$	37,897
Nine Months Ended September 30, 2016
Ending Balance, December 31, 2015	$	12,016		$	8,864		$	1,348	$	8,420		$	1,074		$	3,298		$	494		$	133		$	35,647
Charge-offs	—			(774		)	—		(140		)	—			(456		)	—			(478		)	(1,848		)
Recoveries	—			173			—		8			465			299			—			10			955
Provision for loan losses	(343		)	2,764			539		58			(490		)	238			(72		)	449			3,143
Ending Balance, September 30, 2016	$	11,673		$	11,027		$	1,887	$	8,346		$	1,049		$	3,379		$	422		$	114		$	37,897
As of December 31, 2016
Loans:
Individually evaluated for impairment	$	—		$	8,516		$	2,050	$	2,151		$	—		$	6,972		$	9,665		$	57		$	29,411
Collectively evaluated for impairment	3,212,895			979,158			379,353		1,185,237			64,789			178,963			88,995			3,190			6,092,580
Loans acquired with credit deterioration	2,104			1,037			12,229		6,327			—			7,567			3,070			236			32,570
	$	3,214,999		$	988,711		$	393,632	$	1,193,715		$	64,789		$	193,502		$	101,730		$	3,483		$	6,154,561
Allowance for loan losses:
Individually evaluated for impairment	$	—		$	1,024		$	287	$	14		$	—		$	35		$	—		$	—		$	1,360
Collectively evaluated for impairment	11,602			9,686			1,896		4,626			772			2,414			88			60			31,144
Loans acquired with credit deterioration	—			340			—		3,254			68			893			198			58			4,811
	$	11,602		$	11,050		$	2,183	$	7,894		$	840		$	3,342		$	286		$	118		$	37,315



	Three Months Ended September 30, 2017			Three Months Ended September 30, 2016
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
(dollars in thousands)
Extensions of maturity	1	$	60	—	$	—
Interest-rate reductions	3	122		10	533
Total	4	$	182	10	$	533



	September 30, 2017
	Multi-family		Commercial and Industrial		Commercial Real Estate Owner Occupied		Commercial Real Estate Non-Owner Occupied		Construction		Residential Real Estate		Manufactured Housing		Other Consumer		Total
(amounts in thousands)
Pass/Satisfactory	$	3,577,304	$	1,080,797	$	468,389	$	1,212,945	$	73,203	$	431,364	$	—	$	—	$	6,844,002
Special Mention	36,604		8,663		9,716		22,008		—		—		—		—		76,991
Substandard	5,081		25,762		8,462		2,896		—		3,824		—		—		46,025
Performing (1)	—		—		—		—		—		—		85,537		3,694		89,231
Non-performing (2)	—		—		—		—		—		—		7,401		125		7,526
Total	$	3,618,989	$	1,115,222	$	486,567	$	1,237,849	$	73,203	$	435,188	$	92,938	$	3,819	$	7,063,775



	Actual				For Capital Adequacy Purposes (Minimum Plus Capital Buffer)				To Be Well Capitalized Under Prompt Corrective Action Provisions
(amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2017:
Common equity Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc.	$	677,976	8.284	%	$	470,603	5.750	%	N/A		N/A
Customers Bank	$	1,009,380	12.342	%	$	470,242	5.750	%	$	531,578	6.500	%
Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc.	$	895,447	10.941	%	$	593,369	7.250	%	N/A		N/A
Customers Bank	$	1,009,380	12.342	%	$	592,914	7.250	%	$	654,250	8.000	%
Total capital (to risk weighted assets)
Customers Bancorp, Inc.	$	1,014,784	12.399	%	$	757,057	9.250	%	N/A		N/A
Customers Bank	$	1,156,766	14.145	%	$	756,477	9.250	%	$	817,813	10.000	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	895,447	8.355	%	$	428,709	4.000	%	N/A		N/A
Customers Bank	$	1,009,380	9.434	%	$	427,963	4.000	%	$	534,954	5.000	%
As of December 31, 2016:
Common equity Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc.	$	628,139	8.487	%	$	379,306	5.125	%	N/A		N/A
Customers Bank	$	857,421	11.626	%	$	377,973	5.125	%	$	479,380	6.500	%
Tier 1 capital (to risk weighted assets)
Customers Bancorp, Inc.	$	844,755	11.414	%	$	490,322	6.625	%	N/A		N/A
Customers Bank	$	857,421	11.626	%	$	488,599	6.625	%	$	590,006	8.000	%
Total capital (to risk weighted assets)
Customers Bancorp, Inc.	$	966,097	13.053	%	$	638,343	8.625	%	N/A		N/A
Customers Bank	$	1,003,609	13.608	%	$	636,101	8.625	%	$	737,508	10.000	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	844,755	9.067	%	$	372,652	4.000	%	N/A		N/A
Customers Bank	$	857,421	9.233	%	$	371,466	4.000	%	$	464,333	5.000	%



					Fair Value Measurements at September 30, 2017
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(amounts in thousands)
Assets:
Cash and cash equivalents	$	219,480	$	219,480	$	219,480	$	—	$	—
Investment securities, available for sale	584,823		584,823		2,311		582,512		—
Loans held for sale	2,113,293		2,113,473		—		1,963,076		150,397
Loans receivable, net of allowance for loan losses	7,023,024		7,020,487		—		—		7,020,487
FHLB, Federal Reserve Bank and other restricted stock	98,611		98,611		—		98,611		—
Derivatives	10,447		10,447		—		10,344		103
Liabilities:
Deposits	$	7,597,076	$	7,596,324	$	5,296,636	$	2,299,688	$	—
Federal funds purchased	147,000		147,000		147,000		—		—
FHLB advances	1,462,343		1,462,245		727,343		734,902		—
Other borrowings	186,258		194,157		65,704		128,453		—
Subordinated debt	108,856		115,500		—		115,500		—
Derivatives	12,092		12,092		—		12,092		—


	Amortized Cost				Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items
	June 30,		December 31,		June 30,		December 31,
(amounts in thousands)	2021		2020		2021		2020
Available for sale debt securities	$	80,500	$	272,159	$	846	$	741


	June 30, 2021
	Derivative Assets			Derivative Liabilities
(amounts in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value



Derivatives designated as fair value hedges:
Interest rate swaps	Other assets	$	846	Other liabilities	$	0
Total		$	846		$	0
Derivatives not designated as hedging instruments:
Interest rate swaps	Other assets	$	36,795	Other liabilities	$	38,367
Interest rate caps	Other assets	146		Other liabilities	146
Credit contracts	Other assets	201		Other liabilities	243
Residential mortgage loan commitments	Other assets	301		Other liabilities	0
Total		$	37,443		$	38,756


		Amount of Income (Loss) Recognized in Earnings
		Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	Income Statement Location	2021		2020		2021		2020
Derivatives designated as fair value hedges:
Recognized on interest rate swaps	Net interest income	$	(130)	$	0	$	4,777	$	0
Recognized on hedged available for sale debt securities	Net interest income	130		0		(4,777)		0
Total		$	0	$	0	$	0	$	0
Derivatives not designated as hedging instruments:
Interest rate swaps	Other non-interest income	$	(376)	$	(5,563)	$	2,023	$	(6,578)
Interest rate caps	Other non-interest income	0		0		0		0
Credit contracts	Other non-interest income	(63)		1,405		74		1,274
Residential mortgage loan commitments	Mortgage banking income	105		(164)		101		(27)
Total		$	(334)	$	(4,322)	$	2,198	$	(5,331)



	Three Months Ended September 30, 2017
	Income Statement Location	Amount of Income (Loss) Recognized in Earnings
(amounts in thousands)
Derivatives not designated as hedging instruments:
Interest rate swaps	Other non-interest income	$	91
Credit contracts	Other non-interest income	(6		)
Residential mortgage loan commitments	Mortgage banking income	1
Total		$	86



	Nine Months Ended September 30, 2016
	Income Statement Location	Amount of Income Recognized in Earnings
(amounts in thousands)
Derivatives not designated as hedging instruments:
Interest rate swaps	Other non-interest income	$	1,250
Credit contracts	Other non-interest income	257
Residential mortgage loan commitments	Mortgage banking income	41
Total		$	1,548



	Three Months Ended September 30, 2017
	Amount of Gain Recognized in OCI on Derivatives (Effective Portion) (1)		Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)
(amounts in thousands)
Derivatives in cash flow hedging relationships:
Interest rate swaps	$	104	Interest expense	$	(572	)



	Gross Amount of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet				Net Amount
	Gross Amount of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet				Financial Instruments		Cash Collateral Received		Net Amount
(amounts in thousands)
Description
Interest rate swap derivatives with institutional counterparties	$	4,190	$	—	$	4,190	$	—	$	1,900	$	2,290



	Gross Amount of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Amount of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet				Financial Instruments		Cash Collateral Pledged		Net Amount
(amounts in thousands)
Description
Interest rate swap derivatives with institutional counterparties	$	8,400	$	—	$	8,400	$	—	$	8,262	$	138



	Three Months Ended September 30, 2017
	Community Business Banking		BankMobile					Consolidated
Interest income	$	95,585	$	2,700		⁽¹	⁾	$	98,285
Interest expense	30,250		16					30,266
Net interest income	65,335		2,684					68,019
Provision for loan losses	1,874		478					2,352
Non-interest income	4,190		13,836					18,026
Non-interest expense	33,990		27,050					61,040
Income (loss) before income tax expense (benefit)	33,661		(11,008		)			22,653
Income tax expense (benefit)	18,999		(4,100		)			14,899
Net income (loss)	14,662		(6,908		)			7,754
Preferred stock dividends	3,615		—					3,615
Net income (loss) available to common shareholders	$	11,047	$	(6,908	)			$	4,139



	Three Months Ended September 30,
	2017 vs. 2016
	Increase (Decrease) due to Change in
	Rate			Volume			Total
(amounts in thousands)
Interest income
Interest-earning deposits	$	528		$	69		$	597
Investment securities	335			3,444			3,779
Loans:
Commercial loans to mortgage companies	3,853			(1,744		)	2,109
Multifamily loans	(1,440		)	3,368			1,928
Commercial and industrial	908			2,997			3,905
Non-owner occupied commercial real estate	(195		)	606			411
All other loans	(610		)	1,898			1,288
Total loans	2,516			7,125			9,641
Other interest-earning assets	(365		)	421			56
Total interest income	3,014			11,059			14,073
Interest expense
Interest checking accounts	167			263			430
Money market deposit accounts	4,095			571			4,666
Other savings accounts	4			3			7
Certificates of deposit	1,539			(1,270		)	269
Total interest-bearing deposits	5,805			(433		)	5,372
Borrowings	1,337			3,930			5,267
Total interest expense	7,142			3,497			10,639
Net interest income	$	(4,128	)	$	7,562		$	3,434