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 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~~November 3, 2023, 31,413,946 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~~2023 and for the three and nine month periods ended September 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)		35

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		5149

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		7786


Item 4.	Controls and Procedures		7887

PART II

Item 1.		Legal Proceedings		7988

Item 1A.		Risk Factors		7988

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		8188

Item 3.		Defaults Upon Senior Securities		8189

Item 4.		Mine Safety Disclosures		8189

Item 5.		Other Information		8189

Item 6.		Exhibits		8290

SIGNATURES				8491

~~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

AOCI			Accumulated other comprehensive income (loss)
ASC			Accounting Standards Codification
ASU			Accounting Standards Update

B2B			Business-to-business
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


BTFP			Bank Term Funding Program
CARES Act			Coronavirus Aid, Relief and Economic Security Act
CBITTM			Customers Bank Instant Token
CCF			Customers Commercial Finance, LLC
CECL			Current expected credit losses
Commission			U.S. Securities and Exchange Commission
Company			Customers Bancorp, Inc. and subsidiaries




COVID-19			Coronavirus Disease 2019
CPI			Consumer Price Index
CRA			Community Reinvestment Act
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






EPS			Earnings per share


EVE			Economic value of equity
Exchange Act			Securities Exchange Act of 1934
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation

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


FHLB			Federal Home Loan Bank
FICO			Fair, Isaac and Company
Fintech			Third-Party Financial Technology
FMV			Fair Market Value

FRB			Federal Reserve Bank of Philadelphia

GDP			Gross domestic product



HTM			Held to maturity


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
NPA			Non-performing asset
NPL			Non-performing loan

NYSE			New York Stock Exchange

OCI			Other comprehensive income (loss)

OREO			Other real estate owned


PCD			Purchased Credit-Deteriorated

PPP			Paycheck Protection Program

Table of Contents


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

SAB			SEC Staff Accounting Bulletin
SBA			U.S. 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 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
SERP			Supplemental Executive Retirement Plan
Share Repurchase Program			Share repurchase program authorized by the Board of Directors of Customers Bancorp in 2021
SOFR			Secured Overnight Financing Rate

TDR			Troubled debt restructuring
TRAC			Terminal Rental Adjustment Clause


U.S. GAAP			Accounting principles generally accepted in the United States of America
VIE			Variable interest entity

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET — UNAUDITED

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


	September 30, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	68,288	$	58,025
Interest earning deposits	3,351,686		397,781
Cash and cash equivalents	3,419,974		455,806
Investment securities, at fair value (includes allowance for credit losses of $3,849 and $578, respectively)	2,773,207		2,987,500

Investment securities held to maturity	1,178,370		840,259
Loans held for sale (includes $25,520 and $322, respectively, at fair value)	150,368		328,312
Loans receivable, mortgage warehouse, at fair value	962,566		1,323,312

Loans receivable, PPP	137,063		998,153
Loans and leases receivable	12,463,485		13,144,894
Allowance for credit losses on loans and leases	(139,213)		(130,924)
Total loans and leases receivable, net of allowance for credit losses on loans and leases	13,423,901		15,335,435
FHLB, Federal Reserve Bank, and other restricted stock	126,098		74,196
Accrued interest receivable	123,984		123,374

Bank premises and equipment, net	7,789		9,025
Bank-owned life insurance	291,670		338,441

Goodwill and other intangibles	3,629		3,629
Other assets	358,162		400,135

Total assets	$	21,857,152	$	20,896,112
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing	$	4,758,682	$	1,885,045
Interest bearing	13,436,682		16,271,908
Total deposits	18,195,364		18,156,953



FHLB advances	1,529,839		800,000
Other borrowings	123,775		123,580
Subordinated debt	182,161		181,952

Accrued interest payable and other liabilities	264,406		230,666

Total liabilities	20,295,545		19,493,151
Commitments and contingencies (NOTE 15)
Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 5,700,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022	137,794		137,794
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 35,329,690 and 35,012,250 shares issued as of September 30, 2023 and December 31, 2022; 31,311,254 and 32,373,697 shares outstanding as of September 30, 2023 and December 31, 2022	35,330		35,012
Additional paid in capital	559,346		551,721
Retained earnings	1,101,359		924,134
Accumulated other comprehensive income (loss), net	(149,812)		(163,096)
Treasury stock, at cost (4,018,436 and 2,638,553 shares as of September 30, 2023 and December 31, 2022)	(122,410)		(82,604)
Total shareholders’ equity	1,561,607		1,402,961
Total liabilities and shareholders’ equity	$	21,857,152	$	20,896,112

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
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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest income:
Loans and leases	$	271,107	$	200,438	$	757,064	$	526,478
Investment securities	54,243		30,546		149,585		76,283
Interest earning deposits	43,800		2,949		81,819		4,198
Loans held for sale	4,664		19		27,514		95
Other	2,526		1,964		5,463		8,672
Total interest income	376,340		235,916		1,021,445		615,726
Interest expense:
Deposits	145,825		65,380		426,130		101,873
FHLB advances	26,485		4,684		61,140		7,000
FRB advances	—		—		6,286		—
Subordinated debt	2,689		2,689		8,067		8,067

Other borrowings	1,568		4,131		4,879		10,203
Total interest expense	176,567		76,884		506,502		127,143
Net interest income	199,773		159,032		514,943		488,583
Provision (benefit) for credit losses	17,856		(7,994)		61,088		31,850
Net interest income after provision (benefit) for credit losses	181,917		167,026		453,855		456,733
Non-interest income:


Commercial lease income	8,901		7,097		27,144		19,584
Loan fees	6,029		3,008		14,290		8,171
Bank-owned life insurance	1,973		3,449		9,617		13,722
Mortgage warehouse transactional fees	1,018		1,545		3,468		5,443




Gain (loss) on sale of SBA and other loans	(348)		106		(1,109)		3,155
Loss on sale of capital call lines of credit	—		—		(5,037)		—
Loss on sale of consumer installment loans	—		(23,465)		—		(23,465)
Net gain (loss) on sale of investment securities	(429)		(2,135)		(429)		(6,227)





Other	631		1,378		3,949		4,544
Total non-interest income	17,775		(9,017)		51,893		24,927
Non-interest expense:
Salaries and employee benefits	33,845		31,230		99,310		83,171
Technology, communication and bank operations	15,667		19,588		48,663		66,394
Commercial lease depreciation	7,338		5,966		22,541		16,460
Professional services	8,569		6,269		25,357		20,640
Loan servicing	3,858		3,851		13,296		10,563
Occupancy	2,471		2,605		7,750		9,934
FDIC assessments, non-income taxes and regulatory fees	8,551		2,528		21,059		6,530
Advertising and promotion	650		762		2,245		1,430




Legal settlement expense	4,096		—		4,096		—
Other	4,421		3,399		14,579		11,088
Total non-interest expense	89,466		76,198		258,896		226,210
Income before income tax expense	110,226		81,811		246,852		255,450
Income tax expense	23,470		17,899		58,801		56,127








Net income	86,756		63,912		188,051		199,323
Preferred stock dividends	3,803		2,548		10,826		6,544

Net income available to common shareholders	$	82,953	$	61,364	$	177,225	$	192,779


Basic earnings per common share	$	2.65	$	1.89	$	5.63	$	5.89

Diluted earnings per common share	2.58		1.85		5.53		5.72

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022


Net income	$	86,756	$	63,912	$	188,051	$	199,323
Unrealized gains (losses) on available for sale debt securities:
Unrealized gains (losses) arising during the period	23,666		(46,450)		14,535		(213,532)
Income tax effect	(6,011)		12,077		(3,692)		55,518
Reclassification adjustments for (gains) losses included in net income	(429)		4,227		(429)		9,281
Income tax effect	109		(1,099)		109		(2,413)
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity	1,379		—		3,700		—
Income tax effect	(350)		—		(939)		—
Net unrealized gains (losses) on available for sale debt securities	18,364		(31,245)		13,284		(151,146)






Other comprehensive income (loss), net of income tax effect	18,364		(31,245)		13,284		(151,146)
Comprehensive income (loss)	$	105,120	$	32,667	$	201,335	$	48,177

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 September 30, 2023
	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, June 30, 2023	5,700,000	$	137,794	31,282,318	$	35,301	$	555,737	$	1,018,406	$	(168,176)	$	(122,410)	$	1,456,652


Net income	—	—		—	—		—		86,756		—		—		86,756

Other comprehensive income (loss)	—	—		—	—		—		—		18,364		—		18,364


Preferred stock dividends (1)	—	—		—	—		—		(3,803)		—		—		(3,803)





Share-based compensation expense	—	—		—	—		3,510		—		—		—		3,510

Issuance of common stock under share-based compensation arrangements	—	—		28,936	29		99		—		—		—		128

Balance, September 30, 2023	5,700,000	$	137,794	31,311,254	$	35,330	$	559,346	$	1,101,359	$	(149,812)	$	(122,410)	$	1,561,607

	Three Months Ended September 30, 2022
	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, June 30, 2022	5,700,000	$	137,794	32,449,486	$	34,922	$	545,670	$	837,147	$	(124,881)	$	(77,262)	$	1,353,390

Net income	—	—		—	—		—		63,912		—		—		63,912

Other comprehensive income (loss)	—	—		—	—		—		—		(31,245)		—		(31,245)


Preferred stock dividends (1)	—	—		—	—		—		(2,548)		—		—		(2,548)





Share-based compensation expense	—	—		—	—		3,336		—		—		—		3,336

Issuance of common stock under share-based compensation arrangements	—	—		26,016	26		60		—		—		—		86

Balance, September 30, 2022	5,700,000	$	137,794	32,475,502	$	34,948	$	549,066	$	898,511	$	(156,126)	$	(77,262)	$	1,386,931

(1)Dividends per share of $0.6831 and $0.658950 were declared on Series E and F preferred stock, respectively, for the three months ended September 30, 2023. Dividends per share of $0.445233 and $0.421083 were declared on Series E and F preferred stock, respectively, for the three months ended September 30, 2022.

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


	Nine Months Ended September 30, 2023
	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, 2022	5,700,000	$	137,794	32,373,697	$	35,012	$	551,721	$	924,134	$	(163,096)	$	(82,604)	$	1,402,961



Net income	—	—		—	—		—		188,051		—		—		188,051

Other comprehensive income (loss)	—	—		—	—		—		—		13,284		—		13,284


Preferred stock dividends (1)	—	—		—	—		—		(10,826)		—		—		(10,826)





Share-based compensation expense	—	—		—	—		9,979		—		—		—		9,979

Issuance of common stock under share-based compensation arrangements	—	—		317,440	318		(2,354)		—		—		—		(2,036)
Repurchase of common shares	—	—		(1,379,883)	—		—		—		—		(39,806)		(39,806)
Balance, September 30, 2023	5,700,000	$	137,794	31,311,254	$	35,330	$	559,346	$	1,101,359	$	(149,812)	$	(122,410)	$	1,561,607

	Nine Months Ended September 30, 2022
	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, 2021	5,700,000	$	137,794	32,913,267	$	34,722	$	542,391	$	705,732	$	(4,980)	$	(49,442)	$	1,366,217



Net income	—	—		—	—		—		199,323		—		—		199,323

Other comprehensive income (loss)	—	—		—	—		—		—		(151,146)		—		(151,146)


Preferred stock dividends (1)	—	—		—	—		—		(6,544)		—		—		(6,544)





Share-based compensation expense	—	—		—	—		10,657		—		—		—		10,657

Issuance of common stock under share-based compensation arrangements	—	—		226,380	226		(3,982)		—		—		—		(3,756)
Repurchase of common shares	—	—		(664,145)	—		—		—		—		(27,820)		(27,820)
Balance, September 30, 2022	5,700,000	$	137,794	32,475,502	$	34,948	$	549,066	$	898,511	$	(156,126)	$	(77,262)	$	1,386,931

(1)Dividends per share of $1.941704 and $1.869779 were declared on Series E and F preferred stock, respectively, for the nine months ended September 30, 2023. Dividends per share of $1.160316 and $1.088391 were declared on Series E and F preferred stock, respectively, for the nine months ended September 30, 2022.

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,
	2023		2022
Cash Flows from Operating Activities
Net income from continuing operations	$	188,051	$	199,323
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses	61,088		31,850
Depreciation and amortization	24,226		20,027

Share-based compensation expense	10,048		10,702
Deferred taxes	21,999		(436)
Net amortization (accretion) of investment securities premiums and discounts	(8,859)		2,139
Unrealized (gain) loss on investment securities	197		738
Net (gain) loss on sale of investment securities	429		6,227

Impairment loss on fixed assets and leases	124		1,362
Unrealized (gain) loss on derivatives	(344)		(2,348)


Settlement of terminated fair value hedge derivatives	4,630		—
(Gain) loss on sale of leased assets under lessor operating leases	439		350

(Gain) loss on sale of loans	869		(4,149)
Loss on sale of capital call lines of credit	5,037		—
Loss on sale of consumer installment loans	—		23,465
Origination and purchases of loans held for sale	(470,318)		(28,077)
Proceeds from the sales and repayments of loans held for sale	454,867		44,209

Amortization (accretion) of loan net deferred fees, discounts and premiums	(74,016)		(49,601)


Earnings on investment in bank-owned life insurance	(9,617)		(13,722)
(Increase) decrease in accrued interest receivable and other assets	917		16,883
Increase (decrease) in accrued interest payable and other liabilities	33,339		16,080
Net Cash Provided By (Used In) Operating Activities	243,106		275,022
Cash Flows from Investing Activities
Proceeds from maturities, calls and principal repayments of investment securities available for sale	228,503		408,046
Proceeds from maturities, calls and principal repayments of investment securities held to maturity	175,896		13,631

Proceeds from sales of investment securities available for sale	4,075		681,633
Purchases of investment securities available for sale	—		(929,754)
Purchases of investment securities held to maturity	(73,074)		—
Origination of mortgage warehouse loans	(15,385,554)		(23,568,943)
Proceeds from repayments of mortgage warehouse loans	15,766,489		24,247,843
Net (increase) decrease in loans and leases, excluding mortgage warehouse loans	1,586,922		(1,639,900)
Proceeds from sales of loans and leases	409,503		136,920
Purchases of loans	(702,409)		(368,776)

Proceeds from bank-owned life insurance	56,645		11,807
Net (purchases of) proceeds from sale of FHLB, Federal Reserve Bank, and other restricted stock	(51,667)		6,880

Purchases of bank premises and equipment	(521)		(587)
Proceeds from sale of fixed assets	73		—
Proceeds from sale of other real estate owned	33		—
Proceeds from sales of leased assets under lessor operating leases	2,515		2,889
Purchases of leased assets under lessor operating leases	(20,257)		(86,797)
Net Cash Provided By (Used In) Investing Activities	1,997,172		(1,085,108)

	(continued)









	Nine Months Ended September 30,
	2023		2022












Cash Flows from Financing Activities
Net increase (decrease) in deposits	36,624		744,514

Net increase (decrease) in short-term borrowed funds from FHLB	(300,000)		(700,000)


Net increase (decrease) in federal funds purchased	—		290,000

Proceeds from long-term borrowed funds from FHLB and FRB	2,565,000		500,000
Repayments of long-term borrowed funds from FHLB and FRB	(1,525,000)		—


Repayments of other borrowings	—		(100,000)


Preferred stock dividends paid	(10,823)		(6,374)

Purchase of treasury stock	(39,806)		(27,820)
Payments of employee taxes withheld from share-based awards	(2,429)		(4,248)
Proceeds from issuance of common stock	324		447

Net Cash Provided By (Used In) Financing Activities	723,890		696,519






Net Increase (Decrease) in Cash and Cash Equivalents	2,964,168		(113,567)
Cash and Cash Equivalents – Beginning	455,806		518,032
Cash and Cash Equivalents – Ending	$	3,419,974	$	404,465







Non-cash Investing and Financing Activities:
Transfer of investment securities available for sale to held to maturity	$	—	$	500,174
Purchases of investment securities held to maturity upon sale of consumer installment loans	436,841		400,001

Transfer of loans held for investment to held for sale	309,076		4,108
Transfer of loans held for sale to held for investment	14,377		—

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
—

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); Harrisburg, Pennsylvania (Dauphin County); 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 and Jacksonville, Florida; Wilmington and Charlotte, North Carolina; and nationally for certain loan and deposit products. The Bank has ~~14 full-service~~seven branches and provides commercial banking products, primarily loans and deposits. In addition, ~~Customers~~the 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; Wilmington and Charlotte, North Carolina; and other locations. The Bank also ~~provides liquidity to residential mortgage originators~~serves specialty niche businesses nationwide, ~~through~~including its commercial loans to mortgage companies, 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.~~

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~~2022 consolidated balance sheet presented in this report has been derived from Customers Bancorp’s audited ~~2016~~2022 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~~2022 consolidated financial statements of Customers Bancorp and subsidiaries included in Customers' Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 filed with the SEC on ~~March 8, 2017. That~~February 28, 2023 (the "2022 Form 10-K"). The 2022 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 for Loan Losses; Goodwill and 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; Bank Premises and Equipment; Treasury Stock; Income Taxes; Share-Based Compensation; Segments; Derivative Instruments and Hedging; Comprehensive Income; and Earnings per Share. Certain 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 for these reclassifications, therepolicies. There have been no material changes to ~~Customers'~~Customers Bancorp's significant accounting policies ~~as disclosed in Customers' Annual Report on Form 10-K~~noted above for the ~~year~~three and nine months ended ~~December 31, 2016.~~September 30, 2023.

Presented below are recently issued accounting standards that Customers has adopted as well as those that the Financial Accounting Standards Board (“FASB”) has issued but are not yet effective or that Customers has not yet adopted.

Recently Issued Accounting Standards

Presented below are recently issued accounting standards that Customers has adopted as well as those that the FASB has issued but are not yet effective.

Table of Contents

Accounting Standards Adopted in ~~2017~~2022

~~Since January 1, 2017, Customers has adopted the following FASB~~

Standard

Summary of Guidance

Effects on Financial Statements

ASU 2022-06,

Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848 and Amendments to the Definition of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate

Issued December 2022

• Defers the sunset date of ASC 848 that 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, ASC 848 provides 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. Certain optional expedients and exceptions in ASC 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.

• Amends the definition of the SOFR Overnight Index Swap Rate to any rate based on SOFR qualifies as a benchmark interest rate for purposes of applying fair value hedge accounting.

• Effective as of December 21, 2022 and ASC 848 can be adopted anytime during the period of January 1, 2020 through December 31, 2024.

• Customers adopted the guidance in ASC 848 during the adoption period for certain optional expedients.

• The adoption of ASC 848 did not have a material impact on Customers' financial condition, results of operations and consolidated financial statements.

• Customers elected to apply optional expedients for certain contract modifications during the three and nine months ended September 30, 2023, which did not have a material impact on Customers' financial condition, results of operations and consolidated financial statements. Customers plans 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.

Accounting ~~Standard Updates (“ASUs”), none of which had a material impact to Customers’ consolidated financial statements:~~Standards Adopted in 2023

Standard

Summary of Guidance

Effects on Financial Statements

ASU 2022-02,

Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

Issued March 2022

• Eliminates the accounting guidance for TDRs by creditors, and applies the loan refinancing and restructuring guidance when a borrower is experiencing financial difficulty to determine whether a modification results in a new loan or a continuation of an existing loan.

• Provides enhanced disclosure requirements for certain loan refinancing and restructurings and disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326.

• Effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period, provided the amendments are adopted as of the beginning of the fiscal year that includes the interim period of adoption. Early adoption is permitted separately for the amendments to TDRs and vintage disclosures.

• TDR and vintage disclosures are to be adopted prospectively. An entity may adopt TDR recognition and measurement guidance prospectively or elect to use a modified retrospective transition method, with a cumulative effect adjustment to retained earnings at the beginning of the period of adoption.

• Customers adopted this guidance on January 1, 2023 using a modified retrospective transition method for TDR recognition and measurement.

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

• Additional disclosures related to gross write-offs by year of origination and certain loan modifications to borrowers experiencing financial difficulty are presented in NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES.

~~Customers adopted ASU 2016-05,~~ ~~Derivatives and Hedging: Effect~~

Table 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 accounting as a derivative instrument without regard to the nature 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 changes 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 of the equity method 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 held interest and adopt the equity method of accounting as of the date the investment becomes qualified for the equity method 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 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 equivalent 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.Contents

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 of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also changes certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment 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 of the standard, Customers does not currently expect the adoption of this ASU to have a significant impact on its financial condition, results 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 be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified financial instruments, 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 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 and consolidated financial statements, however, Customers will continue to evaluate the potential impact through 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 and consolidated financial statements, however, Customers will continue to evaluate the potential impact through the adoption date.

~~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 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 currently 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 operations and consolidated financial statements, however, Customers will continue to evaluate the potential impact through the adoption date.~~

~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,~~ which clarifies the scope and application of the accounting guidance on the sale of nonfinancial assets to non-customers, including partial sales. This ASU defines an in-substance nonfinancial asset, in part, 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:~~

1.Standard

~~Cash payments for debt prepayment or extinguishment costs will be classified in financing activities.~~

Summary of Guidance

Effects on Financial Statements

Upon settlement 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.


3.			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.			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.

ASU 2022-03,

Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

Issued June 2022

~~Cash proceeds received from~~

• Clarifies that a contractual restriction on the ~~settlement~~sale of ~~bank-owned life insurance (BOLI) policies~~an equity security is not considered part of the unit of account of the equity security and not considered in measuring fair value.

• Prohibits recognition and measurement of a contractual sale restriction on the sale of an equity security as a separate unit of account.

• Provides disclosure requirements for the equity securities subject to contractual sale restrictions.

• Effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

• Customers will ~~be classified as cash inflows from investing activities. Cash payments for premiums~~adopt this guidance on ~~BOLI may be classified as cash outflows for investing, operating, or~~January 1, 2024. This guidance is not expected to have a ~~combination~~material impact on Customers' financial condition, results of ~~both.~~operations and consolidated financial statements.

A transferor’s beneficial interest obtained in a securitization of financial assets will be disclosed as a non-cash activity, and cash received from beneficial interests will be classified in investing activities.

ASU 2023-02,

Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

Issued March 2023

~~Distributions received from~~

• Provides an election to account for tax equity investments, regardless of the tax credit program, using the proportional amortization method ~~investees~~provided that certain conditions are met.
• Effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for any interim period, as of the beginning of the fiscal year that includes that interim period.

• Customers will ~~be classified using either~~adopt this guidance on January 1, 2024. This guidance is not expected to have a ~~cumulative earnings approach or a look-through approach as an accounting policy election.~~material impact on Customers' financial condition, results of operations and consolidated financial statements.

The ASU contains additional guidance clarifying when an entity should separate cash receipts and cash payments and classify them into more than one class of cash flows (including when reasonable judgment is required to estimate and allocate cash flows) versus when an entity should classify the aggregate amount into one class of cash flows on the basis of predominance.This ASU is effective for Customers for its first reporting period beginning after December 15, 2017, with early adoption permitted. Customers is currently evaluating the impact of this ASU and does not expect the ASU to have a material impact on the presentation of its statement of cash flows.

~~In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.~~ This ASU requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate lifetime expected credit loss and record an allowance that, when deducted from the amortized cost basis of the financial asset (including HTM securities), presents the net amount expected to be collected on the financial asset. This ASU will replace today’s “incurred loss” approach. The CECL model is expected to result in earlier recognition of credit losses. For available-for-sale debt securities, entities will be required to record allowances for credit losses rather than reduce the carrying amount, as they do today under the OTTI model, and will be allowed to reverse previously established allowances in the event the credit of the issuer improves. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for Customers for its first reporting period beginning after December 15, 2019. Earlier adoption is also permitted. Adoption of the new guidance can be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Customers is currently evaluating the impact of this ASU, initiating implementation efforts across the company, and planning for loss modeling requirements consistent with lifetime expected loss estimates. It is expected that the new model will include different assumptions used in calculating credit losses, such as estimating losses over the estimated life of a financial asset and will consider expected future changes in macroeconomic conditions. The adoption of this ASU may result in an increase to Customers' allowance for loan losses which will depend upon the nature and characteristics of Customers' loan portfolio at the adoption date, as well as the macroeconomic conditions and forecasts at that date. Customers currently does not intend to early adopt this new guidance.

~~In March 2016, the FASB issued ASU 2016-04,~~ ~~Liabilities - Extinguishments of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products~~, that would require issuers of prepaid stored-value product (such as gift cards, telecommunication cards, and traveler’s checks), to derecognize the financial liability related to those products for breakage. Breakage is the value of prepaid stored-value products that is not redeemed by consumers for goods, services or cash. There is currently a diversity in the methodology used to recognize breakage. Subtopic 405-20, ~~Extinguishment of Liabilities, includes derecognition guidance for both financial liabilities and nonfinancial liabilities, and Topic 606,~~ ~~Revenue from Contracts with Customers~~, includes authoritative breakage guidance but excludes financial liabilities. The amendments in this ASU provide a narrow scope exception to the guidance in Subtopic 405-20 to require that breakage be accounted for consistent with the breakage guidance in Topic 606. This ASU is effective for Customers for its first reporting period beginning after December 15, 2017. 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 February 2016, the FASB issued ASU 2016-02,~~ ~~Leases, which supersedes the current lease accounting guidance for both lessees and lessors under ASC 840,~~ ~~Leases~~. From the lessee's perspective, the new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for lessees. The new guidance will require lessors to account for leases using an approach that is substantially similar to the existing guidance for sales-type, direct financing leases and operating leases. The new standard is effective for Customers for its first reporting period beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. A modified retrospective transition approach is required for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Customers is currently evaluating the impact of this ASU on its financial condition and results of operations and expects to recognize right-of-use assets and lease liabilities for substantially all of its operating lease commitments based on the present value of unpaid lease payments as of the date of adoption. Customers does not intend to early adopt this ASU.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities.~~ The guidance in this ASU among other things, (1) requires equity investments with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (3) eliminates the requirement for public entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (4) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (5) requires an entity to present separately in other comprehensive income the portion of the change in fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements and (7) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The guidance in this ASU is effective for Customers for its first reporting period beginning after December 15, 2017, including interim periods within those fiscal years. Customers is in the process of evaluating the impacts of the adoption of this ASU, however, it does not expect the impact to be significant to its financial condition, results of operations and consolidated financial statements given the immaterial amount of its investment in equity securities.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, superseding the revenue recognition requirements in ASC 605. This ASU requires an entity to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment includes a five-step process to assist an entity in achieving the main principle(s) of revenue recognition under ASC 605. In August 2015, the FASB issued ASU 2015-14, which formalized the deferral of the effective date of the amendment for a period of one-year from the original effective date. Following the issuance of ASU 2015-14, the amendment will be effective for Customers for its first reporting period beginning after December 15, 2017. In March 2016, the FASB also issued ASU 2016-08, an amendment to the guidance in ASU 2014-09, which reframed the structure of the indicators of when an entity is acting as an agent and focused on evidence that an entity is acting as the principal or agent in a revenue transaction. ASU 2016-08 also eliminated two of the indicators (the entity’s consideration is in the form of a commission and the entity is not exposed to credit risk) in making that determination. This amendment also clarifies that each indicator may be more or less relevant to the assessment depending on the terms and conditions of the contract. In April 2016, the FASB also issued ASU 2016-10, which clarifies the implementation guidance on identifying promised goods or services and on determining whether an entity's promise to grant a license with either a right to use the entity's intellectual property

(which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU 2016-12, an amendment to ASU 2014-09, which provided practical expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on transition, collectability, non-cash consideration and the presentation of sales and other similar taxes. The amendments, collectively, should be applied retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption.

Because the ASU does not apply to revenue associated with leases and financial instruments (including loans and securities), Customers current assessment is that the new guidance will not have a material impact on the elements of its consolidated statements of operations most closely associated with leases and financial instruments (such as interest income, interest expense and securities gain). Customers will adopt this ASU on January 1, 2018 using a modified retrospective approach. Customers has completed its identification of all revenue streams that are included in its financial statements and has identified its deposit related fees, service charges, debit card and prepaid card interchange income, and university fees to be within the scope 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.

NOTE 53 — EARNINGS (LOSS) PER SHARE

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


										Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands, except share and per share data)									(amounts in thousands, except share and per share data)	2023		2022		2023		2022

Net income available to common shareholders									Net income available to common shareholders	$	82,953	$	61,364	$	177,225	$	192,779

Weighted-average number of common shares outstanding – basic									Weighted-average number of common shares outstanding – basic	31,290,581		32,455,814		31,452,700		32,706,652
Share-based compensation plans									Share-based compensation plans	884,503		770,793		583,759		1,000,212

Weighted-average number of common shares – diluted									Weighted-average number of common shares – diluted	32,175,084		33,226,607		32,036,459		33,706,864

	Three Months Ended September 30,				Nine Months Ended September 30,
Basic earnings per common share									Basic earnings per common share	$	2.65	$	1.89	$	5.63	$	5.89
	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	Diluted earnings per common share	2.58		1.85		5.53		5.72

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 September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Anti-dilutive securities:
Share-based compensation awards	319,973	730,486	685,951	100,707

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

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NOTE 64 — 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 months ended September 30, ~~2017~~2023 and ~~2016.~~

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

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

2022. Amounts in parentheses indicate reductions to AOCI.


	Unrealized Gains (Losses) on Available for Sale Securities (1)
	Three Months Ended September 30,
(amounts in thousands)	2023		2022
Balance at July 1	$	(168,176)	$	(124,881)



Unrealized gains (losses) arising during period, before tax	23,666		(46,450)
Income tax effect	(6,011)		12,077
Other comprehensive income (loss) before reclassifications	17,655		(34,373)
Reclassification adjustments for (gains) losses included in net income, before tax	(429)		4,227
Income tax effect	109		(1,099)
Amounts reclassified from accumulated other comprehensive income (loss) to net income	(320)		3,128
Amortization of unrealized loss on securities transferred from available for sale to held to maturity	1,379		—
Income tax effect	(350)		—
Amortization of unrealized loss on securities transferred from available for sale to held to maturity	1,029		—
Net current-period other comprehensive income (loss)	18,364		(31,245)
Balance at September 30	$	(149,812)	$	(156,126)

~~(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.


	Unrealized Gains (Losses) Available for Sale Securities (1)
	Nine Months Ended September 30,
(amounts in thousands)	2023		2022
Balance at January 1	$	(163,096)	$	(4,980)



Unrealized gains (losses) arising during period, before tax	14,535		(213,532)
Income tax effect	(3,692)		55,518
Other comprehensive income (loss) before reclassifications	10,843		(158,014)
Reclassification adjustments for (gains) losses included in net income, before tax	(429)		9,281
Income tax effect	109		(2,413)
Amounts reclassified from accumulated other comprehensive income (loss) to net income	(320)		6,868
Amortization of unrealized loss on securities transferred from available for sale to held to maturity	3,700		—
Income tax effect	(939)		—
Amortization of unrealized loss on securities transferred from available for sale to held to maturity	2,761		—
Net current-period other comprehensive income (loss)	13,284		(151,146)
Balance at September 30	$	(149,812)	$	(156,126)

(1)Reclassification amounts for AFS debt securities are reported as gain (loss) on sale of investment securities and amortization of unrealized losses on debt securities transferred from available-for-sale to held-to-maturity is reported within interest income on the consolidated statements of income.

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NOTE 75 — INVESTMENT SECURITIES

Investment securities at fair value

The amortized cost, ~~and~~ approximate fair value and allowance for credit losses of investment securities at fair value as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 are summarized as follows:


	September 30, 2023 (1)
(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale debt securities:
Asset-backed securities	$	111,915	$	(1,755)	$	4	$	(5,448)	$	104,716



Agency-guaranteed residential collateralized mortgage obligations	133,425		—		—		(14,956)		118,469

Collateralized loan obligations	826,764		—		817		(11,725)		815,856
Commercial mortgage-backed securities	136,111		—		—		(4,923)		131,188
Corporate notes	638,230		(2,094)		86		(57,325)		578,897
Private label collateralized mortgage obligations	1,064,789		—		687		(67,874)		997,602


Available for sale debt securities	$	2,911,234	$	(3,849)	$	1,594	$	(162,251)	2,746,728

Equity securities (2)									26,479
Total investment securities, at fair value									$	2,773,207


	December 31, 2022 (1)
(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale debt securities:
Asset-backed securities	$	169,170	$	(578)	$	—	$	(8,050)	$	160,542



Agency-guaranteed residential collateralized mortgage obligations	147,481		—		—		(13,617)		133,864

Collateralized loan obligations	896,992		—		88		(24,342)		872,738
Commercial mortgage-backed securities	142,222		—		1		(5,866)		136,357
Corporate notes	657,086		—		45		(61,878)		595,253
Private label collateralized mortgage obligations	1,125,583		—		308		(63,630)		1,062,261

Available for sale debt securities	$	3,138,534	$	(578)	$	442	$	(177,383)	2,961,015

Equity securities (2)									26,485
Total investment securities, at fair value									$	2,987,500

(1)Accrued interest on AFS debt securities totaled $19.7 million and $16.7 million at September 30, 2023 and December 31, 2022, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

(2)Includes perpetual preferred stock issued by domestic banks and domestic bank holding companies and equity securities issued by fintech companies, without a readily determinable fair value, and CRA-qualified mutual fund shares at September 30, 2023 and December 31, 2022. No impairments or measurement adjustments have been recorded on the equity securities without a readily determinable fair value since acquisition.

Customers' transactions with unconsolidated VIEs include sales of consumer installment loans and investments in the ~~tables below:~~securities issued by the VIEs. Customers is not the primary beneficiary of the VIEs because Customers has no right to make decisions that will most significantly affect the economic performance of the VIEs. Customers' continuing involvement with the unconsolidated VIEs is not significant. Customers' continuing involvement is not considered to be significant when Customers only invests in securities issued by the VIE and was not involved in the design of the VIE or when Customers has transferred financial assets to the VIE for only cash consideration. Customers' investments in the securities issued by the VIEs are classified as AFS or HTM debt securities on the consolidated balance sheets, and represent Customers' maximum exposure to loss.

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, 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


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


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

~~The following table presents proceeds~~Proceeds from the sale of ~~available-for-sale investment~~AFS debt securities ~~and gross gains and gross losses realized on those sales~~were $4.1 million for the three and nine months ended September 30, ~~2017~~2023. Proceeds from the sale of AFS debt securities were $126.6 million 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
$681.6 million for the three and nine months ended September 30, 2022, respectively. The following table presents gross realized gains and realized losses from the sale of AFS debt securities for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	2023		2022		2023		2022
Gross realized gains	$	—	$	—	$	—	$	2,563
Gross realized losses	(429)		(2,135)		(429)		(8,790)
Net realized gains (losses) on sale of available for sale debt securities	$	(429)	$	(2,135)	$	(429)	$	(6,227)

These gains (losses) were determined using the specific identification method and were reported as net gain (loss) on sale of investment securities ~~included in~~within non-interest income on the consolidated statements of income.

The following table presents ~~available-for-sale~~AFS 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:


	September 30, 2023
(amounts in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	7,500	$	7,444
Due after one year through five years	532,269		488,929
Due after five years through ten years	98,461		82,524

Asset-backed securities	111,915		104,716
Agency-guaranteed residential collateralized mortgage obligations	133,425		118,469
Collateralized loan obligations	826,764		815,856
Commercial mortgage-backed securities	136,111		131,188



Private label collateralized mortgage obligations	1,064,789		997,602


Total available for sale debt securities	$	2,911,234	$	2,746,728

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 for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, ~~2017~~2023 and December 31, ~~2016~~2022 were as follows:


	September 30, 2023
	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	$	—	$	—	$	42,932	$	(2,547)	$	42,932	$	(2,547)


Agency-guaranteed residential collateralized mortgage obligations	—		—		133,425		(14,956)		133,425		(14,956)

Collateralized loan obligations	46,333		(1,472)		614,978		(10,253)		661,311		(11,725)
Commercial mortgage-backed securities	—		—		134,866		(4,923)		134,866		(4,923)
Corporate notes	84,827		(3,106)		469,187		(45,202)		554,014		(48,308)
Private label collateralized mortgage obligations	154,078		(10,605)		674,943		(57,269)		829,021		(67,874)


Total	$	285,238	$	(15,183)	$	2,070,331	$	(135,150)	$	2,355,569	$	(150,333)

Table of Contents

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.~~


	December 31, 2022
	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	$	160,542	$	(8,050)	$	—	$	—	$	160,542	$	(8,050)


Agency-guaranteed residential collateralized mortgage obligations	133,864		(13,617)		—		—		133,864		(13,617)

Collateralized loan obligations	386,701		(13,516)		315,270		(10,826)		701,971		(24,342)
Commercial mortgage-backed securities	39,828		(1,410)		93,005		(4,456)		132,833		(5,866)
Corporate notes	386,464		(36,119)		178,955		(25,759)		565,419		(61,878)
Private label collateralized mortgage obligations	478,096		(29,364)		314,332		(34,266)		792,428		(63,630)


Total	$	1,585,495	$	(102,076)	$	901,562	$	(75,307)	$	2,487,057	$	(177,383)

At September 30, ~~2017,~~2023, there were ~~sixteen available-for-sale investment~~25 AFS debt securities with unrealized losses in the ~~less-than-twelve-month~~less-than-twelve-months category and ~~eleven available-for-sale investment~~155 AFS debt securities with unrealized losses in the ~~twelve-month-or-more~~twelve-months-or-more category. ~~The~~Except for four asset-backed securities and twelve corporate notes where there was a deterioration in future estimated cash flows as further discussed below, 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. All amounts~~rates and credit spreads that resulted in a negative impact on the respective securities' fair value and are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell ~~these~~any of the 180 securities, and it is not more likely than not that Customers will be required to sell any of the 180 securities before recovery of the amortized cost basis. At December 31, 2022, there were 156 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~~allowance for credit losses on four asset-backed securities and ~~$12.9 million, respectively, for~~twelve corporate notes where there was a deterioration in future estimated cash flows during the three and nine months ended September 30, ~~2017 for~~2023 and on four asset-backed securities during the ~~full~~three and nine months ended September 30, 2022. A discounted cash flow approach is used to determine the amount of the ~~decline in fair value below~~allowance. The cash flows expected to be collected, after considering expected prepayments, are discounted at the ~~cost basis established at June 30, 2017 and December 31, 2016.~~original effective interest rate. The ~~fair value~~amount of the ~~equity securities at September 30, 2017 of $2.3 million became~~allowance is limited to the ~~new~~difference between the amortized cost basis of the ~~securities. Because of~~security and its estimated fair value.

The following tables present the ~~change~~activity in ~~disposition strategy~~the allowance for ~~BankMobile at September 30, 2017, Customers did not record a deferred tax asset~~credit losses on AFS debt securities, by major security type, for the ~~other-than-temporary impairment loss recorded in third quarter 2017. In addition, Customers reversed $4.6 million~~periods presented:


	Three Months Ended September 30,
	2023						2022
(amounts in thousands)	Asset-backed securities		Corporate notes		Total		Asset-backed securities		Corporate notes		Total
Balance at July 1	$	1,563	$	1,876	$	3,439	$	411	$	—	$	411
Credit losses on securities for which credit losses were not previously recorded	—		564		564		—		—		—
Credit losses on previously impaired securities	442		69		511		—		—		—
Decrease in allowance for credit losses on previously impaired securities	(250)		(24)		(274)		(158)		—		(158)
Reduction due to sales	—		(391)		(391)		—		—		—
Balance at September 30	$	1,755	$	2,094	$	3,849	$	253	$	—	$	253

Table 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.Contents


	Nine Months Ended September 30,
	2023						2022
(amounts in thousands)	Asset-backed securities		Corporate notes		Total		Asset-backed securities		Corporate notes		Total
Balance at January 1	$	578	$	—	$	578	$	—	$	—	$	—
Credit losses on securities for which credit losses were not previously recorded	—		2,485		2,485		253		—		253
Credit losses on previously impaired securities	1,488		—		1,488		—		—		—
Decrease in allowance for credit losses on previously impaired securities	(311)		—		(311)		—		—		—
Reduction due to sales	—		(391)		(391)		—		—		—
Balance at September 30	$	1,755	$	2,094	$	3,849	$	253	$	—	$	253

At September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, no securities holding of any one issuer, other than the U.S. government and its agencies, amounted to greater than 10% of shareholders' equity.

At September 30, 2023, Customers Bank had pledged AFS investment securities aggregating ~~$127.6~~$1.5 billion in fair value as collateral for immediately available liquidity from the FRB, including the BTFP. The counterparty does not have the ability to sell or repledge these securities.

Investment securities held to maturity

The amortized cost, approximate fair value and allowance for credit losses of investment securities held to maturity as of September 30, 2023 and December 31, 2022 are summarized as follows:


	September 30, 2023 (1)
(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to maturity debt securities:
Asset-backed securities	$	645,362	$	—	$	645,362	$	—	$	(5,174)	$	640,188

Agency-guaranteed residential mortgage-backed securities	7,077		—		7,077		—		(1,027)		6,050
Agency-guaranteed commercial mortgage-backed securities	1,870		—		1,870		—		(139)		1,731
Agency-guaranteed residential collateralized mortgage obligations	191,469		—		191,469		—		(23,331)		168,138
Agency-guaranteed commercial collateralized mortgage obligations	147,414		—		147,414		—		(15,848)		131,566



Private label collateralized mortgage obligations	185,178		—		185,178		—		(17,275)		167,903

Total held to maturity debt securities	$	1,178,370	$	—	$	1,178,370	$	—	$	(62,794)	$	1,115,576

Table of Contents


	December 31, 2022 (1)
(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to maturity debt securities:
Asset-backed securities	$	361,107	$	—	$	361,107	$	—	$	(4,974)	$	356,133

Agency-guaranteed residential mortgage-backed securities	7,189		—		7,189		—		(563)		6,626
Agency-guaranteed commercial mortgage-backed securities	1,928		—		1,928		—		(104)		1,824
Agency-guaranteed residential collateralized mortgage obligations	204,495		—		204,495		—		(18,376)		186,119
Agency-guaranteed commercial collateralized mortgage obligations	151,711		—		151,711		—		(9,435)		142,276



Private label collateralized mortgage obligations	113,829		—		113,829		—		(12,994)		100,835

Total held to maturity debt securities	$	840,259	$	—	$	840,259	$	—	$	(46,446)	$	793,813

(1)Accrued interest on HTM debt securities totaled $2.7 million and ~~$231.3~~$1.0 million at September 30, 2023 and December 31, 2022, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

On June 30, 2023, Customers sold consumer installment loans that were classified as held for sale with a carrying value of $556.7 million, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale during the three months ended June 30, 2023, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs. As part of these sales, Customers recognized a loss on sale of $1.2 million, inclusive of transaction costs, in gain (loss) on sale of SBA and other loans within non-interest income included in the consolidated statement of income for the nine months ended September 30, 2023. Customers provided financing to the purchasers for a portion of the sale price in the form of $436.8 million of asset-backed securities, presented in the table above, collateralized by the sold loans. Customers will act as the servicer for the sold consumer installment loans to one of the VIEs, and will receive a servicing fee. Customers recognized a servicing asset of $3.8 million upon sale.

At the time of the sale, and at each subsequent reporting period, Customers is required to evaluate its involvement with the VIEs to determine if it holds a variable interest in the VIEs and, if so, if Customers is the primary beneficiary of the VIEs. If Customers is both a variable interest holder and the primary beneficiary of the VIEs, it would be required to consolidate the VIEs. As of September 30, 2023, Customers concluded that its investments in asset-backed securities as well as the servicing fees are considered variable interests in the VIEs as there is a possibility, even if remote, that would result in Customers' interests in the asset-backed securities or the servicing fees absorbing some of the losses of the VIEs.

After concluding that Customers has one or more variable interests in the VIEs, Customers must determine if it is the primary beneficiary of the VIEs. U.S. GAAP defines the primary beneficiary as the entity that has both an economic exposure to the VIE as well as the power to direct the activities that are determined to be most significant to the economic performance of the VIE. In order to make this determination, Customers needed to first establish which activities are the most significant to the economic performance of the VIEs. Based on a review of the VIEs' activities, Customers concluded the servicing activities, specifically those performed for significantly delinquent loans contribute most significantly to the performance of the loans and thus the VIEs. This conclusion is based upon review of the historical performance of the types of consumer installment loans sold to the VIEs, as well as consideration of which activities performed by the owner or servicer of the loans contribute most significantly to the ultimate performance of the loans. The loan servicing agreement between Customers and the VIE for a portion of the sold consumer loans provide that the VIE has substantive kick out rights to replace Customers as the servicer with or without cause. Accordingly, as a holder of the asset-backed securities and the servicer of the loans, Customers does not have the power to direct the servicing of significantly delinquent loans given the VIEs' substantive kick-out rights. As discussed above, Customers is not the servicer for the sold consumer loans to one of the VIEs and therefore does not have the power to direct the activities that most significantly impact the economic performance of this VIE. As the activities which most significantly affect the performance of the VIEs are not controlled by Customers, Customers has concluded that it is therefore not the primary beneficiary and does not consolidate the VIEs. Customers accounted for its investments in the asset-backed securities as HTM debt securities on the consolidated balance sheet.

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The following table presents HTM debt securities by stated maturity, including debt securities backed by mortgages and other assets with expected maturities that differ from contractual maturities because borrowers have the right to call or prepay and, therefore, are classified separately with no specific maturity date:


	September 30, 2023
(amounts in thousands)	Amortized Cost		Fair Value




Asset-backed securities	$	645,362	$	640,188


Agency-guaranteed residential mortgage-backed securities	7,077		6,050
Agency-guaranteed commercial mortgage-backed securities	1,870		1,731
Agency-guaranteed residential collateralized mortgage obligations	191,469		168,138
Agency-guaranteed commercial collateralized mortgage obligations	147,414		131,566
Private label collateralized mortgage obligations	185,178		167,903
Total held to maturity debt securities	$	1,178,370	$	1,115,576

Customers recorded no allowance for credit losses on investment securities classified as held to maturity at September 30, 2023 and December 31, 2022. The U.S. government agency securities represent obligations issued by a U.S. government-sponsored enterprise or other federal government agency that are explicitly or implicitly guaranteed by the U.S. federal government and therefore, assumed to have zero credit losses. The private label collateralized mortgage obligations are highly rated with sufficient overcollateralization, and therefore, are estimated to have no expected credit losses. Customers recorded no allowance for its investments in the asset-backed securities. Customers considered the seniority of its beneficial interests, which include overcollateralization of these asset-backed securities in the estimate of the ACL at September 30, 2023 and December 31, 2022. The unrealized losses on HTM debt securities with no ACL were primarily due to changes in market interest rates that resulted in a negative impact on the respective securities' fair value and are expected to be recovered when market prices recover or at maturity.

Credit Quality Indicators

Customers monitors the credit quality of HTM debt securities primarily through credit ratings provided by rating agencies. Investment grade debt securities are rated BBB- or higher by S&P Global Ratings, Baa3 or higher by Moody's Investors Service or equivalent ratings by other rating agencies, and are generally considered to be of low credit risk. Except for the asset-backed securities and a private label collateralized mortgage obligation, all of the HTM debt securities held by Customers were investment grade or U.S. government agency guaranteed securities that were not rated at September 30, 2023 and December 31, 2022. The asset-backed securities and a private label collateralized mortgage obligation are not rated by rating agencies. Customers monitors the credit quality of these asset-backed securities and a private label collateralized mortgage obligation by evaluating the performance of the sold consumer installment loans and other underlying loans against the overcollateralization available for these securities.

The following table presents the amortized cost of HTM debt securities based on their lowest credit rating available:


	September 30, 2023
(amounts in thousands)	AAA		AA		A		Not Rated		Total
Held to maturity debt securities:
Asset-backed securities	$	—	$	—	$	—	$	645,362	$	645,362

Agency-guaranteed residential mortgage-backed securities	—		—		—		7,077		7,077
Agency-guaranteed commercial mortgage-backed securities	—		—		—		1,870		1,870
Agency-guaranteed residential collateralized mortgage obligations	—		—		—		191,469		191,469
Agency-guaranteed commercial collateralized mortgage obligations	—		—		—		147,414		147,414



Private label collateralized mortgage obligations	67,528		18,234		25,920		73,496		185,178

Total held to maturity debt securities	$	67,528	$	18,234	$	25,920	$	1,066,688	$	1,178,370

Customers has elected to not estimate an ACL on accrued interest receivable on HTM debt securities, as it already has a policy in place to reverse or write-off accrued interest, through interest income, for debt securities in nonaccrual status in a timely manner. At September 30, 2023 and December 31, 2022, there were no HTM debt securities past due under the terms of their agreements or in nonaccrual status.

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At September 30, 2023 and December 31, 2022, Customers Bank had pledged HTM investment securities aggregating $402.6 million and $16.7 million in fair value, respectively, as collateral ~~against its borrowings~~ primarily ~~with~~for immediately available liquidity from the ~~FHLB~~FRB, including the BTFP and an unused ~~line~~lines of credit with another financial institution. ~~These~~The counterparties do not have the ability to sell or repledge these securities.

NOTE 86 – LOANS HELD FOR SALE

The composition of loans held for sale as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 was as follows:


(amounts in thousands)	September 30, 2023		December 31, 2022
Commercial loans:

Multifamily loans, at lower of cost or fair value	$	—	$	4,079


Total commercial loans held for sale	—		4,079
Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value	—		507
Residential mortgage loans, at fair value	1,005		322
Personal installment loans, at lower of cost or fair value	124,848		133,801
Other installment loans, at lower of cost or fair value	—		189,603
Other installment loans, at fair value	24,515		—
Total consumer loans held for sale	150,368		324,233
Loans held for sale	$	150,368	$	328,312

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~~included NPLs of $0.2 million and $6.2 million as of September 30, 2023 and December 31, 2022, respectively.

On June 30, 2023, Customers sold $556.7 million of personal and other installment loans that were classified as held for sale, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale during the three months ended June 30, 2023, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs. Customers provided financing to the purchasers for a portion of the sales price in the form of $436.8 million of asset-backed securities while $115.1 million of the remaining sales proceeds were paid in cash. Refer to NOTE 5 – INVESTMENT SECURITIES for additional information.

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NOTE 7 — LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

The following table presents loans and leases receivable as of September 30, 2023 and December 31, 2022.


(amounts in thousands)	September 30, 2023		December 31, 2022
Loans and leases receivable, mortgage warehouse, at fair value	$	962,566	$	1,323,312

Loans receivable, PPP	137,063		998,153
Loans and leases receivable:
Commercial:
Commercial and industrial:

Specialty lending (1)	5,422,161		5,412,887
Other commercial and industrial	1,195,347		1,259,943
Multifamily	2,130,213		2,213,019
Commercial real estate owner occupied	794,815		885,339
Commercial real estate non-owner occupied	1,178,203		1,290,730
Construction	252,588		162,009
Total commercial loans and leases receivable	10,973,327		11,223,927
Consumer:
Residential real estate	483,133		497,952
Manufactured housing	40,129		45,076
Installment:

Personal	629,843		964,641
Other	337,053		413,298

Total consumer loans receivable	1,490,158		1,920,967
Loans and leases receivable	12,463,485		13,144,894

Allowance for credit losses on loans and leases	(139,213)		(130,924)
Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	$	13,423,901	$	15,335,435

(1)Includes direct finance equipment leases of $193.8 million and $157.4 million at September 30, 2023 and December 31, 2022, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(35.8) million and $(21.5) million at September 30, 2023 and December 31, 2022, respectively.

Customers' total loans and leases receivable 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, 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 $96.8 million and $105.5 million at September 30, 2023 and December 31, 2022, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At September 30, 2023 and December 31, 2022, there were $18.4 million and $11.5 million of individually evaluated loans that were collateral-dependent, respectively. Substantially all individually evaluated loans were 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.

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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 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~~2023 and December 31, 2022, all of Customers' commercial mortgage warehouse loans were current in terms of payment. As these loans are reported at their fair value, ~~of these loans was higher than their carrying value. Accordingly, a lower of cost or market value adjustment was~~they do not ~~recorded in third quarter 2017.~~have an ACL and are therefore excluded from ACL-related disclosures.

Loans receivable, PPP

~~Effective December 31, 2016,~~ Customers ~~Bank transferred $25.1~~had $137.1 million and $998.2 million of ~~multi-family~~PPP 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~~outstanding as of September 30, ~~2017~~2023 and December 31, ~~2016. BankMobile loans receivable previously reported as held for sale have been reclassified as held~~2022, respectively, which are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and ~~used to conform with the current period presentation.~~

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

~~The following tables summarize loans receivable by loan type and performance status as~~earn a fixed interest rate of ~~September 30, 2017 and December 31, 2016:~~

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~~1.00%. Customers recognized interest income, including net origination 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.

As of ~~September 30, 2017 and December 31, 2016, the Bank had $0.3~~$0.6 million and ~~$0.5~~$25.8 million respectively, of residential real estate held in other real estate owned. As of September 30, 2017 and December 31, 2016, the Bank had initiated foreclosure proceedings of $1.5 million and $0.4 million, respectively, on loans secured by residential real estate.

~~Allowance for loan losses~~

~~The changes in the allowance for loan losses~~ for the three and nine months ended September 30, ~~2017 and 2016 and the loans and allowance for loan losses by loan class based on impairment evaluation method as~~2023, respectively. Customers recognized interest income, including net origination fees, of September 30, 2017 and December 31, 2016 were as follows. 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 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$14.7 million and ~~$1.0~~$72.1 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~~2022, respectively.

PPP loans include an embedded credit enhancement from the SBA, which guarantees 100% of the principal and ~~2016. Purchased-credit-impaired~~interest owed by the borrower provided that the SBA's eligibility criteria are met. As a result, the eligible PPP loans do not have an ACL and are therefore excluded from ACL-related disclosures. PPP loans that are subsequently determined to be ineligible for SBA forgiveness and guarantee are included as part of the commercial and industrial loan portfolio.

Loans and leases receivable

The following tables summarize loans and leases receivable by loan and lease type and performance status as of September 30, 2023 and December 31, 2022:


	September 30, 2023
(amounts in thousands)	30-59 Days past due (1)		60-89 Days past due (1)		90 Days or more past due (2)		Total past due		Loans and leases not past due (3)(4)		Total loans and leases (4)
Commercial and industrial, including specialty lending	$	2,070	$	1,273	$	5,290	$	8,633	$	6,608,875	$	6,617,508


Multifamily	—		—		—		—		2,130,213		2,130,213

Commercial real estate owner occupied	50		3,234		7,392		10,676		784,139		794,815
Commercial real estate non-owner occupied	—		—		—		—		1,178,203		1,178,203
Construction	—		—		—		—		252,588		252,588
Residential real estate	3,773		2,898		3,831		10,502		472,631		483,133
Manufactured housing	673		367		3,207		4,247		35,882		40,129
Installment	9,728		7,444		7,299		24,471		942,425		966,896



Total	$	16,294	$	15,216	$	27,019	$	58,529	$	12,404,956	$	12,463,485

Table of Contents


	December 31, 2022
(amounts in thousands)	30-59 Days past due (1)		60-89 Days past due (1)		90 Days or more past due (2)		Total past due		Loans and leases not past due (3)		Total loans and leases (4)
Commercial and industrial, including specialty lending	$	3,123	$	717	$	1,415	$	5,255	$	6,667,575	$	6,672,830


Multifamily	10,684		5,217		1,143		17,044		2,195,975		2,213,019

Commercial real estate owner occupied	5,173		—		2,704		7,877		877,462		885,339
Commercial real estate non-owner occupied	2,136		—		11		2,147		1,288,583		1,290,730
Construction	—		—		—		—		162,009		162,009
Residential real estate	5,208		1,157		3,158		9,523		488,429		497,952
Manufactured housing	901		537		3,346		4,784		40,292		45,076
Installment	11,246		7,942		9,527		28,715		1,349,224		1,377,939



Total	$	38,471	$	15,570	$	21,304	$	75,345	$	13,069,549	$	13,144,894

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

(2)Includes loans amounting to $0.6 million and $1.9 million as of September 30, 2023 and December 31, 2022, respectively, that are still accruing interest because collection is considered probable.

(3)Loans and leases where next payment due is less than 30 days from the report date. The tables exclude PPP loans of $137.1 million, of which $1.3 million were 30-59 days past due and $106.9 million were 60 days or more past due as of September 30, 2023, and PPP loans of $998.2 million, of which $0.6 million were 30-59 days past due and $36.0 million were 60 days or more past due as of December 31, 2022. Claims for guarantee payments are submitted to the SBA for eligible PPP loans that are more than 60 days past due.

(4)Includes PCD loans of $195.8 million and $8.3 million at September 30, 2023 and December 31, 2022, respectively. On June 15, 2023, Customers acquired $631.0 million of Venture Banking loan portfolio (included within Specialty Lending above) from the FDIC, which included $228.7 million of PCD loans.

Nonaccrual Loans and Leases

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


	September 30, 2023 (1)						December 31, 2022 (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
Commercial and industrial, including specialty lending	$	3,297	$	2,470	$	5,767	$	1,731	$	30	$	1,761


Multifamily	—		—		—		1,143		—		1,143

Commercial real estate owner occupied	7,442		—		7,442		2,768		—		2,768


Residential real estate	6,441		118		6,559		6,922		—		6,922
Manufactured housing	—		2,582		2,582		—		2,410		2,410
Installment	—		7,299		7,299		—		9,527		9,527



Total	$	17,180	$	12,469	$	29,649	$	12,564	$	11,967	$	24,531

(1) Presented at amortized cost basis.

Interest income recognized on nonaccrual loans was insignificant for the three and nine months ended September 30, 2023 and 2022. Accrued interest reversed when the loans went to nonaccrual status was insignificant for the three and nine months ended September 30, 2023 and 2022.

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Allowance for credit losses on loans and leases

The changes in the ACL on loans and leases by loan and lease type for the three and nine months ended September 30, 2023 and 2022 are presented in the tables below.


(amounts in thousands)	Commercial and industrial (1)		Multifamily		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Three Months Ended September 30, 2023
Ending Balance, June 30, 2023	$	29,092	$	15,400	$	10,215	$	13,495	$	2,639	$	6,846	$	4,338	$	57,631	$	139,656

Charge-offs	(9,008)		(1,999)		(39)		—		—		(42)		—		(18,932)		(30,020)
Recoveries	6,034		—		—		—		—		29		—		6,459		12,522
Provision (benefit) for credit losses on loans and leases	(1,132)		2,469		187		2,324		491		(31)		(258)		13,005		17,055
Ending Balance, September 30, 2023	$	24,986	$	15,870	$	10,363	$	15,819	$	3,130	$	6,802	$	4,080	$	58,163	$	139,213
Nine Months Ended September 30, 2023
Ending Balance, December 31, 2022	$	17,582	$	14,541	$	6,454	$	11,219	$	1,913	$	6,094	$	4,430	$	68,691	$	130,924
Allowance for credit losses on FDIC PCD loans, net of charge-offs (2)	2,576		—		—		—		—		—		—		—		2,576
Charge-offs	(9,600)		(3,447)		(39)		(4,527)		—		(69)		—		(52,031)		(69,713)
Recoveries	6,439		—		34		27		116		34		—		11,350		18,000
Provision (benefit) for credit losses on loans and leases	7,989		4,776		3,914		9,100		1,101		743		(350)		30,153		57,426
Ending Balance, September 30, 2023	$	24,986	$	15,870	$	10,363	$	15,819	$	3,130	$	6,802	$	4,080	$	58,163	$	139,213


(amounts in thousands)	Commercial and industrial (1)		Multifamily		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Three Months Ended September 30, 2022
Ending Balance, June 30, 2022	$	11,081	$	9,765	$	4,745	$	8,880	$	1,179	$	5,578	$	4,080	$	111,222	$	156,530
Charge-offs	(2,657)		—		—		(4,862)		—		—		—		(13,965)		(21,484)
Recoveries	76		—		—		31		10		13		—		2,857		2,987
Provision (benefit) for credit losses on loans and leases	6,631		4,479		1,475		7,283		425		(138)		402		(28,393)		(7,836)
Ending Balance, September 30, 2022	$	15,131	$	14,244	$	6,220	$	11,332	$	1,614	$	5,453	$	4,482	$	71,721	$	130,197
Nine Months Ended September 30, 2022
Ending Balance, December 31, 2021	$	12,702	$	4,477	$	3,213	$	6,210	$	692	$	2,383	$	4,278	$	103,849	$	137,804
Charge-offs	(3,235)		(1,990)		—		(5,025)		—		(4)		—		(35,681)		(45,935)
Recoveries	1,129		337		49		43		226		58		—		4,889		6,731
Provision (benefit) for credit losses on loans and leases	4,535		11,420		2,958		10,104		696		3,016		204		(1,336)		31,597
Ending Balance, September 30, 2022	$	15,131	$	14,244	$	6,220	$	11,332	$	1,614	$	5,453	$	4,482	$	71,721	$	130,197

(1) Includes Specialty Lending.

(2) Represents $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of a Venture Banking loan portfolio (included within Specialty Lending) from the FDIC on June 15, 2023, net of $6.2 million of charge-offs for certain of these PCD loans upon acquisition.

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At September 30, 2023, the ACL on loans and leases was $139.2 million, an increase of $8.3 million from the December 31, 2022 balance of $130.9 million. The increase in ACL for the three months ended September 30, 2023 was primarily attributable to the recognition of increased uncertainties in macroeconomic forecasts, partially offset by a decrease in loan balances held for investment. The increase in ACL for the nine months ended September 30, 2023 was primarily attributable to additional provision for credit losses from the recognition of weaker macroeconomic forecasts and the recognition of ACL for PCD loans acquired from the FDIC, net of related charge-offs upon acquisition, partially offset by a decrease in loan balances held for investment.

Loan Modifications for Borrowers Experiencing Financial Difficulty

Customers adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02") effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of TDRs and enhanced the disclosures for loan modifications to borrowers experiencing financial difficulty. Refer to NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION for additional information on the adoption.

A borrower is considered to be experiencing financial difficulty when there is a significant doubt about the borrower's ability to make the required principal and interest payments on the loan or to get an equivalent financing from another creditor at a market rate for a similar loan.

When borrowers are experiencing financial difficulty, Customers may make certain loan modifications as part of loss mitigation strategies to maximize expected payment. To be classified as a modification made to a borrower experiencing financial difficulty, the modification must be in the form of an interest rate reduction, principal forgiveness, or an other-than-insignificant payment delay (payment deferral), term extension, or combinations thereof.

Customers will generally try other forms of relief before principal forgiveness. Any contractual reduction in the amount of principal due without receiving payment or assets is considered forgiveness. For the purpose of this disclosure, Customers considers any contractual change in interest rate that results in a reduction in interest rate relative to the current stated interest rate as an interest rate reduction. Generally, Customers considers any delay in payment of greater than 90 days in the last 12 months to be significant. Term extensions extend the original contractual maturity of the loan. For the purpose of this disclosure, modification of contingent payment features or covenants that would have accelerated payment are not considered term extensions.

The following table presents the amortized cost of loans that were modified to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2023, disaggregated by class of financing receivable and type of modification granted.


	Three Months Ended September 30, 2023
(dollars in thousands)	Term Extension		Payment Deferral		Debt Forgiveness		Interest Rate Reduction and Term Extension		Total		Percentage of Total by Financing Class











Manufactured housing	$	—	$	—	$	—	$	99	$	99	0.25	%

Personal installment	3,863		210		28		—		4,101		0.42	%

Total	$	3,863	$	210	$	28	$	99	$	4,200


	Nine Months Ended September 30, 2023
(dollars in thousands)	Term Extension		Payment Deferral		Debt Forgiveness		Interest Rate Reduction and Term Extension		Total		Percentage of Total by Financing Class





Commercial real estate owner occupied	$	169	$	—	$	—	$	—	$	169	0.02	%





Manufactured housing	6		—		—		113		119		0.30	%

Personal installment	10,910		442		222		—		11,574		1.20	%

Total	$	11,085	$	442	$	222	$	113	$	11,862

As of September 30, 2023, there were no commitments to lend additional funds to debtors experiencing financial difficulty whose loans have been modified during the three and nine months ended September 30, 2023.

Table of Contents

The following table summarizes the impacts of loan modifications made to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2023.


	Three Months Ended September 30, 2023
	Weighted Average
(dollars in thousands)	Interest Rate Reduction (%)	Term Extension (in months)	Payment Deferral (in months)	Debt Forgiven






Manufactured housing	4.4%	31	0	$	—
Personal installment	—	6	6	20


	Nine Months Ended September 30, 2023
	Weighted Average
(dollars in thousands)	Interest Rate Reduction (%)		Term Extension (in months)	Payment Deferral (in months)	Debt Forgiven


Commercial real estate owner occupied	—	%	4	0	$	—



Manufactured housing	4.3		30	0	—
Personal installment	—		6	6	183

The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored to understand the effectiveness of modification efforts. Loans are considered to be ~~performing and are~~in payment default at 90 days or more past due. The following table presents an aging analysis of loan modifications made to borrowers experiencing financial difficulty during the nine months ended September 30, 2023.


	September 30, 2023
(dollars in thousands)	30-59 Days past due		60-89 Days past due		90 Days or more past due		Current		Total





Commercial real estate owner occupied	$	—	$	—	$	169	$	—	$	169





Manufactured housing	—		—		—		119		119

Personal installment	837		565		354		9,820		11,576

Total	$	837	$	565	$	523	$	9,939	$	11,864

As of September 30, 2023, the loans that were made to borrowers experiencing financial difficulty during the nine months ended September 30, 2023 that subsequently defaulted were not ~~included~~material. Customers' ACL is influenced by loan level characteristics that inform the assessed propensity to default. As such, the provision for credit losses is impacted by changes in ~~the tables below.~~

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

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
such loan level characteristics, such as payment performance. Loans made to borrowers experiencing financial difficulty can be classified as either accrual or nonaccrual.

Troubled Debt ~~Restructurings~~Restructuring

At ~~September 30, 2017 and~~ December 31, ~~2016,~~2022, there were ~~$20.8~~$16.8 million ~~and $16.4 million, respectively,~~ in loans reported as troubled debt restructurings (“TDRs”). TDRs are reported as impaired loans in the calendar year of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent years, a TDR may be returned to accrual status if it satisfies a minimum six-month performance requirement, however, it will remain classified as impaired. Generally, the Bank requires sustained performance for nine months before returning a TDR to accrual status.

Modification of purchased-credit-impaired loans that are accounted for within loan pools in accordance with the accounting standards for purchased-credit-impaired loans do not result in the removal of these loans from the pool even if the modifications would otherwise be considered a TDR. Accordingly, as each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, modifications of loans within such pools are not considered TDRs.

The following table presents loans modified ~~in a troubled debt restructuring~~ by type of concession for the three and nine months ended September 30, ~~2017 and 2016.~~2022. There were no 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 months ended September 30, ~~2017 and 2016.~~

2022.


	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment
Interest-rate reductions	—	$	—	14	$	470
Other (1)	71	739		170	1,933
Total	71	$	739	184	$	2,403

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

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 30, 2017, except for one commercial and industrial loan with an outstanding commitment of $2.3 million,~~December 31, 2022, there ~~were no other 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 loans have been modified in ~~TDRs at December 31, 2016.~~TDRs.

Table of ~~September 30, 2017, ten manufactured housing~~Contents

The following table presents, by loan type, the number of loans ~~totaling $0.5 million that were~~ modified in TDRs ~~within~~and the ~~past~~related recorded investment, for which there was a payment default within 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.


	September 30, 2022
(dollars in thousands)	Number of loans	Recorded investment
Manufactured housing	1	$	46


Residential real estate	1	119
Installment	34	420


Total loans	36	$	585

Loans modified in ~~troubled debt restructurings are~~TDRs were evaluated for impairment. The nature and extent of impairment of TDRs, including those which ~~have~~had experienced a subsequent default, iswas 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.

~~Purchased Credit Impaired Loans~~

~~The changes in accretable yield related to purchased-credit-impaired loans for the three 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 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 with the FDIC. In connection with 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 part 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 covered assets as of June 30, 2016.

The following table presents changes in the allowance for loan losses 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.

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

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.~~ACL.

Credit Quality Indicators

~~Multi-family,~~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. Commercial and industrial including specialty lending, multifamily, 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, 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 including specialty lending, multifamily, 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~~Pass 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 2022 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 and current period gross write-offs as of September 30, ~~2017~~2023 and December 31, ~~2016.~~2022.


	Term Loans Amortized Cost Basis by Origination Year as of September 30, 2023
(amounts in thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total








Commercial and industrial loans and leases, including specialty lending:
Pass	$	1,031,612	$	2,268,670	$	522,684	$	174,974	$	168,998	$	85,084	$	1,984,328	$	204,135	$	6,440,485
Special mention	19,000		3,379		18,923		1,986		—		272		3,088		4,558		51,206
Substandard	—		18,462		25,388		27,196		5,854		44,809		4,108		—		125,817
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans and leases	$	1,050,612	$	2,290,511	$	566,995	$	204,156	$	174,852	$	130,165	$	1,991,524	$	208,693	$	6,617,508

Commercial and industrial loans and leases charge-offs:
Three Months Ended September 30, 2023 (1)(2)	$	138	$	143	$	—	$	8,528	$	—	$	199	$	—	$	—	$	9,008
Nine Months Ended September 30, 2023 (1)(2)	138		365		23		8,554		24		496		—		—		9,600

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 September 30, 2023
(amounts in thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total








































Multifamily loans:
Pass	$	778	$	1,242,054	$	359,025	$	128,185	$	21,610	$	260,432	$	—	$	—	$	2,012,084
Special mention	—		—		—		—		—		74,509		—		—		74,509
Substandard	—		—		1,480		—		—		42,140		—		—		43,620
Doubtful	—		—		—		—		—		—		—		—		—
Total multifamily loans	$	778	$	1,242,054	$	360,505	$	128,185	$	21,610	$	377,081	$	—	$	—	$	2,130,213

Multifamily loans charge-offs:
Three Months Ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	1,999	$	—	$	—	$	1,999
Nine Months Ended September 30, 2023	—		—		—		—		—		3,447		—		—		3,447

Commercial real estate owner occupied loans:
Pass	$	25,225	$	257,777	$	181,397	$	88,803	$	82,090	$	126,363	$	—	$	—	$	761,655
Special mention	—		—		15,477		—		—		523		—		—		16,000
Substandard	—		—		—		—		347		16,813		—		—		17,160
Doubtful	—		—		—		—				—		—		—		—
Total commercial real estate owner occupied loans	$	25,225	$	257,777	$	196,874	$	88,803	$	82,437	$	143,699	$	—	$	—	$	794,815

Commercial real estate owner occupied loans charge-offs:
Three Months Ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	39	$	—	$	—	$	39
Nine Months Ended September 30, 2023	—		—		—		—		—		39		—		—		39







Commercial real estate non-owner occupied loans:
Pass	$	3,710	$	322,767	$	116,015	$	151,875	$	71,562	$	371,130	$	—	$	—	$	1,037,059
Special mention	—		—		—		20,832		17,433		9,209		—		—		47,474
Substandard	—		10,910		—		—		10,679		72,081		—		—		93,670
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate non-owner occupied loans	$	3,710	$	333,677	$	116,015	$	172,707	$	99,674	$	452,420	$	—	$	—	$	1,178,203

Commercial real estate non-owner occupied loans charge-offs:
Three Months Ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Nine Months Ended September 30, 2023	—		—		—		—		—		4,527		—		—		4,527

Construction loans:
Pass	$	20,906	$	151,144	$	23,573	$	1,788	$	29,298	$	14,162	$	—	$	11,577	$	252,448
Special mention	140		—		—		—		—		—		—		—		140
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total construction loans	$	21,046	$	151,144	$	23,573	$	1,788	$	29,298	$	14,162	$	—	$	11,577	$	252,588

Construction loans charge-offs:
Three Months Ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Nine Months Ended September 30, 2023	—		—		—		—		—		—		—		—		—

Total commercial loans and leases receivable	$	1,101,371	$	4,275,163	$	1,263,962	$	595,639	$	407,871	$	1,117,527	$	1,991,524	$	220,270	$	10,973,327

Total commercial loans and leases receivable charge-offs:
Three Months Ended September 30, 2023	$	138	$	143	$	—	$	8,528	$	—	$	2,237	$	—	$	—	$	11,046
Nine Months Ended September 30, 2023	138		365		23		8,554		24		8,509		—		—		17,613

Table of Contents

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 September 30, 2023
(amounts in thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
































































































Residential real estate loans:
Performing	$	12,592	$	175,897	$	134,100	$	6,519	$	15,769	$	72,798	$	59,589	$	—	$	477,264
Non-performing	—		352		819		231		424		3,856		187		—		5,869
Total residential real estate loans	$	12,592	$	176,249	$	134,919	$	6,750	$	16,193	$	76,654	$	59,776	$	—	$	483,133

Residential real estate loans charge-offs:
Three Months Ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	42	$	—	$	—	$	42
Nine Months Ended September 30, 2023	—		—		—		—		—		69		—		—		69

Manufactured housing loans:
Performing	$	—	$	—	$	—	$	—	$	195	$	37,013	$	—	$	—	$	37,208
Non-performing	—		—		—		—		—		2,921		—		—		2,921
Total manufactured housing loans	$	—	$	—	$	—	$	—	$	195	$	39,934	$	—	$	—	$	40,129

Manufactured housing loans charge-offs:
Three Months Ended September 30, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Nine Months Ended September 30, 2023	—		—		—		—		—		—		—		—		—

Installment loans:
Performing	$	165,527	$	398,708	$	212,516	$	67,474	$	55,564	$	5,000	$	54,232	$	—	$	959,021
Non-performing	1,038		3,565		2,135		352		593		77		115		—		7,875
Total installment loans	$	166,565	$	402,273	$	214,651	$	67,826	$	56,157	$	5,077	$	54,347	$	—	$	966,896

Installment loans charge-offs:
Three Months Ended September 30, 2023	$	1,987	$	7,222	$	5,728	$	1,574	$	2,078	$	343	$	—	$	—	$	18,932
Nine Months Ended September 30, 2023	5,475		17,041		18,219		4,667		5,544		1,085		—		—		52,031




























Total consumer loans	$	179,157	$	578,522	$	349,570	$	74,576	$	72,545	$	121,665	$	114,123	$	—	$	1,490,158

Total consumer loans charge-offs:
Three Months Ended September 30, 2023	$	1,987	$	7,222	$	5,728	$	1,574	$	2,078	$	385	$	—	$	—	$	18,974
Nine Months Ended September 30, 2023	5,475		17,041		18,219		4,667		5,544		1,154		—		—		52,100

Loans and leases receivable	$	1,280,528	$	4,853,685	$	1,613,532	$	670,215	$	480,416	$	1,239,192	$	2,105,647	$	220,270	$	12,463,485

Loans and leases receivable charge-offs:
Three Months Ended September 30, 2023	$	2,125	$	7,365	$	5,728	$	10,102	$	2,078	$	2,622	$	—	$	—	$	30,020
Nine Months Ended September 30, 2023	$	5,613	$	17,406	$	18,242	$	13,221	$	5,568	$	9,663	$	—	$	—	$	69,713

(1) Excludes $6.2 million of charge-offs for certain PCD loans against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of a Venture Banking loan portfolio (included within Specialty Lending) from the FDIC on June 15, 2023. These PCD loans were originated in years 2016 to 2022.


~~(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.~~

(2) Includes $7.0 million of charge-offs for commercial and industrial loans originated under the PPP that were subsequently determined to be ineligible for SBA forgiveness and guarantee and ultimately deemed uncollectible.

Table of Contents


	Term Loans Amortized Cost Basis by Origination Year as of December 31, 2022
(amounts in thousands)	2022		2021		2020		2019		2018		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total







Commercial and industrial loans and leases, including specialty lending:
Pass	$	3,206,250	$	682,132	$	242,516	$	198,866	$	56,572	$	83,417	$	2,066,349	$	—	$	6,536,102
Special mention	11,134		6,023		27,780		—		1,501		172		2,599		—		49,209
Substandard	—		22,917		967		8,431		6,713		39,554		8,937		—		87,519
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans and leases	$	3,217,384	$	711,072	$	271,263	$	207,297	$	64,786	$	123,143	$	2,077,885	$	—	$	6,672,830












Multifamily loans:
Pass	$	1,260,544	$	364,047	$	130,656	$	22,167	$	112,212	$	203,215	$	—	$	—	$	2,092,841
Special mention	—		—		—		—		4,959		50,858		—		—		55,817
Substandard	—		1,500		—		—		—		62,861		—		—		64,361
Doubtful	—		—		—		—		—		—		—		—		—
Total multifamily loans	$	1,260,544	$	365,547	$	130,656	$	22,167	$	117,171	$	316,934	$	—	$	—	$	2,213,019
Commercial real estate owner occupied loans:
Pass	$	293,096	$	220,515	$	105,925	$	90,752	$	34,196	$	121,616	$	—	$	—	$	866,100
Special mention	—		—		—		—		134		1,841		—		—		1,975
Substandard	—		—		—		134		10,569		6,561		—		—		17,264
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate owner occupied loans	$	293,096	$	220,515	$	105,925	$	90,886	$	44,899	$	130,018	$	—	$	—	$	885,339
Commercial real estate non-owner occupied loans:
Pass	$	339,044	$	119,304	$	156,281	$	73,827	$	62,237	$	386,235	$	—	$	—	$	1,136,928
Special mention	—		—		21,211		—		—		10,617		—		—		31,828
Substandard	10,910		—		—		28,656		8,198		74,210		—		—		121,974
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate non-owner occupied loans	$	349,954	$	119,304	$	177,492	$	102,483	$	70,435	$	471,062	$	—	$	—	$	1,290,730
Construction loans:
Pass	$	72,177	$	36,114	$	9,537	$	28,644	$	4,696	$	9,112	$	1,729	$	—	$	162,009
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total construction loans	$	72,177	$	36,114	$	9,537	$	28,644	$	4,696	$	9,112	$	1,729	$	—	$	162,009
Total commercial loans and leases receivable	$	5,193,155	$	1,452,552	$	694,873	$	451,477	$	301,987	$	1,050,269	$	2,079,614	$	—	$	11,223,927
Residential real estate loans:
Performing	$	162,217	$	148,217	$	7,224	$	17,128	$	10,739	$	77,762	$	67,782	$	—	$	491,069
Non-performing	271		366		238		441		1,425		3,357		785		—		6,883
Total residential real estate loans	$	162,488	$	148,583	$	7,462	$	17,569	$	12,164	$	81,119	$	68,567	$	—	$	497,952
Manufactured housing loans:
Performing	$	—	$	—	$	—	$	213	$	103	$	41,918	$	—	$	—	42,234
Non-performing	—		—		—		—		—		2,842		—		—		2,842
Total manufactured housing loans	$	—	$	—	$	—	$	213	$	103	$	44,760	$	—	$	—	$	45,076
Installment loans:
Performing	$	785,699	$	305,729	$	100,173	$	100,570	$	8,430	$	782	$	64,690	$	—	$	1,366,073
Non-performing	5,164		4,356		1,023		1,111		61		59		92		—		11,866
Total installment loans	$	790,863	$	310,085	$	101,196	$	101,681	$	8,491	$	841	$	64,782	$	—	$	1,377,939












Total consumer loans	$	953,351	$	458,668	$	108,658	$	119,463	$	20,758	$	126,720	$	133,349	$	—	$	1,920,967
Loans and leases receivable	$	6,146,506	$	1,911,220	$	803,531	$	570,940	$	322,745	$	1,176,989	$	2,212,963	$	—	$	13,144,894

Table of Contents

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.~~held for investment were as follows for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	2023		2022		2023		2022
Purchases (1)
Specialty lending	$	—	$	—	$	631,252	$	—
Other commercial and industrial	4,977		—		15,285		—


Commercial real estate owner occupied	—		—		2,867		—


Residential real estate	—		15,067		4,238		170,022


Personal installment (2)	—		47,778		—		123,785
Other installment (2)	96,758		74,969		96,758		74,969
Total	$	101,735	$	137,814	$	750,400	$	368,776
Sales (3)
Specialty lending (4)	$	—	$	2,200	$	287,185	$	2,200
Other commercial and industrial (5)	6,725		—		54,083		22,880
Multifamily	—		—		—		2,879
Commercial real estate owner occupied (5)	5,671		—		24,522		8,960
Commercial real estate non-owner occupied	—		—		16,000		—




Personal installment (6)	—		500,001		—		500,001
Other installment	—		—		154,042		—
Total	$	12,396	$	502,201	$	535,832	$	536,920

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was ~~98.5%~~100.0% and 99.9% of loans outstanding. In second quarter 2017, Customers purchased an additional $90.0 million of thirty-year fixed-rate residential mortgage loans from Everbank. The purchase price was 101.0% of loans outstanding. There were no loan purchases duringthe loans' unpaid principal balance for the three months ended September 30, ~~2017~~2023 and ~~during~~2022, respectively. The purchase price was 87.7% and 98.7% of the ~~three or nine months ended September 30, 2016.~~

~~In first quarter 2017, Customers sold $94.9 million of multi-family loans~~loans' unpaid principal balance for $95.4 million resulting in a gain on sale of $0.5 million and $8.7 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.

~~None of these purchases and sales during~~ the nine months ended September 30, ~~2017~~2023 and ~~2016 materially affected~~2022, respectively.

(2)Installment loan purchases for the three and nine months ended September 30, 2023 and 2022 consist of third-party originated unsecured consumer loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

(3)For the three months ended September 30, 2023 and 2022, sales of loans held for investment resulted in net losses of $0.2 million and net gains of $0.1 million, respectively, included in the gain (loss) on sale of SBA and other loans in the consolidated statements of income. For the nine months ended September 30, 2023 and 2022, sales of loans held for investment resulted in net gains of $0.2 million and $3.2 million, respectively.

(4)Includes a loss of $5.0 million from the sale of $670.0 million of short-term syndicated capital call lines of credit ~~profile~~($280.7 million of ~~Customers’ related~~loans held for investment in unpaid principal balance and $389.3 million of unfunded loan ~~portfolio.~~commitments) included in loss on sale of capital call lines of credit in the consolidated statement of income for the nine months ended September 30, 2023.

(5)Primarily sales of SBA loans.

(6)Customers sold $521.8 million of consumer installment loans held for investment, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE for a loss of $23.5 million included in loss on sale of consumer installment loans in the consolidated statements of income for the three and nine months ended September 30, 2022. Customers provided financing to the purchaser for a portion of the sales price in the form of $400.0 million of asset-backed securities. $100.7 million of the remaining sales proceeds were paid in cash.

Loans Pledged as Collateral

Customers has pledged eligible real estate, commercial and industrial, mortgage warehouse, PPP and consumer installment loans as collateral for ~~potential~~ borrowings outstanding or available immediately from the ~~Federal Home Loan Bank of Pittsburgh ("FHLB")~~FHLB and FRB in the amount of ~~$5.5~~$8.5 billion and $7.1 billion at September 30, ~~2017, compared to $4.8 billion at~~2023 and December 31, ~~2016.~~2022, respectively.

NOTE 8 — LEASES

Lessee

Customers has operating leases for its branches, certain LPOs, and administrative offices, with remaining lease terms ranging between three months and ten years. These operating leases comprise substantially all of Customers' obligations in which Customers is the lessee. These lease agreements typically consist of initial lease terms ranging between one and ten years, with options to renew the leases or extend the term up to ten 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 ROU 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.

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As most of Customers' operating leases do not provide an implicit rate, Customers utilized its incremental borrowing rate when determining the present value of lease payments.

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


(amounts in thousands)	Classification	September 30, 2023		December 31, 2022
ASSETS
Operating lease ROU assets	Other assets	$	16,755	$	16,133
LIABILITIES
Operating lease liabilities	Other liabilities	$	19,222	$	19,046

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


		Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	Classification	2023		2022		2023		2022
Operating lease cost (1)	Occupancy expenses	$	1,260	$	1,137	$	3,775	$	3,352

(1) There were no variable lease costs for the three and nine months ended September 30, 2023 and 2022, and sublease income for operating leases was immaterial.

Maturities of non-cancelable operating lease liabilities were as follows at September 30, 2023:


(amounts in thousands)	September 30, 2023
2023	$	1,334
2024	4,786
2025	3,745
2026	2,977
2027	2,469
Thereafter	5,625
Total minimum payments	20,936
Less: interest	1,714
Present value of lease liabilities	$	19,222

Customers does not have leases where it is involved with the construction or design of an underlying asset. Cash paid pursuant to the operating lease liabilities was $1.3 million and $4.4 million for the three and nine months ended September 30, 2023, respectively. Cash paid pursuant to the operating lease liabilities was $1.2 million and $3.6 million for the three and nine months ended September 30, 2022, 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 September 30, 2023 and December 31, 2022:

September 30, 2023

December 31, 2022

Weighted average remaining lease term (years)

Operating leases

5.7 years

5.1 years

Weighted average discount rate

Operating leases

3.24

2.85

Equipment Lessor

CCF is a wholly-owned subsidiary of Customers Bank and is referred to as the Equipment Finance Group. The Equipment Finance Group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The Equipment Finance Group is primarily focused on serving the following segments: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. Lease terms typically range from 24 months to 120 months. The Equipment Finance Group offers the following products: Loans, Capital Lease, PUT, TRAC, Split-TRAC, and FMV. Direct finance equipment leases are included in commercial and industrial loans and leases receivable.

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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 ACL 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 September 30, 2023 and December 31, 2022:


(amounts in thousands)	Classification	September 30, 2023		December 31, 2022
ASSETS
Direct financing leases
Lease receivables	Loans and leases receivable	$	175,931	$	140,182
Guaranteed residual assets	Loans and leases receivable	14,211		12,370
Unguaranteed residual assets	Loans and leases receivable	9,551		7,555
Deferred initial direct costs	Loans and leases receivable	977		667
Unearned income	Loans and leases receivable	(6,840)		(3,404)
Net investment in direct financing leases		$	193,830	$	157,370

Operating leases
Investment in operating leases	Other assets	$	264,595	$	248,454
Accumulated depreciation	Other assets	(72,512)		(52,585)
Deferred initial direct costs	Other assets	1,270		1,461
Net investment in operating leases		193,353		197,330
Total lease assets		$	387,183	$	354,700

Maturities of operating and direct financing lease receivables were as follows at September 30, 2023:


(amounts in thousands)	Operating leases		Direct financing leases
2023	$	9,705	$	11,562
2024	38,612		46,214
2025	34,976		36,992
2026	39,906		29,175
2027	29,824		24,254
Thereafter	69,025		28,840
Total minimum payments	$	222,048	177,037
Less: interest			1,106
Present value of lease receivables			$	175,931

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NOTE 9 – DEPOSITS

The components of deposits at September 30, 2023 and December 31, 2022 were as follows:


	September 30, 2023		December 31, 2022
(amounts in thousands)
Demand, non-interest bearing	$	4,758,682	$	1,885,045
Demand, interest bearing	5,824,410		8,476,027
Savings, including money market deposit accounts	3,617,946		3,546,015


Time	3,994,326		4,249,866
Total deposits	$	18,195,364	$	18,156,953

The scheduled maturities for time deposits at September 30, 2023 were as follows:


(amounts in thousands)	September 30, 2023
2023	$	864,722
2024	2,457,137
2025	165,024
2026	360,201
2027	59,783
Thereafter	87,459
Total time deposits	$	3,994,326

Time deposits greater than the FDIC limit of $250,000 totaled $160.4 million and $85.5 million at September 30, 2023 and December 31, 2022, respectively.

Demand deposit overdrafts reclassified as loans were $4.1 million and $3.7 million at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023, the Bank had $591.3 million in state and municipal deposits to which it had pledged $599.4 million of available borrowing capacity through the FHLB to the depositors through a standby letter of credit arrangement.

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NOTE 10 - BORROWINGS

Short-term debt

InShort-term debt at September 30, 2023 and December 31, 2022 was as follows:


	September 30, 2023				December 31, 2022
(dollars in thousands)	Amount		Rate		Amount		Rate

FHLB advances	—		—	%	300,000		4.54	%

Total short-term debt	$	—			$	300,000

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



(dollars in thousands)	September 30, 2023 (1)			December 31, 2022 (2)

FRB advances (3)
Maximum outstanding at any month end	$	—		$	—
Average balance during the period	160,571			—
Weighted-average interest rate during the period	5.23		%	—		%
FHLB advances
Maximum outstanding at any month end	—			775,000
Average balance during the period	116,862			144,918
Weighted-average interest rate during the period	5.16		%	1.07		%
Federal funds purchased
Maximum outstanding at any month end	—			895,000
Average balance during the period	5,055			349,581
Weighted-average interest rate during the period	4.97		%	1.66		%

(1) For the nine months ended September 30, 2023.

(2) For the year ended December 31, 2022.

(3) Includes advances under the BTFP. The BTFP offers loans of up to one year to eligible depository institutions pledging any collateral valued at par, that are eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.

At September 30, 2023 and December 31, 2022, Customers Bank had aggregate availability under federal funds lines totaling $1.7 billion.

Long-term debt

FHLB and FRB advances

Long-term FHLB and FRB advances at September 30, 2023 and December 31, 2022 were as follows:


	September 30, 2023				December 31, 2022
(dollars in thousands)	Amount		Rate		Amount		Rate
FHLB advances (1)(2)	$	1,529,839	4.43	%	$	500,000	3.37	%

Total long-term FHLB and FRB advances	$	1,529,839			$	500,000

(1) Amounts reported in the above table include variable and fixed rate long-term advances from FHLB of $590.0 million with maturities ranging from June ~~2017,~~2024 to September 2026 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers ~~Bancorp issued $100~~Bank's option, and fixed rate long-term advances of $950.0 million with maturities ranging from March 2025 to March 2028, at September 30, 2023.

(2) Includes $10.2 million of unamortized basis adjustments from interest rate swaps designated as fair value hedges of long-term advances from FHLB at September 30, 2023. Refer to NOTE 14 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for additional information.

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Maturities of long-term FHLB advances were as follows at September 30, 2023:


	September 30, 2023
(dollars in thousands)	Amount (1)		Rate

2024	250,000		3.44	%
2025	200,000		4.45	%
2026	540,000		5.54	%
2027	450,000		3.70	%
Thereafter	100,000		4.19	%
Total long-term FHLB advances	$	1,540,000

(1) Amounts reported in the above table include variable and fixed rate long-term advances from FHLB of $590.0 million with maturities ranging from June 2024 to September 2026 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank's option.

The maximum borrowing capacity with the FHLB and FRB at September 30, 2023 and December 31, 2022 was as follows:



(amounts in thousands)	September 30, 2023		December 31, 2022
Total maximum borrowing capacity with the FHLB	$	3,393,013	$	3,241,120
Total maximum borrowing capacity with the FRB (1)	5,013,377		2,510,189
Qualifying loans and securities (1) serving as collateral against FHLB and FRB advances	10,050,340		7,142,865

(1) Includes $484.9 million of borrowing capacity available under the BTFP at September 30, 2023, which offers loans of up to one year to eligible depository institutions pledging any collateral valued at par, that are eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.

Senior and Subordinated Debt

Long-term senior notes and subordinated debt at ~~99.775% of face value. The price to purchasers represents a yield-to-maturity of 4.0% on the fixed coupon rate of 3.95%.~~ September 30, 2023 and December 31, 2022 were as follows:


		September 30, 2023		December 31, 2022
(dollars in thousands)
Issued by	Ranking	Carrying Amount		Carrying Amount		Rate		Issued Amount		Date Issued	Maturity	Price
Customers Bancorp	Senior (1)	$	98,893	$	98,788	2.875	%	$	100,000	August 2021	August 2031	100.000	%
Customers Bancorp	Senior	24,882		24,792		4.500	%	25,000		September 2019	September 2024	100.000	%


Total other borrowings		$	123,775	$	123,580

Customers Bancorp	Subordinated (2)(3)	$	72,721	$	72,585	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Subordinated (2)(4)	109,440		109,367		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt		$	182,161	$	181,952

(1)The senior notes ~~mature~~will bear an annual fixed rate of 2.875% until August 15, 2026. From August 15, 2026 until maturity, the notes will bear an annual interest rate equal to a benchmark rate, which is expected to be the three-month term SOFR after June 30, 2023, plus 235 basis points. Customers Bancorp has the ability to call the senior notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after August 15, 2026.

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

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

(4)The subordinated notes will bear an annual fixed rate of 6.125% until June ~~2022.~~

~~The net proceeds~~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. Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers expects that the subordinated notes will substitute three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate in order to calculate the annual interest rate after ~~deducting the underwriting discount and estimated offering expenses were approximately $98.6 million. The net proceeds were contributed to~~June 26, 2024. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.

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NOTE 11 — SHAREHOLDERS’ EQUITY

Common Stock

On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise. The exact number of shares, timing for ~~purposes~~such purchases, and the price and terms at and on which such purchases are to be made were at the discretion of the Company and complied with all applicable regulatory limitations. The term of the Share Repurchase Program was extended to September 27, 2023, unless earlier terminated. Customers Bancorp purchased no shares and 1,379,883 shares of its ~~working capital needs~~common stock for $39.8 million under the Share Repurchase Program during the three and nine months ended September 30, 2023, respectively. Customers Bancorp purchased no shares and 664,145 shares of its common stock for $27.8 million under the Share Repurchase Program during the three and nine months ended September 30, 2022, respectively. On September 27, 2023, the Share Repurchase Program expired.

Preferred Stock

As of September 30, 2023 and December 31, 2022, Customers Bancorp has two series of preferred stock outstanding. The table below summarizes Customers' issuances of preferred stock that remain outstanding at September 30, 2023 and December 31, 2022 and the ~~funding~~dividends paid per share.


(amounts in thousands except share and per share data)		Shares at		Carrying value at				Initial Fixed Rate		Date at which dividend rate becomes floating and earliest redemption date	Floating rate of Three-Month LIBOR Plus:		Dividend Paid Per Share in 2023 (1)
Fixed-to-floating rate:	Issue Date	September 30, 2023	December 31, 2022	September 30, 2023		December 31, 2022


Series E	April 28, 2016	2,300,000	2,300,000	$	55,593	$	55,593	6.45	%	June 15, 2021	5.140	%	$	1.94
Series F	September 16, 2016	3,400,000	3,400,000	82,201		82,201		6.00	%	December 15, 2021	4.762	%	$	1.87
Totals		5,700,000	5,700,000	$	137,794	$	137,794

(1) For the nine months ended September 30, 2023.

Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of ~~its organic growth.~~26.161 basis points for three-month LIBOR as the benchmark reference rate on Series E and F Preferred Stock, plus 5.140% and 4.762%, respectively, beginning with dividends declared on October 25, 2023.

NOTE 1112 — 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, the 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. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of September 30, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions.

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. a leverage ratio). Customers applied this regulatory guidance in the calculation of its regulatory capital ratios presented below.

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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 30, ~~2017~~2023 and December 31, ~~2016,~~2022, 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

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
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2023:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,596,157	11.305	%	$	635,353	4.500	%	N/A		N/A		$	988,327	7.000	%
Customers Bank	$	1,830,143	12.974	%	$	634,762	4.500	%	$	916,878	6.500	%	$	987,408	7.000	%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,733,950	12.281	%	$	847,137	6.000	%	N/A		N/A		$	1,200,111	8.500	%
Customers Bank	$	1,830,143	12.974	%	$	846,349	6.000	%	$	1,128,466	8.000	%	$	1,198,995	8.500	%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	2,015,526	14.275	%	$	1,129,516	8.000	%	N/A		N/A		$	1,482,490	10.500	%
Customers Bank	$	2,038,998	14.455	%	$	1,128,466	8.000	%	$	1,410,582	10.000	%	$	1,481,111	10.500	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	1,733,950	7.805	%	$	888,675	4.000	%	N/A		N/A		$	888,675	4.000	%
Customers Bank	$	1,830,143	8.246	%	$	887,727	4.000	%	$	1,109,658	5.000	%	$	887,727	4.000	%
As of December 31, 2022:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,470,837	9.637	%	$	686,838	4.500	%	N/A		N/A		$	1,068,415	7.000	%
Customers Bank	$	1,708,598	11.213	%	$	685,694	4.500	%	$	990,447	6.500	%	$	1,066,636	7.000	%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,608,630	10.539	%	$	915,784	6.000	%	N/A		N/A		$	1,297,361	8.500	%
Customers Bank	$	1,708,598	11.213	%	$	914,259	6.000	%	$	1,219,012	8.000	%	$	1,295,201	8.500	%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,862,089	12.200	%	$	1,221,045	8.000	%	N/A		N/A		$	1,602,622	10.500	%
Customers Bank	$	1,889,472	12.400	%	$	1,219,012	8.000	%	$	1,523,765	10.000	%	$	1,599,954	10.500	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	1,608,630	7.664	%	$	839,547	4.000	%	N/A		N/A		$	839,547	4.000	%
Customers Bank	$	1,708,598	8.150	%	$	838,611	4.000	%	$	1,048,264	5.000	%	$	838,611	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 1, 2016,~~ with ~~a maximum buffer~~respect to each 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~~and total capital ~~ratio~~to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a conservation buffer 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 1213 — 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.

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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.

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 30, ~~2017~~2023 and December 31, ~~2016:~~2022:

~~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~~with a readily determinable fair value, 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).

When quoted market prices are not available, Customers employs an independent pricing service that utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has an established process to challenge their valuations, or methodologies, that appear unusual or unexpected.

Customers also utilizes internally and externally developed models that use unobservable inputs due to limited or no market activity of the instrument. These models use unobservable inputs that are inherently judgmental and reflect our best estimates of the assumptions a market participant would use to calculate fair value. Certain unobservable inputs in isolation may have either a directionally consistent or opposite impact on the fair value of the instrument for a given change in that input. When multiple inputs are used within the valuation techniques, a change in one input in a certain direction may be offset by an opposite change from another input. 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~~

Table 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.Contents

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 - ~~Commercial mortgage warehouse loans:~~Consumer other installment loans (fair value option):

The fair value of medical installment loans within consumer other installment loans is the amount of cash initially advanced to fund the loan, plus accrued interest and fees, as specified in the agreement with a fintech company, and generally held for up to 90 days prior to sale. These assets are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Loans receivable - Commercial mortgage warehouse 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:~~

The fair values of multi-family loans held for sale are estimated using pricing indications from letters of intent with third party investors, recent sale transactions within the secondary markets for loans with similar characteristics, non-binding indicative bids from brokers, or estimates made by management considering current market ratesDerivatives (assets and ~~terms. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.~~

~~Loans receivable, net of allowance for loan losses:~~

The fair values of loans held for investment are estimated using discounted cash flows and market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. These assets are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

~~Impaired loans:~~

~~Impaired loans are those loans that are accounted for under ASC 310,~~ ~~Receivables~~, in which the Bank has measured impairment generally based on the fair value of the loan’s collateral or discounted cash flow analysis. Fair value is generally determined based upon independent third-party appraisals of the properties that collateralize the loans or discounted cash flows based upon the expected proceeds. 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") 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)~~liabilities):

The fair values of 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 the effect of nonperformance risk by incorporating credit valuation adjustments for ~~the Bank~~Customers 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~~Customers generally uses commitments on hand from ~~third-~~third party investors to estimate an exit price and adjusts for the probability of the commitment being exercised based on ~~the Bank’s~~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.

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

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis

~~Off-balance-sheet financial instruments:~~Collateral-dependent loans:

~~The~~Collateral-dependent loans are those loans that are accounted for under ASC 326, Financial Instruments - Credit Losses ("ASC 326"), in which the Bank has measured impairment generally based on the fair value of the loan’s collateral or DCF analysis. Fair value is generally determined based upon independent third-party appraisals of the properties that collateralize the loans, DCF based upon the expected 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 ~~unused commitments~~input that is significant to ~~lend and standby letters of credit are considered to be~~ the ~~same as their contractual amounts.~~fair value measurements.

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~~Customers' disclosures and those of other companies may not be meaningful.

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The estimated fair values of Customers' financial instruments at September 30, ~~2017~~2023 and December 31, ~~2016~~2022 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.~~follows:


					Fair Value Measurements at September 30, 2023
(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	$	3,419,974	$	3,419,974	$	3,419,974	$	—	$	—
Debt securities, available for sale	2,746,728		2,746,728		—		2,704,363		42,365
Debt securities, held to maturity	1,178,370		1,115,576		—		475,388		640,188


Loans held for sale	150,368		150,368		—		1,005		149,363

Total loans and leases receivable, net of allowance for credit losses on loans and leases	13,423,901		13,052,491		—		962,566		12,089,925
FHLB, Federal Reserve Bank, and other restricted stock	126,098		126,098		—		126,098		—
Derivatives	28,475		28,475		—		28,421		54

Liabilities:
Deposits	$	18,195,364	$	18,171,737	$	14,201,038	$	3,970,699	$	—




FHLB advances	1,529,839		1,507,761		—		1,507,761		—
Other borrowings	123,775		103,388		—		103,388		—
Subordinated debt	182,161		160,712		—		160,712		—
Derivatives	41,433		41,433		—		41,433		—


					Fair Value Measurements at December 31, 2022
(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	$	455,806	$	455,806	$	455,806	$	—	$	—
Debt securities, available for sale	2,961,015		2,961,015		—		2,887,749		73,266
Debt securities, held to maturity	840,259		793,813		—		437,680		356,133


Loans held for sale	328,312		328,312		—		322		327,990

Total loans and leases receivable, net of allowance for credit losses on loans and leases	15,335,435		14,890,823		—		1,323,312		13,567,511
FHLB, Federal Reserve Bank, and other restricted stock	74,196		74,196		—		74,196		—
Derivatives	44,435		44,435		—		44,380		55

Liabilities:
Deposits	$	18,156,953	$	18,127,338	$	13,907,087	$	4,220,251	$	—



FHLB advances	800,000		781,113		—		781,113		—
Other borrowings	123,580		108,081		—		108,081		—
Subordinated debt	181,952		168,441		—		168,441		—
Derivatives	42,106		42,106		—		42,106		—

Table of Contents

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, 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 30, ~~2017~~2023 and December 31, ~~2016~~2022 were as follows:


	September 30, 2023
	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	$	—	$	62,351	$	42,365	$	104,716



Agency-guaranteed residential collateralized mortgage obligations	—		118,469		—		118,469

Collateralized loan obligations	—		815,856		—		815,856
Commercial mortgage-backed securities	—		131,188		—		131,188
Corporate notes	—		578,897		—		578,897
Private label collateralized mortgage obligations	—		997,602		—		997,602



Derivatives	—		28,421		54		28,475
Loans held for sale – fair value option	—		1,005		24,515		25,520
Loans receivable, mortgage warehouse – fair value option	—		962,566		—		962,566

Total assets – recurring fair value measurements	$	—	$	3,696,355	$	66,934	$	3,763,289
Liabilities
Derivatives	$	—	$	41,433	$	—	$	41,433
Measured at Fair Value on a Nonrecurring Basis:
Assets


Collateral-dependent loans	$	—	$	—	$	3,515	$	3,515

Total assets – nonrecurring fair value measurements	$	—	$	—	$	3,515	$	3,515

Table of Contents


	September 30, 2017
	Fair Value Measurements at the End of the Reporting Period Using									December 31, 2022
	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	$	—	$	87,276	$	73,266	$	160,542

Agency-guaranteed residential collateralized mortgage obligations									Agency-guaranteed residential collateralized mortgage obligations	—		133,864		—		133,864

Collateralized loan obligations									Collateralized loan obligations	—		872,738		—		872,738
Commercial mortgage-backed securities									Commercial mortgage-backed securities	—		136,357		—		136,357
Corporate notes	—		46,077		—		46,077		Corporate notes	—		595,253		—		595,253
Equity securities	2,311		—		—		2,311
Private label collateralized mortgage obligations									Private label collateralized mortgage obligations	—		1,062,261		—		1,062,261

Derivatives	—		10,344		103		10,447		Derivatives	—		44,380		55		44,435
Loans held for sale – fair value option	—		1,963,076		—		1,963,076		Loans held for sale – fair value option	—		322		—		322
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	—		1,323,312		—		1,323,312

Total assets – recurring fair value measurements									Total assets – recurring fair value measurements	$	—	$	4,255,763	$	73,321	$	4,329,084
Liabilities									Liabilities
Derivatives	$	—	$	12,092	$	—	$	12,092	Derivatives	$	—	$	42,106	$	—	$	42,106
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
Other real estate owned	—		—		782		782
Total assets - nonrecurring fair value measurements	$	—	$	—	$	3,758	$	3,758

Collateral-dependent loans									Collateral-dependent loans	$	—	$	—	$	4,819	$	4,819

Total assets – nonrecurring fair value measurements									Total assets – nonrecurring fair value measurements	$	—	$	—	$	4,819	$	4,819

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~~asset-backed securities (Level 3 ~~assets~~assets) measured at fair value on a recurring basis for the three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 are summarized ~~as follows. Additional information about residential mortgage loan commitments can be found~~ in ~~NOTE 13 - DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES.~~the tables below.


	Asset-backed securities
(amounts in thousands)	Three Months Ended September 30,
	2023		2022
Balance at July 1	$	51,825	$	106,919

Principal payments and premium amortization	(10,023)		(16,852)
Increase in allowance for credit losses	(442)		—
Decrease in allowance for credit losses	250		158
Change in fair value recognized in OCI	755		(2,339)
Balance at September 30	$	42,365	$	87,886



	Asset-backed securities
(amounts in thousands)	Nine Months Ended September 30,
	2023		2022
Balance at January 1	$	73,266	$	142,885

Principal payments and premium amortization	(31,683)		(51,348)
Increase in allowance for credit losses	(1,488)		(253)
Decrease in allowance for credit losses	311		—
Change in fair value recognized in OCI	1,959		(3,398)
Balance at September 30	$	42,365	$	87,886

Residential Mortgage Loan Commitments
Three Months Ended September 30,
2017 2016
(amounts in thousands)
Balance at June 30 $ 102
$ 157
Issuances 103
85
Settlements (102 ) (157 )
Balance at September 30 $ 103
$ 85

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 months ended September 30, ~~2017~~2023 and ~~2016.~~2022.

Table of Contents

The following ~~table summarizes~~tables summarize financial assets and financial liabilities measured at fair value as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 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

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

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range
(Weighted Average)

September 30, 2023

~~(2)~~Asset-backed securities

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

42,365

Discounted cash flow

Discount rate

Annualized loss rate

Constant prepayment rate

10% - 10%

(10%)

3% - 6%

(5%)

12% - 30%

(25%)

~~(3)~~

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

~~(4)~~

~~Presented as a percentage of the value determined by appraisal for impaired loans and other real estate owned.~~

Quantitative Information about Level 3 Fair Value Measurements

(dollars in thousands)

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range
(Weighted Average)

December 31, 2022

Asset-backed securities

73,266

Discounted cash flow

Discount rate

Annualized loss rate

Constant prepayment rate

9% - 9%

(9%)

4% - 5%

(5%)

19% - 25%

(23%)

NOTE 1314 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Risk Management Objectives of Using Derivatives

Customers is exposed to certain risks arising from both its business operations and economic conditions. Customers manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources, and durations of its assets and liabilities. Specifically, Customers enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the ~~value~~values of which are determined by interest rates. ~~Customers'~~Customers’ derivative financial instruments are used to manage differences in the amount, timing, and duration of ~~Customers'~~Customers’ known or expected cash receipts and its known or expected cash payments principally related to certain ~~borrowings.~~borrowings and deposits. Customers also has interest-rate derivatives resulting from ~~a service~~an accommodation provided to certain qualifying customers, and therefore, they are not used to manage ~~Customers'~~Customers’ interest-rate risk in assets or liabilities. Customers manages a matched book with respect to its derivative instruments used in this customer service in order to minimize its net risk exposure resulting from such transactions.

~~Cash Flow~~Fair Value Hedges of ~~Interest Rate~~Benchmark Interest-Rate Risk

~~Customers' objectives~~Customers is exposed to changes in ~~using interest-rate derivatives are~~the fair value of certain of its fixed rate AFS debt securities, deposits and FHLB advances due to ~~add stability to~~changes in the benchmark interest ~~expense and to manage exposure to interest-rate movements. To accomplish this objective,~~rate. Customers ~~primarily~~ uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate such as ~~part of its interest-rate-risk management strategy. Interest-rate~~the Fed Funds Effective Swap Rate. Interest rate swaps designated as ~~cash flow~~fair value hedges of certain fixed rate AFS debt securities involve the ~~receipt~~payment of ~~variable~~fixed-rate amounts ~~from~~to a counterparty in exchange for Customers ~~making~~receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate swaps designated as fair value hedges of certain deposits and FHLB advances involve the payment of variable-rate amounts to a counterparty in exchange for Customers receiving fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.

~~The effective portion of changes in the fair value of~~ For derivatives designated and ~~qualifying~~that qualify as ~~cash flow~~fair value hedges, ~~is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in~~ the ~~period that~~gain or loss on the derivative as well as the offsetting loss or gain on the hedged ~~forecasted transaction affects earnings. To date, such~~item attributable to the hedged risk are recognized in net interest income.

Table of Contents

At September 30, 2023, Customers had six outstanding interest rate derivatives with notional amounts totaling $472.5 million that were ~~used to hedge the variable cash flows associated with the forecasted issuances of debt. The ineffective portion of the change in~~designated as fair value hedges of ~~the derivatives is to be recognized directly in earnings.~~certain AFS debt securities and FHLB advances. During the ~~three and~~ nine months ended September 30, ~~2017 and 2016,~~2023, Customers ~~did not record any hedge ineffectiveness.~~

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on Customers' variable-rate debt. Customers expects to reclassify $1.2 million from accumulated other comprehensive income to interest expense during the next 12 months.

Customers is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 24 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).

~~At September 30, 2017, Customers had nine outstanding~~entered into five interest rate derivatives, two of which were terminated with notional amounts totaling $550.0 million that were designated as ~~cash flow~~fair value hedges of certain deposits and FHLB advances resulting in $4.6 million of basis adjustments being amortized over the remaining terms of the hedged items as a reduction in interest expense. During the three and nine months ended September 30, 2022, Customers terminated four and thirteen interest rate ~~risk.~~derivatives with notional amounts totaling $10.0 million and $58.0 million, respectively, that were designated as fair value hedges together with the sale of hedged AFS debt securities. At December 31, ~~2016,~~2022, Customers had ~~four~~three outstanding interest rate derivatives with notional amounts totaling ~~$325.0~~$22.5 million ~~that were~~ designated as ~~cash flow~~fair value hedges of ~~interest rate risk. The hedges expire between January 2018~~certain AFS debt securities.

As of September 30, 2023 and ~~April 2019.~~December 31, 2022, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges.


	Amortized Cost				Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items
(amounts in thousands)	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
AFS debt securities	$	22,500	$	22,500	$	(1,331)	$	1,777
Deposits	300,000		—		1,787		—
FHLB advances	700,000		—		(10,160)		—

Derivatives Not Designated as Hedging Instruments

Customers executes interest rate swaps ~~with commercial banking customers to facilitate their respective risk management strategies~~ (typically the loan customers will swap a floating-rate loan for a fixed-rate loan). and interest rate caps with commercial banking customers to facilitate their respective risk management strategies. The customer interest rate swaps and interest rate caps are simultaneously offset by interest rate swaps and interest rate caps that Customers executes with a third party in order to minimize ~~interest rate~~interest-rate risk exposure resulting from such transactions. ~~Because~~As the interest rate swaps and interest rate caps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and caps and the offsetting third-party market swaps and caps are recognized directly in earnings. At September 30, ~~2017,~~2023, Customers had 76129 interest rate swaps with an aggregate notional amount of ~~$793.6~~$1.2 billion and 10 interest rate caps with an aggregated notional amount of $179.0 million related to this program. At December 31, ~~2016,~~2022, Customers had 76141 interest rate swaps with an aggregate notional amount of ~~$716.6~~$1.3 billion and 12 interest rate caps with an aggregate notional amount of $245.8 million related to this program.

Customers enters into residential mortgage loan commitments in connection with its consumer mortgage banking activities to fund mortgage loans at specified rates and times in the future. These commitments are short-term in nature and generally expire in 30 to 60 days. The residential mortgage loan commitments that relate to the origination of mortgage loans that will be held for sale are considered derivative instruments under ~~the~~ applicable accounting guidance and are reported at fair value, with changes in fair value recorded directly in earnings. At September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, Customers had an ~~outstanding~~aggregate notional ~~balance~~amount of residential mortgage loan commitments of ~~$5.4~~$2.7 million and ~~$3.6~~$1.5 million, respectively.

Customers has also purchased and sold credit derivatives to either hedge or participate in the performance risk associated with some of its counterparties. These derivatives are not designated as hedging instruments and are reported at fair value, with changes in fair value ~~reported~~recorded directly in earnings. At September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, Customers had ~~outstanding~~an aggregate notional ~~balances~~amount of credit derivatives of ~~$53.3~~$97.6 million and ~~$44.9~~$142.0 million, respectively.

Table of Contents

Fair Value of Derivative Instruments on the Balance Sheet

The following tables present the fair value of Customers' derivative financial instruments as well as their presentation on the consolidated balance ~~sheet~~sheets as of September 30, ~~2017~~2023 and December 31, ~~2016.~~2022.

September 30, 2023

Derivative Assets

Derivative Liabilities

(amounts in thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives not designated as hedging instruments:

Interest rate swaps and caps (1)

Other assets

28,420

Other liabilities

41,428

Credit contracts

Other assets

Other liabilities

Residential mortgage loan commitments

Other assets

Other liabilities

—

Total

28,475

41,433


	December 31, 2022
	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	$	1,777	Other liabilities	$	—
Total		$	1,777		$	—
Derivatives not designated as hedging instruments:
Interest rate swaps and caps	Other assets	$	42,589	Other liabilities	$	42,076

Credit contracts	Other assets	14		Other liabilities	30
Residential mortgage loan commitments	Other assets	55		Other liabilities	—

Total		$	42,658		$	42,106

September 30, 2017
Derivative Assets Derivative Liabilities

Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
(amounts in thousands)
Derivatives designated as cash flow hedges:
Interest rate swaps Other assets $ 355
Other liabilities $ 2,001
Total $ 355
$ 2,001
Derivatives not designated as hedging instruments:
Interest rate swaps Other assets $ 9,861
Other liabilities $ 10,083
Credit contracts Other assets 128
Other liabilities 8
Residential mortgage loan commitments Other assets 103
Other liabilities —
Total $ 10,092
$ 10,091

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

(1) Customers' centrally cleared derivatives are legally settled through variation margin payments and these payments are reflected as a reduction of the related derivative asset or liability, including accrued interest, on the consolidated balance sheet.

Effect of Derivative Instruments on ~~Comprehensive~~Net Income

The following ~~tables present~~table presents amounts included in the ~~effect~~consolidated statements of ~~Customers' derivative financial instruments on comprehensive~~ income related to derivatives designated as fair value hedges and derivatives not designated as hedges for the three and nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022.


		Amount of Income (Loss) Recognized in Earnings
		Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	Income Statement Location	2023		2022		2023		2022
Derivatives designated as fair value hedges:
Recognized on interest rate swaps	Net interest income	$	6,377	$	510	$	13,209	$	3,530
Recognized on hedged AFS debt securities	Net interest income	(196)		(510)		(446)		(3,530)

Recognized on hedged FHLB advances	Net interest income	(6,181)		—		(12,763)		—
Total		$	—	$	—	$	—	$	—
Derivatives not designated as hedging instruments:
Interest rate swaps and caps	Other non-interest income	$	192	$	503	$	332	$	2,244

Credit contracts	Other non-interest income	13		60		12		104
Residential mortgage loan commitments	Other non-interest income	(13)		(57)		—		(139)

Total		$	192	$	506	$	344	$	2,209

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 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 $ (1,577 ) Interest expense $ (1,306 )

~~(1) Amounts presented are net~~Table of ~~taxes. See NOTE 6 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME for total effect on other comprehensive income from derivatives designated as cash flow hedges for the periods presented.~~Contents

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 30, ~~2017,~~2023, the fair value of derivatives in a net ~~liability~~asset position ~~(which includes accrued interest but excludes any adjustment for nonperformance-risk)~~ related to these agreements was ~~$7.3~~$28.4 million. In addition, Customers, which has ~~minimum~~ collateral posting thresholds with certain of these counterparties, ~~and at September 30, 2017~~ had ~~posted $8.3~~received $30.3 million of cash as ~~collateral.~~collateral at September 30, 2023. Customers records cash posted or received as collateral with these counterparties, except with a central clearing entity, as a reduction or an increase in the outstanding balance of cash and cash equivalents and an increase in the balance of other ~~assets.~~assets or other liabilities.

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~~tables 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~~tables below. Customers has not made a policy election to offset its derivative positions.


	Gross Amounts Recognized on the Consolidated Balance Sheet				Gross Amounts Not Offset in the Consolidated Balance Sheet				Net Amount
(amounts in thousands)			Financial Instruments	Cash Collateral Received/Posted
September 30, 2023
Interest rate derivative assets with institutional counterparties	$	28,419			$	—	$	(28,419)	$	—

Interest rate derivative liabilities with institutional counterparties	$	—			$	—	$	—	$	—

~~Offsetting of Financial Assets and Derivative Assets~~


	Gross Amounts Recognized on the Consolidated Balance Sheet				Gross Amounts Not Offset in the Consolidated Balance Sheet				Net Amount
(amounts in thousands)			Financial Instruments	Cash Collateral Received/Posted
December 31, 2022
Interest rate derivative assets with institutional counterparties	$	29,706			$	(619)	$	(29,087)	$	—

Interest rate derivative liabilities with institutional counterparties	$	619			$	(619)	$	—	$	—

~~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 1415 — ~~BUSINESS SEGMENTS~~LOSS CONTINGENCIES

~~Customers has historically operated under one~~Loss contingencies, including claims and legal actions arising in the ordinary course of business, ~~segment, "Community Banking."~~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, ~~beginning~~ in third quarter 2016, Customers revised its segment financial reporting to reflect the manner in which its chief operating decision makers (our Chief Executive Officer and Board of Directors) have begun allocating resources and assessing performance subsequent to Customers' acquisitionlight of the ~~Disbursement business from Higher One~~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 ~~the combination~~future changes in circumstances or additional information could result in accruals or resolution in excess of ~~that business with the BankMobile technology platform late in second quarter 2016.~~

~~Management has determined that Customers'~~established accruals, which could adversely affect Customers’ results of 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.

potentially materially.

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 ~~events or future predictions, including events or predictions relating to future financial~~ performance and ~~are generally identifiable~~business. Statements preceded by, followed by, or that include the ~~use of forward-looking terminology such as~~words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” ~~“may,~~“anticipate,” ~~“will,~~“estimate,” ~~“should,~~“intend,” “plan,” ~~“intend,~~“project,” or ~~“anticipate”~~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 and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the ~~negative thereof or comparable terminology. Forward-looking statements reflect numerous assumptions, estimates~~goals, plans, objectives, intentions and ~~forecasts as to future events. No assurance can be given that the assumptions, estimates and forecasts underlying~~expectations expressed in such forward-looking statements, ~~will accurately reflect future conditions,~~including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, the impact of COVID-19 and its variants on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, 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; higher inflation and its impacts; and the effects of any 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, 2022, 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 months ended September 30, ~~2017.~~2023. 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~~2022 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.

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 leases against its operating earnings. Customers has included a detailed discussion of this process in "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' audited consolidated financial statements in its 2022 Form 10-K, as well as several tables describing its ACL in "NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' unaudited consolidated financial statements.

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Impact of Macroeconomic and Banking Industry Uncertainties, COVID-19 and Geopolitical Conflicts

The Federal Reserve began normalizing monetary policy with its decision in late 2021 to taper its quantitative easing and raising the federal funds rate beginning in March 2022. Inflation remains elevated in 2023, reflecting supply and demand imbalances related to COVID-19 and its variants, higher food and energy prices from the military conflicts between Russia and Ukraine and in Israel, and broader price pressures. The Federal Reserve has raised interest rates significantly throughout 2022 and into 2023 in attempts to bring the inflation to its long run target rate of two percent.

In early March 2023, regional banks, Silicon Valley Bank and Signature Bank were placed in receivership by the state regulators and the FDIC. Citing systemic risk to the U.S. banking system, the FDIC, Federal Reserve and the U.S. Department of Treasury announced that all depositors of Silicon Valley Bank and Signature Bank would be made whole and have access to their funds. The Federal Reserve has also established a new Bank Term Funding Program, which offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities and other qualifying assets as collateral. These assets will be valued at par. The BTFP is an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress. As of September 30, 2023, Customers had no advances outstanding under the Federal Reserve's discount window or the BTFP. Refer to "NOTE 10 – BORROWINGS" to Customers' unaudited consolidated financial statements.

Significant uncertainties as to future economic conditions continue to exist, including higher inflation and interest rate environment, elevated liquidity risk to the U.S. banking system, particularly to the regional banks, disruptions to global supply chain and labor markets and higher oil and commodity prices exacerbated by the military conflicts between Russia and Ukraine and in Israel. Customers has taken deliberate actions in response, including maintaining higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios. Customers has shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates to position the Bank for higher interest rates. Customers has also shifted the mix of its available for sale debt securities portfolio towards variable rate, shorter duration debt securities. The Bank's debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity, including through the BTFP. The Bank had $6.3 billion in immediately available liquidity from the FRB and FHLB and cash on hand of $3.4 billion as of September 30, 2023. The Bank's estimated FDIC insured deposits represented approximately 74% of our deposits (inclusive of accrued interest) as of September 30, 2023. Customers is focused on growing its non-interest bearing and lower-cost interest-bearing deposits. Customers continues to monitor closely the impact of uncertainties affecting the macroeconomic conditions, the U.S. banking system, particularly regional banks, COVID-19 and its variants, the military conflicts between Russia and Ukraine and in Israel, as well as any effects that may result from the federal government's responses including future rate hikes and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, COVID-19 and its variants, the geopolitical conflicts and developments in the U.S. banking system will impact Customers' operations and financial results during the remainder of 2023 is highly uncertain.

New Accounting Pronouncements

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

Critical Accounting Policies and Estimates

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~~2022 Form ~~10-K and updated in this report on Form 10-Q for the quarterly period ended September 30, 2017.~~10-K.

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~~judgments 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.

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Allowance for Credit Losses

Customers' ACL at September 30, 2023 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 loan and lease 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 industry and state.

The ACL may be affected materially by a variety of qualitative factors that Customers considers to reflect its current judgment of various events and risks that are not measured in our statistical procedures, including uncertainty related to the economic forecasts used in the modelled credit loss estimates, nature and volume of the 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, as deemed applicable, to arrive at a scenario or a composite of scenarios 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 a 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 President, 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 judgments and the related disclosures are reviewed by Customers' Audit Committee of the Board of Directors.

The net increase in our estimated ACL as of September 30, 2023 as compared to our December 31, 2022 estimate was primarily attributable to additional provision for credit losses from the recognition of weaker macroeconomic forecasts and the recognition of ACL for PCD loans acquired from the FDIC, net of related charge-offs upon acquisition, partially offset by lower loan balances held for investment. There was a provision for credit losses on loans and leases of $17.1 million and $57.4 million for the three and nine months ended September 30, 2023, respectively, resulting in an ACL ending balance of $142.2 million ($139.2 million for loans and leases and $3.0 million for unfunded lending-related commitments) as of September 30, 2023.

To determine the ACL as of September 30, 2023, Customers utilized Moody's September 2023 Baseline forecast to generate its modelled expected losses and considered Moody's other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management's reasonable expectations of current and future economic conditions. The Baseline forecast at September 2023 assumed slightly higher growth rate in macroeconomic forecasts compared to the second quarter 2023 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board not raising the effective fed funds rate further as it has reached its terminal range of 5.25% to 5.5%, and easing gradually beginning in mid-2024; a short federal government shutdown causing a slightly lower GDP growth in the fourth quarter 2023 and recovering in the first quarter 2024; recent U.S. bank failures are not symptomatic of a broader problem in the U.S. financial system and policymakers' aggressive response will ensure that the failures do not weaken the financial system or the U.S. economy; the military conflict between Russia and Ukraine continuing for the foreseeable future but its fallout on energy, agriculture and other commodity markets and the global economy fading; the CPI rising 3.3% in the fourth quarter 2023 and 2.7% in 2024; and the unemployment rate rising to 3.9% in the fourth quarter 2023 and 4.1% in 2024. Customers continues to monitor the impact of the U.S. banking system turmoil, military conflicts between Russia and Ukraine and in Israel, inflation, and monetary and fiscal policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

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As of December 31, 2022, the ACL ending balance was $133.9 million ($130.9 million for loans and leases and $3.0 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2022, Customers utilized the Moody's December 2022 Baseline forecast to generate its modelled expected losses and considered Moody's other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management's reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2022 assumed lower growth rates in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2021; oil prices remaining volatile, but gradually declining by mid-2023, from recession fears, weakening global economies and the embargo on Russian crude oil from the Russian invasion of Ukraine; COVID-19 becoming less disruptive to global supply chains, tourism and business travel, immigration and labor markets; the Federal Reserve raising the effective fed funds rate to just under 5.0% and cutting the fed funds rate beginning in late 2023 and throughout 2024; the CPI rising 4.1% in 2023 and 2.4% in 2024; and the unemployment rate rising to 4.0% in 2023 and 4.1% in 2024.

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 a longer federal government shutdown causing consumer and business confidence to decline, recent bank failures raising fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards, the Federal Reserve keeping the fed funds rate at the terminal range of 5.25% to 5.5% through the fourth quarter of 2023 but easing subsequently as the economy weakens, military conflict between Russia and Ukraine persisting longer than expected, rising unemployment and the U.S. economy falling into recession in the fourth quarter of 2023. Under this scenario, as an example, the unemployment rate is estimated at 4.1% and 7.3% in 2023 and 2024, respectively. These numbers represent a 0.4% and 3.2% higher unemployment estimate than the Baseline scenario projection of 3.7% and 4.1% for the same time periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modelled results. This would result in an incremental quantitative impact to the ACL of approximately $62 million at September 30, 2023. 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 geopolitical instability, risks of rising inflation including a near-term recession, worsening of the U.S. banking system turmoil, or the emergence of a more contagious and severe COVID-19 variant, 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 geopolitical instability, risks of rising inflation, worsening of the U.S. banking system turmoil, federal government shutdown and COVID-19 and its variants have 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, refer to "NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' 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 nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				QTD				Nine Months Ended September 30,				YTD
(dollars in thousands)	2023		2022		Change		% Change		2023		2022		Change		% Change
Net interest income	$	199,773	$	159,032	$	40,741	25.6	%	$	514,943	$	488,583	$	26,360	5.4	%
Provision (benefit) for credit losses	17,856		(7,994)		25,850		(323.4)	%	61,088		31,850		29,238		91.8	%
Total non-interest income	17,775		(9,017)		26,792		(297.1)	%	51,893		24,927		26,966		108.2	%
Total non-interest expense	89,466		76,198		13,268		17.4	%	258,896		226,210		32,686		14.4	%
Income before income tax expense	110,226		81,811		28,415		34.7	%	246,852		255,450		(8,598)		(3.4)	%
Income tax expense	23,470		17,899		5,571		31.1	%	58,801		56,127		2,674		4.8	%




Net income	86,756		63,912		22,844		35.7	%	188,051		199,323		(11,272)		(5.7)	%
Preferred stock dividends	3,803		2,548		1,255		49.3	%	10,826		6,544		4,282		65.4	%

Net income available to common shareholders	$	82,953	$	61,364	$	21,589	35.2	%	$	177,225	$	192,779	$	(15,554)	(8.1)	%

Customers reported net income available to common shareholders of ~~$4.1~~$83.0 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$177.2 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,~~three and ~~total non-performing assets (non-performing loans and other real estate owned) only 0.30% of total assets at~~nine months ended 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 continue2023, respectively, compared 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~~net income available to common shareholders of $61.4 million and $192.8 million for the three and nine months ended September 30, 2022, respectively. Factors contributing to the change in net income available to common shareholders for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 were as follows.

Net interest income

Net interest income increased $40.7 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 due to an increase in average interest-earning assets and higher market interest rates on variable rate loans, interest-earning deposits and investments, offset in part by higher funding costs from higher average balances of interest bearing deposits and other borrowings and increased market interest rates. Average interest-earning assets increased by $1.5 billion for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The increase in interest-earning assets was driven by increases in interest-earning deposits, investments and commercial and industrial loans and leases, primarily in variable rate lower credit risk specialty lending, offset in part by decreases in PPP loans due to PPP loan forgiveness and guarantee payments from the SBA as the PPP program was substantially completed in early 2023, commercial loans to mortgage companies due to lower mortgage activity from rising interest rates and consumer installment loans as Customers continued its de-risking strategy. NIM increased by 54 basis points to 3.70% for the three months ended September 30, 2023 from 3.16% for the three months ended September 30, 2022. The NIM increase was primarily attributable to higher interest income on variable rate loans, investments, and interest-earning deposits given the rising interest rate environment and higher-than-expected purchase discount accretion of approximately $27 million recognized on the Venture Banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs, which is unlikely to occur in future periods. The NIM increase was partially offset by the shift in the mix of interest-bearing liabilities in a rising interest rate environment, which drove a 248 basis point increase in the cost of interest-bearing liabilities for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, and reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness, which accelerated the recognition of net deferred loan origination fees, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Customers' total cost of funds, including non-interest bearing deposits was 3.48% and 1.62% for the three months ended September 30, 2023 and 2022, respectively.

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Net interest income increased $26.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 due to an increase in average interest-earning assets and higher market interest rates on variable rate loans, interest-earning deposits and investments, offset in part by higher funding costs from higher average balances of interest bearing deposits and other borrowings and increased market interest rates. Average interest-earning assets increased by $1.6 billion for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase in interest-earning assets was driven by increases in interest-earning deposits, commercial and industrial loans and leases, primarily in variable rate lower credit risk specialty lending and multifamily loans, offset in part by decreases in PPP loans due to PPP loan forgiveness and guarantee payments from the SBA as the PPP program was substantially completed in early 2023, commercial loans to mortgage companies due to lower mortgage activity from rising interest rates, and consumer installment loans as Customers continued its de-risking strategy. NIM decreased ~~$14.5~~by 10 basis points to 3.28% for the nine months ended September 30, 2023 from 3.38% for the nine months ended September 30, 2022. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 297 basis point increase in the cost of interest-bearing liabilities and contributed to the NIM decrease for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease in NIM was also due to reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness, which accelerated the recognition of net deferred loan origination fees, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The NIM decrease was partially offset by a shift in the mix of interest-earning assets in a rising interest rate environment mostly due to higher interest rates on variable rate loans in specialty lending, investments, and interest-earning deposits which drove a 224 basis point increase in the yield on interest-earning assets, and higher-than-expected purchase discount accretion of approximately $27 million recognized on the Venture Banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs, which is unlikely to occur in future periods. Customers' total cost of funds, including non-interest bearing deposits was 3.42% and 0.93% for the nine months ended September 30, 2023 and 2022, respectively.

Provision (benefit) for credit losses

The $25.9 million increase in the provision for credit losses for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily reflects the recognition of increased uncertainties in macroeconomic forecasts, partially offset by lower loan balances held for investment including the sale of consumer installment loans to a third-party sponsored VIE during the three months ended September 30, 2022. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment represented 1.10% of total loans and leases receivable at September 30, 2023, compared to 0.95% of total loans and leases receivable at September 30, 2022. Net charge-offs for the three months ended September 30, 2023 were $17.5 million, or ~~77.8%,~~50 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.5 million, or 47 basis points on an annualized basis, for the three months ended September 30, 2022. The decrease in net charge-offs for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was primarily due to a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate collateral dependent loan that Customers decided to exit during the three months ended September 30, 2022, partially offset by higher charge-offs for multifamily and consumer installment loans.

The $29.2 million increase in the provision for credit losses for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily reflects the recognition of weaker macroeconomic forecasts, partially offset by lower loan balances held for investment including the sale of consumer installment loans to a third-party sponsored VIE during the nine months ended September 30, 2022. Net charge-offs for the nine months ended September 30, 2023 were $51.7 million, or 47 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $39.2 million, or 36 basis points on an annualized basis, for the nine months ended September 30, 2022. The net charge-offs of $51.7 million for nine months ended September 30, 2023 excludes $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the Venture Banking loan portfolio on June 15, 2023. The increase in net charge-offs for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily due to higher charge-offs for consumer installment loans.

The provision for credit losses for the three and nine months ended September 30, 2023 also included a provision for credit losses of $0.8 million and $3.7 million, respectively, on certain asset-backed securities and corporate notes included in our investment securities available for sale. The provision for credit losses on certain asset-backed securities included in our investment securities available for sale was a benefit to provision for credit losses of $0.2 million and a provision for credit losses of $0.3 million for the three and nine months ended September 30, 2022, respectively. Refer to "NOTE 5 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

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Non-interest income

The $26.8 million increase in non-interest income for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily resulted from $23.5 million in loss on sale of consumer installment loans to a third-party sponsored VIE for the three months ended September 30, 2022, increases of $3.0 million in loan fees and $1.8 million in commercial lease income, and a decrease of $1.7 million in net loss on sale of investment securities. These increases were offset in part by decreases of $1.5 million in bank-owned life insurance income, $0.7 million in other non-interest income, $0.5 million in mortgage warehouse transactional fees and $0.5 million in gain on sale of SBA and other loans for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

The $27.0 million increase in non-interest income for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily resulted from $23.5 million in loss on sale of consumer installment loans to a third-party sponsored VIE for the nine months ended September 30, 2022, a decrease of $5.8 million in net loss on sale of investment securities, and increases of $7.6 million in commercial lease income and $6.1 million in loan fees. These increases were offset in part by $5.0 million in loss on sale of capital call lines of credit for the nine months ended September 30, 2023, and decreases of $4.3 million in gain on sale of SBA and other loans, $4.1 million in bank-owned life insurance income, $2.0 million in mortgage warehouse transactional fees and $0.6 million in other non-interest income for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Non-interest expense

The $13.3 million increase in non-interest expense for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily resulted from a legal settlement expense of $4.1 million for the three months ended September 30, ~~2017 when~~2023, and increases of $6.0 million in FDIC assessments, non-income taxes and regulatory fees, $2.6 million in salaries and employee benefits, $2.3 million in professional services, $1.4 million in commercial lease depreciation and $1.0 million in other non-interest expense. These increases were offset in part by a decrease of $3.9 million in technology, communication and bank operations for the three months ended September 30, 2023 compared to ~~net~~the three months ended September 30, 2022.

The $32.7 million increase in non-interest expense for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily resulted from a legal settlement expense of $4.1 million, and increases of $16.1 million in salaries and employee benefits, $14.5 million in FDIC assessments, non-income taxes and regulatory fees, $6.1 million in commercial lease depreciation, $4.7 million in professional services, $3.5 million in other non-interest expense and $2.7 million in loan servicing. These increases were offset in part by decreases of $17.7 million in technology, communication and bank operations and $2.2 million in occupancy for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Income tax expense

Customers' effective tax rate was 21.29% for the three months ended September 30, 2023 compared to 21.88% for the three months ended September 30, 2022. The decrease in the effective tax rate primarily resulted from an increase in income ~~available~~tax credits.

Customers' effective tax rate was 23.82% for the nine months ended September 30, 2023 compared to ~~common shareholders of $18.7~~21.97% for the nine months ended September 30, 2022. The increase in the effective tax rate primarily resulted from tax expense on surrendered bank-owned life insurance policies and lower stock-based compensation benefits, partially offset by an increase in income tax credits.

Preferred stock dividends

Preferred stock dividends were $3.8 million and $2.5 million for the three 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~~2023 and 2022, respectively. Preferred stock dividends were $10.8 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~~$6.5 million for ~~three~~the nine months ended September 30, ~~2017 for~~2023 and 2022, respectively. There were no changes to the ~~full~~ amount of ~~the decline in fair value of the Religare investment below the cost basis established at June 30, 2017.~~

Other contributors to the decrease in net income available to common shareholders included an increase in the provision for loan losses of $2.3 million, primarily as a result of growth in the loan portfolio and provisions on impaired loans, and increases in non-interest expenses of $4.8 million, primarily driven by increases in salaries and employee benefits and technology-related expenses, including core process system and conversion costs and noncapitalizable software development costs. These increases were offset in part by increased gains on sale of investment securities of $5.4 million and an increase in net interest income of $3.4 million.

~~Net interest income of $68.0 million increased $3.4 million, or 5.3%, for~~preferred stock outstanding during the three and nine months ended September 30, ~~2017 when~~2023 and 2022.

On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to ~~net interest income~~a fixed rate of ~~$64.6 million for~~6.45%. On December 15, 2021, the three months ended September 30, 2016. This increase resulted primarily from an increase in the average balance of interest-earning assets of $1.2 billion for third quarter 2017, offset in part by a 21 basis point decline in net interest margin (tax-equivalent) to 2.62% for third quarter 2017 from 2.83% for third quarter 2016.

~~The provision for loan losses of $2.4 million increased $2.3 million for the three months ended September 30, 2017 when~~Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to ~~the provision for loan losses~~a fixed rate of $0.1 million for the three months ended September 30, 2016. The third quarter 2017 provision expense included provisions of $1.4 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 million for the three months ended September 30, 2016. This decrease was primarily the result of an $8.3 million other-than-temporary impairment loss related6.00%. Pursuant to the ~~Religare investment, decreases in other non-interest income~~Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment 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%,~~26.161 basis points 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 increasesthree-month LIBOR as the ~~average number of full-time equivalent employees remained relatively consistent over the past year,~~benchmark reference rate on Series E and ~~increases in technology, communications~~F Preferred Stock, plus 514 and ~~bank operations and other expenses of $1.9 million and $0.9 million,~~476 basis points, 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 result of preferred stock issuances aggregating $85.0 million in September 2016beginning with dividends ~~at 6.00%.~~declared on October 25, 2023.

~~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 nine months ended September 30, 2023 and 2022. 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 September 30,												Three Months Ended September 30,
	2023						2022						2023 vs. 2022
(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	$	3,211,753	$	43,800	5.41	%	$	528,001	$	2,949	2.22	%	$	9,003	$	31,848	$	40,851
Investment securities (1)	4,240,116		54,243		5.12	%	3,770,922		30,546		3.24	%	19,513		4,184		23,697
Loans and leases:

Commercial and industrial:
Specialty lending loans and leases (2)	5,717,252		157,671		10.94	%	5,064,730		64,753		5.07	%	83,613		9,305		92,918
Other commercial and industrial loans (2)	1,613,614		28,012		6.89	%	1,585,136		18,794		4.70	%	8,876		342		9,218
Commercial loans to mortgage companies	1,159,698		16,916		5.79	%	1,623,624		17,092		4.18	%	5,511		(5,687)		(176)
Multifamily loans	2,141,384		21,292		3.94	%	2,206,953		20,427		3.67	%	1,481		(616)		865
PPP loans	166,164		604		1.44	%	1,349,403		14,666		4.31	%	(6,070)		(7,992)		(14,062)
Non-owner occupied commercial real estate loans	1,425,831		21,208		5.90	%	1,372,244		15,595		4.51	%	4,982		631		5,613
Residential mortgages	528,022		5,965		4.48	%	513,694		5,008		3.87	%	811		146		957
Installment loans	1,147,069		24,103		8.34	%	1,938,199		44,122		9.03	%	(3,157)		(16,862)		(20,019)



Total loans and leases (3)	13,899,034		275,771		7.87	%	15,653,983		200,457		5.08	%	99,870		(24,556)		75,314
Other interest-earning assets	134,416		2,526		7.45	%	68,549		1,964		11.37	%	(848)		1,410		562
Total interest-earning assets	21,485,319		376,340		6.96	%	20,021,455		235,916		4.68	%	122,100		18,324		140,424
Non-interest-earning assets	492,691						492,911

Total assets	$	21,978,010					$	20,514,366
Liabilities
Interest checking accounts	$	5,758,215	58,637		4.04	%	$	6,669,787	33,685		2.00	%	30,108		(5,156)		24,952
Money market deposit accounts	2,181,184		22,983		4.18	%	5,789,991		24,348		1.67	%	20,511		(21,876)		(1,365)
Other savings accounts	1,077,298		11,582		4.27	%	625,908		1,818		1.15	%	7,714		2,050		9,764
Certificates of deposit	4,466,522		52,623		4.67	%	1,141,970		5,529		1.92	%	15,530		31,564		47,094
Total interest-bearing deposits (4)	13,483,219		145,825		4.29	%	14,227,656		65,380		1.82	%	84,035		(3,590)		80,445
Federal funds purchased	—		—		—	%	513,011		2,871		2.22	%	—		(2,871)		(2,871)

Borrowings	2,328,955		30,742		5.24	%	874,497		8,633		3.92	%	3,723		18,386		22,109
Total interest-bearing liabilities	15,812,174		176,567		4.43	%	15,615,164		76,884		1.95	%	98,704		979		99,683
Non-interest-bearing deposits (4)	4,347,977						3,245,963
Total deposits and borrowings	20,160,151				3.48	%	18,861,127				1.62	%
Other non-interest-bearing liabilities	306,822						255,735

Total liabilities	20,466,973						19,116,862
Shareholders' equity	1,511,037						1,397,504
Total liabilities and shareholders' equity	$	21,978,010					$	20,514,366
Net interest income			199,773						159,032				$	23,396	$	17,345	$	40,741
Tax-equivalent adjustment			405						334
Net interest earnings			$	200,178					$	159,366
Interest spread					3.48	%					3.06	%
Net interest margin					3.70	%					3.16	%
Net interest margin tax equivalent					3.70	%					3.16	%
Net interest margin tax equivalent, excluding PPP loans (5)					3.75	%					3.18	%

(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 3.24% and 1.48% for the three months ended September 30, ~~2017 was $68.0 million,~~2023 and 2022, 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 September 30, 2023 and 2022, presented to approximate interest income as a taxable asset and 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. Please refer to the reconciliation schedule that follows this table.

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Net interest income increased $40.7 million for the three months ended September 30, ~~2016, as average loan and security balances increased $1.2 billion. Net interest margin (tax equivalent) narrowed by 21 basis points to 2.62% for third quarter 2017~~2023 compared to ~~2.83% for third quarter 2016.~~the three months ended September 30, 2022 due to an increase in average interest-earning assets and higher market interest rates on variable rate loans, interest-earning deposits and investments, offset in part by higher funding costs from higher average balances of interest bearing deposits and other borrowings and increased market interest rates. The increase in 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)~~income was also ~~impacted by Customers Bancorp's issuance~~attributable to higher-than-expected purchase discount accretion of ~~$100~~approximately $27 million ~~principal amount of 3.95% senior notes~~on the Venture Banking loan portfolio acquired from the FDIC on June ~~30, 2017~~15, 2023 due to loan maturities and ~~a one-time interest expense adjustment of approximately $0.3 million.~~

~~Interest expense on total interest-bearing~~increased payoffs, which is unlikely to occur in future periods. Average interest-earning assets increased by $1.5 billion, primarily related to increases in interest-earning deposits, ~~increased $5.4 million~~investments and commercial and industrial loans and leases, primarily in ~~third quarter 2017 compared~~variable rate lower credit risk specialty lending, offset in part by decreases in PPP loans due to ~~third quarter 2016. The increase~~PPP loan forgiveness and guarantee payments from the SBA as the PPP program was ~~mainly driven by the average rate on interest-bearing deposits, which increased 34 basis points for third quarter 2017 compared~~substantially completed in early 2023, commercial loans to ~~third quarter 2016, reflecting higher~~mortgage companies due to lower mortgage activity from rising interest rates ~~offered by~~and consumer installment loans as Customers oncontinued its money market deposit accounts and certificates of deposits in order to remain competitive and attract new and retain existing deposit customers. Deposit volumes remained relatively stable, as average interest-bearing deposits increased $30.2 millionde-risking strategy. Total consumer installment loans decreased for the three months ended September 30, ~~2017~~2023 compared to ~~average interest-bearing deposits~~the three months ended September 30, 2022, as consumer installment loans held for investment decreased primarily for risk management purposes and the build out of our held-for-sale strategy in 2023 in which we accumulate loans with the intent to sell in the future.

The NIM increased by 54 basis points to 3.70% for the three months ended September 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 rate on borrowings, which increased 30 basis points for third quarter 2017 compared to third quarter 2016, primarily as a result of an increase in the borrowing rate for short term advances, including FHLB advances and federal funds purchased, and an increase in the outstanding balance of senior note borrowings.

~~Provision for Loan Losses~~

~~The provision for loan losses of $2.4 million increased by $2.3 million~~2023 from 3.16% for the three months ended September 30, ~~2017,~~2022 resulting primarily from a shift in the mix of interest-earning assets in a rising interest rate environment, offset in part by a shift in the mix of interest-bearing liabilities in a rising interest rate environment and reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness, which accelerated the recognition of net deferred loan origination fees. The shift in the mix of interest-earning assets in a rising interest rate environment, mostly due to higher interest rates on variable rate loans in specialty lending, and higher-than-expected purchase discount accretion of approximately $27 million on the Venture Banking loan portfolio acquired from the FDIC on June 15, 2023, drove an increase in the yield on interest-earning assets and contributed to the NIM increase for the three months ended September 30, 2023 compared to ~~$0.1~~the three months ended September 30, 2022. The NIM increase was offset in part by a shift in the mix of interest-bearing liabilities in a rising interest rate environment, which drove a 248 basis point increase in the cost of interest-bearing liabilities, and reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Customers' total cost of funds, including non-interest bearing deposits was 3.48% and 1.62% for the three months ended September 30, 2023 and 2022, respectively.

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	Nine Months Ended September 30,												Nine Months Ended September 30,
	2023						2022						2023 vs. 2022
(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	$	2,100,435	$	81,819	5.21	%	$	595,305	$	4,197	0.94	%	$	49,867	$	27,755	$	77,622
Investment securities (1)	4,074,464		149,585		4.90	%	3,969,809		76,283		2.56	%	71,247		2,055		73,302
Loans and leases:

Commercial and industrial:
Specialty lending loans and leases (2)	5,748,053		383,138		8.91	%	3,963,180		127,304		4.29	%	180,394		75,440		255,834
Other commercial and industrial loans (2)	1,663,494		79,610		6.40	%	1,496,772		46,768		4.18	%	27,149		5,693		32,842
Commercial loans to mortgage companies	1,240,403		53,934		5.81	%	1,785,495		46,713		3.50	%	24,450		(17,229)		7,221
Multifamily loans	2,176,294		62,857		3.86	%	1,863,915		51,506		3.69	%	2,448		8,903		11,351
PPP loans	418,194		25,788		8.24	%	1,946,651		72,132		4.95	%	30,639		(76,983)		(46,344)
Non-owner occupied commercial real estate loans	1,434,459		61,284		5.71	%	1,331,037		40,551		4.07	%	17,382		3,351		20,733
Residential mortgages	535,502		17,298		4.32	%	482,263		13,586		3.77	%	2,113		1,599		3,712
Installment loans	1,517,632		100,669		8.87	%	1,881,160		128,013		9.10	%	(3,163)		(24,181)		(27,344)



Total loans and leases (3)	14,734,031		784,578		7.12	%	14,750,473		526,573		4.77	%	258,594		(589)		258,005
Other interest-earning assets	119,187		5,463		6.13	%	62,955		8,673		NM (6)		(7,998)		4,788		(3,210)
Total interest-earning assets	21,028,117		1,021,445		6.49	%	19,378,542		615,726		4.25	%	349,304		56,415		405,719
Non-interest-earning assets	537,160						526,437

Total assets	$	21,565,277					$	19,904,979
Liabilities
Interest checking accounts	$	6,181,097	178,984		3.87	%	$	6,286,224	55,059		1.17	%	124,860		(935)		123,925
Money market deposit accounts	2,208,853		63,444		3.84	%	5,128,270		36,545		0.95	%	57,607		(30,708)		26,899
Other savings accounts	966,539		27,707		3.83	%	732,801		3,359		0.61	%	22,961		1,387		24,348
Certificates of deposit	4,663,548		155,995		4.47	%	710,130		6,910		1.30	%	45,410		103,675		149,085
Total interest-bearing deposits (4)	14,020,037		426,130		4.06	%	12,857,425		101,873		1.06	%	314,218		10,039		324,257
Federal funds purchased	5,055		188		4.97	%	416,344		4,374		1.40	%	3,192		(7,378)		(4,186)

Borrowings	2,160,332		80,184		4.96	%	783,644		20,896		3.57	%	10,756		48,532		59,288
Total interest-bearing liabilities	16,185,424		506,502		4.18	%	14,057,413		127,143		1.21	%	357,322		22,037		379,359
Non-interest-bearing deposits (4)	3,642,832						4,206,778
Total deposits and borrowings	19,828,256				3.42	%	18,264,191				0.93	%
Other non-interest-bearing liabilities	271,387						250,783

Total liabilities	20,099,643						18,514,974
Shareholders' equity	1,465,634						1,390,005
Total liabilities and shareholders' equity	$	21,565,277					$	19,904,979
Net interest income			514,943						488,583				$	(8,018)	$	34,378	$	26,360
Tax-equivalent adjustment			1,170						843
Net interest earnings			$	516,113					$	489,426
Interest spread					3.08	%					3.32	%
Net interest margin					3.27	%					3.37	%
Net interest margin tax equivalent					3.28	%					3.38	%
Net interest margin tax equivalent, excluding PPP loans (5)					3.27	%					3.27	%

(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 3.23% and 0.80% for the nine months ended September 30, 2023 and 2022, respectively.

(5)Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2023 and 2022, presented to approximate interest income as a taxable asset and 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. Please refer to the reconciliation schedule that follows this table.

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(6)Not Meaningful. Average yield on other interest-earning assets for the nine months ended September 30, 2022 was 18.42% primarily due to $6.4 million of equity investment distributions.

Net interest income increased $26.4 million for the ~~same~~nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 due to an increase in average interest-earning assets and higher market interest rates on variable rate loans, interest-earning deposits and investments, offset in part by higher funding costs from higher average balances of interest bearing deposits and other borrowings and increased market interest rates. The increase in net interest income was also attributable to higher-than-expected purchase discount accretion of approximately $27 million recognized on the Venture Banking loan portfolio purchased from the FDIC on June 15, 2023 due to loan maturities and increased payoffs, which is unlikely to occur in future periods. Average interest-earning assets increased by $1.6 billion, primarily related to increases in interest-earning deposits, commercial and industrial loans and leases, primarily in variable rate lower credit risk specialty lending and multifamily loans, partially offset by decreases in PPP loans due to PPP loan forgiveness and guarantee payments from the SBA as the PPP program was substantially completed in early 2023, commercial loans to mortgage companies due to lower mortgage activity from rising interest rates and consumer installment loans as Customers continued its de-risking strategy.

The NIM decreased by 10 basis points to 3.28% for the nine months ended September 30, 2023 from 3.38% for the nine months ended September 30, 2022 resulting primarily from a shift in the mix of interest-bearing liabilities in a rising interest rate environment and reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness, which accelerated the recognition of net deferred loan origination fees, offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 297 basis point increase in the cost of interest-bearing liabilities and contributed to the NIM decrease for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease in NIM was also due to reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease in NIM was offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment, mostly due to higher interest rates on variable rate loans in specialty lending, investments, and interest-earning deposits which drove a 224 basis point increase in the yield on interest-earning assets, and higher-than-expected purchase discount accretion of approximately $27 million recognized on the Venture Banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs, which is unlikely to occur in future periods. Customers' total cost of funds, including non-interest bearing deposits was 3.42% and 0.93% for the nine months ended September 30, 2023 and 2022, respectively.

Customers' net interest margin tables contain non-GAAP financial measures calculated using non-GAAP amounts. These measures include net interest margin tax equivalent, excluding PPP loans. Management uses these non-GAAP measures to compare the current period presentation to historical periods in ~~2016.~~ 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, excluding PPP loans for the three and nine months ended September 30, 2023 and 2022 is set forth below.


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2023			2022			2023			2022
Net interest income (GAAP)	$	199,773		$	159,032		$	514,943		$	488,583
Tax-equivalent adjustment	405			334			1,170			843
Net interest income tax equivalent (GAAP)	200,178			159,366			516,113			489,426
Loans receivable, PPP net interest (income) expense	1,381			(9,632)			(11,960)			(63,193)
Net interest income tax equivalent, excluding PPP loans (Non-GAAP)	$	201,559		$	149,734		$	504,153		$	426,233

Average total interest-earning assets (GAAP)	$	21,485,319		$	20,021,455		$	21,028,117		$	19,378,542
Average PPP loans	(166,164)			(1,349,403)			(418,194)			(1,946,651)
Adjusted average total interest-earning assets (Non-GAAP)	$	21,319,155		$	18,672,052		$	20,609,923		$	17,431,891

Net interest margin (GAAP)	3.70		%	3.16		%	3.27		%	3.37		%
Net interest margin tax equivalent (GAAP)	3.70		%	3.16		%	3.28		%	3.38		%
Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)	3.75		%	3.18		%	3.27		%	3.27		%

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PROVISION (BENEFIT) FOR CREDIT LOSSES

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. Customers recorded a provision for credit losses on loans and leases during the three months ended September 30, 2023, which resulted primarily from the recognition of increased uncertainties in macroeconomic forecasts, partially offset by lower loan balances held for investment. Customers recorded a provision for credit losses of ~~$2.4 million in third quarter 2017 included provisions of $1.4~~$17.1 million for loans and leases and $48 thousand for lending-related commitments, respectively, for the three months ended September 30, 2023. Customers recorded a benefit to provision for credit losses of $7.8 million for loans and leases, which resulted primarily from the sale of consumer installment loans to a third-party sponsored VIE, partially offset by loan ~~portfolio~~ growth and ~~reserves~~deteriorating macroeconomic forecasts, and a provision for credit losses of $0.3 million for lending-related commitments, respectively, for the three months ended September 30, 2022. Net charge-offs for the three months ended September 30, 2023 were $17.5 million, or 50 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.5 million, or 47 basis points of average loans and leases on an annualized basis, for the three months ended September 30, 2022. The decrease in net charge-offs for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was primarily due to a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate collateral dependent loan that Customers decided to exit during the three months ended September 30, 2022, partially offset by higher charge-offs for multifamily and consumer installment loans.

Customers recorded a provision for credit losses of $57.4 million for loans and leases and $24 thousand for lending-related commitments, respectively, for the nine months ended September 30, 2023, which resulted primarily from the recognition of weaker macroeconomic forecasts, partially offset by lower loan balances held for investment. Customers recorded a provision for credit losses of $31.6 million for loans and leases, which reflected the benefit associated with the sale of consumer installment loans to a third-party sponsored VIE, and $0.8 million for ~~impaired~~lending-related commitments, respectively, for the nine months ended September 30, 2022. Net charge-offs for the nine months ended September 30, 2023 were $51.7 million, or 47 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $39.2 million, or 36 basis points of average loans and leases on an annualized basis, for the nine months ended September 30, 2022. The net charge-offs of $51.7 million for nine months ended September 30, 2023 excludes $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the Venture Banking loan portfolio on June 15, 2023. The increase in net charge-offs for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily due to higher charge-offs for consumer installment loans. ~~In third quarter 2016, the provision for loan losses of $0.1 million was the result of minimal loan growth during the quarter, as planned, as well as exceptional asset quality.~~

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

~~Non-Interest Income~~The provision for credit losses for the three and nine months ended September 30, 2023 also included a provision for credit losses of $0.8 million and $3.7 million, respectively, on certain asset-backed securities and corporate notes included in our investment securities available for sale. The provision for credit losses on certain asset-backed securities included in our investment securities available for sale was a benefit to provision for credit losses of $0.2 million and a provision for credit losses of $0.3 million for the three and nine months ended September 30, 2022, respectively. Refer to "NOTE 5 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

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NON-INTEREST INCOME

The table below presents the components of non-interest income for the three and nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022.


	Three Months Ended September 30,				QTD				Nine Months Ended September 30,				YTD
(dollars in thousands)	2023		2022		Change		% Change		2023		2022		Change		% Change
Commercial lease income	$	8,901	$	7,097	$	1,804	25.4	%	$	27,144	$	19,584	$	7,560	38.6	%
Loan fees	6,029		3,008		3,021		100.4	%	14,290		8,171		6,119		74.9	%
Bank-owned life insurance	1,973		3,449		(1,476)		(42.8)	%	9,617		13,722		(4,105)		(29.9)	%
Mortgage warehouse transactional fees	1,018		1,545		(527)		(34.1)	%	3,468		5,443		(1,975)		(36.3)	%




Gain (loss) on sale of SBA and other loans	(348)		106		(454)		(428.3)	%	(1,109)		3,155		(4,264)		(135.2)	%
Loss on sale of capital call lines of credit	—		—		—		—	%	(5,037)		—		(5,037)		NM
Loss on sale of consumer installment loans	—		(23,465)		23,465		(100.0)	%	—		(23,465)		23,465		(100.0)	%
Net gain (loss) on sale of investment securities	(429)		(2,135)		1,706		(79.9)	%	(429)		(6,227)		5,798		(93.1)	%





Other	631		1,378		(747)		(54.2)	%	3,949		4,544		(595)		(13.1)	%
Total non-interest income	$	17,775	$	(9,017)	$	26,792	(297.1)	%	$	51,893	$	24,927	$	26,966	108.2	%

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 $1.8 million increase in commercial lease income for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily resulted from the growth of Customers' equipment finance business. There can be no assurance that Customers' equipment finance business will continue to grow in 2023, given the significant uncertainty in the macroeconomic environment, which may impact Customers' growth strategy.

The $7.6 million increase in commercial lease income for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily resulted from the growth of Customers' equipment finance business. There can be no assurance that Customers' equipment finance business will continue to grow in 2023, given the significant uncertainty in the macroeconomic environment, which may impact Customers' growth strategy.

Loan fees

The $3.0 million increase in loan fees for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily resulted from an increase in fees earned on unused lines of credit, servicing related revenue and other fees from commercial borrowers.

The $6.1 million increase in loan fees for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily resulted from an increase in fees earned on unused lines of credit, servicing related revenue and other fees from commercial borrowers.

Bank-owned life insurance

Bank-owned life insurance income 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 $1.5 million decrease in bank-owned life insurance income for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 resulted from a decrease in death benefits paid by insurance carriers under the policies.

The $4.1 million decrease in bank-owned life insurance income for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 resulted from a decrease in death benefits paid by insurance carriers under the policies.

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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
Mortgage warehouse transactional fees

~~Non-interest income decreased $9.5~~The $0.5 million decrease in mortgage warehouse transactional fees for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily resulted from lower mortgage activity due to higher interest rates. There can be no assurance that Customers will earn mortgage warehouse transactional fees in 2023 comparable to 2022, given the lower mortgage banking activity in a higher interest rate environment.

The $2.0 million decrease in mortgage warehouse transactional fees for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily resulted from lower mortgage activity due to higher interest rates. There can be no assurance that Customers will earn mortgage warehouse transactional fees in 2023 comparable to 2022, given the lower mortgage banking activity in a higher interest rate environment.

Gain (loss) on sale of SBA and other loans

The $0.5 million decrease in gain on sale of SBA and other loans for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily reflected losses on sales of SBA loans and consumer installment loans. Customers had $0.2 million in net losses on sales of $12.4 million of SBA loans and $0.2 million in losses on sales of consumer installment loans for the three months ended September 30, 2023, compared to no sales of SBA loans or consumer installment loans for the three months ended September 30, 2022. There can be no assurance that Customers will realize gains from sales of loans in 2023 comparable to 2022 given the significant uncertainty in the capital markets.

The $4.3 million decrease in gain on sale of SBA and other loans for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily reflected $0.2 million in net gains on sales of $78.6 million of SBA loans, $0.2 million in losses on sales of consumer installment loans and a loss of $1.2 million, inclusive of transaction costs, on sales of $556.7 million in consumer installment loans that were classified as held for sale, accrued interest and unamortized deferred loan origination costs, to third-party sponsored VIEs for the nine months ended September 30, 2023, compared to $3.2 million in gains on sales of $31.8 million of SBA loans for the nine months ended September 30, 2022. Customers has continued to build out its held-for-sale strategy in 2023 in which we accumulate loans with the intent to sell in the future. Refer to "NOTE 5 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs during the nine months ended September 30, 2023. There can be no assurance that Customers will realize gains from sales of loans in 2023 comparable to 2022 given the significant uncertainty in the capital markets.

Loss on sale of capital call lines of credit

The $5.0 million increase in realized loss from the sale of capital call lines of credit for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 reflected the sale of $670.0 million of short-term syndicated capital call lines of credit within Specialty Lending, inclusive of accrued interest and unamortized deferred loan origination costs for the nine months ended September 30, 2023, compared to no such sales for the nine months ended September 30, 2022. Customers decided to exit completely the non-strategic, short-term syndicated capital call lines of credit with borrowers that Customers had no deposit relationships.

Loss on sale of consumer installment loans

The $23.5 million decrease in realized loss from the sale of consumer installment loans for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 reflected a loss on sale of $521.8 million in consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE for the three months ended September 30, 2022.

The $23.5 million decrease in realized loss from the sale of consumer installment loans for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 reflected a loss on sale of $521.8 million in consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE for the nine months ended September 30, 2022.

Net gain (loss) on sale of investment securities

The $1.7 million decrease in net loss on sale of investment securities for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 reflects net losses realized from the sales of $5.0 million in AFS debt securities for the three months ended September 30, 2023, compared to the sales of $126.6 million in AFS debt securities during the three months ended September 30, ~~2017 to $18.0~~2022. There can be no assurance that Customers will realize gains from sales of investment securities in 2023, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

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The $5.8 million decrease in net loss on sale of investment securities for the nine months ended September 30, 2023 compared to ~~$27.5~~the nine months ended September 30, 2022 reflects net losses realized from the sales of $5.0 million in AFS debt securities for the nine months ended September 30, 2023, compared to the sales of $681.6 million in AFS debt securities during the nine months ended September 30, 2022. There can be no assurance that Customers will realize gains from sales of investment securities in 2023, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

Other non-interest income

The $0.7 million decrease in other non-interest income for the three months ended September 30, ~~2016. This decrease was~~2023 compared to the three months ended September 30, 2022 primarily resulted from decreases in unrealized gains on derivatives due to ~~an $8.3~~changes in market interest rates and deposit account analysis fees.

The $0.6 million ~~other-than-temporary-impairment loss on equity securities, a~~ decrease in other non-interest income ~~of $2.4 million~~for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily resulted from decreases in unrealized gains on derivatives due to ~~a $2.2 million recovery of a previously recorded loss~~changes in ~~third quarter 2016, decreases in interchange~~market interest rates, deposit account analysis fees 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 in the volume of warehouse transactions. These decreases were offset in part by increases in gains realized from ~~the sale of investment securities of $5.4 million and~~mortgage banking activities from lower mortgage activities due to increased interest rates, partially offset by an increase in SERP income ~~from bank-owned life insurance policies of $0.3 million.~~due to changes in market prices.

~~Non-Interest Expense~~NON-INTEREST EXPENSE

The table below presents the components of non-interest expense for the three and nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022.


	Three Months Ended September 30,				QTD				Nine Months Ended September 30,				YTD
(dollars in thousands)	2023		2022		Change		% Change		2023		2022		Change		% Change
Salaries and employee benefits	$	33,845	$	31,230	$	2,615	8.4	%	$	99,310	$	83,171	$	16,139	19.4	%
Technology, communication and bank operations	15,667		19,588		(3,921)		(20.0)	%	48,663		66,394		(17,731)		(26.7)	%
Commercial lease depreciation	7,338		5,966		1,372		23.0	%	22,541		16,460		6,081		36.9	%
Professional services	8,569		6,269		2,300		36.7	%	25,357		20,640		4,717		22.9	%
Loan servicing	3,858		3,851		7		0.2	%	13,296		10,563		2,733		25.9	%
Occupancy	2,471		2,605		(134)		(5.1)	%	7,750		9,934		(2,184)		(22.0)	%
FDIC assessments, non-income taxes and regulatory fees	8,551		2,528		6,023		238.3	%	21,059		6,530		14,529		222.5	%
Advertising and promotion	650		762		(112)		(14.7)	%	2,245		1,430		815		57.0	%



Legal settlement expense	4,096		—		4,096		NM		4,096		—		4,096		NM
Other	4,421		3,399		1,022		30.1	%	14,579		11,088		3,491		31.5	%
Total non-interest expense	$	89,466	$	76,198	$	13,268	17.4	%	$	258,896	$	226,210	$	32,686	14.4	%

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 $2.6 million increase in salaries and employee benefits for the three months ended September 30, ~~2017, an increase of $4.8 million from non-interest expense of $56.2 million for~~2023 compared to the three months ended September 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~~2022 primarily resulted from ~~$22.7 million for the three months ended September 30, 2016. The~~an 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~~team members, annual merit increases 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 wereincentives, partially 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~~severance.

The $16.1 million increase 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~~salaries and employee benefits 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 shareholders primarily resulted from an increase in non-interest expense of $32.5 million, an increase in preferred stock dividends of $4.9 million, and an increase in provision for loan losses of $3.1 million. These increases were offset in part by an increase in net interest income 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 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.

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 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.

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~~2023 compared to the nine months ended September 30, ~~2016. This increase~~2022 primarily resulted from ~~increased~~an increase in average full-time equivalent team members, annual merit increases, incentives and SERP expenses, partially offset by a decrease in severance.

Technology, communication and bank operations

The $3.9 million decrease in technology, communication and bank operations expense for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily resulted from decreases in deposit ~~volume~~servicing-related expenses resulting from lower servicing fees and the discontinuation of the interchange maintenance fees paid to BM Technologies pursuant to the amended deposit servicing agreement, partially offset by $1.8 million increase in fees paid for software as ~~average interest-bearing deposits~~a service.

Table of Contents

The $17.7 million decrease in technology, communication and bank operations expense 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,~~2023 compared to the nine months ended September 30, ~~2016. This increase was driven~~2022 primarily resulted from decreases in deposit servicing-related expenses resulting from lower servicing fees and the discontinuation of the interchange maintenance fees paid to BM Technologies pursuant to the amended deposit servicing agreement, partially offset by ~~a 47 basis point~~$5.2 million increase in ~~average rates~~fees paid for software as a service.

Customers incurred expenses of $7.9 million and $13.0 million to BM Technologies under the deposit servicing agreement, included within the technology, communication and bank operations expense during the three months ended September 30, 2023 and 2022, respectively. Customers incurred expenses of $22.8 million and $46.7 million to BM Technologies under the deposit servicing agreement, included within the technology, communication and bank operations expense during the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, Customers held $989.7 million and $1.1 billion, respectively, of deposits serviced by BM Technologies. Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or April 15, 2025. Customers expects that approximately $637.0 million of these serviced deposits held on September 30, 2023 in connection with BM Technologies' Higher Education business will leave Customers Bank during fourth quarter 2023. The remaining serviced deposits of approximately $352.8 million in connection with an existing white label relationship will remain at Customers Bank and continue to be serviced by BM Technologies. Refer to "NOTE 9 – DEPOSITS" to Customers' unaudited consolidated financial statements for additional information.

Commercial lease depreciation

The $1.4 million increase in commercial lease depreciation 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 whenthree months ended September 30, 2023 compared to ~~average borrowings~~the three months ended September 30, 2022 primarily resulted from the growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor. There can be no assurance that Customers' equipment finance business will continue to grow in 2023, given the significant uncertainty in the macroeconomic environment, which may impact Customers' growth strategy.

The $6.1 million increase in commercial lease depreciation for the nine months ended September 30, ~~2016.~~2023 compared to the nine months ended September 30, 2022 primarily resulted from the growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor. There can be no assurance that Customers' equipment finance business will continue to grow in 2023, given the significant uncertainty in the macroeconomic environment, which may impact Customers' growth strategy.

~~Provision for Loan Losses~~Professional services

The ~~provision~~$2.3 million increase in professional services for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily due to increases in legal fees related to loan ~~losses increased~~transactions and consulting fees related to technology, compliance and risk management, partially offset by ~~$3.1~~a decrease in outside professional services related to PPP forgiveness.

The $4.7 million ~~to $5.9 million~~increase in professional services for the nine months ended September 30, ~~2017,~~2023 compared to ~~$2.9 million for~~ the ~~same period~~nine months ended September 30, 2022 was primarily due to increases in ~~2016. The provision for~~legal fees related to loan ~~losses of $5.9 million included $2.3 million for loan portfolio growth~~transactions and ~~$3.9 million for impaired loans,~~PPP related matters and consulting fees related to technology, compliance and risk management, partially offset ~~in part~~ by a ~~$0.8~~decrease in outside professional services related to PPP forgiveness.

Loan servicing

The $2.7 million ~~release resulting from improved asset quality and lower incurred losses than previously estimated. The provision for~~increase in loan ~~losses of $2.9 million~~servicing 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 estimated cash flows expected to be collected on purchased credit-impaired loans, a reduction in the estimated amounts owed2023 compared to the ~~FDIC for previous FDIC assisted transactions, and other recoveries of approximately $2.1 million.~~nine months ended September 30, 2022 primarily resulted from the growth in loan portfolios serviced by third parties.

~~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~~Occupancy

The ~~table below presents the components of non-interest income~~$2.2 million decrease in occupancy for the nine months ended September 30, ~~2017~~2023 compared to the nine months ended September 30, 2022 was primarily due to impairment of ROU assets, bank premises and ~~2016.~~

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 income increased $17.9 million~~equipment related to consolidation of branch locations and other offices during the nine months ended September 30, ~~2017 to $59.2~~2022.

FDIC assessments, non-income taxes and regulatory fees

The $6.0 million increase in FDIC assessments, non-income taxes and regulatory fees for the three months ended September 30, 2023 compared to ~~$41.2~~the three months ended September 30, 2022 primarily resulted from an increase in FDIC assessment rates.

The $14.5 million increase in FDIC assessments, non-income taxes and regulatory fees for the nine months ended September 30, ~~2016. This~~2023 compared to the nine months ended September 30, 2022 primarily resulted from an increase ~~was primarily due to a $17.9~~in FDIC assessment rates.

Table of Contents

Legal settlement expense

The $4.1 million increase in ~~interchange and card revenues reflecting a full nine~~legal settlement expense for the three months ~~of BankMobile Disbursements business activity in 2017~~ended September 30, 2023 compared to the three ~~full~~ months ~~in 2016, an $8.5~~ended September 30, 2022 reflects expenses from a settlement with a third party PPP service provider.

The $4.1 million increase in ~~gains on sale of investment securities, an~~legal settlement expense for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 reflects expenses from a settlement with a third party PPP service provider.

Other non-interest expense

The $1.0 million increase in ~~deposit fees of $2.7 million, and increased income~~other non-interest expense for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily resulted from ~~bank-owned life insurance policies of $1.7 million, offset~~increases in part by a $12.9 million other-than-temporary-impairment loss on equity securities 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~~expenses related to business development.

The ~~table below presents the components of~~$3.5 million increase in other non-interest expense for the nine months ended September 30, ~~2017~~2023 compared to the nine months ended September 30, 2022 primarily resulted from increases in provision for operating losses and ~~2016.~~expenses related to business development, partially offset by recoveries of loan workout expenses.

INCOME TAXES

The table below presents income tax expense and the effective tax rate for the three and nine months ended September 30, 2023 and 2022.


	Three Months Ended September 30,						QTD				Nine Months Ended September 30,						YTD
(dollars in thousands)	2023			2022			Change		% Change		2023			2022			Change		% Change
Income before income tax expense	$	110,226		$	81,811		$	28,415	34.7	%	$	246,852		$	255,450		$	(8,598)	(3.4)	%
Income tax expense	23,470			17,899			5,571		31.1	%	58,801			56,127			2,674		4.8	%
Effective tax rate	21.29		%	21.88		%					23.82		%	21.97		%

The $5.6 million increase in income tax expense for the three months ended September 30, 2023, when compared to the same period in the prior year, primarily resulted from an increase in pre-tax income, partially offset by an increase in income tax credits. The decrease in the effective tax rate for the three months ended September 30, 2023, when compared to the same period in the prior year, primarily resulted from an increase in income tax credits.

The $2.7 million increase in income tax expense for the nine months ended September 30, 2023, when compared to the same period in the prior year, primarily resulted from tax expense on surrendered bank-owned life insurance policies of $4.1 million. The increase in the effective tax rate for the nine months ended September 30, 2023, when compared to the same period in the prior year, primarily resulted from tax expense on surrendered bank-owned life insurance policies of $4.1 million and lower stock-based compensation benefits, partially offset by an increase in income tax credits.

PREFERRED STOCK DIVIDENDS

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~~Preferred stock dividends were $3.8 million and $2.5 million for the three months ended September 30, 2023 and 2022, respectively. Preferred stock dividends were $10.8 million and $6.5 million for the nine months ended September 30, ~~2017, an increase~~2023 and 2022, respectively. There were no changes to the amount of ~~$32.5 million from non-interest expense of $128.3 million for~~preferred stock outstanding during the three and nine months ended September 30, ~~2016.~~2023 and 2022.

~~Salaries and employee benefits, which represent~~On June 15, 2021, the ~~largest component of non-interest expense, increased $11.5 million, or 19.8%~~Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, 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 conversion expenses of $9.0 million, interchange expenses of $4.7 million, non-capitalizable software development costs of $3.4 million, and depreciation expense primarily driven by the $3.2 catch-up adjustment recorded 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 ~~three full months~~a fixed rate of ~~activity for 2016.~~

~~Professional services expense increased by $7.9 million, or 60.0%~~6.45%. On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, to $21.1 million for the nine months ended September 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 services 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 relatedcompared to a ~~lower insurance assessment charged~~fixed rate of 6.00%. Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by ~~the FDIC~~Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR 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 basedbenchmark reference rate on historical rates of loss on such transactions. The increase is mainly attributable to the accrual for the estimated liability for a full nine months of operations of the BankMobile Disbursements business in 2017.

~~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 vestingSeries E and ~~the exercise of stock options since the award date compared to $0.6 million for the the same period in 2016.~~

F Preferred Stock, ~~Dividends~~

Preferred stock dividends increased $4.9 million in the nine months ended September 30, 2017 to $10.8 million, compared to $5.9 million for the nine months ended September 30, 2016. This increase was the result of preferred stock issuances totaling $142.5 million issued in April 2016plus 514 and 476 basis points, respectively, beginning with dividends ~~at 6.45% and in September 2016 with dividends at 6.00%.~~declared on October 25, 2023.

Table of Contents

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 $21.9 billion at September 30, ~~2017 with total assets of $10.5 billion.~~2023. This represented ~~a $1.1 billion, or 11.6%,~~an increase of $961.0 million from total assets of ~~$9.4~~$20.9 billion at December 31, ~~2016.~~2022. 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%,~~assets was primarily driven by ~~growth~~increases of $3.0 billion in ~~multifamily, commercial~~cash and ~~industrial~~cash equivalents and $338.1 million in investment securities held to maturity, partially offset by decreases of $861.1 million in loans receivable, PPP, $681.4 million in loans and ~~consumer residential loans. Commercial~~leases receivable, $360.7 million in loans receivable, mortgage warehouse, at fair value, $214.3 million in investment securities, at fair value and $177.9 million in loans held for ~~investment increased $0.7 billion, or 11.5%, to $6.5~~sale.

Total liabilities were $20.3 billion at September 30, ~~2017 compared to $5.9~~2023. This represented an increase of $802.4 million from $19.5 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.~~2022. The increase in total liabilities primarily resulted ~~primarily~~ from increases of $729.8 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 and $38.4 million or 113.8%, to $186.3 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 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.

in total deposits.

The following table sets forth certain key condensed balance sheet data as of September 30, ~~2017~~2023 and December 31, ~~2016:~~2022:


(dollars in thousands)							(dollars in thousands)	September 30, 2023		December 31, 2022		Change		% Change
Cash and cash equivalents							Cash and cash equivalents	$	3,419,974	$	455,806	$	2,964,168	650.3	%
Investment securities, at fair value							Investment securities, at fair value	2,773,207		2,987,500		(214,293)		(7.2)	%
Investment securities held to maturity							Investment securities held to maturity	1,178,370		840,259		338,111		40.2	%
Loans held for sale							Loans held for sale	150,368		328,312		(177,944)		(54.2)	%
Loans receivable, mortgage warehouse, at fair value							Loans receivable, mortgage warehouse, at fair value	962,566		1,323,312		(360,746)		(27.3)	%

Loans receivable, PPP							Loans receivable, PPP	137,063		998,153		(861,090)		(86.3)	%
Loans and leases receivable							Loans and leases receivable	12,463,485		13,144,894		(681,409)		(5.2)	%
Allowance for credit losses on loans and leases							Allowance for credit losses on loans and leases	(139,213)		(130,924)		(8,289)		6.3	%
Bank-owned life insurance							Bank-owned life insurance	291,670		338,441		(46,771)		(13.8)	%
Other assets							Other assets	358,162		400,135		(41,973)		(10.5)	%

Total assets							Total assets	21,857,152		20,896,112		961,040		4.6	%
Total deposits							Total deposits	18,195,364		18,156,953		38,411		0.2	%

	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			FHLB advances	1,529,839		800,000		729,839		91.2	%
Other borrowings	186,258			87,123			Other borrowings	123,775		123,580		195		0.2	%
Subordinated debt	108,856			108,783			Subordinated debt	182,161		181,952		209		0.1	%

Accrued interest payable and other liabilities							Accrued interest payable and other liabilities	264,406		230,666		33,740		14.6	%

Total liabilities	9,561,187			8,526,864			Total liabilities	20,295,545		19,493,151		802,394		4.1	%
Total shareholders’ equity	910,642			855,872			Total shareholders’ equity	1,561,607		1,402,961		158,646		11.3	%
Total liabilities and shareholders’ equity	10,471,829			9,382,736			Total liabilities and shareholders’ equity	$	21,857,152	$	20,896,112	$	961,040	4.6	%

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 $68.3 million and $58.0 million at September 30, ~~2017. This represents a $24.2 million decrease from $37.5 million at~~2023 and December 31, ~~2016. These~~2022, 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 million~~$3.4 billion and ~~$227.2~~$397.8 million at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, 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 and risk management decisions made to optimize Customers' net interest income, while effectively managing interest-rate risk and liquidity. The increase in interest-earning deposits from December 31, ~~2016 was $10.0 million and $20.0 million, respectively,~~2022 primarily resulted from maintaining a higher level of ~~restricted cash placed~~liquidity in ~~escrow for payment~~response to ~~Higher One in connection with~~heightened liquidity risk to the ~~acquisition~~U.S. banking system, particularly to the regional banks since early March 2023.

Table of ~~the Disbursement business.~~Contents

Investment ~~Securities~~securities at fair value

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, asset-backed securities, collateralized loan obligations, commercial mortgage-backed securities, private label collateralized mortgage obligations, corporate notes and ~~marketable~~certain equity securities. 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.

At September 30, ~~2017,~~2023, investment securities ~~were $584.8 million~~at fair value totaled $2.8 billion compared to ~~$493.5 million~~$3.0 billion at December 31, ~~2016,~~2022. The decrease primarily resulted from the maturities, calls and principal repayments totaling $228.5 million and the sales of $4.1 million, partially offset by an increase in the fair value of ~~$91.3 million. The increase was~~AFS debt securities, or a decrease in unrealized losses of $14.5 million primarily ~~the result of purchases of agency-guaranteed mortgage-backed securities of $796.6 million during~~due to changes in market interest rates and credit spreads for the nine months ended September 30, ~~2017,~~2023.

For financial reporting purposes, AFS debt securities are carried at fair value. Unrealized gains and losses on AFS debt securities, other than credit losses, are included in other comprehensive income (loss) and reported as a separate component of shareholders’ equity, net of the related tax effect. Changes in the fair value of equity securities with a readily determinable fair value and securities reported at fair value based on a fair value option election are recorded in non-interest income in the period in which they occur. Customers recorded a provision for credit losses of $3.7 million on certain asset-backed securities and corporate notes included in our investment securities at fair value for the nine months ended September 30, 2023. Refer to "NOTE 5 – INVESTMENT SECURITIES" and "NOTE 13 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS" to Customers' unaudited consolidated financial statements for additional information.

The following table sets forth information about the maturities and weighted-average yield of the AFS debt securities portfolio. The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security adjusted for prepayment estimates, and considers the contractual coupon, amortization of premiums and accretion of discounts. Yields exclude the impact of related hedging derivatives.


	September 30, 2023
	Within one year		After one but within five years		After five but within ten years		No specific maturity		Total
Asset-backed securities	—	%	—	%	—	%	1.50	%	1.50	%



Agency-guaranteed residential collateralized mortgage obligations	—		—		—		2.49		2.49

Collateralized loan obligations	—		—		—		7.24		7.24
Commercial mortgage-backed securities	—		—		—		6.68		6.68
Corporate notes	6.75		6.77		4.54		—		6.43
Private label collateralized mortgage obligations	—		—		—		3.39		3.39

Weighted-average yield	6.75	%	6.77	%	4.54	%	4.84	%	5.19	%

The agency-guaranteed collateralized mortgage obligations in the AFS portfolio were issued by Ginnie Mae and contain guarantees for the collection of principal and interest on the underlying mortgages.

Investment securities held to maturity

At September 30, 2023, investment securities held to maturity totaled $1.2 billion compared to $840.3 million at December 31, 2022. The increase in investment securities held to maturity resulted from $436.8 million of asset-backed securities investments in VIEs in connection with the sale of consumer installment loans that were classified as held for sale and a purchase of $73.1 million of private label collateralized mortgage obligation, partially offset ~~in part~~ by ~~sales~~the maturities, calls and principal repayments totaling $175.9 million for the nine months ended September 30, 2023.

On June 30, 2023, Customers sold $556.7 million of ~~$698.5~~consumer installment loans that were classified as held for sale, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale during the three months ended June 30, 2023, accrued interest and ~~impairment charges~~unamortized deferred loan origination costs, to third-party sponsored VIEs. As part of ~~$12.9 million.~~these sales, Customers ~~held all~~recognized a loss on sale of $1.2 million, inclusive of transaction costs, in gain (loss) on sale of SBA and other loans within non-interest income included in the consolidated statement of income for the nine months ended September 30, 2023. Customers provided financing to the purchasers for a portion of the sale price in the form of $436.8 million of asset-backed securities collateralized by the sold loans. Customers accounts for its investment in the asset-backed securities as HTM debt securities on the consolidated balance sheet. Refer to "NOTE 5 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

Table of Contents

The following table sets forth information about the maturities and weighted-average yield of the investment securities ~~sold~~held to maturity. The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security adjusted for prepayment estimates, and considers the contractual coupon, amortization of premiums, accretion of discounts and amortization of unrealized losses upon transfer from investment securities available for sale to held to maturity, along with the unrealized loss in ~~2017~~accumulated other comprehensive income.


	September 30, 2023
	Within one year		After one but within five years		After five but within ten years		No specific maturity		Total
Asset-backed securities	—	%	—	%	—	%	5.74	%	5.74	%

Agency-guaranteed residential mortgage-backed securities	—		—		—		1.80		1.80
Agency-guaranteed commercial mortgage-backed securities	—		—		—		1.77		1.77
Agency-guaranteed residential collateralized mortgage obligations	—		—		—		1.47		1.47
Agency-guaranteed commercial collateralized mortgage obligations	—		—		—		2.33		2.33



Private label collateralized mortgage obligations	—		—		—		4.43		4.43

Weighted-average yield	—	%	—	%	—	%	4.32	%	4.32	%

The agency-guaranteed mortgage-backed securities and collateralized mortgage obligations in the HTM portfolio were issued by Fannie Mae, Freddie Mac and Ginnie Mae, and contain guarantees for ~~more than 90 days.~~the collection of principal and interest on the underlying mortgages.

Investment securities classified as HTM are those debt securities that Customers has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs, or changes in general economic conditions. For financial reporting purposes, these securities are carried at cost, adjusted for the amortization of premiums and accretion of discounts, computed by a method which approximates the interest method over the terms of the securities. Refer to "NOTE 5 – INVESTMENT SECURITIES" and "NOTE 13 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS" to Customers' unaudited consolidated financial statements for additional information.

~~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); Harrisburg, Pennsylvania (Dauphin County); 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; Orlando and ~~the New England area.~~Jacksonville, Florida; Wilmington and Charlotte, North Carolina; and nationally for certain loan and deposit products. The portfolio of loans to mortgage ~~banking~~ companies is ~~a nation-wide portfolio.~~nationwide. The loan portfolio consists primarily of loans to support mortgage ~~banking~~ companies’ funding needs, ~~multi-family/~~multifamily, 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, home improvement and medical loans through arrangements with fintech companies and other market place lenders nationwide.

Commercial Lending

Customers' commercial lending is divided into ~~four~~six groups: Business Banking, Small and Middle Market Business Banking, ~~Multi-family~~Specialty Banking, Multifamily and Commercial Real Estate Lending, ~~and~~ Mortgage Banking Lending, and SBA Lending. 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.

As of September 30, 2023, Customers had $12.1 billion in commercial loans outstanding, totaling approximately 88.0% of its total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage warehouse, at fair value and PPP loans, compared to commercial loans outstanding of $13.5 billion, comprising approximately 85.8% of its total loan and lease portfolio at December 31, 2022.

Table of Contents

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.

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 technology, 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. Customers' SBA Lending includes digital small balance 7(a) lending.

~~In 2009, Customers launched its~~Customers' Specialty Banking includes lending to mortgage companies, equipment finance, healthcare lending, real estate specialty finance, fund finance, technology and venture capital banking and financial institutions group. Customers added three new verticals within its Specialty Banking, which included capital call lines, technology and venture capital banking and financial institutions group in 2021 to further build its franchise and support the growth of its commercial lending. Customers' lender finance vertical within fund finance provides variable rate loans secured by diverse collateral pools to private debt funds. Customers' capital call lines vertical within fund finance provides variable rate loans secured by collateral pools and limited partnership commitments from institutional investors in private equity funds and cash management services to the alternative investment industry. Customers' technology and venture capital banking primarily provides loans to businesses with mission critical software products, recurring software revenues and funded by well-known venture capital firms.

On June 15, 2023, Customers acquired $631.0 million of a Venture Banking loan portfolio at a discount from the FDIC. Customers has also recruited team members that originated these loans to service the venture-backed growth industry from seed-stage through late-stage. The newly recruited team gives clients access to the capital to grow from innovation to maturity and leverage a customized, best-in-class tech platform to support their growth. The team has long-standing relationships with these clients offering them premier end-to-end financial services meeting their needs. The addition of these team members creates venture banking client coverage in Austin, the Bay Area, Boston, Southern California, Chicago, Denver, Raleigh/Durham, and Washington, D.C. The technology and life sciences portfolio has been combined with Customers’ existing technology and venture capital banking vertical. The portfolio of capital call loans to venture capital firms has been combined with Customers' existing capital call lines vertical within fund finance.

On June 30, 2023, Customers sold $670 million of short-term syndicated capital call lines of credit within Specialty Lending consisting of $280.7 million of loans held for investment and $389.3 million of unfunded loan commitments. The Bank exited completely from these non-strategic, short-term syndicated capital call lines of credit, which did not provide any deposit relationships.

Customers' lending to mortgage companies 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 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. The underlying residential loans are taken as collateral for ~~the Bank’s~~Customers' commercial loans to the mortgage companies. As of September 30, ~~2017,~~2023 and December 31, 2022, commercial loans ~~in the warehouse lending portfolio~~to mortgage companies totaled ~~$2.0~~$962.6 million and $1.3 billion, respectively, and are ~~designated~~reported as ~~held for sale.~~loans receivable, mortgage warehouse, at fair value on the consolidated balance sheet.

The ~~goal~~Equipment Finance Group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The Equipment Finance Group is primarily focused on serving the following segments: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. As of ~~the Bank’s multi-family~~September 30, 2023 and December 31, 2022, Customers had $515.1 million and $560.3 million, respectively, of equipment finance loans outstanding. As of September 30, 2023 and December 31, 2022, Customers had $193.8 million and $157.4 million of equipment finance leases outstanding, respectively. As of September 30, 2023 and December 31, 2022, Customers had $193.4 million and $197.3 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $72.5 million and $52.6 million, respectively.

Customers' multifamily lending group is ~~to build~~focused on retaining a portfolio of high-quality ~~multi-family~~multifamily loans within Customers' covered markets. These lending activities use conservative underwriting standards and primarily target the ~~Bank’s covered markets, while cross selling other products and services. This product primarily targets~~ refinancing ~~existing~~of loans with other banks ~~using conservative underwriting standards and provides~~or provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the ~~multi-family~~multifamily property, plus an assignment of all leases related to such property. As of September 30, ~~2017, the Bank~~2023, Customers had ~~multi-family~~multifamily loans of ~~$3.8~~$2.1 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%~~15.5% of the total loan and lease portfolio, ~~including loans held for sale,~~compared to $2.2 billion, or approximately 14.0% of the total loan and lease portfolio, at December 31, ~~2016.~~2022.

Table of September 30, 2017, the Bank had $8.6 billion in commercial loans outstanding, totaling approximately 94.2% 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, at December 31, 2016.Contents

Consumer Lending

Customers provides unsecured consumer installment loans, residential mortgage and home equity ~~and residential mortgage~~ loans to ~~customers. Underwriting standards~~customers nationwide, including through relationships with fintech companies. Customers has continued to build out its held-for-sale strategy in 2023 in which we accumulate loans with the intent to sell in the future while reducing consumer installment loans held for investment. The installment loan portfolio consists largely of originated and purchased personal, student loan refinancing, home ~~equity lending~~improvement and medical loans. None of the loans held for investment 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 30, ~~2017, the Bank~~2023, Customers had ~~$533.8 million~~$1.6 billion in consumer loans outstanding ~~or 5.8% of the Bank’s total loan portfolio, which includes~~(including consumer loans held for ~~sale.~~investment and held for sale), or 12.0% of the total loan and lease portfolio, compared to $2.2 billion, or 14.2% of the total loan and lease portfolio, as of December 31, 2022.

Purchases and sales of loans held for investment were as follows for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	2023		2022		2023		2022
Purchases (1)
Specialty lending	$	—	$	—	$	631,252	$	—
Other commercial and industrial	4,977		—		15,285		—


Commercial real estate owner occupied	—		—		2,867		—


Residential real estate	—		15,067		4,238		170,022


Personal installment (2)	—		47,778		—		123,785
Other installment (2)	96,758		74,969		96,758		74,969
Total	$	101,735	$	137,814	$	750,400	$	368,776
Sales (3)
Specialty lending (4)	$	—	$	2,200	$	287,185	$	2,200
Other commercial and industrial (5)	6,725		—		54,083		22,880
Multifamily	—		—		—		2,879
Commercial real estate owner occupied (5)	5,671		—		24,522		8,960
Commercial real estate non-owner occupied	—		—		16,000		—




Personal installment (6)	—		500,001		—		500,001
Other installment	—		—		154,042		—
Total	$	12,396	$	502,201	$	535,832	$	536,920

(1)Amounts reported represent the unpaid principal balance at time of purchase. The ~~Bank plans~~purchase price was 100.0% and 99.9% of the loans' unpaid principal balance for the three months ended September 30, 2023 and 2022, respectively. The purchase price was 87.7% and 98.7% of the loans' unpaid principal balance for the nine months ended September 30, 2023 and 2022, respectively.

(3)For the three months ended September 30, 2023 and 2022, sales of loans held for investment resulted in ~~real estate secured~~net losses of $0.2 million and net gains of $0.1 million, respectively, included in the gain (loss) on sale of SBA and other loans in the consolidated statements of income. For the nine months ended September 30, 2023 and 2022, sales of loans held for investment resulted in net gains of $0.2 million and $3.2 million, respectively.

(4)Includes a loss of $5.0 million from the sale of $670.0 million of short-term syndicated capital call lines of credit ($280.7 million of loans held for investment in unpaid principal balance and $389.3 million of unfunded loan commitments) included in loss on sale of capital call lines of credit in the consolidated statement of income for the nine months ended September 30, 2023.

(5)Primarily sales of SBA loans.

(6)Customers sold $521.8 million of consumer ~~lending.~~installment loans held for investment, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE for a loss of $23.5 million included in loss on sale of consumer installment loans in the consolidated statements of income for the three and nine months ended September 30, 2022. Customers provided financing to the purchaser for a portion of the sales price in the form of $400.0 million of asset-backed securities. $100.7 million of the remaining sales proceeds were paid in cash.

~~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 30, ~~2017~~2023 and December 31, ~~2016~~2022 was as follows:


(amounts in thousands)	September 30, 2023		December 31, 2022
Commercial loans:
Multifamily loans, at lower of cost or fair value	$	—	$	4,079


Total commercial loans held for sale	—		4,079
Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value	—		507
Residential mortgage loans, at fair value	1,005		322
Personal installment loans, at lower of cost or fair value	124,848		133,801
Other installment loans, at lower of cost or fair value	—		189,603
Other installment loans, at fair value	24,515		—
Total consumer loans held for sale	150,368		324,233
Loans held for sale	$	150,368	$	328,312

September 30, December 31,
2017 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

~~At September 30, 2017, loans~~Loans held for sale ~~totaled $2.1 billion, or 23.0% of the total loan portfolio, and $2.1 billion, or 25.6% of the total loan portfolio, at December 31, 2016.~~

Mortgage warehouse 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 consolidated 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.

On June 30, 2023, Customers sold $556.7 million of consumer installment loans that were classified as held for sale, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale during the three months ended June 30, 2023, accrued interest and unamortized deferred loan origination costs, to third-party sponsored VIEs. Customers provided financing to the purchasers for a portion of the sales price in the form of $436.8 million of asset-backed securities while $115.1 million of the remaining sales proceeds were paid in cash. Customers also recognized servicing assets of $3.8 million upon sale. Refer to "NOTE 5 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

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Total Loans and Leases Receivable

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


(amounts in thousands)	September 30, 2023		December 31, 2022
Loans and leases receivable, mortgage warehouse, at fair value	$	962,566	$	1,323,312

Loans receivable, PPP	137,063		998,153
Loans and leases receivable:
Commercial:
Commercial and industrial:

Specialty lending (1)	5,422,161		5,412,887
Other commercial and industrial	1,195,347		1,259,943
Multifamily	2,130,213		2,213,019
Commercial real estate owner occupied	794,815		885,339
Commercial real estate non-owner occupied	1,178,203		1,290,730
Construction	252,588		162,009
Total commercial loans and leases receivable	10,973,327		11,223,927
Consumer:
Residential real estate	483,133		497,952
Manufactured housing	40,129		45,076

Installment:
Personal	629,843		964,641
Other	337,053		413,298

Total consumer loans receivable	1,490,158		1,920,967
Loans and leases receivable	12,463,485		13,144,894
Allowance for credit losses on loans and leases	(139,213)		(130,924)
Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	$	13,423,901	$	15,335,435

(1)Includes direct finance equipment leases of $193.8 million and $157.4 million at September 30, 2023 and December 31, 2022, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(35.8) million and $(21.5) million at September 30, 2023 and December 31, 2022, respectively.

Loans receivable, mortgage warehouse, at fair value

The mortgage warehouse product line primarily provides financing to mortgage companies nationwide from the ~~allowance~~time of origination of the 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 ~~loan losses, increased~~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 September 30, 2023, all of Customers' commercial mortgage warehouse loans were current in terms of payment.

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 losses. Customers' mortgage warehouse lending team members monitor these mortgage originators by ~~$905.7 million~~obtaining financial and other relevant information to ~~$7.0~~reduce these risks during the lending period. Loans receivable, mortgage warehouse, at fair value totaled $1.0 billion and $1.3 billion at September 30, ~~2017 from $6.1 billion at~~2023 and December 31, ~~2016.~~ 2022, respectively.

On June 30, 2022, one of Customers’ commercial mortgage warehouse borrowers filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. As of September 30, 2023, Customers had an outstanding loan balance with the borrower of $6.0 million in a cash secured working capital loan that was also fully guaranteed by an affiliate of the primary shareholder of the borrower.

Table of Contents

Loans receivable, PPP

Customers had $137.1 million and $998.2 million of PPP loans outstanding as of September 30, ~~2017~~2023 and December 31, ~~2016 consisted~~2022, respectively, which are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met, and earn a fixed interest rate of 1.00%. Customers recognized interest income, including origination fees, of $0.6 million and $25.8 million for the ~~following:~~

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

three and nine months ended September 30, 2023, respectively. Customers recognized interest income, including origination fees, of $14.7 million and $72.1 million for the three and nine months ended September 30, 2022, 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~~$17.1 million and ~~$0.1~~$57.4 million for the three and nine months ended September 30, 2023, respectively. The provision (benefit) for credit losses on loans and leases was a benefit to provision for credit losses of $7.8 million and a provision for credit losses of $31.6 million for the three and nine months ended September 30, 2022, respectively. The ACL maintained for loans and leases receivable (excluding loans held for sale and loans receivable, mortgage warehouse, at fair value) was $139.2 million, or 1.10% of loans and leases receivable at September 30, 2023, and $130.9 million or 0.93% of loans and leases receivable at December 31, 2022.

The increase in the ACL resulted primarily from additional provision for credit losses from the recognition of weaker macroeconomic forecasts and the recognition of ACL for PCD loans acquired from the FDIC, net of related charge-offs upon acquisition, partially offset by a decrease in loan balances held for investment. Net charge-offs were $17.5 million for the three months ended September 30, ~~2017 and 2016, respectively, and $5.9~~2023, a decrease of $1.0 million ~~and $2.9~~compared to the same period in 2022. Net charge-offs were $51.7 million for the nine months ended September 30, 2017 and 2016, respectively. The allowance for loan losses maintained for loans receivable (excludes loans held for sale) was $38.3 million, or 0.54% of loans receivable, at September 30, 2017 and $37.3 million, or 0.61% of loans receivable, at December 31, 2016. Net charge-offs were $2.5 million for the three months ended September 30, 2017,2023, an increase of ~~$2.2~~$12.5 million compared to the same period in ~~2016. Net~~2022. The net charge-offs ~~were $4.9 million~~ for the nine months ended September 30, ~~2017, an increase~~2023 exclude $6.2 million of ~~$4.0~~charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million ~~compared to~~of allowance for credit losses on PCD loans recognized upon acquisition of the ~~same period in 2016.~~Venture Banking loan portfolio on June 15, 2023. The increase in net charge-offs ~~period over period~~ was ~~largely driven by~~primarily due to higher charge-offs for consumer installment loans. Installment charge-offs were attributable to unsecured consumer installment loans originated or purchased through arrangements with fintech companies and other market place lenders. Refer to the ~~charge-off~~table of ~~$1.6 million and $1.8 million during the third quarter 2017 and second quarter 2017, respectively, related to two relationships in the commercial and industrial post-2009 originated loan portfolio.~~

~~The chart below depicts~~ changes in ~~the Bank’s allowance~~Customers' ACL for annualized net-charge offs to average loans by loan ~~losses~~type for the periods indicated.

Table of Contents

The ~~amounts presented~~tables below present changes in Customers' ACL for the ~~provision~~periods indicated.


(amounts in thousands)	Commercial and industrial (1)			Multifamily			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Construction			Residential real estate			Manufactured housing			Installment			Total
Three Months Ended September 30, 2023
Ending Balance, June 30, 2023	$	29,092		$	15,400		$	10,215		$	13,495		$	2,639		$	6,846		$	4,338		$	57,631		$	139,656


Charge-offs (2)	(9,008)			(1,999)			(39)			—			—			(42)			—			(18,932)			(30,020)
Recoveries (2)	6,034			—			—			—			—			29			—			6,459			12,522
Provision (benefit) for credit losses on loans and leases	(1,132)			2,469			187			2,324			491			(31)			(258)			13,005			17,055
Ending Balance, September 30, 2023	$	24,986		$	15,870		$	10,363		$	15,819		$	3,130		$	6,802		$	4,080		$	58,163		$	139,213
Nine Months Ended September 30, 2023
Ending Balance, December 31, 2022	$	17,582		$	14,541		$	6,454		$	11,219		$	1,913		$	6,094		$	4,430		$	68,691		$	130,924
Allowance for credit losses on FDIC PCD loans, net of charge-offs (3)	2,576			—			—			—			—			—			—			—			2,576
Charge-offs (2)	(9,600)			(3,447)			(39)			(4,527)			—			(69)			—			(52,031)			(69,713)
Recoveries (2)	6,439			—			34			27			116			34			—			11,350			18,000
Provision (benefit) for credit losses on loans and leases	7,989			4,776			3,914			9,100			1,101			743			(350)			30,153			57,426
Ending Balance, September 30, 2023	$	24,986		$	15,870		$	10,363		$	15,819		$	3,130		$	6,802		$	4,080		$	58,163		$	139,213

Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended September 30, 2023	(0.18)		%	(0.37)		%	(0.02)		%	—		%	—		%	(0.01)		%	—		%	(4.83)		%	(0.56)		%
Nine Months Ended September 30, 2023	(0.10)		%	(0.32)		%	0.00		%	(0.73)		%	0.12		%	(0.01)		%	—		%	(6.80)		%	(0.82)		%

Table of Contents


(amounts in thousands)	Commercial and industrial (1)			Multifamily			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Construction			Residential real estate			Manufactured housing			Installment			Total
Three Months Ended September 30, 2022
Ending Balance, June 30, 2022	$	11,081		$	9,765		$	4,745		$	8,880		$	1,179		$	5,578		$	4,080		$	111,222		$	156,530
Charge-offs (2)	(2,657)			—			—			(4,862)			—			—			—			(13,965)			(21,484)
Recoveries (2)	76			—			—			31			10			13			—			2,857			2,987
Provision (benefit) for credit losses on loans and leases	6,631			4,479			1,475			7,283			425			(138)			402			(28,393)			(7,836)
Ending Balance, September 30, 2022	$	15,131		$	14,244		$	6,220		$	11,332		$	1,614		$	5,453		$	4,482		$	71,721		$	130,197
Nine Months Ended September 30, 2022
Ending Balance, December 31, 2021	$	12,702		$	4,477		$	3,213		$	6,210		$	692		$	2,383		$	4,278		$	103,849		$	137,804
Charge-offs (2)	(3,235)			(1,990)			—			(5,025)			—			(4)			—			(35,681)			(45,935)
Recoveries (2)	1,129			337			49			43			226			58			—			4,889			6,731
Provision (benefit) for credit losses on loans and leases	4,535			11,420			2,958			10,104			696			3,016			204			(1,336)			31,597
Ending Balance, September 30, 2022	$	15,131		$	14,244		$	6,220		$	11,332		$	1,614		$	5,453		$	4,482		$	71,721		$	130,197

Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended September 30, 2022	(0.17)		%	—		%	—		%	(1.59)		%	0.02		%	0.01		%	—		%	(2.27)		%	(0.58)		%
Nine Months Ended September 30, 2022	(0.06)		%	(0.12)		%	0.01		%	(0.58)		%	0.17		%	0.02		%	—		%	(2.19)		%	(0.48)		%

(1)Includes specialty lending.

(2)Charge-offs and recoveries on PCD loans that are accounted for in pools are recognized on a net basis when the pool matures.

(3)Represents $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of a Venture Banking loan ~~losses below do not include the effect of changes to estimated benefits resulting~~portfolio (included within Specialty Lending) from the FDIC ~~loss share arrangements~~on June 15, 2023, net of $6.2 million of charge-offs for ~~the covered~~certain of these PCD loans ~~for periods prior to the termination of the FDIC loss sharing agreements.~~upon acquisition.

~~Analysis of the Allowance for Loan Losses~~

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 held for investment 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 and Estimates herein and "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' audited consolidated financial statements in its 2022 Form 10-K for further discussion on management's methodology for estimating the ACL.

Table of ~~the allowance for loan losses.~~Contents

~~Approximately 85% 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. Customers' exposure to higher risk commercial real estate such as the office and retail sectors is minimal, each representing only 1% of the loan portfolio.

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 substantially come from the operation of the collateral or fair value of the collateral less estimated costs to sell if repayment of the loan is expected to be provided from the 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 held for investment.

Asset Quality

Customers ~~divides its~~segments 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 and acquired loan categories~~lease receivables by ~~loan~~ product or other characteristic generally defining a shared characteristic with other loans or leases 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 held for investment are absorbed by the allowance for loan losses. Credit losses from acquired loans are absorbed by the allowance for loan losses, nonaccretable difference fair value marks, and cash reserves. As described below, the allowance for loan losses is intended to absorb only those losses estimated to have been incurred after acquisition, whereas the fair value mark and cash reserves absorb losses estimated to have been embedded in the acquired loans at acquisition.ACL. The schedule that follows includes both loans held for sale and loans held for investment.

Table of Contents

Asset Quality at September 30, ~~2017~~2023


(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 and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)
Loan and Lease Type
Commercial and industrial, including specialty lending	$	6,617,508	$	6,608,558	$	3,184	$	—	$	5,767	$	—	$	5,767	0.09	%	0.09	%


Multifamily	2,130,213		2,130,213		—		—		—		—		—		—	%	—	%
Commercial real estate owner occupied	794,815		784,139		3,234		—		7,442		—		7,442		0.94	%	0.94	%
Commercial real estate non-owner occupied	1,178,203		1,178,203		—		—		—		4		4		—	%	0.00	%
Construction	252,588		252,588		—		—		—		—		—		—	%	—	%
Total commercial loans and leases receivable	10,973,327		10,953,701		6,418		—		13,209		4		13,213		0.12	%	0.12	%
Residential	483,133		470,716		5,858		—		6,559		35		6,594		1.36	%	1.36	%
Manufactured housing	40,129		35,882		1,040		625		2,582		64		2,646		6.43	%	6.58	%
Installment	966,896		942,425		17,172		—		7,299		—		7,299		0.75	%	0.75	%



Total consumer loans receivable	1,490,158		1,449,023		24,070		625		16,440		99		16,539		1.10	%	1.11	%
Loans and leases receivable (1)	12,463,485		12,402,724		30,488		625		29,649		103		29,752		0.24	%	0.24	%
Loans receivable, PPP (2)	137,063		137,063		—		—		—		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	962,566		962,566		—		—		—		—		—		—	%	—	%

Total loans held for sale	150,368		149,067		1,084		—		218		—		218		0.14	%	0.14	%
Total portfolio	$	13,713,482	$	13,651,420	$	31,572	$	625	$	29,867	$	103	$	29,970	0.22	%	0.22	%

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 30, ~~2017~~2023 (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
Commercial and industrial, including specialty lending	$	6,617,508	$	5,767	$	24,986	0.38	%	433.26	%


Multifamily	2,130,213		—		15,870		0.74	%	—	%
Commercial real estate owner occupied	794,815		7,442		10,363		1.30	%	139.25	%
Commercial real estate non-owner occupied	1,178,203		—		15,819		1.34	%	—	%
Construction	252,588		—		3,130		1.24	%	—	%
Total commercial loans and leases receivable	10,973,327		13,209		70,168		0.64	%	531.21	%
Residential	483,133		6,559		6,802		1.41	%	103.70	%
Manufactured housing	40,129		2,582		4,080		10.17	%	158.02	%
Installment	966,896		7,299		58,163		6.02	%	796.86	%



Total consumer loans receivable	1,490,158		16,440		69,045		4.63	%	419.98	%
Loans and leases receivable (1)	12,463,485		29,649		139,213		1.12	%	469.54	%
Loans receivable, PPP (2)	137,063		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	962,566		—		—		—	%	—	%

Total loans held for sale	150,368		218		—		—	%	—	%
Total portfolio	$	13,713,482	$	29,867	$	139,213	1.02	%	466.11	%

(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.

(2) The tables exclude PPP loans of $137.1 million, of which $1.3 million were 30-59 days past due and $106.9 million were 60 days or more past due as of September 30, 2023, and PPP loans of $998.2 million, of which $0.6 million were 30-59 days past due and $36.0 million were 60 days or more past due as of December 31, 2022. Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.

Table of Contents

~~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 compare 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 loans (excluding held-for-sale loans) totaled $6.5 billion, or 92.4%~~A reconciliation of total loans and lease portfolio, excluding loans receivable, PPP and other related amounts, at September 30, ~~2017,~~2023, is 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 and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)
Total loans and leases portfolio (GAAP)	$	13,713,482	$	13,651,420	$	31,572	$	625	$	29,867	$	103	$	29,970	0.22	%	0.22	%
Less: Loans receivable, PPP (1)	137,063		137,063		—		—		—		—		—		—	%	—	%
Total loans and leases portfolio, excluding loans receivable, PPP (Non-GAAP)	13,576,419		13,514,357		31,572		625		29,867		103		29,970		0.22	%	0.22	%
Less: Loans held for sale	150,368		149,067		1,084		—		218		—		218		0.14	%	0.14	%
Less: Loans receivable, mortgage warehouse, at fair value	962,566		962,566		—		—		—		—		—		—	%	—	%
Loans and leases receivable, excluding loans receivable, PPP (Non-GAAP)	$	12,463,485	$	12,402,724	$	30,488	$	625	$	29,649	$	103	$	29,752	0.24	%	0.24	%


(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)
Total loans and leases portfolio (GAAP)	$	13,713,482	$	29,867	$	139,213	1.02	%	466.11	%
Less: Loans receivable, PPP (1)	137,063		—		—		—	%	—	%
Total loans and leases portfolio, excluding loans receivable, PPP (Non-GAAP)	13,576,419		29,867		139,213		1.03	%	466.11	%
Less: Loans held for sale	150,368		218		—		—	%	—	%
Less: Loans receivable, mortgage warehouse, at fair value	962,566		—		—		—	%	—	%
Loans and leases receivable, excluding loans receivable, PPP (Non-GAAP)	$	12,463,485	$	29,649	$	139,213	1.12	%	469.54	%

(1) Loans receivable, PPP includes PPP loans that are past due, as claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.

The total loan and lease portfolio was $13.7 billion at September 30, 2023 compared to ~~$5.8~~$15.8 billion ~~or 94.8% of total loans receivable~~ at December 31, ~~2016. The management team adopted new underwriting standards that management believes better limits risks of loss in 2009~~2022, and ~~have worked to monitor these standards. Only $23.6~~$29.9 million, or ~~0.36%~~0.22% of ~~post 2009 originated~~ loans and leases, were non-performing at September 30, ~~2017,~~2023 compared to ~~$10.5~~$30.7 million, or ~~0.18%~~0.19% of ~~post 2009~~ loans and leases, at December 31, ~~2016.~~2022. The ~~post 2009 loans were~~total loan and lease portfolio was supported by an ~~allowance for loan losses~~ACL of ~~$33.5~~$139.2 million ~~(0.51%~~(466.11% of ~~post 2009 originated loans)~~NPLs and ~~$31.8~~1.02% of total loans and leases) and $130.9 million ~~(0.55%~~(425.95% of ~~post 2009 originated loans)~~NPLs and 0.83% of total loans and leases), ~~respectively,~~ at September 30, ~~2017~~2023 and December 31, ~~2016.~~2022, respectively.

~~Loans Acquired~~

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.DEPOSITS

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 branchless digital banking, our white label relationship, deposit brokers, listing services and other relationships. ~~Total~~Customers Bank provides TassatPayTM instant blockchain-based digital payments platform via CBITTM, which allows clients to make instant payments in U.S. dollars. CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. As of September 30, 2023 and December 31, 2022, Customers Bank held $2.6 billion and $2.3 billion, respectively, of deposits ~~were $7.6~~from customers participating in CBIT, which are reported as deposit liabilities in the consolidated balance sheets. As of September 30, 2023, substantially all the CBIT-related deposit accounts are non-interest bearing. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The deposits from customers participating in CBIT include the omnibus deposit account established for the CBIT instant payments platform, which had an outstanding balance of $1.2 billion and $23 thousand at September 30, ~~2017, an increase of $0.3 billion, or 4.0%, from $7.3 billion at~~2023 and December 31, ~~2016. Demand deposits were $1.8 billion at September 30, 2017, compared to $1.3 billion at December 31, 2016, an increase~~2022, respectively.

Table of $484.1 million, or 37.1%. These amounts consist primarily of non-interest bearing demand deposits. Savings, including MMDA, totaled $3.5 billion at September 30, 2017, an increase of $340.5 million, or 10.8%, from $3.2 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 deposits were $2.3 billion at September 30, 2017, a decrease of $531.3 million, or 18.8%, from $2.8 billion at December 31, 2016. At September 30, 2017, the Bank had $1.4 billion in state and municipal deposits to which Customers has pledged 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.Contents

The components of deposits were as follows at the dates indicated:


(dollars in thousands)	September 30, 2023		December 31, 2022		Change		% Change
Demand, non-interest bearing	$	4,758,682	$	1,885,045	$	2,873,637	152.4	%
Demand, interest bearing	5,824,410		8,476,027		(2,651,617)		(31.3)	%
Savings, including MMDA	3,617,946		3,546,015		71,931		2.0	%
Non-time deposits	14,201,038		13,907,087		293,951		2.1	%


Time deposits	3,994,326		4,249,866		(255,540)		(6.0)	%
Total deposits	$	18,195,364	$	18,156,953	$	38,411	0.2	%

Total deposits were $18.2 billion at September 30, 2023, an increase of $38.4 million, or 0.2%, from $18.2 billion at December 31, 2022. The increase in total deposits was primarily due to increases in non-interest bearing demand deposits of $2.9 billion, or 152.4%, to $4.8 billion at September 30, 2023 from $1.9 billion at December 31, 2022 and savings, including MMDA of $71.9 million, or 2.0%, to $3.6 billion at September 30, 2023, from $3.5 billion at December 31, 2022. These increases were partially offset by decreases in interest bearing demand deposits of $2.7 billion, or 31.3%, to $5.8 billion at September 30, 2023, from $8.5 billion at December 31, 2022 and time deposits of $255.5 million, or 6.0%, to $4.0 billion at September 30, 2023, from $4.2 billion at December 31, 2022.

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
Total deposits at September 30, 2023 and December 31, 2022 include $989.7 million and $1.1 billion, respectively, of deposits serviced by BM Technologies under a deposit servicing agreement. Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or April 15, 2025. Customers expects that approximately $637.0 million of these serviced deposits held on September 30, 2023 in connection with BM Technologies' Higher Education business will leave Customers Bank during fourth quarter 2023. The remaining serviced deposits of approximately $352.8 million in connection with an existing white label relationship will remain at Customers Bank and continue to be serviced by BM Technologies.

The total amount of estimated uninsured deposits totaled $4.7 billion and $6.4 billion at September 30, 2023 and December 31, 2022, respectively. Time deposits greater than the FDIC limit of $250,000 totaled $160.4 million and $85.5 million at September 30, 2023 and December 31, 2022, respectively.

~~Borrowings~~FHLB ADVANCES AND OTHER 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, federal funds purchased, senior unsecured notes and subordinated debt. Subordinated debt is also considered as Tier 2 capital for certain regulatory calculations. ~~As of~~

Short-term debt

Short-term debt at September 30, ~~2017~~2023 and December 31, ~~2016, total outstanding borrowings~~2022 was as follows:


	September 30, 2023				December 31, 2022
(dollars in thousands)	Amount		Rate		Amount		Rate

FHLB advances	—		—	%	300,000		4.54	%

Total short-term debt	$	—			$	300,000

Table of Contents

Long-term debt

FHLB and FRB Advances

Long-term FHLB and FRB advances at September 30, 2023 and December 31, 2022 were ~~$1.9 billion~~as follows:


	September 30, 2023				December 31, 2022
(dollars in thousands)	Amount		Rate		Amount		Rate
FHLB advances (1)(2)	$	1,529,839	4.43	%	$	500,000	3.37	%

Total long-term FHLB and FRB advances	$	1,529,839			$	500,000

(1) Amounts reported in the above table include variable and ~~$1.1 billion, respectively,~~fixed rate long-term advances from FHLB of $590.0 million with maturities ranging from June 2024 to September 2026 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank's option, and fixed rate long-term advances of $950.0 million with maturities ranging from March 2025 to March 2028, at September 30, 2023.

(2) Includes $10.2 million of unamortized basis adjustments from interest rate swaps designated as fair value hedges of long-term advances from FHLB at September 30, 2023. Refer to "NOTE 14 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" to Customers' unaudited consolidated financial statements for additional information.

The maximum borrowing capacity with the FHLB and FRB at September 30, 2023 and December 31, 2022 was as follows:


(dollars in thousands)	September 30, 2023		December 31, 2022
Total maximum borrowing capacity with the FHLB	$	3,393,013	$	3,241,120
Total maximum borrowing capacity with the FRB (1)	5,013,377		2,510,189
Qualifying loans and securities (1) serving as collateral against FHLB and FRB advances	10,050,340		7,142,865

(1) Includes $484.9 million of borrowing capacity available under the BTFP at September 30, 2023, which ~~represented~~offers loans of up to one year to eligible depository institutions pledging any collateral valued at par, that are eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.

Senior Notes and Subordinated Debt

Long-term senior notes and subordinated debt at September 30, 2023 and December 31, 2022 were as follows:


		September 30, 2023		December 31, 2022
(dollars in thousands)
Issued by	Ranking	Carrying Amount		Carrying Amount		Rate		Issued Amount		Date Issued	Maturity	Price
Customers Bancorp	Senior (1)	$	98,893	$	98,788	2.875	%	$	100,000	August 2021	August 2031	100.000	%
Customers Bancorp	Senior	24,882		24,792		4.500	%	25,000		September 2019	September 2024	100.000	%


Total other borrowings		$	123,775	$	123,580

Customers Bancorp	Subordinated (2)(3)	$	72,721	$	72,585	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Subordinated (2)(4)	109,440		109,367		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt		$	182,161	$	181,952

(1)The senior notes will bear an ~~increase~~annual fixed rate of ~~$0.8 billion, or 65.9%. This increase was primarily~~2.875% until August 15, 2026. From August 15, 2026 until maturity, the ~~result of~~notes will bear an ~~increase in investments and loans receivable increasing~~annual interest rate equal to a benchmark rate, which is expected to be the ~~need for short-term borrowings. In~~three-month term SOFR after June ~~2017,~~30, 2023, plus 235 basis points. Customers Bancorp ~~issued $100 million of~~has the ability to call the senior notes, in whole, or in part, at ~~99.775%~~a redemption price equal to 100% of ~~face value~~the principal balance at certain times on or after August 15, 2026.

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

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

(4)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. Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers expects that the subordinated notes will ~~mature~~substitute three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate in order to calculate the annual interest rate after June ~~2022.~~26, 2024. Customers ~~will use~~Bank has the ~~net proceeds for general corporate purposes, which may include working capital and~~ability to call the ~~funding~~subordinated notes, in whole, or in part, at a redemption price equal to 100% of ~~organic growth~~the principal balance at ~~Customers Bank. For more information about Customers' borrowings, refer to NOTE 10 - BORROWINGS~~.certain times on or after June 26, 2024.

Table of Contents

SHAREHOLDERS' EQUITY

~~Capital Adequacy and Shareholders’ Equity~~The components of shareholders' equity were as follows at the dates indicated:


(dollars in thousands)	September 30, 2023		December 31, 2022		Change		% Change
Preferred stock	$	137,794	$	137,794	$	—	—	%
Common stock	35,330		35,012		318		0.9	%
Additional paid in capital	559,346		551,721		7,625		1.4	%
Retained earnings	1,101,359		924,134		177,225		19.2	%
Accumulated other comprehensive income (loss), net	(149,812)		(163,096)		13,284		(8.1)	%
Treasury stock	(122,410)		(82,604)		(39,806)		48.2	%
Total shareholders' equity	$	1,561,607	$	1,402,961	$	158,646	11.3	%

Shareholders’ equity increased ~~$54.8~~$158.6 million, or 11.3%, to ~~$910.6 million~~$1.6 billion at September 30, ~~2017~~2023 when compared to shareholders' equity of ~~$855.9 million~~$1.4 billion at December 31, ~~2016, a 6.4%~~2022. The increase primarily resulted from increases of $177.2 million in retained earnings and $13.3 million in accumulated other comprehensive income (loss), net, partially offset by an increase of $39.8 million in treasury stock.

The increases in common stock and additional paid in capital resulted primarily from the ~~first nine months~~issuance of ~~2017. The primary components of the net increase were as follows:~~

~~net income of $57.2 million~~common stock under share-based compensation arrangements for the nine months ended September 30, ~~2017;~~2023.

~~other comprehensive~~The increase in retained earnings resulted from net income of ~~$5.3~~$188.1 million, ~~for the nine months ended September 30, 2017, arising primarily from unrealized gains on available-for-sale securities;~~

~~share-based compensation expense of $4.5 million for the nine months ended September 30, 2017;~~

partially offset ~~in part~~ by preferred stock dividends of $10.8 million for the nine months ended September 30, ~~2017;~~2023.

The increase in accumulated other comprehensive income (loss), net primarily resulted from a decrease of $14.5 million in unrealized losses on AFS debt securities and

~~issuance~~ income tax effect of ~~common stock under share-based compensation arrangements of $2.0~~$3.7 million ~~for~~during the nine months ended September 30, ~~2017.~~2023.

The ~~Bank and~~increase in treasury stock resulted from repurchases of 1,379,883 shares of common stock for $39.8 million pursuant to the Share Repurchase Program during the nine months ended September 30, 2023. On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise. The exact number of shares, timing for such purchases, and the price and terms at and on which such purchases are ~~subject~~ to ~~various~~be made were at the discretion of the Company and complied with all applicable regulatory ~~capital requirements~~limitations. The term of the Share Repurchase Program was extended to September 27, 2023, unless earlier terminated. On September 27, 2023, the Share Repurchase Program expired.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity for a financial institution is a measure of that ~~are monitored by federal banking agencies. Failure~~institution’s ability to meet ~~minimum~~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 ~~requirements can lead to supervisory actions by regulators; any supervisory action could have a direct material effect on Customers' financial performance. At September 30, 2017, the Bank~~position, and Customers Bancorp met all capital adequacy requirements to which they were subject. Capital levels continue to exceed the well-capitalized threshold established by regulation at the Bank and exceed the applicable Basel III regulatory thresholds for Customers Bancorp and the Bank.

~~The capital ratios for 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 %

~~The capital ratios above reflect the capital requirements under "Basel III" effective during first quarter 2015 and the capital conservation buffer effective January 1, 2017. Failure~~strives to maintain ~~the required capital conservation buffer will result in limitations on capital distributions~~a strong liquidity position that is sufficient to meet Customers' short-term and ~~on discretionary bonuses to executive officers. As of September 30, 2017, the Bank~~long-term needs, commitments and ~~Bancorp were in compliance with the Basel III requirements. See "NOTE 11 - REGULATORY CAPITAL" for additional discussion regarding regulatory capital requirements.~~contractual obligations.

~~Off-Balance Sheet Arrangements~~

~~The Bank~~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 consolidated balance ~~sheets.~~sheet.

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.

Customers recognized a provision for credit losses on unfunded lending-related commitments of $48 thousand and $24 thousand during the three and nine months ended September 30, 2023, respectively, resulting in an ACL of $3.0 million as of September 30, 2023. Customers had an ACL on unfunded lending-related commitments of $3.0 million as of December 31, 2022.

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Customers' contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of September 30, 2023. These obligations and commitments include the transfer of deposits serviced by BM Technologies under the deposit service agreement on the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or April 15, 2025. As of September 30, ~~2017~~2023 and December 31, ~~2016, the following off-balance sheet commitments, financial instruments~~2022, Customers held $989.7 million 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

~~Commitments to fund loans, unfunded commitments to fund mortgage warehouse loans, unfunded commitments~~$1.1 billion, respectively, of deposits serviced by BM Technologies under ~~lines of credit and letters of credit are agreements~~a deposit servicing agreement. Customers agreed to extend ~~credit~~the deposit servicing agreement to ~~or for~~ the ~~benefit~~earlier of ~~a customer in the ordinary course~~BM Technologies' successful completion of the ~~Bank's business.~~

~~Commitments to fund loans and unfunded commitments under lines of credit may be obligations~~transfer 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~~serviced deposits to a ~~third party. Letters~~new sponsor bank or April 15, 2025. Customers expects that approximately $637.0 million of ~~credit may obligate the~~these serviced deposits held on September 30, 2023 in connection with BM Technologies' Higher Education business will leave Customers Bank during fourth quarter 2023. The remaining serviced deposits of approximately $352.8 million in connection with an existing white label relationship will remain at Customers Bank and continue to ~~fund draws under those letters of credit whether or not a customer continues~~be serviced by BM Technologies. Refer 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 facilities~~"NOTE 8 – LEASES", "NOTE 9 – DEPOSITS" and "NOTE 10 – BORROWINGS" to ~~customers.~~

~~Liquidity and Capital Resources~~

~~Liquidity~~Customers' unaudited consolidated financial statements for a financial institution is a measure 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.additional information.

Customers' investment portfolio, including debt securities available for sale and held to maturity provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional ~~liquidity~~ funding. ~~Our~~Customers' principal sources of funds are deposits, ~~proceeds from debt issuances,~~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 ~~Federal Home Loan Bank~~FHLB and the ~~Federal Reserve Bank of Philadelphia~~FRB, including the BTFP to meet short-term liquidity needs. Longer-term borrowing arrangements are also maintained with the ~~Federal Home Loan Bank.~~FHLB and the FRB. As of September 30, ~~2017, our~~2023, Customers' borrowing capacity with the ~~Federal Home Loan Bank~~FHLB was ~~$4.7~~$3.4 billion, of which $1.5 billion was utilized in borrowings and ~~$1.9 billion~~$599.4 million of available capacity was utilized to collateralize state and municipal deposits. As of December 31, ~~2016, our~~2022, Customers' borrowing capacity with the ~~Federal Home Loan Bank~~FHLB was ~~$4.1~~$3.2 billion, of which ~~$0.9 billion~~$800.0 million was utilized in borrowings and ~~$1.7 billion~~$175.6 million of available capacity was utilized to collateralize state and municipal deposits. As of September 30, ~~2017~~2023 and December 31, ~~2016, our~~2022, Customers' borrowing capacity with the ~~Federal Reserve~~FRB was $5.0 billion and $2.5 billion, respectively.

Customers Bank provides blockchain-based digital payments via CBIT, which allows clients to make instant payments in U.S. dollars. CBIT may only be created or minted by, transferred to and redeemed by commercial customers of ~~Philadelphia was $151.1 million~~Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. CBIT is not listed or traded on any digital currency exchange. As of September 30, 2023 and ~~$158.6 million,~~December 31, 2022, Customers Bank held $2.6 billion and $2.3 billion, respectively, of deposits from customers participating in CBIT, which are reported as deposit liabilities in the consolidated balance sheets. As of September 30, 2023, substantially all the CBIT-related deposit accounts are non-interest bearing.

The CBIT instant payments platform provides a closed-system for intrabank commercial transactions and is not intended to be a trading platform for tokens or digital assets. CBIT tokens are used only in connection with the CBIT instant payments platform and are not securities for purposes of applicable securities laws. There are no scenarios in which the transaction or redemption value of one CBIT would not be equal to one U.S. dollar. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The deposits from customers participating in CBIT include the omnibus deposit account, which had an outstanding balance of $1.2 billion and $23 thousand at September 30, 2023 and December 31, 2022, respectively.

~~Net~~The table below summarizes Customers' cash flows for the nine months ended September 30, 2023 and 2022:


	Nine Months Ended September 30,
(dollars in thousands)	2023		2022		Change		% Change
Net cash provided by (used in) operating activities	$	243,106	$	275,022	$	(31,916)	(11.6)	%
Net cash provided by (used in) investing activities	1,997,172		(1,085,108)		3,082,280		(284.1)	%
Net cash provided by (used in) financing activities	723,890		696,519		27,371		3.9	%
Net increase (decrease) in cash and cash equivalents	$	2,964,168	$	(113,567)	$	3,077,735	NM

Cash flows provided by (used in) operating activities

Cash provided by operating activities of $243.1 million for the nine months ended September 30, 2023 resulted from proceeds from the sales and repayments of loans held for sale of $454.9 million, which included cash proceeds from the sales of consumer installment loans that were ~~$185.9 million~~classified as held for sale to third-party sponsored VIEs during the nine months ended September 30, ~~2017, compared to~~2023, net ~~cash flows used~~income of $188.1 million, net non-cash operating adjustments of $36.3 million, an increase in accrued interest payable and other liabilities of $33.3 million and a decrease in accrued interest receivable and other assets of $0.9 million, partially offset by originations and purchases of loans held for sale of $470.3 million.

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Cash provided by operating activities of ~~$528.7~~$275.0 million ~~during~~for the nine months ended September 30, ~~2016. During~~2022 resulted from net income of $199.3 million, net non-cash operating adjustments of $42.7 million, a decrease in accrued interest receivable and other assets of $16.9 million and an increase in accrued interest payable and other liabilities of $16.1 million.

Cash flows provided by (used in) investing activities

Cash provided by investing activities of $2.0 billion for the nine months ended September 30, ~~2017,~~2023 primarily resulted from a net decrease in loans and leases, excluding mortgage warehouse loans of $1.6 billion primarily from PPP loan forgiveness and guarantee payments by the SBA, proceeds from the sales of loans and leases of $409.5 million including the sales of capital call lines of credit 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~~investment, proceeds from ~~sales~~net repayments of mortgage warehouse loans ~~held for sale by $619.1 million.~~

~~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~~$380.9 million, ~~during the nine months ended September 30, 2016. Purchases~~proceeds from maturities, calls, and principal repayments of investment securities available for sale ~~totaled $796.6~~of $228.5 million ~~during the nine months ended September 30, 2017, compared~~and held to ~~$5.0~~maturity of $175.9 million, ~~during the nine months ended September 30, 2016. Proceeds~~proceeds from surrenders of BOLI of $56.6 million and proceeds from sales of investment securities available for sale ~~were $698.5~~of $4.1 million, ~~for the nine month ended September 30, 2017, compared to $2.9 million during the nine months ended September 30, 2016. Purchases~~partially offset by purchases of loans of $702.4 million including loans purchased from the FDIC, purchases of investment securities held ~~for investment~~to maturity of $73.1 million, net purchases of FHLB, Federal Reserve Bank, and ~~bank owned life insurance policies totaled $262.6~~other restricted stock of $51.7 million, and ~~$90.0 million, respectively,~~purchases of leased asset under lessor operating leases of $20.3 million.

Cash used in investing activities of $1.1 billion for the nine months ended September 30, ~~2017, compared~~2022 primarily resulted from a net increase in loans and leases, excluding mortgage warehouse loans of $1.6 billion, purchases of investment securities available for sale of $929.8 million, purchases of loans of $368.8 million and purchases of leased assets under lessor operating leases of $86.8 million, partially offset by proceeds from sales of investment securities available for sale of $681.6 million, proceeds from net repayments of mortgage warehouse loans of $678.9 million, proceeds from maturities, calls, and principal repayments of investment securities available for sale of $408.0 million and proceeds from sales of loans and leases of $136.9 million, which included the cash proceeds of the sale of $521.8 million of consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to ~~no similar purchases during~~a third-party sponsored VIE.

Cash flows provided by (used in) financing activities

Cash provided by financing activities of $723.9 million for the nine months ended September 30, ~~2016. Proceeds~~2023 primarily resulted from proceeds from long-term borrowed funds from the ~~sale~~FHLB and the FRB of ~~loans held~~$2.6 billion and a net increase in deposits of $36.6 million, partially offset by repayments of long-term borrowed funds from the FHLB and FRB of $1.5 billion, a net decrease in short-term borrowed funds from the FHLB of $300.0 million and purchases of treasury stock of $39.8 million..

Cash provided by financing activities of $696.5 million for ~~investment totaled $124.7 million during~~ the nine months ended September 30, ~~2017, compared to $91.9~~2022 primarily resulted from a net increase in deposits of $744.5 million, ~~during~~proceeds from long-term borrowed funds from the ~~nine months ended September 30, 2016. Cash flows used to fund new loans held for investment totaled $921.0~~FHLB of $500.0 million, and ~~$641.1 million during the nine months ended September 30, 2017 and 2016, respectively.~~

~~Financing activities provided~~ a net ~~aggregate~~increase in federal funds purchased 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~~$290.0 million, partially offset by a net ~~cash flows of $293.3 million, net increases~~decrease in short-term borrowed funds ~~provided $593.5 million, net increases in federal funds provided $64.0 million, proceeds~~ from the ~~issuance~~FHLB of ~~five-year~~$700.0 million, repayments of other borrowings of $100.0 million upon maturity of the Customers Bancorp 3.950% senior notes in June 2022, and purchases of treasury stock of $27.8 million.

CAPITAL ADEQUACY

The Bank and the Bancorp are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet 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, the 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 ~~$98.6~~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. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million ~~payment~~will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of ~~preferred stock dividends used $10.8~~September 30, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions.

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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 ~~net proceeds~~a bank can exclude all PPP loans pledged as collateral to the PPPLF from its average total consolidated assets for purposes of calculating the ~~issuance~~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 ~~stock provided $2.1 million. During~~equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the ~~nine months ended~~regulations). At September 30, ~~2016, increases~~2023 and December 31, 2022, the Bank and the Bancorp met all capital adequacy requirements to which they were subject.

Generally, to 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 capital ratios and the Tier 1 leverage ratio in ~~deposits provided $1.5 billion, net repayments~~excess of ~~short-term borrowed funds used $663.6 million, net decrease~~the related minimum ratios set forth 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~~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 September 30, 2023:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,596,157	11.305	%	$	635,353	4.500	%	N/A		N/A		$	988,327	7.000	%
Customers Bank	$	1,830,143	12.974	%	$	634,762	4.500	%	$	916,878	6.500	%	$	987,408	7.000	%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,733,950	12.281	%	$	847,137	6.000	%	N/A		N/A		$	1,200,111	8.500	%
Customers Bank	$	1,830,143	12.974	%	$	846,349	6.000	%	$	1,128,466	8.000	%	$	1,198,995	8.500	%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	2,015,526	14.275	%	$	1,129,516	8.000	%	N/A		N/A		$	1,482,490	10.500	%
Customers Bank	$	2,038,998	14.455	%	$	1,128,466	8.000	%	$	1,410,582	10.000	%	$	1,481,111	10.500	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	1,733,950	7.805	%	$	888,675	4.000	%	N/A		N/A		$	888,675	4.000	%
Customers Bank	$	1,830,143	8.246	%	$	887,727	4.000	%	$	1,109,658	5.000	%	$	887,727	4.000	%
As of December 31, 2022:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,470,837	9.637	%	$	686,838	4.500	%	N/A		N/A		$	1,068,415	7.000	%
Customers Bank	$	1,708,598	11.213	%	$	685,694	4.500	%	$	990,447	6.500	%	$	1,066,636	7.000	%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,608,630	10.539	%	$	915,784	6.000	%	N/A		N/A		$	1,297,361	8.500	%
Customers Bank	$	1,708,598	11.213	%	$	914,259	6.000	%	$	1,219,012	8.000	%	$	1,295,201	8.500	%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	$	1,862,089	12.200	%	$	1,221,045	8.000	%	N/A		N/A		$	1,602,622	10.500	%
Customers Bank	$	1,889,472	12.400	%	$	1,219,012	8.000	%	$	1,523,765	10.000	%	$	1,599,954	10.500	%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.	$	1,608,630	7.664	%	$	839,547	4.000	%	N/A		N/A		$	839,547	4.000	%
Customers Bank	$	1,708,598	8.150	%	$	838,611	4.000	%	$	1,048,264	5.000	%	$	838,611	4.000	%

The Basel III Capital Rules require that we maintain a 2.500% capital conservation buffer with respect to each of common equity Tier 1, Tier 1 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 capital conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock ~~provided $7.3 million. These financing activities provided sufficient cash flows~~repurchases, and certain discretionary bonus payments to ~~support Customers' investing~~executive officers. As of September 30, 2023, the Bank and ~~operating activities.~~the Bancorp were in compliance with the Basel III requirements.

~~Overall, based on our core deposit base and available sources~~

Table of ~~borrowed funds, management believes that Customers has adequate resources to meet its short-term and long-term cash requirements for the foreseeable future.~~Contents

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.

~~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 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 30, ~~2018,~~2024 and December 31, 2023, based upon the assets, liabilities and off-balance sheet financial instruments in existence at September 30, ~~2017. We have~~2023 and December 31, 2022. 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 September 30, 2023, current market interest rates were increased immediately by 100, 200, and 300 basis points. For downward rate shocks modeling a falling rate environment at September 30, 2023, current market interest rates were ~~only~~ decreased immediately by 100, ~~basis points due to the limitations of the current low interest rate environment that renders the Down~~ 200 and ~~Down~~ 300 ~~rate shocks impractical.~~basis points. The following table reflects the estimated percentage change in estimated net interest income for the ~~period~~twelve months ending September 30, ~~2018,~~2024 and December 31, 2023, resulting from changes in interest rates.

Net change in net interest income


	% Change
Rate Shocks	September 30, 2023	December 31, 2022
Up 3%	14.6%	0.4%
Up 2%	9.7%	0.4%
Up 1%	4.6%	0.3%
Down 1%	(5.8)%	(0.9)%
Down 2%	(12.2)%	(2.0)%
Down 3%	(18.8)%	(4.8)%



~~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 September 30, 2023, current market interest rates were increased immediately by 100, 200, and 300 basis points. For downward rate shocks modeling a falling rate environment at September 30, 2023, current market interest rates were ~~only~~ decreased immediately by 100, ~~basis points due to the limitations of the current low interest rate environment that renders the Down~~ 200 and ~~Down~~ 300 ~~rate shocks impractical.~~basis points. 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 30, ~~2017,~~2023 and December 31, 2022, resulting from shocks to interest rates.

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~~Rate Shocks~~	~~From base~~
~~Up 3%~~	~~(30.9~~	)%
~~Up 2%~~	~~(18.7~~	)%
~~Up 1%~~	~~(8.3~~	)%
~~Down 1%~~	~~4.2~~	%


	From Base
Rate Shocks	September 30, 2023	December 31, 2022
Up 3%	7.9%	(27.8)%
Up 2%	6.1%	(16.9)%
Up 1%	2.6%	(6.6)%
Down 1%	(9.7)%	0.0%
Down 2%	(22.1)%	(31.3)%
Down 3%	(37.3)%	(57.2)%

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.

LIBOR Transition

Customers has variable rate loans, investment securities, fixed-to-floating rate senior and subordinated debt, preferred stock and derivatives that reference LIBOR. All tenors of LIBOR have ceased on June 30, 2023. The 1-, 3- and 6-month U.S. dollar LIBOR settings will continue to be published using a synthetic methodology until September 2024. Customers established an enterprise-wide LIBOR transition program, which includes a LIBOR transition team with senior management level leadership. Progress on the LIBOR transition effort is monitored by executive management as well as the asset/liability committee and Customers' Board of Directors.

At September 30, 2023, all of Customers' LIBOR-based commercial loans and leases, commercial real estate loans and residential mortgages have been transitioned to SOFR. In addition, $110.0 million of fixed-to-floating rate borrowings and $137.8 million of preferred equity instruments reference LIBOR, which have been or will be transitioned to SOFR. Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate, plus 514 and 476 basis points, respectively, to calculate the dividends on Series E and F Preferred Stock, respectively, beginning with dividends declared on October 25, 2023. Customers' derivatives primarily reference LIBOR. In October 2020, the International Swaps and Derivatives Association, Inc. published the IBOR Fallbacks Supplement (“Supplement”) and the IBOR Fallback Protocol (“Protocol”). The Protocol enabled market participants to incorporate certain revisions into their legacy non-cleared derivatives with other counterparties that also chose to adhere to the Protocol. Customers adhered to the IBOR Protocol in November 2020 and remediated its interest rate swap transactions with its end-user customers, which referenced the fallback SOFR per the IBOR Protocol. With respect to Customers' cleared interest rate swap agreements that reference LIBOR, clearinghouses adopted the same relevant SOFR benchmark alternatives of the IBOR Supplement and IBOR Protocol. The uncertainty relating to the continuing implementation of one or more alternative benchmark indexes to replace LIBOR could materially impact the Customers’ interest rate risk profile and its management thereof. For a discussion of the risks associated with the LIBOR transition to alternative reference rates, refer to Part I, Item 1A. "Risk Factors" included in Customers' 2022 Form 10-K.

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 atas of September 30, ~~2017.~~2023.

(b)Changes in Internal Control Over Financial Reporting.During the quarter ended September 30, ~~2017,~~2023, 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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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

~~There have been no material changes~~For information on Customers' legal proceedings, refer to “NOTE 15 – 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~~2022 Form 10-K and ~~our~~subsequently filed 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-Q. There are no material changes from the risk factors included within the ~~2016~~2022 Form 10-K ~~March 31, 2017 Quarterly Report,~~ and ~~June 30, 2017 Quarterly Report other than the risks described below.~~subsequently filed quarterly reports on Form 10-Q. The risks described within the ~~2016~~2022 Form 10-K ~~the March 31, 2017 Quarterly Report, the June 30, 2017 Quarterly Report~~ and ~~below~~subsequently filed quarterly reports on Form 10-Q 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~~Refer to “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

Issuer Purchases of Equity Securities

On ~~November 26, 2013, Customers announced that~~August 25, 2021, the Board of Directors ~~had~~of Customers Bancorp authorized ~~a stock~~the Share Repurchase Program to repurchase ~~plan in which the Bancorp could acquire~~ up to 5%3,235,326 shares of ~~its current~~the Company's common stock (representing 10% of the Company’s outstanding shares ~~at prices not to exceed a 20% premium over~~of common stock on June 30, 2021). Purchases of shares under the ~~then current book value. The repurchase program has no expiration date but~~Share Repurchase Program may be ~~suspended, modified~~executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or ~~discontinued at any time,~~otherwise. The exact number of shares, timing for such purchases, and the ~~Bancorp has no obligation~~price and terms at and on which such purchases are to ~~repurchase any amount~~be made were at the discretion of ~~its~~the Company and complied with all applicable regulatory limitations. The term of the Share Repurchase Program was extended to September 27, 2023, unless earlier terminated. On September 27, 2023, the Share Repurchase Program expired. The common ~~stock under the program.~~

~~During~~shares repurchased during the three and nine months ended September 30, ~~2017,~~ 2023 pursuant to the Share Repurchase Program were as follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares purchased as part of publicly announced plans or programs	Maximum Number of Shares that may yet be purchased under the plans or programs
January 1 - January 31, 2023	—	$	—	—	1,877,392
February 1 - February 28, 2023	1,013,283	31.48		1,013,283	864,109
March 1 - March 31, 2023	366,600	20.57		366,600	497,509
April 1 - April 30, 2023	—	—		—	497,509
May 1 - May 31, 2023	—	—		—	497,509
June 1 - June 30, 2023	—	—		—	497,509
July 1 - July 31, 2023	—	—		—	497,509
August 1 - August 31, 2023	—	—		—	497,509
September 1 - September 30, 2023	—	—		—	—
Total	1,379,883	$	28.58	1,379,883	—

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.

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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.~~During the third quarter of 2023, no director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements.

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Item 6. Exhibits


Exhibit No.			Description

~~Exhibit~~ ~~No.~~2.1		*	~~Description~~ 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

2.2			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

2.3			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			~~Statement with Respect~~Articles of Amendment to ~~Shares~~the Amended and Restated Articles of ~~Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C,~~Incorporation of Customers Bancorp, Inc., incorporated by reference to Exhibit 3.1 to the Customers ~~Bancorp~~Bancorp’s Form 8-K filed with the SEC on ~~May 18, 2015~~June 3, 2019

3.5			~~Statement with Respect~~Amendment to ~~Shares~~Amended and Restated Bylaws of ~~Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D,~~Customers Bancorp, Inc., incorporated by reference to Exhibit 3.1 to the Customers ~~Bancorp~~Bancorp’s Form 8-K filed with the SEC on ~~January 29, 2016~~June 19, 2019

~~3.6~~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~~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~~31.1			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



101		The ~~Exhibits filed~~following financial statements from the Customers’ Quarterly Report on Form 10-Q as ~~part~~ of ~~this report are as follows:~~and for the quarterly period ended September 30, 2023, formatted in Inline XBRL include: (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.

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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.

November 9, 2023		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.~~ November 9, 2023		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 .



	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



	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		—



	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	)



	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	)



	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



	September 30,		December 31,
	2017		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



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	%



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	%



	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	%