UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the quarterly period ended ~~March 31,~~June 30, 2021


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the transition period from to .

001-35542

(Commission File number)

(Exact name of registrant as specified in its charter)


Customers Bancorp, Inc.

Pennsylvania

27-2290659

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

701 Reading Avenue

West Reading, PA 19611

(Address of principal executive offices)

(610) 933-2000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Title of Each Class

Trading Symbols

Name of Each Exchange on which Registered

Voting Common Stock, par value $1.00 per share

CUBI

New York Stock Exchange

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

CUBI/PC

New York Stock Exchange

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

CUBI/PD

New York Stock Exchange

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

CUBI/PE

New York Stock Exchange

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

CUBI/PF

New York Stock Exchange

5.375% Subordinated Notes due 2034

CUBB

New York Stock Exchange

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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

☐

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.

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 ~~April 30,~~August 6, 2021, ~~32,266,264~~32,373,955 shares of Voting Common Stock were outstanding.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

Table of Contents

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

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





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

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

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

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




COVID-19			Coronavirus Disease 2019

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

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

ED			U.S. Department of Education

EPS			Earnings per share

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

FDIC			Federal Deposit Insurance Corporation

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

FHA			Federal Housing Administration
FHLB			Federal Home Loan Bank

FPRD			Final Program Review Determination
FRB			Federal Reserve Bank of Philadelphia

GDP			Gross domestic product
GNMA			Government National Mortgage Association

Higher One			Higher One Holdings, Inc.
HTM			Held to maturity
~~Interest-only GNMA securities~~			~~Interest-only classes of Ginnie Mae guaranteed home equity conversation mortgage-backed securities~~
IRS			Internal Revenue Service
LIBOR			London Interbank Offered Rate
LPO			Limited Purpose Office
MFAC			Megalith Financial Acquisition Corp.
MMDA			Money market deposit accounts
NIM			Net interest margin, tax equivalent
NM			Not meaningful

NPL			Non-performing loan

NYSE			New York Stock Exchange

OCI			Other comprehensive income

OREO			Other real estate owned


PCD			Purchased Credit-Deteriorated
PCI			Purchased Credit-Impaired

Table of Contents


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

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



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

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

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET — UNAUDITED

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

March 31,
2021 December 31,
2020
ASSETS
Cash and due from banks $ 3,123 $ 78,090
Interest earning deposits 512,241 615,264
Cash and cash equivalents 515,364 693,354
Investment securities, at fair value 1,441,904 1,210,285
Loans held for sale (includes $1,205 and $5,509, respectively, at fair value) 46,106 79,086
Loans receivable, mortgage warehouse, at fair value 3,407,622 3,616,432
Loans receivable, PPP 5,178,089 4,561,365
Loans and leases receivable 7,536,489 7,575,368
Allowance for credit losses on loans and leases (128,736) (144,176)
Total loans and leases receivable, net of allowance for credit losses on loans and leases 15,993,464 15,608,989
FHLB, Federal Reserve Bank, and other restricted stock 69,420 71,368
Accrued interest receivable 83,186 80,412
Bank premises and equipment, net 10,943 11,225
Bank-owned life insurance 281,923 280,067
Goodwill and other intangibles 3,911 3,969
Other assets 371,439 338,438
Assets of discontinued operations 0 62,055
Total assets $ 18,817,660 $ 18,439,248
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing $ 2,687,628 $ 2,356,998
Interest bearing 9,784,812 8,952,931
Total deposits 12,472,440 11,309,929
Federal funds purchased 365,000 250,000
FHLB advances 850,000 850,000
Other borrowings 124,138 124,037
Subordinated debt 181,464 181,394
FRB PPP liquidity facility 3,284,156 4,415,016
Accrued interest payable and other liabilities 351,741 152,082
Liabilities of discontinued operations 0 39,704
Total liabilities 17,628,939 17,322,162
Commitments and contingencies (NOTE 14) 0 0
Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 9,000,000 shares issued and outstanding as of
March 31, 2021 and December 31, 2020
217,471 217,471
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 33,519,381 and 32,985,707 shares issued as of March 31, 2021 and December 31, 2020; 32,238,762 and 31,705,088 shares outstanding as of March 31, 2021 and December 31, 2020 33,519 32,986
Additional paid in capital 515,318 455,592
Retained earnings 438,802 438,581
Accumulated other comprehensive income (loss), net 5,391 (5,764)
Treasury stock, at cost (1,280,619 shares as of March 31, 2021 and December 31, 2020) (21,780) (21,780)
Total shareholders’ equity 1,188,721 1,117,086
Total liabilities and shareholders’ equity $ 18,817,660 $ 18,439,248


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

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

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

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


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

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
March 31,
2021 2020
Interest income:
Loans and leases $ 152,117 $ 116,080
Investment securities 7,979 4,977
Other 1,019 4,286
Total interest income 161,115 125,343
Interest expense:
Deposits 15,658 34,353
FHLB advances 5,192 5,390
Subordinated debt 2,689 2,689
FRB PPP liquidity facility, federal funds purchased and other borrowings 4,845 1,590
Total interest expense 28,384 44,022
Net interest income 132,731 81,321
Provision (benefit) for credit losses on loans and leases (2,919) 31,786
Net interest income after provision (benefit) for credit losses on loans and leases 135,650 49,535
Non-interest income:
Interchange and card revenue 85 270
Deposit fees 863 551
Commercial lease income 5,205 4,268
Bank-owned life insurance 1,679 1,762
Mortgage warehouse transactional fees 4,247 1,952
Gain (loss) on sale of SBA and other loans 1,575 11
Mortgage banking income 463 296
Gain (loss) on sale of investment securities 23,566 3,974
Unrealized gain (loss) on investment securities 974 (1,378)
Unrealized gain (loss) on derivatives 2,537 (1,146)
Loss on cash flow hedge derivative terminations (24,467) 0
Other 1,741 600
Total non-interest income 18,468 11,160
Non-interest expense:
Salaries and employee benefits 23,971 20,523
Technology, communication and bank operations 19,988 10,539
Professional services 6,289 3,544
Occupancy 2,621 2,613
Commercial lease depreciation 4,291 3,427
FDIC assessments, non-income taxes and regulatory fees 2,719 2,867
Merger and acquisition related expenses 418 0
Loan workout (261) 366
Advertising and promotion 561 1,424
Other 1,330 3,664
Total non-interest expense 61,927 48,967
Income before income tax expense 92,191 11,728
Income tax expense 17,560 3,274
Net income from continuing operations 74,631 8,454
Loss from discontinued operations before income taxes (20,354) (6,722)
Income tax expense (benefit) from discontinued operations 17,682 (1,368)
Net loss from discontinued operations (38,036) (5,354)
Net income 36,595 3,100
Preferred stock dividends 3,391 3,615
Net income (loss) available to common shareholders $ 33,204 $ (515)
(continued)


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

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


Interchange and card revenue	84		193		169		463

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

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

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

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

	(continued)

Table of Contents

Three Months Ended
March 31,
2021 2020
Basic earnings (loss) per common share from continuing operations $ 2.23 $ 0.15
Basic earnings (loss) per common share 1.04 (0.02)
Diluted earnings (loss) per common share from continuing operations 2.17 0.15
Diluted earnings (loss) per common share 1.01 (0.02)


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

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

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED

(amounts in thousands)

Three Months Ended
March 31,
2021 2020
Net income $ 36,595 $ 3,100
Unrealized gains (losses) on available for sale debt securities:
Unrealized gains (losses) arising during the period 400 (9,098)
Income tax effect (104) 2,366
Reclassification adjustments for (gains) losses included in net income (23,566) (3,974)
Income tax effect 6,127 1,033
Net unrealized gains (losses) on available for sale debt securities (17,143) (9,673)
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period 12,315 (27,697)
Income tax effect (3,202) 7,351
Reclassification adjustment for (gains) losses included in net income 25,926 1,478
Income tax effect (6,741) (384)
Net unrealized gains (losses) on cash flow hedges 28,298 (19,252)
Other comprehensive income (loss), net of income tax effect 11,155 (28,925)
Comprehensive income (loss) $ 47,750 $ (25,825)


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


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

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 March 31, 2021
Preferred Stock Common Stock
Shares of
Preferred
Stock
Outstanding Preferred
Stock Shares of
Common
Stock
Outstanding Common
Stock Additional
Paid in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury
Stock Total
Balance, December 31, 2020 9,000,000 $ 217,471 31,705,088 $ 32,986 $ 455,592 $ 438,581 $ (5,764) $ (21,780) $ 1,117,086
Net income — — — — — 36,595 — — 36,595
Other comprehensive income (loss) — — — — — — 11,155 — 11,155
Preferred stock dividends (1)
— — — — — (3,391) — — (3,391)
Sale of non-controlling interest in BMT (2)
— — — — 31,893 — — — 31,893
Distribution of investment in BM Technologies (3)
— — — — — (32,983) — — (32,983)
Restricted stock awards to certain BMT team members (4)
— — — — 19,592 — — — 19,592
Share-based compensation expense — — — — 3,609 — — — 3,609
Issuance of common stock under share-based compensation arrangements — — 533,674 533 4,632 — — — 5,165
Balance, March 31, 2021 9,000,000 $ 217,471 32,238,762 $ 33,519 $ 515,318 $ 438,802 $ 5,391 $ (21,780) $ 1,188,721
Three Months Ended March 31, 2020
Preferred Stock Common Stock
Shares of
Preferred
Stock
Outstanding Preferred Stock Shares of
Common
Stock
Outstanding Common
Stock Additional
Paid in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury
Stock Total
Balance, December 31, 2019 9,000,000 $ 217,471 31,336,791 $ 32,617 $ 444,218 $ 381,519 $ (1,250) $ (21,780) $ 1,052,795
Cumulative effect from change in accounting principle - CECL — — — — — (61,475) — — (61,475)
Net income — — — — — 3,100 — — 3,100
Other comprehensive income (loss) — — — — — — (28,925) — (28,925)
Preferred stock dividends(1)
— — — — — (3,615) — — (3,615)
Share-based compensation expense — — — — 3,228 — — — 3,228
Issuance of common stock under share-based compensation arrangements — — 133,235 134 (606) — — — (472)
Balance, March 31, 2020 9,000,000 $ 217,471 31,470,026 $ 32,751 $ 446,840 $ 319,529 $ (30,175) $ (21,780) $ 964,636



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


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

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


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



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

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

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

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

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


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

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

(1)Dividends per share of ~~$0.34478125, $0.40625,~~$0.350359, $0.336942, $0.403125, and $0.375 per share were declared on Series C, D, E, and F preferred stock for the three months ended ~~March 31,~~June 30, 2021. Dividends per share of $0.4375, $0.40625, $0.403125, and $0.375 per share were declared on Series C, D, E, and F preferred stock for the three months ended ~~March 31,~~June 30, 2020.

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



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

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


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

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

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

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


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

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


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

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

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

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

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

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

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

See accompanying notes to the unaudited consolidated financial statements.

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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(amounts in thousands)

Three Months Ended
March 31,
2021 2020
Cash Flows from Operating Activities
Net income from continuing operations $ 74,631 $ 8,454
Adjustments to reconcile net income to net cash provided by (used in) continuing operating activities:
Provision (benefit) for credit losses on loans and leases (2,919) 31,786
Depreciation and amortization 5,321 7,038
Share-based compensation expense 3,082 3,463
Deferred taxes (6,198) (22,287)
Net amortization (accretion) of investment securities premiums and discounts (14) 251
Unrealized (gain) loss on investment securities (974) 1,378
(Gain) loss on sale of investment securities (23,566) (3,974)
Unrealized (gain) loss on derivatives (2,537) 1,146
Loss on cash flow hedge derivative terminations 24,467 0
Settlement of terminated cash flow hedge derivatives (27,156) 0
Fair value adjustment on loans held for sale (1,115) 0
(Gain) loss on sale of SBA and other loans (2,071) (170)
Origination of loans held for sale (12,323) (7,046)
Proceeds from the sale of loans held for sale 17,122 7,948
Amortization (accretion) of fair value discounts and premiums (345) (378)
Earnings on investment in bank-owned life insurance (1,679) (1,762)
(Increase) decrease in accrued interest receivable and other assets 20,979 (98,985)
Increase (decrease) in accrued interest payable and other liabilities 135,679 38,206
Net Cash Provided By (Used In) Continuing Operating Activities 200,384 (34,932)
Cash Flows from Investing Activities
Proceeds from maturities, calls and principal repayments of investment securities 62,348 24,079
Proceeds from sales of investment securities available for sale 353,915 0
Purchases of investment securities available for sale (589,874) (158,782)
Origination of mortgage warehouse loans (16,998,093) (9,791,820)
Proceeds from repayments of mortgage warehouse loans 17,211,909 9,520,758
Net (increase) decrease in loans and leases, excluding mortgage warehouse loans (486,158) 174,971
Proceeds from sales of loans and leases 39,534 0
Purchase of loans (117,036) (193,363)
Net proceeds from sale of (purchases of) FHLB, Federal Reserve Bank, and other restricted stock 1,948 (2,926)
Purchases of bank premises and equipment (298) (89)
Purchases of leased assets under lessor operating leases (4,849) (6,384)
Net Cash Used In Continuing Investing Activities (526,654) (433,556)
Cash Flows from Financing Activities
Net increase (decrease) in deposits 1,162,511 (235,293)
Net increase (decrease) in short-term borrowed funds from the FRB 0 175,000
Net increase (decrease) in short-term borrowed funds from the FHLB 0 410,000
Net increase (decrease) in federal funds purchased 115,000 167,000
Net increase (decrease) in borrowed funds from FRB PPP liquidity facility (1,130,860) 0
Preferred stock dividends paid (3,401) (3,615)
Payments of employee taxes withheld from share-based awards (1,988) (932)
Proceeds from issuance of common stock 6,684 225
Proceeds from sale of non-controlling interest in BMT 23,125 0
Net Cash Provided By Continuing Financing Activities 171,071 512,385
Net Increase (Decrease) in Cash and Cash Equivalents From Continuing Operations (155,199) 43,897
(continued)
Three Months Ended
March 31,
2021 2020
Discontinued Operations:
Net Cash Used In Operating Activities $ (22,791) $ (232)
Net Cash Provided By Investing Activities 0 62
Net Increase (Decrease) in Cash and Cash Equivalents From Discontinued Operations (22,791) (170)
Net Increase (Decrease) in Cash and Cash Equivalents (177,990) 43,727
Cash and Cash Equivalents – Beginning 693,354 212,505
Cash and Cash Equivalents – Ending $ 515,364 $ 256,232
Non-cash Operating and Investing Activities:
Transfer of loans to other real estate owned $ 0 $ 31
Distribution of investment in BM Technologies common stock 32,983 0
Transfer of loans held for investment to held for sale 44,258 0
Unsettled sales of investment securities 0 104,469
Unsettled purchases of investment securities 56,620 97,247


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

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

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

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


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

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

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

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





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


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

	(continued)

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

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






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

See accompanying notes to the unaudited consolidated financial statements.

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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF THE BUSINESS

Customers Bancorp, Inc. (“Customers Bancorp”) is a bank holding company engaged in banking activities through its wholly owned subsidiary, Customers Bank ("the Bank”), collectively referred to as “Customers” herein.

Customers Bancorp and its wholly owned subsidiaries, the Bank, and non-bank subsidiaries, serve residents and businesses in Southeastern Pennsylvania (Bucks, Berks, Chester, Philadelphia and Delaware Counties); Rye Brook, New York (Westchester County); Hamilton, New Jersey (Mercer County); Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire (Rockingham County); Manhattan and Melville, New York; Washington, D.C.; Chicago, Illinois; Dallas, Texas; Orlando, Florida; and nationally for certain loan and deposit products. The Bank has 12 full-service branches and provides commercial banking products, primarily loans and deposits. In addition, Customers Bank also administratively supports loan and other financial products, including equipment finance leases, to customers through its limited-purpose offices in Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire; Manhattan and Melville, New York; Philadelphia and Lancaster, Pennsylvania; Chicago, ~~Illinois,~~Illinois; Dallas, Texas and Orlando, Florida. The Bank also serves specialty niche businesses nationwide, including its commercial loans to mortgage banking businesses, commercial equipment financing, SBA lending, specialty lending and consumer loans through relationships with fintech companies.

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

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation

The interim unaudited consolidated financial statements 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, 2020 consolidated balance sheet presented in this report has been derived from Customers Bancorp’s audited 2020 consolidated financial statements. Management believes that the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for the periods presented. These interim unaudited consolidated financial statements should be read in conjunction with the 2020 consolidated financial statements of Customers Bancorp and subsidiaries included in Customers' Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021 (the "2020 Form 10-K"). The 2020 Form 10-K describes Customers Bancorp’s significant accounting policies, which include its policies on Principles of Consolidation; Cash and Cash Equivalents and Statements of Cash Flows; Restrictions on Cash and Amounts due from Banks; Business Combinations; Investment Securities; Loan Accounting Framework; Loans Held for Sale and Loans at Fair Value; Loans Receivable - Mortgage Warehouse, at Fair Value; Loans Receivable, PPP; Loans and Leases Receivable; PCD Loans and Leases; ACL; Goodwill and Other Intangible Assets; FHLB, Federal Reserve Bank, and Other Restricted Stock; OREO; BOLI; Bank Premises and Equipment; Lessor and Lessee Operating Leases; Treasury Stock; Income Taxes; Share-Based Compensation; Transfer of Financial Assets; Derivative Instruments and Hedging; Comprehensive Income (Loss); EPS; and Loss Contingencies. There have been no material changes to Customers Bancorp's significant accounting policies noted above for the three and six months ended ~~March 31,~~June 30, 2021.

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

~~Table of Content~~s

have been reclassified to conform with the current period presentation. See NOTE 3 – DISCONTINUED OPERATIONS for additional information.

Accounting and Reporting Considerations related to COVID-19

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

Accounting for PPP Loans

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

Loan Modifications

As mentioned above, Section 4013 of the CARES Act, as amended by the CAA, gives entities temporary relief from the accounting and disclosure requirements for TDRs. In addition, on April 7, 2020, certain regulatory banking agencies issued an interagency statement that offers practical expedients for evaluating whether loan modifications in response to the COVID-19 pandemic are TDRs. To qualify for TDR accounting and disclosure relief under the CARES Act, as amended by the CAA, the applicable loan must not have been more than 30 days past due as of December 31, 2019, and the modification must be executed during the period beginning on March 1, 2020, and ending on the earlier of January 1, 2022, or the date that is 60 days after the termination date of the national emergency declared by the president on March 13, 2020, under the National Emergencies Act related to the outbreak of COVID-19. The CARES Act applies to modifications made as a result of COVID-19 including: forbearance agreements, interest rate modifications, repayment plans, and other arrangements to defer or delay payment of principal or interest. The interagency statement does not require the modification to be completed within a certain time period if it is related to COVID-19 and can be provided to borrowers either individually or as part of a loan modification program. Moreover, the interagency statement applies to short-term modifications (e.g. not more than six months deferral) including payment deferrals, fee waivers, extensions of repayment terms, or other insignificant payment delays as a result of COVID-19.

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Customers applied Section 4013 of the CARES Act and the interagency statement in connection with applicable modifications. For modifications that qualify under either the CARES Act or the interagency statement, TDR accounting and reporting is suspended. These modifications generally involve principal and/or interest payment deferrals for a period of 90 days at a time and can be extended to six months or longer for modifications that qualified under the Section 4013 of the CARES Act if requested by the borrower as long as the reason is still related to COVID-19. These modified loans would not also be reported as past due or nonaccrual during the deferral period. See NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES for additional information.

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Recently Issued Accounting Standards

Presented below are recently issued accounting standards that Customers has adopted.

Standard

Summary of Guidance

Effects on Financial Statements

ASU 2020-04,

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

Issued March 2020

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

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

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

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

• As of ~~March 31,~~June 30, 2021, Customers has not yet elected to apply optional expedients for

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

ASU 2021-01,

Reference Rate Reform (Topic 848) - Scope

Issued January 2021

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

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

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

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

• As of ~~March 31,~~June 30, 2021, Customers has not yet elected to apply optional expedients for

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

NOTE 3 – DISCONTINUED OPERATIONS

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

~~Upon closing of the divestiture,~~ Customers received cash consideration of $23.1 million upon closing of the divestiture and $3.7 million of additional cash consideration in May 2021. Upon closing of the divestiture, the holders of Customers Bancorp's common stock who held their shares as of the close of business on December 18, 2020 became entitled to receive an aggregate of 4,876,387 shares of BM Technologies' common stock. Customers distributed 0.15389 shares of BM Technologies common stock for each share of Customers Bancorp's common stock held as of the close of business on December 18, 2020 as special dividends. Certain team members of BMT also received 1,348,748 restricted shares of BM Technologies' common stock in the form of severance payments. The total stock consideration from the divestiture that were distributed to holders of Customers Bancorp's common stock and certain BMT team members represented 52% of the outstanding common stock of BM Technologies at the closing date of the divestiture.

The sale of BMT was accounted for as a sale of non-controlling interest and the merger between BMT and MFAC was accounted for as a reverse recapitalization as BMT was considered to be the accounting acquirer. Upon closing of the transaction, Customers had no remaining investment in BM Technologies.

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

~~Table of Content~~s

The following summarized financial information related to BMT has been segregated from continuing operations and reported as discontinued operations for the periods presented.


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




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

Three Months Ended
March 31,
(amounts in thousands) 2021 2020
Discontinued operations:
Non-interest income $ 0 $ 16,072
Non-interest expense 20,354 22,794
Loss from discontinued operations before income taxes (20,354) (6,722)
Income tax expense (benefit) 17,682 (1,368)
Net loss from discontinued operations $ (38,036) $ (5,354)

The assets and liabilities of discontinued operations on the consolidated balance sheet as of December 31, 2020 were as follows:


(amounts in thousands)	December 31, 2020
Carrying amounts of assets included as part of discontinued operations:
Cash and cash equivalents	$	2,989
Premises and equipment, net	401
Goodwill and other intangibles	10,329
Other assets	48,336
Total assets of discontinued operations	$	62,055

Carrying amounts of liabilities included as part of discontinued operations:
Borrowings from Customers Bank	$	21,000
Accrued interest payable and other liabilities	18,704
Total liabilities of discontinued operations	$	39,704

In connection with the divestiture, Customers has also entered into various agreements with BM Technologies, including a transition services agreement, software license agreement, deposit servicing agreement, non-competition agreement and loan agreement for periods ranging from one to ten years. Customers incurred expenses of ~~$13.7~~$14.3 million and $27.9 million, respectively, to BM Technologies under the deposit servicing agreement, included within the technology, communication and bank operations expense in ~~the~~ income from continuing operations during the three and six months ended ~~March 31,~~June 30, 2021.

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NOTE 4 — EARNINGS (LOSS) PER SHARE

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

Three Months Ended
March 31,
(amounts in thousands, except share and per share data) 2021 2020
Net income from continuing operations available to common shareholders $ 71,240 $ 4,839
Net loss from discontinued operations (38,036) (5,354)
Net income available to common shareholders $ 33,204 $ (515)
Weighted-average number of common shares outstanding – basic 31,883,946 31,391,151
Share-based compensation plans 957,765 0
Weighted-average number of common shares – diluted 32,841,711 31,391,151
Basic earnings (loss) per common share from continuing operations $ 2.23 $ 0.15
Basic earnings (loss) per common share from discontinued operations (1.19) (0.17)
Basic earnings (loss) per common share 1.04 (0.02)
Diluted earnings (loss) per common share from continuing operations $ 2.17 $ 0.15
Diluted earnings (loss) per common share from discontinued operations (1.16) (0.17)
Diluted earnings (loss) per common share 1.01 (0.02)


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

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

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

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

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

The following 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
March 31,
2021 2020
Share-based compensation awards 277,725 6,718,131


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

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NOTE 5 — CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT

The following tables present the changes in accumulated other comprehensive income (loss) by component for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. Amounts in parentheses indicate reductions to AOCI.


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



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


									Three Months Ended June 30, 2020
		Three Months Ended March 31, 2021
(amounts in thousands)	(amounts in thousands)	Unrealized Gains (Losses) on Available for Sale Securities (1)		Unrealized Gains (Losses) on Cash Flow Hedges (2)		Total		(amounts in thousands)	Unrealized Gains (Losses) on Available for Sale Securities (1)		Unrealized Gains (Losses) on Cash Flow Hedges (2)		Total
Balance - December 31, 2020		$	23,312	$	(29,076)	$	(5,764)
Balance - March 31, 2020								Balance - March 31, 2020	$	4,614	$	(34,789)	$	(30,175)

Unrealized gains (losses) arising during period, before tax	Unrealized gains (losses) arising during period, before tax	400		12,315		12,715		Unrealized gains (losses) arising during period, before tax	35,315		(6,369)		28,946
Income tax effect	Income tax effect	(104)		(3,202)		(3,306)		Income tax effect	(9,182)		1,684		(7,498)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	296		9,113��		9,409		Other comprehensive income (loss) before reclassifications	26,133		(4,685)		21,448
Reclassification adjustments for (gains) losses included in net income, before tax	Reclassification adjustments for (gains) losses included in net income, before tax	(23,566)		25,926		2,360		Reclassification adjustments for (gains) losses included in net income, before tax	(4,353)		2,718		(1,635)
Income tax effect	Income tax effect	6,127		(6,741)		(614)		Income tax effect	1,131		(734)		397
Amounts reclassified from accumulated other comprehensive income (loss) to net income	Amounts reclassified from accumulated other comprehensive income (loss) to net income	(17,439)		19,185		1,746		Amounts reclassified from accumulated other comprehensive income (loss) to net income	(3,222)		1,984		(1,238)
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	(17,143)		28,298		11,155		Net current-period other comprehensive income (loss)	22,911		(2,701)		20,210
Balance - March 31, 2021		$	6,169	$	(778)	$	5,391
Balance - June 30, 2020								Balance - June 30, 2020	$	27,525	$	(37,490)	$	(9,965)

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

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


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



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

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Three Months Ended March 31, 2020
(amounts in thousands)
Unrealized Gains (Losses) on Available for Sale Securities (1)
Unrealized Gains (Losses) on Cash Flow Hedges (2)
Total
Balance - December 31, 2019 $ 14,287 $ (15,537) $ (1,250)
Unrealized gains (losses) arising during period, before tax (9,098) (27,697) (36,795)
Income tax effect 2,366 7,351 9,717
Other comprehensive income (loss) before reclassifications (6,732) (20,346) (27,078)
Reclassification adjustments for losses (gains) included in net income, before tax (3,974) 1,478 (2,496)
Income tax effect 1,033 (384) 649
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2,941) 1,094 (1,847)
Net current-period other comprehensive income (loss) (9,673) (19,252) (28,925)
Balance - March 31, 2020 $ 4,614 $ (34,789) $ (30,175)


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



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

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

NOTE 6 — INVESTMENT SECURITIES

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

March 31, 2021 (1)
(amounts in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Available for sale debt securities:
Asset-backed securities $ 381,525 $ 5,717 $ (249) $ 386,993
U.S. government agencies securities 20,000 53 0 20,053
Agency-guaranteed mortgage-backed securities 37,933 9 (308) 37,634
Agency-guaranteed collateralized mortgage obligations 211,226 365 (487) 211,104
Collateralized loan obligations 162,998 139 (43) 163,094
Commercial mortgage-backed securities 13,059 0 0 13,059
Corporate notes (2)
255,126 3,422 (624) 257,924
Private label collateralized mortgage obligations 329,367 1,277 (1,955) 328,689
State and political subdivision debt securities (3)
18,481 46 0 18,527
Available for sale debt securities $ 1,429,715 $ 11,028 $ (3,666) 1,437,077
Equity securities (4)
4,827
Total investment securities, at fair value $ 1,441,904


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

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

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

Agency-guaranteed collateralized mortgage obligations		160,950		916		(99)		161,767
Agency-guaranteed residential collateralized mortgage obligations										Agency-guaranteed residential collateralized mortgage obligations	139,985		916		(60)		140,841
Agency-guaranteed commercial collateralized mortgage obligations										Agency-guaranteed commercial collateralized mortgage obligations	20,965		0		(39)		20,926
Collateralized loan obligations	Collateralized loan obligations	32,367		0		0		32,367		Collateralized loan obligations	32,367		0		0		32,367
Corporate notes (2)	Corporate notes (2)	372,764		24,144		(164)		396,744		Corporate notes (2)	372,764		24,144		(164)		396,744
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	136,943		423		(374)		136,992		Private label collateralized mortgage obligations	136,943		423		(374)		136,992
State and political subdivision debt securities (3)	State and political subdivision debt securities (3)	17,346		945		0		18,291		State and political subdivision debt securities (3)	17,346		945		0		18,291
Available for sale debt securities	Available for sale debt securities	$	1,174,188	$	32,890	$	(647)	1,206,431		Available for sale debt securities	$	1,174,188	$	32,890	$	(647)	1,206,431

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

(1)Accrued interest on AFS debt securities totaled ~~$4.3~~$5.0 million and $4.2 million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

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

(3)Includes both taxable and non-taxable municipal securities.

(4)Includes equity securities issued by a foreign entity.

During the three and six months ended ~~March 31,~~June 30, 2021, Customers recognized unrealized gains of $1.7 million and $2.7 million, respectively, on its equity securities. During the three and six months ended June 30, 2020, Customers recognized unrealized gains of ~~$1.0~~$1.2 million and unrealized losses of ~~$1.4~~$0.2 million, respectively, on its equity securities. These unrealized gains and losses are reported as unrealized gain (loss) on investment securities within non-interest income on the consolidated statements of income. In June 2021, Customers sold all of the outstanding shares in CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which held the equity securities issued by a foreign entity, for $3.8 million, and recognized $2.8 million in loss on sale of foreign subsidiaries within non-interest income on the consolidated statement of income.

Proceeds from the sale of AFS securities were ~~$353.9~~$53.7 million and $407.6 million for the three and six months ended ~~March 31, 2021.~~June 30, 2021, respectively. Proceeds from the sale of AFS securities were $109.2 million during the three and six months ended ~~March 31, 2020 were received in April~~June 30, 2020. Realized gains from the sale of AFS debt securities were ~~$23.6~~$1.8 million and ~~$4.0~~$25.4 million for the three and six months ended ~~March 31,~~June 30, 2021, respectively. Realized gains from the sale of AFS debt securities were $4.4 million and $8.3 million for the three and six months ended June 30, 2020, respectively. These gains (losses) were determined using the specific identification method and were reported as gain (loss) on sale of investment securities within non-interest income on the consolidated statements of income.

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

March 31, 2021
(amounts in thousands) Amortized
Cost Fair
Value
Due in one year or less $ 0 $ 0
Due after one year through five years 140,681 141,641
Due after five years through ten years 142,991 144,893
Due after ten years 9,935 9,970
Asset-backed securities 381,525 386,993
Collateralized loan obligations 162,998 163,094
Commercial mortgage-backed securities 13,059 13,059
Agency-guaranteed mortgage-backed securities 37,933 37,634
Private label collateralized mortgage obligations 329,367 328,689
Agency-guaranteed collateralized mortgage obligations 211,226 211,104
Total debt securities $ 1,429,715 $ 1,437,077


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


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

~~Table of Content~~s

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

March 31, 2021
Less Than 12 Months 12 Months or More Total
(amounts in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Available for sale debt securities:
Asset-backed securities $ 90,064 $ (249) $ 0 $ 0 $ 90,064 $ (249)
Agency-guaranteed mortgage-backed securities 10,377 (308) 0 0 10,377 (308)
Agency-guaranteed collateralized mortgage obligations 55,825 (487) 0 0 55,825 (487)
Collateralized loan obligations 55,703 (43) 0 0 55,703 (43)
Corporate notes 48,905 (624) 0 0 48,905 (624)
Private label collateralized mortgage obligations 108,417 (1,955) 0 0 108,417 (1,955)
Total $ 369,291 $ (3,666) $ 0 $ 0 $ 369,291 $ (3,666)



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

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

At ~~March 31,~~June 30, 2021, there were 3038 AFS debt securities with unrealized losses in the less-than-twelve-month category and 0 AFS debt securities with unrealized losses in the twelve-month-or-more category. The unrealized losses were principally due to changes in market interest rates that resulted in a negative impact on the respective securities' fair value. All amounts related to these securities are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell any of the 3038 securities, and it is not more likely than not that Customers will be required to sell any of the 3038 securities before recovery of the amortized cost basis. At December 31, 2020, there were 16 AFS debt securities in an unrealized loss position.

At ~~March 31,~~June 30, 2021 and December 31, 2020, Customers Bank had pledged investment securities aggregating ~~$17.6~~$16.0 million and $18.8 million in fair value, respectively, as collateral primarily for an unused line of credit with another financial institution. These counterparties do not have the ability to sell or repledge these securities.

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

NOTE 7 – LOANS HELD FOR SALE

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

(amounts in thousands) March 31, 2021 December 31, 2020
Commercial loans:
Multi-family loans, at lower of cost or fair value $ 19,251 $ 0
Commercial and industrial loans, at lower of cost or fair value 0 55,683
Commercial real estate non-owner occupied loans, at lower of cost or fair value 0 17,251
Total commercial loans held for sale 19,251 72,934
Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value 643 643
Residential mortgage loans, at fair value 1,205 5,509
Installment loans, at lower of cost or fair value 25,007 0
Total consumer loans held for sale 26,855 6,152
Loans held for sale $ 46,106 $ 79,086



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


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

Total loans held for sale as of ~~March 31,~~June 30, 2021 and December 31, 2020 included NPLs of ~~$0.6~~$0.5 million and $18.5 million, respectively.

~~Table of Content~~s

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

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


(amounts in thousands)	(amounts in thousands)	March 31, 2021		December 31, 2020		(amounts in thousands)	June 30, 2021		December 31, 2020
Loans and leases receivable, mortgage warehouse, at fair value	Loans and leases receivable, mortgage warehouse, at fair value	$	3,407,622	$	3,616,432	Loans and leases receivable, mortgage warehouse, at fair value	$	2,855,284	$	3,616,432
Loans receivable, PPP	Loans receivable, PPP	5,178,089		4,561,365		Loans receivable, PPP	6,305,056		4,561,365
Loans receivable:	Loans receivable:					Loans receivable:
Commercial:	Commercial:					Commercial:
Multi-family	Multi-family	1,640,278		1,761,301		Multi-family	1,497,485		1,761,301
Commercial and industrial (1)	Commercial and industrial (1)	2,220,652		2,289,441		Commercial and industrial (1)	2,360,656		2,289,441
Commercial real estate owner occupied	Commercial real estate owner occupied	590,093		572,338		Commercial real estate owner occupied	653,649		572,338
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,194,832		1,196,564		Commercial real estate non-owner occupied	1,206,646		1,196,564
Construction	Construction	156,837		140,905		Construction	179,198		140,905
Total commercial loans and leases receivable	Total commercial loans and leases receivable	5,802,692		5,960,549		Total commercial loans and leases receivable	5,897,634		5,960,549
Consumer:	Consumer:					Consumer:
Residential real estate	Residential real estate	293,805		317,170		Residential real estate	266,911		317,170
Manufactured housing	Manufactured housing	59,977		62,243		Manufactured housing	57,904		62,243
Installment	Installment	1,380,015		1,235,406		Installment	1,549,693		1,235,406
Total consumer loans receivable	Total consumer loans receivable	1,733,797		1,614,819		Total consumer loans receivable	1,874,508		1,614,819
Loans and leases receivable (2)	Loans and leases receivable (2)	7,536,489		7,575,368		Loans and leases receivable (2)	7,772,142		7,575,368

Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(128,736)		(144,176)		Allowance for credit losses on loans and leases	(125,436)		(144,176)
Total loans and leases receivable, net of allowance for credit losses on loans and leases	Total loans and leases receivable, net of allowance for credit losses on loans and leases	$	15,993,464	$	15,608,989	Total loans and leases receivable, net of allowance for credit losses on loans and leases	$	16,807,046	$	15,608,989

(1)Includes direct finance equipment leases of ~~$107.1~~$129.0 million and $108.0 million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of ~~$(133.2)~~$(223.1) million and $(54.6) million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

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Customers' total loans and leases receivable portfolio includes loans receivable which are reported at fair value based on an election made to account for these loans at fair value and loans and leases receivable which are predominately reported at their outstanding unpaid principal balance, net of charge-offs and deferred costs and fees and unamortized premiums and discounts and are evaluated for impairment. The total amount of accrued interest recorded for total loans was ~~$79.3~~$85.4 million and $76.6 million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At ~~March~~June 30, 2021 and December 31, ~~2021,~~2020, there were ~~$38.8~~$36.6 million and $59.5 million of individually evaluated loans that were ~~collateral-dependent.~~collateral-dependent, respectively. Substantially all individually evaluated loans are collateral-dependent and consisted primarily of commercial and industrial, commercial real estate, and residential real estate loans. Collateral-dependent commercial and industrial loans were secured by accounts receivable, inventory and equipment; collateral-dependent commercial real estate loans were secured by commercial real estate assets; and residential real estate loans were secured by residential real estate assets.

Loans receivable, PPP

On March 27, 2020, the CARES Act was signed into law and created funding for a new product called the PPP. The PPP is administered by the SBA and is intended to assist organizations with payroll related expenses. Customers had ~~$5.2~~$6.3 billion and $4.6 billion of PPP loans outstanding as of ~~March~~June 30, 2021 and December 31, ~~2021,~~2020, respectively, which are fully guaranteed by the SBA and earn a fixed interest rate of 1.00%. Customers recognized interest income, including origination fees, of ~~$38.8~~$41.1 million and $79.9 million for the three and six months ended ~~March 31, 2021. There was 0~~June 30, 2021, respectively. Customers recognized interest income, ~~recognized,~~ including origination fees, of $11.7 million for the three and six months ended ~~March 31,~~June 30, 2020.

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

Loans receivable, mortgage warehouse, at fair value

Mortgage warehouse loans consist of commercial loans to mortgage companies. These mortgage warehouse lending transactions are subject to master repurchase 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

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warehouse loans are designated as loans held for 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 and receives proceeds directly from third party investors when the underlying mortgage loans are sold into the secondary 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 under 30 days from purchase to sale. The primary goal of these lending transactions is to provide liquidity to mortgage companies.

At ~~March 31,~~June 30, 2021 and December 31, 2020, all of Customers' commercial mortgage warehouse loans were current in terms of payment. As these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures.

Loans and leases receivable

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


		March 31, 2021													June 30, 2021
(amounts in thousands)	(amounts in thousands)	30-59 Days past due (1)		60-89 Days past due (1)		90 Days or more past due (1)		Total past due (1)		Loans and leases not past due (2)		Total loans and leases (3)		(amounts in thousands)	30-59 Days past due (1)		60-89 Days past due (1)		90 Days or more past due (1)		Total past due (1)		Loans and leases not past due (2)		Total loans and leases (3)
Multi-family	Multi-family	$	8,480	$	1,245	$	16,703	$	26,428	$	1,613,850	$	1,640,278	Multi-family	$	0	$	3,355	$	15,004	$	18,359	$	1,479,126	$	1,497,485
Commercial and industrial	Commercial and industrial	2,086		4,732		2,705		9,523		2,211,129		2,220,652		Commercial and industrial	4		1,318		6,415		7,737		2,352,919		2,360,656

Commercial real estate owner occupied	Commercial real estate owner occupied	1,920		0		2,219		4,139		585,954		590,093		Commercial real estate owner occupied	0		0		1,684		1,684		651,965		653,649
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	2,169		0		2,356		4,525		1,190,307		1,194,832		Commercial real estate non-owner occupied	0		12		0		12		1,206,634		1,206,646
Construction	Construction	0		0		0		0		156,837		156,837		Construction	0		0		0		0		179,198		179,198
Residential real estate	Residential real estate	2,514		235		1,324		4,073		289,732		293,805		Residential real estate	56		679		5,029		5,764		261,147		266,911
Manufactured housing	Manufactured housing	1,403		871		1,917		4,191		55,786		59,977		Manufactured housing	1,387		237		5,171		6,795		51,109		57,904
Installment	Installment	5,492		2,125		78		7,695		1,372,320		1,380,015		Installment	5,966		2,154		2,728		10,848		1,538,845		1,549,693
Total	Total	$	24,064	$	9,208	$	27,302	$	60,574	$	7,475,915	$	7,536,489	Total	$	7,413	$	7,755	$	36,031	$	51,199	$	7,720,943	$	7,772,142

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

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

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

(2)Loans and leases where next payment due is less than 30 days from the report date. The ~~March 31,~~June 30, 2021 and December 31, 2020 tables exclude PPP loans of ~~$5.2~~$6.3 billion and $4.6 billion, respectively, which are all current as of ~~March 31,~~June 30, 2021 and December 31, 2020.

(3)Includes PCD loans of ~~$12.5~~$11.7 million and $13.4 million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

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Nonaccrual Loans and Leases

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

March 31, 2021 (1)
December 31, 2020 (1)
(amounts in thousands) Nonaccrual loans with no related allowance Nonaccrual loans with related allowance Total nonaccrual loans Nonaccrual loans with no related allowance Nonaccrual loans with related allowance Total nonaccrual loans
Multi-family $ 20,530 $ 0 $ 20,530 $ 18,800 $ 2,928 $ 21,728
Commercial and industrial 7,282 262 7,544 6,384 2,069 8,453
Commercial real estate owner occupied 3,242 0 3,242 3,411 0 3,411
Commercial real estate non-owner occupied 2,259 97 2,356 2,356 0 2,356
Residential real estate 9,353 0 9,353 9,911 0 9,911
Manufactured housing 0 2,871 2,871 0 2,969 2,969
Installment 0 2,185 2,185 0 3,211 3,211
Total $ 42,666 $ 5,415 $ 48,081 $ 40,862 $ 11,177 $ 52,039


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

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

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

(1) Presented at amortized cost basis.

Interest income recognized on nonaccrual loans was insignificant for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. Accrued interest ~~of $16 thousand and $1.2 million was~~ reversed when the loans went to nonaccrual status was insignificant during the three and six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

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Allowance for credit losses on loans and leases

The changes in the ACL on loans and leases for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 are presented in the tables below.


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

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

Three Months Ended March 31, 2021 Multi-family Commercial and industrial Commercial real estate owner occupied Commercial real estate non-owner occupied Construction Residential real estate Manufactured housing Installment Total
(amounts in thousands)
Ending Balance,
December 31, 2020 $ 12,620 $ 12,239 $ 9,512 $ 19,452 $ 5,871 $ 3,977 $ 5,190 $ 75,315 $ 144,176
Charge-offs (1,132) (635) (142) 0 0 (50) 0 (12,687) (14,646)
Recoveries 0 260 8 10 5 10 0 1,832 2,125
Provision (benefit) for credit losses (3,462) (4,361) (3,443) (7,841) (1,773) (728) (390) 19,079 (2,919)
Ending Balance,
March 31, 2021 $ 8,026 $ 7,503 $ 5,935 $ 11,621 $ 4,103 $ 3,209 $ 4,800 $ 83,539 $ 128,736


Three Months Ended March 31, 2020		Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
(amounts in thousands)	(amounts in thousands)																			(amounts in thousands)	Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Ending Balance, December 31, 2019		$	6,157	$	15,556	$	2,235	$	6,243	$	1,262	$	3,218	$	1,060	$	20,648	$	56,379
Cumulative effect of change in accounting principle		2,171		759		5,773		7,918		(98)		1,518		3,802		57,986		79,829
Three Months Ended June 30, 2020																				Three Months Ended June 30, 2020
Ending Balance, March 31, 2020																				Ending Balance, March 31, 2020	$	8,750	$	18,806	$	8,527	$	18,530	$	1,934	$	4,180	$	4,987	$	83,569	$	149,283

Charge-offs	Charge-offs	0		(97)		0		(12,797)		0		0		0		(6,246)		(19,140)		Charge-offs	0		(20)		0		(2,801)		0		0		0		(8,304)		(11,125)
Recoveries	Recoveries	0		54		3		0		3		29		0		340		429		Recoveries	0		25		2		0		113		26		0		635		801
Provision (benefit) for credit losses	Provision (benefit) for credit losses	422		2,534		516		17,166		767		(585)		125		10,841		31,786		Provision (benefit) for credit losses	5,947		(6,509)		2,876		10,764		3,250		344		1,027		3,247		20,946
Ending Balance, March 31, 2020		$	8,750	$	18,806	$	8,527	$	18,530	$	1,934	$	4,180	$	4,987	$	83,569	$	149,283
Ending Balance, June 30, 2020																				Ending Balance, June 30, 2020	$	14,697	$	12,302	$	11,405	$	26,493	$	5,297	$	4,550	$	6,014	$	79,147	$	159,905
Six Months Ended June 30, 2020																				Six Months Ended June 30, 2020
Ending Balance, December 31, 2019																				Ending Balance, December 31, 2019	$	6,157	$	15,556	$	2,235	$	6,243	$	1,262	$	3,218	$	1,060	$	20,648	$	56,379
Cumulative effect of change in accounting principle - CECL																				Cumulative effect of change in accounting principle - CECL	2,171		759		5,773		7,918		(98)		1,518		3,802		57,986		79,829
Charge-offs																				Charge-offs	0		(117)		0		(15,598)		0		0		0		(14,550)		(30,265)

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

At ~~March 31,~~June 30, 2021, the ACL was ~~$128.7~~$125.4 million, a decrease of ~~$15.5~~$18.8 million from the December 31, 2020 balance of $144.2 million. The decrease resulted primarily from a decrease in provision for credit losses from continuing improvement in macroeconomic forecasts. The increase in ACL for the installment portfolio is mainly due to loan portfolio growth.

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Troubled Debt Restructurings

At ~~March 31,~~June 30, 2021 and December 31, 2020, there were ~~$16.0~~$16.8 million and $16.1 million, respectively, in loans reported as TDRs. TDRs are reported as impaired loans in the quarter of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent quarters, a TDR may be returned to accrual status if it satisfies a minimum performance requirement of six months, however, it will remain classified as impaired. Generally, the Bank requires sustained performance for nine months before returning a TDR to accrual status. Customers had 0 lease receivables that had been restructured as a TDR as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

~~The~~Section 4013 of the CARES Act, as amended by the CAA, gives entities temporary relief from the accounting and disclosure requirements for TDRs. In addition, on April 7, 2020, certain regulatory banking agencies ~~recently~~ issued ~~guidance stating certain~~an interagency statement that offers practical expedients for evaluating whether loan modifications in response to ~~borrowers experiencing financial distress as a result of~~ the ~~economic impacts created by~~ COVID-19 ~~may not be required to be treated as TDRs under U.S. GAAP.~~pandemic are TDRs. For COVID-19 related loan modifications which met the loan modification criteria under either the CARES Act or the criteria specified by the regulatory agencies, Customers elected to suspend TDR accounting for such loan modifications. At ~~March 31,~~June 30, 2021, commercial and consumer deferments related to COVID-19 were ~~$176.1~~$89.8 million and ~~$13.0~~$8.4 million, respectively. At December 31, 2020, commercial and consumer deferments related to COVID-19 were $202.1 million and $16.4 million, respectively.

The following table presents loans modified in a TDR by type of concession for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. There were 0 modifications that involved forgiveness of debt for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.


		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
		2021			2020				2021			2020			2021			2020
(dollars in thousands)	(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment		(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment		Number of loans	Recorded investment		Number of loans	Recorded investment
Extensions of maturity	Extensions of maturity	0	$	0	4	$	245	Extensions of maturity	0	$	0	2	$	140	0	$	0	6	$	385
Interest-rate reductions	Interest-rate reductions	8	184		12	530		Interest-rate reductions	4	157		20	843		12	341		32	1,373
Other (1)	Other (1)	20	541		0	0		Other (1)	99	1,141		0	0		119	1,682		0	0
Total	Total	28	$	725	16	$	775	Total	103	$	1,298	22	$	983	131	$	2,023	38	$	1,758

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

As of ~~March 31,~~June 30, 2021 and December 31, 2020, there were 0 commitments to lend additional funds to debtors whose loans have been modified in TDRs.

The following table presents, by loan type, the number of loans modified in TDRs and the related recorded investment, for which there was a payment default within twelve months following the modification:


		March 31, 2021			March 31, 2020			June 30, 2021			June 30, 2020
(dollars in thousands)	(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment			(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment
Manufactured housing	Manufactured housing	3	$	48	0	$	0		Manufactured housing	7	$	189	0	$	0

Commercial real estate owner occupied	Commercial real estate owner occupied	0	0		1	8			Commercial real estate owner occupied	0	0		1	958
Residential real estate	Residential real estate	1	56		5	684			Residential real estate	1	43		4	313
Installment	Installment	16	250		0	0			Installment	15	247		0	0
Total loans	Total loans	20	$	354	6	$	692		Total loans	23	$	479	5	$	1,271

Loans modified in TDRs are evaluated for impairment. The nature and extent of impairment of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of ACL.

Purchased Credit-Deteriorated Loans

Customers adopted ASC 326 Financial Instruments - Credit Losses ("ASC 326") using the prospective transition approach for financial assets purchased with credit deterioration that were previously classified as PCI and accounted for under ASC 310-30. In accordance with the standard, Customers did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. As of ~~March~~June 30, 2021 and December 31, ~~2021,~~2020, the amortized cost basis of PCD assets amounted to ~~$12.5 million.~~$11.7 million and $13.4 million, respectively.

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Credit Quality Indicators

The ACL represents management's estimate of expected losses in Customers' loans and leases receivable portfolio, excluding commercial mortgage warehouse loans reported at fair value pursuant to a fair value option election and PPP loans receivable. Multi-family, commercial and industrial, owner occupied commercial real estate, non-owner occupied commercial real estate, and 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. Residential real estate loans, manufactured housing and installment loans are evaluated based on the payment activity of the loan.

To facilitate the monitoring of credit quality within the multi-family, commercial and industrial, owner occupied commercial real estate, non-owner occupied commercial real estate, and construction loan portfolios, and as an input in the ACL lifetime loss rate model for the commercial and industrial loan portfolio, the Bank utilizes the following categories of risk ratings: pass/satisfactory (includes risk rating 1 through 6), special mention, substandard, doubtful, and loss. The risk rating categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass/satisfactory ratings, which are assigned to those borrowers who do not have identified potential or well-defined weaknesses and for whom there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on a quarterly basis during the month preceding the end of the calendar quarter. While assigning risk ratings involves judgment, the risk-rating process allows management to identify riskier credits in a timely manner and allocate the appropriate resources to manage those loans and leases. The 2020 Form 10-K describes Customers Bancorp’s risk rating grades.

Risk ratings are not established for certain consumer loans, including residential real estate, home equity, manufactured housing, and installment loans, mainly because these portfolios consist of a larger number of homogeneous loans with smaller balances. Instead, these portfolios are evaluated for risk mainly based upon aggregate payment history through the monitoring of delinquency levels and trends and are classified as performing and non-performing. The following tables present the credit ratings of loans and leases receivable as of ~~March 31,~~June 30, 2021 and December 31, 2020.

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Term Loans Amortized Cost Basis by Origination Year as of March 31, 2021
(amounts in thousands) 2021 2020 2019 2018 2017 Prior Revolving loans amortized cost basis Revolving loans converted to term Total
Multi-family loans:
Pass $ 90,497 $ 130,496 $ 22,678 $ 275,379 $ 418,365 $ 565,953 $ 0 $ 0 $ 1,503,368
Special mention 0 0 0 0 20,279 36,870 0 0 57,149
Substandard 0 0 0 0 50,078 29,683 0 0 79,761
Doubtful 0 0 0 0 0 0 0 0 0
Total multi-family loans $ 90,497 $ 130,496 $ 22,678 $ 275,379 $ 488,722 $ 632,506 $ 0 $ 0 $ 1,640,278
Commercial and industrial loans and leases:
Pass $ 274,698 $ 448,597 $ 335,492 $ 139,864 $ 109,093 $ 112,621 $ 692,981 $ 0 $ 2,113,346
Special mention 16,935 13,200 1,044 563 33 258 16,342 0 48,375
Substandard 0 10,856 6,619 18,049 7,148 7,752 8,507 0 58,931
Doubtful 0 0 0 0 0 0 0 0 0
Total commercial and industrial loans and leases $ 291,633 $ 472,653 $ 343,155 $ 158,476 $ 116,274 $ 120,631 $ 717,830 $ 0 $ 2,220,652
Commercial real estate owner occupied loans:
Pass $ 33,144 $ 82,661 $ 167,487 $ 71,146 $ 61,561 $ 133,469 $ 672 $ 0 $ 550,140
Special mention 0 0 4,286 0 11,010 292 0 0 15,588
Substandard 0 0 2,848 9,538 240 11,739 0 0 24,365
Doubtful 0 0 0 0 0 0 0 0 0
Total commercial real estate owner occupied loans $ 33,144 $ 82,661 $ 174,621 $ 80,684 $ 72,811 $ 145,500 $ 672 $ 0 $ 590,093
Commercial real estate non-owner occupied:
Pass $ 11,186 $ 120,080 $ 94,136 $ 95,355 $ 120,861 $ 423,438 $ 14,019 $ 0 $ 879,075
Special mention 0 61,994 11,285 996 99,671 53,340 0 0 227,286
Substandard 0 0 0 17,741 20,611 50,119 0 0 88,471
Doubtful 0 0 0 0 0 0 0 0 0
Total commercial real estate non-owner occupied loans $ 11,186 $ 182,074 $ 105,421 $ 114,092 $ 241,143 $ 526,897 $ 14,019 $ 0 $ 1,194,832
Construction:
Pass $ 971 $ 28,168 $ 110,973 $ 4,921 $ 0 $ 9,627 $ 667 $ 0 $ 155,327
Special mention 0 1,510 0 0 0 0 0 0 1,510
Substandard 0 0 0 0 0 0 0 0 0
Doubtful 0 0 0 0 0 0 0 0 0
Total construction loans $ 971 $ 29,678 $ 110,973 $ 4,921 $ 0 $ 9,627 $ 667 $ 0 $ 156,837
Total commercial loans and leases receivable $ 427,431 $ 897,562 $ 756,848 $ 633,552 $ 918,950 $ 1,435,161 $ 733,188 $ 0 $ 5,802,692
Residential real estate loans:
Performing $ 2,573 $ 11,110 $ 14,660 $ 12,060 $ 7,379 $ 105,969 $ 131,018 $ 0 $ 284,769
Non-performing 0 0 98 906 780 4,785 2,467 0 9,036
Total residential real estate loans $ 2,573 $ 11,110 $ 14,758 $ 12,966 $ 8,159 $ 110,754 $ 133,485 $ 0 $ 293,805
Manufactured housing loans:
Performing $ 0 $ 0 $ 300 $ 443 $ 77 $ 54,394 $ 0 $ 0 $ 55,214
Non-performing 0 0 0 0 0 4,763 0 0 4,763
Total manufactured housing loans $ 0 $ 0 $ 300 $ 443 $ 77 $ 59,157 $ 0 $ 0 $ 59,977
Installment loans:
Performing $ 204,365 $ 476,856 $ 599,887 $ 91,009 $ 3,633 $ 1,249 $ 0 $ 0 $ 1,376,999
Non-performing 0 341 2,117 437 33 88 0 0 3,016
Total installment loans $ 204,365 $ 477,197 $ 602,004 $ 91,446 $ 3,666 $ 1,337 $ 0 $ 0 $ 1,380,015
Total consumer loans $ 206,938 $ 488,307 $ 617,062 $ 104,855 $ 11,902 $ 171,248 $ 133,485 $ 0 $ 1,733,797
Loans and leases receivable $ 634,369 $ 1,385,869 $ 1,373,910 $ 738,407 $ 930,852 $ 1,606,409 $ 866,673 $ 0 $ 7,536,489


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






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






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

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






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

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Loan Purchases and Sales

Purchases and sales of loans were as follows for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:

Three Months Ended March 31,
(amounts in thousands) 2021 2020
Purchases (1)
Residential real estate $ 0 $ 495
Installment (2)
115,849 191,761
Total $ 115,849 $ 192,256
Sales (3)
Commercial and industrial $ 18,931 $ 0
Commercial real estate owner occupied 2,237 0
Commercial real estate non-owner occupied 18,366 0
Installment 0 1,822
Total $ 39,534 $ 1,822


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

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



Residential real estate	0		0		0		495

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

Residential real estate	11,623		0		28,186		0

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

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was ~~101.0%~~102.0% and ~~100.6%~~98.5% of loans outstanding for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The purchase price was 103.0% and 100.4% of loans outstanding for the six months ended June 30, 2021 and 2020, respectively.

(2)Installment loan purchases for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 consist of third-party originated unsecured consumer loans. None of the loans are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

(3)Amounts reported in the above table are the unpaid principal balance at time of sale. For the ~~quarters~~three months ended ~~March 31,~~June 30, 2021 and 2020, loan sales resulted in net gains of ~~$1.6~~$2.2 million and ~~$11 thousand,~~$0.3 million, respectively, included in gain (loss) on sale of SBA and other loans and mortgage banking income in the consolidated statement of income (loss). For the six months ended June 30, 2021 and 2020, loan sales resulted in net gains of $4.3 million and $0.4 million, respectively.

Loans Pledged as Collateral

Customers has pledged eligible real estate and commercial and industrial loans, including PPP loans as collateral for borrowings from the FHLB and FRB in the amount of ~~$6.8~~$7.1 billion and $8.5 billion at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. PPP loans of ~~$3.3~~$3.9 billion and $4.6 billion were pledged to the FRB in accordance with borrowing from the PPPLF at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

NOTE 9 — LEASES

Lessee

Customers has operating leases for its branches, LPOs, and administrative offices, with remaining lease terms ranging between 52 months and 6 years. These operating leases comprise substantially all of Customers' obligations in which Customers is the lessee. Most lease agreements consist of initial lease terms ranging between 1 and 5 years, with options to renew the leases or extend the term up to 15 years at Customers' sole discretion. Some operating leases include variable lease payments that are based on an index or rate, such as the CPI. Variable lease payments are not included in the liability or right of use asset and are recognized in the period in which the obligation for those payments are incurred. Customers' operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, Customers does not have any commitments that would meet the definition of a finance lease.

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

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

(amounts in thousands) Classification March 31, 2021 December 31, 2020
ASSETS
Operating lease ROU assets (1)
Other assets $ 15,442 $ 16,578
LIABILITIES
Operating lease liabilities (1)
Other liabilities $ 16,829 $ 18,005


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

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

~~Table of Content~~s

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

Three Months Ended March 31,
(amounts in thousands) Classification 2021 2020
Operating lease cost (1)(2)
Occupancy expenses $ 1,117 $ 1,205


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

(1) There were 0 variable lease costs for the three and six months ended ~~March 31,~~June 30, 2021 and 2020, and sublease income for operating leases is immaterial.

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

Maturities of non-cancelable operating lease liabilities were as follows at ~~March 31,~~June 30, 2021:

(amounts in thousands) March 31, 2021
2021 $ 3,477
2022 4,509
2023 4,031
2024 2,957
2025 1,887
Thereafter 1,465
Total minimum payments 18,326
Less: interest 1,497
Present value of lease liabilities $ 16,829


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

Customers does not have leases where it is involved with the construction or design of an underlying asset. Customers has no legally binding minimum lease payments for leases signed but not yet commenced as of ~~March 31,~~June 30, 2021. Cash paid pursuant to the operating lease liability was ~~$1.1~~$1.4 million and ~~$1.3~~$2.5 million for the three and six months ended ~~March 31,~~June 30, 2021, respectively. Cash paid pursuant to the operating lease liability was $1.5 million and $3.0 million for the three and six months ended June 30, 2020, respectively. These payments were reported as cash flows used in operating activities in the statement of cash flows.

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

(amounts in thousands) March 31, 2021 December 31, 2020
Weighted average remaining lease term (years)
Operating leases (1)
4.5 years 4.7 years
Weighted average discount rate
Operating leases (1)
2.89 % 2.90 %

(amounts in thousands)

June 30, 2021

December 31, 2020

Weighted average remaining lease term (years)

Operating leases (1)

4.1 years

4.7 years

Weighted average discount rate

Operating leases (1)

2.67

2.90

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

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Equipment Lessor

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

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

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

~~Table of Content~~s

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 ~~March 31,~~June 30, 2021 and December 31, 2020:

(amounts in thousands) Classification March 31, 2021 December 31, 2020
ASSETS
Direct financing leases
Lease receivables Loans and leases receivable $ 104,230 $ 104,982
Guaranteed residual assets Loans and leases receivable 9,452 12,988
Unguaranteed residual assets Loans and leases receivable 3,807 1,229
Deferred initial direct costs Loans and leases receivable 528 560
Unearned income Loans and leases receivable (10,433) (11,175)
Net investment in direct financing leases $ 107,584 $ 108,584
Operating leases
Investment in operating leases Other assets $ 136,754 $ 131,791
Accumulated depreciation Other assets (33,204) (28,919)
Deferred initial direct costs Other assets 1,113 996
Net investment in operating leases 104,663 103,868
Total lease assets $ 212,247 $ 212,452


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

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

COVID-19 Impact on Leases

Customers granted concessions to lessees as a result of the business impact of the COVID-19 pandemic. At ~~March 31,~~June 30, 2021, the book ~~value~~values of finance and operating leases with payment deferments were ~~$29.3~~$28.1 million and ~~$14.5~~$8.1 million, respectively. At December 31, 2020, the book values of finance and operating leases with payment deferments were $30.4 million and $15.2 million, respectively. The concessions did not have a material impact on interest income from leases for the three and six months ended ~~March 31, 2021.~~June 30, 2021 and 2020. Additionally, Customers did not receive any concessions on its operating leases in which Customers is the lessee.

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NOTE 10 - BORROWINGS

Short-term debt

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

March 31, 2021 December 31, 2020
(dollars in thousands) Amount Rate Amount Rate
FHLB advances $ 850,000 1.21 % $ 850,000 1.19 %
Federal funds purchased 365,000 0.05 % 250,000 0.09 %
Total short-term debt $ 1,215,000 $ 1,100,000

~~Table of Content~~s


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

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

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


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

FHLB advances	FHLB advances							FHLB advances
Maximum outstanding at any month end	Maximum outstanding at any month end	$	850,000		$	910,000		Maximum outstanding at any month end	$	850,000		$	910,000
Average balance during the period	Average balance during the period	850,000			809,788			Average balance during the period	500,273			809,788
Weighted-average interest rate during the period	Weighted-average interest rate during the period	2.48		%	2.31		%	Weighted-average interest rate during the period	2.48		%	2.31		%
Federal funds purchased	Federal funds purchased							Federal funds purchased
Maximum outstanding at any month end	Maximum outstanding at any month end	365,000			842,000			Maximum outstanding at any month end	365,000			842,000
Average balance during the period	Average balance during the period	16,333			239,481			Average balance during the period	44,171			239,481
Weighted-average interest rate during the period	Weighted-average interest rate during the period	0.07		%	0.19		%	Weighted-average interest rate during the period	0.07		%	0.19		%

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

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

At ~~March 31,~~June 30, 2021 and December 31, 2020, Customers Bank had aggregate availability under federal funds lines totaling ~~$1.1~~$1.3 billion and $924.0 million, respectively.

Long-term debt

FHLB and FRB advances

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

March 31, 2021 December 31, 2020
(dollars in thousands) Amount Rate Amount Rate
FRB PPP Liquidity Facility advances $ 3,284,156 0.35 % $ 4,415,016 0.35 %
Total long-term FHLB and FRB advances $ 3,284,156 $ 4,415,016



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


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

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

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

(amounts in thousands) March 31, 2021 December 31, 2020
Total maximum borrowing capacity with the FHLB $ 2,492,783 $ 2,729,516
Total maximum borrowing capacity with the FRB (1)
183,124 223,299
Qualifying loans serving as collateral against FHLB and FRB advances (1)
3,258,271 3,363,364



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

(1) Amounts reported in the above table exclude borrowings under the PPPLF, which are limited to the face value of the loans originated under the PPP. At ~~March 31,~~June 30, 2021, Customers had ~~$3.3~~$3.9 billion of borrowings under the PPPLF, with a borrowing capacity of up to ~~$5.2~~$6.3 billion, which is the face value of the qualifying loans Customers has originated or purchased and outstanding under the PPP. At December 31, 2020, Customers had $4.4 billion of borrowings under the PPPLF.

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Senior and Subordinated Debt

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


			March 31, 2021			December 31, 2020															June 30, 2021			December 31, 2020
(dollars in thousands)	(dollars in thousands)													(dollars in thousands)
Issued by	Issued by	Ranking			Amount			Amount		Rate		Issued Amount	Date Issued		Maturity			Price		Issued by			Ranking			Amount		Amount		Rate	Issued Amount	Date Issued		Maturity	Price
Customers Bancorp	Customers Bancorp	Senior	$	24,581		$	24,552	4.500	%	$	25,000	September 2019	September 2024		100.000	%	Customers Bancorp		Senior		$	24,612		$	24,552	4.500	%	$	25,000	September 2019	September 2024	100.000	%
Customers Bancorp	Customers Bancorp	Senior	99,557			99,485		3.950	%	100,000		June 2017	June 2022		99.775	%	Customers Bancorp		Senior		99,629			99,485		3.950	%	100,000		June 2017	June 2022	99.775	%

Total other borrowings	Total other borrowings		$	124,138		$	124,037										Total other borrowings				$	124,241		$	124,037

Customers Bancorp	Customers Bancorp	Subordinated (1)(2)	$	72,267		$	72,222	5.375	%	$	74,750	December 2019	December 2034		100.000	%	Customers Bancorp		Subordinated (1)(2)		$	72,313		$	72,222	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Customers Bank	Subordinated (1)(3)	109,197			109,172		6.125	%	110,000		June 2014	June 2029		100.000	%	Customers Bank		Subordinated (1)(3)		109,221			109,172		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt	Total subordinated debt		$	181,464		$	181,394										Total subordinated debt				$	181,534		$	181,394

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

(2)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.

(3)The subordinated notes will bear an annual fixed rate of 6.125% until June 26, 2024. From June 26, 2024 until maturity, the notes will bear an annual interest rate equal to the three-month LIBOR plus 344.3 basis points. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.

NOTE 11 — REGULATORY CAPITAL

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

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

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

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

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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 excess of the related minimum ratios as set forth in the following table:

Minimum Capital Levels to be Classified as:
Actual Adequately Capitalized Well Capitalized Basel III Compliant
(amounts in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio
As of March 31, 2021:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,021,018 8.774 % $ 523,659 4.500 % N/A N/A $ 814,581 7.000 %
Customers Bank $ 1,365,443 11.745 % $ 523,182 4.500 % $ 755,708 6.500 % $ 813,839 7.000 %
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,238,489 10.643 % $ 698,212 6.000 % N/A N/A $ 989,134 8.500 %
Customers Bank $ 1,365,443 11.745 % $ 697,576 6.000 % $ 930,102 8.000 % $ 988,233 8.500 %
Total capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,447,285 12.437 % $ 930,949 8.000 % N/A N/A $ 1,221,871 10.500 %
Customers Bank $ 1,523,681 13.106 % $ 930,102 8.000 % $ 1,162,627 10.000 % $ 1,220,758 10.500 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc. $ 1,238,489 8.478 % $ 584,359 4.000 % N/A N/A $ 584,359 4.000 %
Customers Bank $ 1,365,443 9.352 % $ 584,025 4.000 % $ 730,031 5.000 % $ 584,025 4.000 %
As of December 31, 2020:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 954,839 8.079 % $ 531,844 4.500 % N/A N/A $ 827,312 7.000 %
Customers Bank $ 1,254,082 10.615 % $ 531,639 4.500 % $ 767,923 6.500 % $ 826,994 7.000 %
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,172,310 9.919 % $ 709,125 6.000 % N/A N/A $ 1,004,594 8.500 %
Customers Bank $ 1,254,082 10.615 % $ 708,852 6.000 % $ 945,136 8.000 % $ 1,004,207 8.500 %
Total capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,401,119 11.855 % $ 945,500 8.000 % N/A N/A $ 1,240,969 10.500 %
Customers Bank $ 1,424,791 12.060 % $ 945,136 8.000 % $ 1,181,421 10.000 % $ 1,240,492 10.500 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc. $ 1,172,310 8.597 % $ 545,485 4.000 % N/A N/A $ 545,485 4.000 %
Customers Bank $ 1,254,082 9.208 % $ 544,758 4.000 % $ 680,947 5.000 % $ 544,758 4.000 %


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

The Basel III Capital Rules require that we maintain a 2.500% capital conservation buffer with respect to each of CET1, 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 conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.

NOTE 12 — DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Customers uses fair value measurements to record fair value adjustments to certain assets and liabilities and to disclose the fair value of its financial instruments. ASC 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 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 820, Fair Value Measurements and Disclosures ("ASC 820"), as explained below.

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

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

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

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

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

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

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

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

Financial Instruments Recorded at Fair Value on a Recurring Basis

Investment securities:

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

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

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 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 under 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.

Derivatives (assets and 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 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.

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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. Customers generally uses commitments on hand from third party investors to estimate an exit price and adjusts for the probability of the commitment being exercised based on 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" and "Accrued interest payable and other liabilities" on the consolidated balance sheet.

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

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis

Collateral-dependent loans:

Collateral-dependent loans are those loans that are accounted for under 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 input that is significant to the fair value measurements.

Other real estate owned:

The fair value of 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.

The estimated fair values of Customers' financial instruments at June 30, 2021 and December 31, 2020 were as follows.


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


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

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

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

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



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

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~~The estimated fair values of Customers' financial instruments at March 31, 2021 and December 31, 2020 were as follows.~~

Fair Value Measurements at March 31, 2021
(amounts in thousands) Carrying Amount Estimated Fair Value Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)
Assets:
Cash and cash equivalents $ 515,364 $ 515,364 $ 515,364 $ 0 $ 0
Debt securities, available for sale 1,437,077 1,437,077 0 1,437,077 0
Equity securities 4,827 4,827 4,827 0 0
Loans held for sale 46,106 46,106 0 45,463 643
Total loans and leases receivable, net of allowance for credit losses on loans and leases 15,993,464 16,487,438 0 3,407,622 13,079,816
FHLB, Federal Reserve Bank and other restricted stock 69,420 69,420 0 69,420 0
Derivatives 36,502 36,502 0 36,306 196
Liabilities:
Deposits $ 12,472,440 $ 12,473,798 $ 11,806,559 $ 667,239 $ 0
FRB PPP Liquidity Facility 3,284,156 3,284,156 0 3,284,156 0
Federal funds purchased 365,000 365,000 365,000 0 0
FHLB advances 850,000 850,787 0 850,787 0
Other borrowings 124,138 135,571 0 135,571 0
Subordinated debt 181,464 197,080 0 197,080 0
Derivatives 37,536 37,536 0 37,536 0


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

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

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

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

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

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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 ~~March 31,~~June 30, 2021 and December 31, 2020 were as follows:

March 31, 2021
Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands) Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total
Measured at Fair Value on a Recurring Basis:
Assets
Available for sale debt securities:
Asset-backed securities $ 0 $ 386,993 $ 0 $ 386,993
U.S. government agencies securities 0 20,053 0 20,053
Agency-guaranteed mortgage-backed securities 0 37,634 0 37,634
Agency-guaranteed collateralized mortgage obligations 0 211,104 0 211,104
Commercial mortgage-backed securities 0 13,059 0 13,059
Collateralized loan obligations 0 163,094 0 163,094
Corporate notes 0 257,924 0 257,924
Private label collateralized mortgage obligations 0 328,689 0 328,689
State and political subdivision debt securities 0 18,527 0 18,527
Equity securities 4,827 0 0 4,827
Derivatives 0 36,306 196 36,502
Loans held for sale – fair value option 0 1,205 0 1,205
Loans receivable, mortgage warehouse – fair value option 0 3,407,622 0 3,407,622
Total assets – recurring fair value measurements $ 4,827 $ 4,882,210 $ 196 $ 4,887,233
Liabilities
Derivatives $ 0 $ 37,536 $ 0 $ 37,536
Measured at Fair Value on a Nonrecurring Basis:
Assets
Loans held for sale $ 0 $ 44,258 $ 0 $ 44,258
Collateral-dependent loans 0 0 7,331 7,331
Other real estate owned 0 0 35 35
Total assets – nonrecurring fair value measurements $ 0 $ 44,258 $ 7,366 $ 51,624


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


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

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

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

3538

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		December 31, 2020									December 31, 2020
		Fair Value Measurements at the End of the Reporting Period Using									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		(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:									Measured at Fair Value on a Recurring Basis:
Assets	Assets									Assets
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
Asset-backed securities	Asset-backed securities	$	0	$	377,145	$	0	$	377,145	Asset-backed securities	$	0	$	377,145	$	0	$	377,145
U.S. government agencies securities	U.S. government agencies securities	0		20,034		0		20,034		U.S. government agencies securities	0		20,034		0		20,034
Agency-guaranteed mortgage–backed securities		0		63,091		0		63,091
Agency-guaranteed residential mortgage–backed securities										Agency-guaranteed residential mortgage–backed securities	0		63,091		0		63,091

Agency-guaranteed collateralized mortgage obligations		0		161,767		0		161,767
Agency-guaranteed residential collateralized mortgage obligations										Agency-guaranteed residential collateralized mortgage obligations	0		140,841		0		140,841
Agency-guaranteed commercial collateralized mortgage obligations										Agency-guaranteed commercial collateralized mortgage obligations	0		20,926		0		20,926
Collateralized loan obligations	Collateralized loan obligations	0		32,367		0		32,367		Collateralized loan obligations	0		32,367		0		32,367
Corporate notes	Corporate notes	0		396,744		0		396,744		Corporate notes	0		396,744		0		396,744
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	0		136,992		0		136,992		Private label collateralized mortgage obligations	0		136,992		0		136,992
State and political subdivision debt securities	State and political subdivision debt securities	0		18,291		0		18,291		State and political subdivision debt securities	0		18,291		0		18,291

Equity securities	Equity securities	3,854		0		0		3,854		Equity securities	3,854		0		0		3,854
Derivatives	Derivatives	0		54,023		200		54,223		Derivatives	0		54,023		200		54,223
Loans held for sale – fair value option	Loans held for sale – fair value option	0		5,509		0		5,509		Loans held for sale – fair value option	0		5,509		0		5,509
Loans receivable, mortgage warehouse – fair value option	Loans receivable, mortgage warehouse – fair value option	0		3,616,432		0		3,616,432		Loans receivable, mortgage warehouse – fair value option	0		3,616,432		0		3,616,432
Total assets – recurring fair value measurements	Total assets – recurring fair value measurements	$	3,854	$	4,882,395	$	200	$	4,886,449	Total assets – recurring fair value measurements	$	3,854	$	4,882,395	$	200	$	4,886,449
Liabilities	Liabilities									Liabilities
Derivatives	Derivatives	$	0	$	98,164	$	0	$	98,164	Derivatives	$	0	$	98,164	$	0	$	98,164
Measured at Fair Value on a Nonrecurring Basis:	Measured at Fair Value on a Nonrecurring Basis:									Measured at Fair Value on a Nonrecurring Basis:
Assets	Assets									Assets

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

The changes in residential mortgage loan commitments (Level 3 assets) measured at fair value on a recurring basis for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 are summarized in the tables below. Additional information about residential mortgage loan commitments can be found in NOTE 13 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.

Residential Mortgage Loan Commitments
Three Months Ended March 31,
(amounts in thousands) 2021 2020
Balance at December 31 $ 200 $ 79
Issuances 196 215
Settlements (200) (79)
Balance at March 31 $ 196 $ 215


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

Table of Contents


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

There were no transfers between levels during the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

~~Table of Content~~s

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

Quantitative Information about Level 3 Fair Value Measurements

(amounts in thousands)

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range

(Weighted Average) (4)

~~March 31,~~June 30, 2021

Collateral-dependent loans – real estate

~~6,778~~4,456

Collateral appraisal (1)

Liquidation expenses (2)

8% - ~~20%~~26%

~~(12%~~(10%)

Collateral-dependent loans – commercial and industrial

~~553~~867

Collateral appraisal (1)

Business asset valuation (3)

Liquidation expenses (2)

Business asset valuation adjustments (4)

7%8% - 8%

(8%)

~~40%~~19% - 40%

~~(40%~~(21%)

Residential mortgage loan commitments

~~196~~301

Adjusted market bid

Pull-through rate

~~81%~~75% - ~~81%~~95%

~~(81%~~(85%)

(1)Obtained from approved independent appraisers. Appraisals are current and in compliance with credit policy. Customers does not generally discount appraisals.
Fair value is also estimated based on sale agreements or letters of intent with third parties.

(2)Appraisals are adjusted by management for liquidation expenses. The range and weighted average of liquidation expense adjustments are presented as a percentage of the appraisal.

(3)Business asset valuation obtained from independent party.

(4)Business asset valuations may be adjusted by management for qualitative factors including economic conditions and the condition of the business assets. The range and weighted average of the business asset adjustments are presented as a percent of the business asset valuation.

Quantitative Information about Level 3 Fair Value Measurements

(amounts in thousands)

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range

(Weighted Average) (4)

December 31, 2020

Collateral-dependent loans – real estate

2,928

Collateral appraisal (1)

Liquidation expenses (2)

8% - 8%

(8%)

Collateral-dependent loans – commercial and industrial

939

Collateral appraisal (1)

Business asset valuation (3)

Liquidation expenses (2)

Business asset valuation adjustments (4)

7% - 8%

(8%)

60% - 60%

(60%)

Other real estate owned

Collateral appraisal (1)

Liquidation expenses (2)

8% - 9%

(9%)

Residential mortgage loan commitments

200

Adjusted market bid

Pull-through rate

78% - 78%

(78%)

(1)Obtained from approved independent appraisers. Appraisals are current and in compliance with credit policy. Customers does not generally discount appraisals.

(2)Appraisals are adjusted by management for liquidation expenses. The range and weighted average of liquidation expense adjustments are presented as a percentage of the appraisal.

(3)Business asset valuation obtained from independent party.

Table of Contents

NOTE 13 — 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 values of which are determined by interest rates. Customers’ derivative financial instruments are used to manage differences in the amount, timing, and duration of Customers’ known or expected cash receipts and its known or expected cash payments principally related to certain borrowings and deposits. Customers also has interest-rate derivatives resulting from a service provided to certain qualifying customers, and therefore, they are not used to manage 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.

~~Table of Content~~s

Cash Flow Hedges of Interest-Rate Risk

Customers’ objectives in using interest-rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, Customers primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for Customers making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in accumulated other comprehensive income (loss) and subsequently reclassified into earnings in the period that the hedged item affects earnings. To date, such derivatives were used to hedge the variable cash flows associated with the forecasted issuances of debt and a certain variable-rate deposit relationship. At December 31, 2020, Customers had 5 outstanding interest rate derivatives with notional amounts totaling $1.1 billion that were designated as cash flow hedges of interest rate risk.

Customers discontinues cash flow hedge accounting if it is probable the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in accumulated other comprehensive income (loss) are reclassified immediately into earnings and any subsequent changes in the fair value of such derivatives are recognized directly in earnings. ~~In March~~During the six months ended June 30, 2021, Customers terminated 4 interest rate derivatives with notional amounts totaling $850 million that were designated as cash flow hedges of interest-rate risk associated with 3-month FHLB advances, and reclassified $25.9 million of the realized losses and accrued interest from AOCI to current earnings because the hedged forecasted transactions were determined to be no longer probable of occurring.

~~At March 31, 2021,~~ Customers ~~had 1 outstanding interest rate derivative with notional amount of $225.0 million that was designated as cash flow hedge of interest rate risk. Customers is hedging~~hedged its exposure to the variability in future cash flows for a variable-rate deposit, relationship over a maximum period of 24 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments). The outstanding cash flow hedge at March 31, 2021 expireswhich matured in June 2021. ~~Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to~~At June 30, 2021, Customers had 0 interest ~~expense~~rate derivative designated as cash flow hedges of interest payments are made on Customers' variable-rate debt and a variable-rate deposit relationship. Customers expects to reclassify $1.1 million of losses from accumulated other comprehensive income (loss) to interest expense during the next 12 months.rate risk.

Fair Value Hedges of Benchmark Interest-Rate Risk

Customers is exposed to changes in the fair value of certain of its fixed rate AFS debt securities due to changes in the benchmark interest rate. Customers 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 the Fed Funds Effective Swap Rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for Customers receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

At ~~March 31,~~June 30, 2021, Customers had 1716 outstanding interest rate derivatives with notional amounts totaling ~~$85.5~~$80.5 million that were designated as fair value hedges of certain available for sale debt securities. ~~In March~~During the six months ended June 30, 2021, Customers terminated 78 interest rate derivatives with notional amounts totaling ~~$186.8~~$191.8 million that were designated as fair value hedges together with the sale of hedged available for sale debt securities. At December 31, 2020, Customers had 24 outstanding interest rate derivatives with notional amounts totaling $272.3 million designated as fair value hedges.

As of ~~March 31,~~June 30, 2021, 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) March 31, December 31, March 31, December 31,
2021 2020 2021 2020
Available for sale debt securities $ 85,500 $ 272,159 $ 976 $ 741


	Amortized Cost				Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items
	June 30,		December 31,		June 30,		December 31,
(amounts in thousands)	2021		2020		2021		2020
Available for sale debt securities	$	80,500	$	272,159	$	846	$	741

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Derivatives Not Designated as Hedging Instruments

Customers executes interest rate swaps (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 risk exposure resulting from such transactions. 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 ~~March 31,~~June 30, 2021, Customers had ~~161~~157 interest rate swaps with an aggregate notional amount of ~~$1.5~~$1.4 billion and 12 interest rate caps with an aggregated notional amount of ~~$206.1~~$205.4 million related to this program. At December 31, 2020, Customers had 155 interest rate swaps with an aggregate notional amount of $1.4 billion and 12 interest rate caps with an aggregate notional amount of $204.9 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 applicable accounting guidance and are reported at fair value, with changes in fair value recorded directly in earnings. At ~~March 31,~~June 30, 2021 and December 31, 2020, Customers had an outstanding notional balance of residential mortgage loan commitments of ~~$8.8~~$6.0 million and $11.9 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 directly in earnings. At ~~March 31,~~June 30, 2021 and December 31, 2020, Customers had outstanding notional balances of credit derivatives of ~~$173.6~~$165.8 million and $177.2 million, respectively.

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 balance sheet as of ~~March 31,~~June 30, 2021 and December 31, 2020.

March 31, 2021
Derivative Assets Derivative Liabilities
(amounts in thousands) Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives designated as cash flow hedges:
Interest rate swaps Other assets $ 0 Other liabilities $ 1,034
Total $ 0 $ 1,034
Derivatives designated as fair value hedges:
Interest rate swaps Other assets $ 976 Other liabilities $ 0
Total $ 976 $ 0
Derivatives not designated as hedging instruments:
Interest rate swaps Other assets $ 34,962 Other liabilities $ 36,154
Interest rate caps Other assets 166 Other liabilities 166
Credit contracts Other assets 202 Other liabilities 182
Residential mortgage loan commitments Other assets 196 Other liabilities 0
Total $ 35,526 $ 36,502


	June 30, 2021
	Derivative Assets			Derivative Liabilities
(amounts in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value



Derivatives designated as fair value hedges:
Interest rate swaps	Other assets	$	846	Other liabilities	$	0
Total		$	846		$	0
Derivatives not designated as hedging instruments:
Interest rate swaps	Other assets	$	36,795	Other liabilities	$	38,367
Interest rate caps	Other assets	146		Other liabilities	146
Credit contracts	Other assets	201		Other liabilities	243
Residential mortgage loan commitments	Other assets	301		Other liabilities	0
Total		$	37,443		$	38,756

3942

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	December 31, 2020
	Derivative Assets			Derivative Liabilities
(amounts in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as cash flow hedges:
Interest rate swaps	Other assets	$	196	Other liabilities	$	40,765
Total		$	196		$	40,765
Derivatives designated as fair value hedges:
Interest rate swaps	Other assets	$	0	Other liabilities	$	741
Total		$	0		$	741
Derivatives not designated as hedging instruments:
Interest rate swaps	Other assets	$	53,455	Other liabilities	$	56,209
Interest rate caps	Other assets	46		Other liabilities	46
Credit contracts	Other assets	326		Other liabilities	403
Residential mortgage loan commitments	Other assets	200		Other liabilities	0
Total		$	54,027		$	56,658

Effect of Derivative Instruments on Net Income

The following tables present amounts included in the consolidated statements of income related to derivatives designated as fair value hedges and derivatives not designated as hedges for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.


			Amount of Income (Loss) Recognized in Earnings				Amount of Income (Loss) Recognized in Earnings
			Three Months Ended March 31,						Three Months Ended June 30,			Six Months Ended June 30,
(amounts in thousands)	(amounts in thousands)	Income Statement Location	2021		2020			(amounts in thousands)	Income Statement Location	2021		2020		2021		2020
Derivatives designated as fair value hedges:	Derivatives designated as fair value hedges:							Derivatives designated as fair value hedges:
Recognized on interest rate swaps	Recognized on interest rate swaps	Net interest income	$	4,907	$	0		Recognized on interest rate swaps	Net interest income	$	(130)	$	0	$	4,777	$	0
Recognized on hedged available for sale debt securities	Recognized on hedged available for sale debt securities	Net interest income	(4,907)		0			Recognized on hedged available for sale debt securities	Net interest income	130		0		(4,777)		0
Total	Total		$	0	$	0		Total		$	0	$	0	$	0	$	0
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Interest rate swaps	Interest rate swaps	Other non-interest income	$	2,399	$	(1,015)		Interest rate swaps	Other non-interest income	$	(376)	$	(5,563)	$	2,023	$	(6,578)
Interest rate caps	Interest rate caps	Other non-interest income	0		0			Interest rate caps	Other non-interest income	0		0		0		0
Credit contracts	Credit contracts	Other non-interest income	137		(132)			Credit contracts	Other non-interest income	(63)		1,405		74		1,274
Residential mortgage loan commitments	Residential mortgage loan commitments	Mortgage banking income	(4)		137			Residential mortgage loan commitments	Mortgage banking income	105		(164)		101		(27)
Total	Total		$	2,532	$	(1,010)		Total		$	(334)	$	(4,322)	$	2,198	$	(5,331)

4043

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Effect of Derivative Instruments on Comprehensive Income

The following table presents the effect of Customers' derivative financial instruments on comprehensive income for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.


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

Amount of Gain (Loss) Recognized in OCI on Derivatives (1)
Location of Gain (Loss) Reclassified from Accumulated OCI into Income Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
Three Months Ended
March 31,
Three Months Ended
March 31,
(amounts in thousands) 2021 2020 2021 2020
Derivatives in cash flow hedging relationships:
Interest rate swaps $ 9,113 $ (20,346) Interest expense $ (1,459) $ (1,478)
0 0 Other non-interest income (24,467) 0
Total $ 9,113 $ (20,346) $ (25,926) $ (1,478)


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

(1) Amounts presented are net of taxes. See NOTE 5 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) for the total effect on other comprehensive income (loss) from derivatives designated as cash flow hedges for the periods presented.

Credit-risk-related Contingent Features

By entering into derivative contracts, Customers is exposed to credit risk. The credit risk associated with derivatives executed with customers is the same as that involved in extending the related loans and is subject to the same standard credit policies. To mitigate the credit-risk exposure to major derivative dealer counterparties, Customers only enters into agreements with those counterparties that maintain credit ratings of high quality 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 ~~March 31,~~June 30, 2021, the fair value of derivatives in a net liability position (which includes accrued interest but excludes any adjustment for nonperformance-risk) related to these agreements was ~~$36.4~~$37.5 million. In addition, Customers, which has collateral posting thresholds with certain of these counterparties, had posted ~~$35.0~~$35.6 million of cash as collateral at ~~March 31,~~June 30, 2021. Customers records cash posted as collateral with these counterparties, except with a central clearing party, as a reduction in the outstanding balance of cash and cash equivalents and an increase in the balance of other assets.

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Disclosures about Offsetting Assets and Liabilities

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

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Gross Amounts Recognized on the Consolidated Balance Sheets Gross Amounts Not Offset in the Consolidated Balance Sheet
(amounts in thousands) Financial Instruments Cash Collateral Received/(Posted) Net Amount
March 31, 2021
Interest rate derivative assets with institutional counterparties $ 98 $ 0 $ 0 $ 98
Interest rate derivative liabilities with institutional counterparties $ 35,017 $ 0 $ (35,017) $ 0


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

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


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

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

NOTE 14 — LOSS CONTINGENCIES

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

~~Lifestyle Healthcare Group, Inc. Matter~~

~~On January 9, 2017, Lifestyle Healthcare Group, Inc., et al (“Plaintiffs”) filed a Complaint captioned~~ Lifestyle Healthcare Group, Inc.; Fred Rappaport; Victoria Rappaport; Lifestyle Management Group, LLC Trading as Lifestyle Real Estate I, LP; Lifestyle Real Estate I GP, LLC; Daniel Muck; Lifestyle Management Group, LLC; Lifestyle Management Group, LLC Trading as Lifestyle I, LP D/B/A Lifestyle Medspa, Plaintiffs (“Lifestyle Parties”) v. Customers Bank, Robert White; Saldutti Law, LLC a/k/a Saldutti Law Group; Robert L. Saldutti, Esquire; and Michael Fuoco, Civil Action No. 01206, in the First Judicial District of Pennsylvania, Court of Common Pleas of Philadelphia. In this Complaint, the Plaintiffs generally allege wrongful use of civil proceedings and abuse of process in connection with a case filed and later dismissed in federal court, titled, Customers Bank v. Fred Rappaport, et al., U.S.D.C.E.D. Pa., No. 15-6145. On January 30, 2017, Customers Bank filed Preliminary Objections to the Complaint seeking dismissal of Plaintiff’s claims against Customers Bank and Robert White, named as co-defendants. In response to the Preliminary Objections, Lifestyle filed an Amended Complaint against Customers Bank and Robert White. Customers Bank filed Preliminary Objections to the Second Amended Complaint seeking dismissal of Plaintiff's claim against Customers Bank and Robert White, named as co-defendants. The Court dismissed certain counts and determined to allow certain other counts to proceed. On September 17, 2020, a Stipulation of Dismissal with Prejudice was filed with the Court as a result of the voluntary resolution of the matter by and between Plaintiffs and defendants, Customers Bank, Robert White and Michael Fuoco only.

United States Department of Education Matter

In third quarter 2018, Customers received a Final Program Review Determination ("FPRD") letter dated September 5, 2018 from the ED regarding a focused program review of Higher One's/Customers Bank's administration, as a third party servicer, of the programs authorized pursuant to Title IV of the Higher Education Act of 1965. The ED program review covered the award years beginning in 2013 through the FPRD issuance date, including the time period when Higher One was acting as the third party servicer prior to Customers' acquisition of the Disbursement business on June 15, 2016. The FPRD determined that, with respect to students enrolled at specified partner institutions, Higher One/Customers did not provide convenient fee-free access to ATMs or bank branch offices in such locations as required by the ED’s cash management regulations. Those regulations, which were in effect during the period covered by the program review and were revised during that period, seek, among other purposes, to ensure that students can make fee-free cash

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withdrawals. The FPRD determined that students incurred prohibited costs in accessing Title IV credit balance funds, and the FPRD classifies those costs as financial liabilities of Customers. The FPRD also requires Customers to take prospective action to increase ATM access for students at certain of its partner institutions. Customers disagreed with the FPRD and appealed the asserted financial liabilities of $6.5 million, and a request for review has been submitted to trigger an administrative process before the ED’s Office of Hearing and Appeals.

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On March 26, 2020, the ED and Customers filed a Joint Motion to Dismiss with Prejudice (the "Joint Motion") with the United States Department of Education. The Joint Motion states that the ED and Customers reached an agreement that resolves the liabilities at issue in the appeal. The Joint Motion was granted on April 27, 2020. As part of the settlement, the liabilities assessed in the FPRD were reduced to $3.0 million (the "settlement amount"). Customers had previously recorded a liability in the amount of $1.0 million during third quarter 2019 and increased its liability by an additional $1.0 million in first quarter 2020. The remaining $1.0 million is expected to be funded from funds in an escrow account set-up at the time of Customers' acquisition of the Disbursement business from Higher One in 2016.

~~Bureau of the Fiscal Service Notice of Direct Debit (U.S. Treasury Check Reclamation)~~

On June 21, 2019, Customers received a Notice of Direct Debit (U.S. Treasury Check Reclamation) from the Bureau of the Fiscal Service (“Reclamation Notice”). The Reclamation Notice represented a demand to Customers for the return of funds on a U.S. Treasury check for approximately $5.4 million. Customers filed a written protest pursuant to Code of Federal Regulations, Title 31, Chapter II, Part 240, which resulted in a suspension of the direct debit by the Bureau of the Fiscal Service. On January 31, 2020, Customers received an Abandonment Notice from the Bureau of Fiscal Service instructing Customers to disregard the Notice of Direct Debit as the Bureau of Fiscal Service would not be seeking reclamation of these funds.

Specialty’s Café Bakery, Inc. Matter

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

NOTE 15 – SUBSEQUENT EVENTS

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

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of 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 include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: the adverse impact on the U.S. economy, including the markets in which we operate, of the coronavirus outbreak, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; and the effects of changes in accounting standards or ~~policies, including ASU 2016-13, Financial Instruments—CECL.~~policies. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements 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. 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

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report on Form 10-K for the year ended December 31, 2020, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of 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 six months ended ~~March 31,~~June 30, 2021. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers' 2020 Form 10-K.

Overview

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

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

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

Impact of COVID-19

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

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

On March 27, 2020, the CARES Act was signed into law. It contains substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act includes the SBA's PPP, a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans are intended to guarantee an eight-week or 24-week period of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills. On April 16, 2020, the SBA announced that all available funds had been exhausted and applications were no longer being accepted. On April 22, 2020, an additional $310 billion of funds for the PPP was signed into law. On August 8, 2020, the SBA announced that the PPP was closed and no longer accepting PPP applications from participating lenders. On December 27, 2020, the CAA was signed into law, including Division N, Title III, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which provides $284 billion in additional funding for the SBA's PPP for small businesses affected by the COVID-19 pandemic. The CAA provides small businesses who received an initial PPP loan and experienced a 25% reduction in gross receipts to request a second PPP loan of up to $2.0 million. On January 11, 2021, the SBA reopened the PPP program to small business and non-profit organizations that did not receive a loan through the initial PPP phase. On March 11, 2021, the American Rescue Plan Act of 2021 was enacted expanding eligibility for first and second round of PPP loans and revising the exclusions from payroll costs for purposes of loan forgiveness. The PPP ~~ends~~ended on May 31, 2021. As of ~~March 31,~~June 30, 2021, Customers has helped thousands of small businesses by originating approximately ~~$7.1~~$9.5 billion in PPP loans directly or through fintech partnerships.

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In response to the COVID-19 pandemic, Customers has also implemented a short-term loan modification program to provide temporary payment relief to certain of its borrowers who meet the program's qualifications. This program allows for a deferral of payments for a maximum of 90 days at a time. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date of the existing loan. As of ~~March 31,~~June 30, 2021, total commercial deferments declined to ~~$176.1~~$89.8 million, or ~~1.6%~~0.8% of total loans and leases, excluding PPP loans, from a peak of $1.2 billion and total consumer deferments declined to ~~$13.0~~$8.4 million, or 0.1% of total loans and leases, excluding PPP loans, from a peak of $108 million. Customers had no pending commercial loan deferment requests as of June 30, 2021. As of December 31, 2020, total commercial deferments were $202.1 million, or 1.8% of total loans and leases, excluding PPP loans. Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the following reconciliation schedule. ~~Customers had no pending commercial loan deferment requests as of March 31, 2021.~~


	~~March 31,~~
~~(dollars in thousands)~~	~~2021~~
~~Loans held for sale (GAAP)~~	$	~~46,106~~
~~Loans receivable, mortgage warehouse, at fair value (GAAP)~~	~~3,407,622~~
~~Loans and leases receivable (GAAP)~~	~~12,714,474~~
~~Total loans and leases receivable (GAAP)~~	~~16,168,202~~
~~Less: Loans receivable, PPP~~	~~5,177,985~~
~~Total loans and leases, excluding PPP (Non-GAAP)~~	$	~~10,990,217~~

~~Commercial deferments (GAAP)~~	$	~~176,100~~
~~Consumer deferments (GAAP)~~	~~13,000~~
~~Total deferments (GAAP)~~	$	~~189,100~~

~~Commercial deferments to total loans and leases, excluding PPP (Non-GAAP)~~	~~1.6~~		%
~~Consumer deferments to total loans and leases, excluding PPP (Non-GAAP)~~	~~0.1~~		%
~~Total deferments to total loans and leases, excluding PPP (Non-GAAP)~~	~~1.7~~		%



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

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

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

The FRB has taken a range of actions to support the flow of credit to households and businesses. For example, on March 15, 2020, the FRB reduced the target range for the federal funds rate to 0.00% to 0.25% and announced that it would increase its holdings of U.S.

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Treasury securities and agency mortgage-backed securities and begin purchasing agency commercial mortgage-backed securities. The FRB has also encouraged depository institutions to borrow from the discount window and has lowered the primary credit rate for such borrowing by 150 basis points while extending the term of such loans up to 90 days. Reserve requirements have been reduced to zero as of March 26, 2020. The FRB has also established, or has taken steps to establish, a range of facilities and programs to support the U.S. economy and U.S. marketplace participants in response to economic disruptions associated with COVID-19, including among others, Main Street Lending facilities to purchase loan participations, under specified conditions, from banks lending to small and medium U.S. businesses and the PPPLF, which was created to bolster the effectiveness of the PPP by taking loans as collateral at face value. Customers has been participating in these facilities and programs, and it may participate in some or all of these facilities or programs, including as a lender, agent, or intermediary on behalf of clients or customers at various times in the future. As of ~~March~~June 30, 2021 and December 31, ~~2021,~~2020, Customers had ~~$3.3~~$3.9 billion and $4.4 billion in borrowings from the ~~PPPLF.~~PPPLF, respectively.

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

New Accounting Pronouncements

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

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Critical Accounting Policies

Customers has adopted various accounting policies that govern the application of 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 2 - SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" in Customers' audited consolidated financial statements included in its 2020 Form 10-K and updated in this Form 10-Q for the quarterly period ended ~~March 31,~~June 30, 2021 in "NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" in Customers' unaudited consolidated financial statements.

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

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

Allowance for Credit Losses

Customers' ACL at ~~March 31,~~June 30, 2021 represents Customers' current estimate of the lifetime credit losses expected from its loan and lease portfolio and its unfunded lending-related commitments that are not unconditionally cancellable. Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans and leases' expected remaining term.

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

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

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

The net decrease in our estimated ACL as of ~~March 31,~~June 30, 2021 as compared to our December 31, 2020 estimate was primarily attributable to the continuing improvement in macroeconomic ~~forecasts.~~forecasts affecting the commercial loan portfolio. The increase in ACL in our installment loan portfolio is mainly due to loan growth. There was a ~~$2.9~~$3.3 million ~~benefit to (or release) the~~and $0.4 million provision for credit losses on loans and leases for the three and six months ended ~~March 31,~~June 30, 2021, respectively, resulting in an ACL ending balance of ~~$129.7~~$126.5 million ($~~128.7~~125.4 million for loans and leases and ~~$1.0~~$1.1 million for unfunded lending-related commitments) as of ~~March 31,~~June 30, 2021.

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To determine the ACL as of ~~March 31,~~June 30, 2021, Customers utilized ~~the~~ Moody's ~~March~~June 2021 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 ~~March~~June 2021 assumed continued improvement in forecasts of macroeconomic conditions compared to the ~~fourth~~first quarter ~~forecast~~forecasts of macroeconomic conditions used by Customers; the Federal Reserve maintaining a target range for the fed funds rate at 0.00% to 0.25% into 2023; the tapering of quantitative easing not beginning until 2022; ~~and~~ an improving U.S. economy from $1.9 trillion of stimulus from the federal government enacted in March 2021 and a federal spending legislation on infrastructure and social benefits in the second half of ~~2021.~~2021; and the acceleration in consumer prices is expected to be transitory along with the U.S. labor supply constraints. Customers continues to monitor the impact of the COVID-19 pandemic and related policy measures on the economy and, if ~~the depth of the recession or~~ pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody's. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers' modelling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around new infections, hospitalizations and COVID-19 deaths ~~being significantly above~~diminish more slowly than the Baseline projections, leading to a much slower re-opening of the economy. Under this scenario, as an example, the unemployment rate is estimated at ~~7.2%~~6.9% and ~~8.2%~~9.0% at the end of 2021 and 2022, respectively. These numbers represent a 1.5% and ~~3.8%~~5.2% higher unemployment estimate than Baseline scenario projections of ~~5.7%~~5.4% and ~~4.3%~~3.7%, respectively for the same time periods. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modeled results. This would result in an incremental quantitative impact to the ACL of approximately ~~$39.0~~$49.7 million. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers ~~uses~~may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

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

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

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Results of Operations

The following table sets forth the condensed statements of income for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:

Three Months Ended March 31,
(dollars in thousands) 2021 2020 Change % Change
Net interest income $ 132,731 $ 81,321 $ 51,410 63.2 %
Provision (benefit) for credit losses on loans and leases (2,919) 31,786 (34,705) (109.2) %
Total non-interest income 18,468 11,160 7,308 65.5 %
Total non-interest expense 61,927 48,967 12,960 26.5 %
Income before income tax expense 92,191 11,728 80,463 686.1 %
Income tax expense 17,560 3,274 14,286 436.3 %
Net income from continuing operations 74,631 8,454 66,177 782.8 %
Loss from discontinued operations before income tax expense (20,354) (6,722) (13,632) 202.8 %
Income tax expense (benefit) from discontinued operations 17,682 (1,368) 19,050 (1,392.5) %
Net loss from discontinued operations (38,036) (5,354) (32,682) 610.4 %
Net income 36,595 3,100 33,495 1,080.5 %
Preferred stock dividends 3,391 3,615 (224) (6.2) %
Net income available to common shareholders $ 33,204 $ (515) $ 33,719 (6,547.4) %


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

Customers reported net income available to common shareholders of ~~$33.2~~$58.0 million and $91.2 million for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to a net ~~loss~~income available to common shareholders of ~~$0.5~~$19.1 million and $18.6 million for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. Factors contributing to the change in net income available to common shareholders for the three and six months ended ~~March 31,~~June 30, 2021 compared to the three and six months ended ~~March 31,~~June 30, 2020 were as follows.

Net interest income

Net interest income increased ~~$51.4~~$46.8 million for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 as average interest-earning assets increased by ~~$7.0~~$4.7 billion, and NIM increased by 133 basis point to ~~3.00%~~2.98% for the three months ended ~~March 31,~~June 30, 2021 from ~~2.99%~~2.65% for the three months ended ~~March 31,~~June 30, 2020. The increase in ~~interest earnings~~interest-earning assets ~~were~~was driven by increases in the origination of the latest round of PPP loans, commercial loans to mortgage companies, commercial and industrial loans and leases, investment securities and installment loans, offset in part by ~~decreases~~a decrease in multi-family ~~loans and residential mortgages.~~loans. There was also PPP loan forgiveness from the first two rounds which accelerated the recognition of net deferred loan origination fees that contributed to the NIM increase. The shift in the mix of interest-earning assets and interest-bearing liabilities in a lower interest rate environment drove ~~a 95~~an 11 basis point decline in the yield on interest-earning assets and a ~~121~~50 basis point decline in the cost of interest-bearing liabilities for the three months ended ~~March 31,~~June 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities was ~~$5.2~~$6.3 billion ($~~4.6~~6.1 billion average balance) of PPP loans yielding ~~3.41%~~2.69% and related PPPLF borrowings of ~~$3.3~~$3.9 billion ($3.9 billion average balance) costing 0.35%. Customers' total cost of funds, including non-interest bearing deposits was ~~0.67%~~0.54% and ~~1.70%~~0.99% for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

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

Provision ~~(benefit)~~ for credit losses on loans and leases

The ~~$34.7~~$17.7 million decrease in the provision for credit losses for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020, reflects ~~Customers' adoption of CECL and~~ the continuing improvement in macroeconomic forecasts since the beginning of COVID-19 pandemic in first quarter 2020. Upon adoption of the CECL standard on January 1, 2020, the ACL for loans and leases and off-balance sheet credit exposures increased by $79.8 million and $3.4 million, respectively. 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 ~~(benefit)~~ is presented as part of other non-interest expense on the consolidated income statement. The ACL on loans and leases held for investment represented ~~1.7%~~1.18% of total loans and leases receivable, excluding PPP loans (non-GAAP measure, please refer to the non-GAAP reconciliation within Loans and Leases - Asset Quality), at ~~March 31,~~June 30, 2021, compared to ~~2.0%~~2.20% at ~~March 31,~~June 30, 2020. Net charge-offs for the three months ended ~~March 31,~~June 30, 2021 were ~~$12.5~~$6.6 million, or 3316 basis points of average loans and leases on an annualized basis, compared to net charge-offs of ~~$18.7~~$10.3 million, or 7932 basis points on an annualized basis, for the three months ended ~~March 31,~~June 30, 2020. The decrease in net charge-offs for the three months ended ~~March 31,~~June 30, 2021, compared to the three months ended ~~March 31,~~June 30, 2020, was primarily due to a charge-off of $2.8 million for one commercial real estate collateral dependent loan during the three months ended June 30, 2020.

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

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ended ~~March 31, 2020, partially offset by an increase in charge-off of installment loans, coinciding with the growth of the portfolio year-over-year.~~June 30, 2020.

Non-interest income

The ~~$7.3~~$5.1 million increase in non-interest income for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from increases of ~~$19.6 million in gain on sale of investment securities,~~ $3.7 million in unrealized gain (loss) on derivatives, ~~$2.4~~$1.9 million in ~~unrealized~~ gain (loss) on ~~investment securities, $2.3~~sale of SBA and other loans, $1.2 million in other non-interest income, $1.0 million in bank-owned life insurance, $0.8 million in commercial lease income, $0.7 million in mortgage warehouse transactional fees ~~$1.6~~and $0.5 million in unrealized gain (loss) on investment securities. These increases were offset in part by a $2.8 million loss from the sale of foreign subsidiaries and a decrease of $2.5 million in gain (loss) on sale of investment securities.

The $12.4 million increase in non-interest income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from increases of $17.1 million in gain (loss) on sale of investment securities, $7.4 million in unrealized gain (loss) on derivatives, $3.4 million in gain (loss) on sale of SBA and other loans, ~~$1.1~~$3.0 million in mortgage warehouse transactional fees, $2.9 million in unrealized gain (loss) on investment securities, $2.4 million in other non-interest income, $1.7 million in commercial lease income and $0.9 million in ~~commercial lease income.~~bank-owned life insurance. These increases were offset in part by $24.5 million of ~~losses~~loss on cash flow hedge derivative terminations and $2.8 million of loss on sale of foreign subsidiaries for the ~~three~~six months ended ~~March 31,~~June 30, 2021.

Non-interest expense

The ~~$13.0~~$21.0 million increase in non-interest expense for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from increases of ~~$9.4~~$8.5 million in technology, communication and bank operations, ~~$3.4~~$5.3 million in professional services, $4.8 million in salaries and employee benefits, ~~$2.7~~$3.3 million in ~~professional services, $0.9~~other non-interest expense and $0.8 million in commercial lease ~~depreciation and $0.4 million in merger and acquisition related expenses.~~depreciation. These increases were offset in part by ~~decreases~~a decrease of ~~$2.3 million in other non-interest expense, $0.9 million in advertising and promotion and $0.6~~$1.7 million in loan workout expenses for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020.

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

Income tax expense

Customers' effective tax rate from continuing operations was ~~19.0%~~24.7% for the three months ended ~~March 31,~~June 30, 2021 compared to ~~27.9%~~24.2% for the three months ended ~~March 31,~~June 30, 2020. The increase in the effective tax rate primarily resulted from an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes.

Customers' effective tax rate from continuing operations was 21.7% for the six months ended June 30, 2021 compared to 25.2% for the six months ended June 30, 2020. The decrease in the effective tax rate primarily resulted from an increase in investment tax credits in 2021 and the recording of net discrete tax benefits associated with the divestiture of BMT and the recognition of a deferred tax asset related to the outside basis difference of foreign subsidiaries for the ~~three~~six months ended ~~March 31, 2021.~~June 30, 2021, offset in part by an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes.

Net loss from discontinued operations

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

Customers had no loss from discontinued operations, net of income taxes for the three months ended June 30, 2021 compared to $2.3 million for the three months ended June 30, 2020. The $2.3 million decrease was a result of the divestiture of BMT during the three months ended March 31, 2021.

Customers' loss from discontinued operations, net of income taxes was $38.0 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$5.4~~$7.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020. The ~~$32.7~~$30.4 million increase primarily resulted from restricted stock awards of BM Technologies' common stock granted to certain team members of BMT and the effect of the divestiture being treated as a taxable asset sale for tax purposes, offset in part by a tax benefit related to the restricted stock ~~awards.~~awards during the three months ended March 31, 2021. See "NOTE 3 – DISCONTINUED OPERATIONS" to the unaudited consolidated financial statements for additional information.

Preferred stock dividends

Preferred stock dividends were ~~$3.4~~$3.3 million and $3.6 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Preferred stock dividends were $6.7 million and $7.2 million for the six months ended June 30, 2021 and 2020, respectively. There were no changes to the amount of preferred stock outstanding during the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

On June 15, 2020, the Series C ~~preferred stock~~Preferred Stock became floating at three-month LIBOR plus 5.300%, compared to a fixed rate of 7.00%. On March 15, 2021, the Series D ~~preferred stock~~Preferred Stock became floating at three-month LIBOR plus 5.09%, ~~or 5.27%~~compared to a fixed rate of 6.50%. On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of ~~6.50%~~6.45%.

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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, related interest spread, net interest margin and the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities for the three and six months ended ~~March 31,~~June 30, 2021 and 2020. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

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		Three Months Ended March 31,												Three Months Ended March 31,							Three Months Ended June 30,												Three Months Ended June 30,
		2021						2020						2021 vs. 2020							2021						2020						2021 vs. 2020
(dollars in thousands)	(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		(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	Assets																			Assets
Interest-earning deposits	Interest-earning deposits	$	1,177,315	$	302	0.10	%	$	772,249	$	2,860	1.49	%	$	(3,543)	$	984	$	(2,559)	Interest-earning deposits	$	646,342	$	188	0.12	%	$	384,622	$	113	0.12	%	$	—	$	75	$	75
Investment securities (1)	Investment securities (1)	1,357,558		7,979		2.35	%	566,287		4,977		3.52	%	(2,063)		5,066		3,003		Investment securities (1)	1,512,644		8,327		2.20	%	705,389		6,155		3.49	%	(2,900)		5,072		2,172
Loans and leases:	Loans and leases:																			Loans and leases:
Commercial loans to mortgage companies	Commercial loans to mortgage companies	3,122,098		23,791		3.09	%	1,841,659		17,514		3.82	%	(3,847)		10,124		6,277		Commercial loans to mortgage companies	2,737,629		21,069		3.09	%	2,456,067		17,740		2.91	%	1,166		2,163		3,329
Multi-family loans	Multi-family loans	1,689,174		15,848		3.80	%	2,213,858		22,367		4.06	%	(1,386)		(5,133)		(6,519)		Multi-family loans	1,551,370		15,013		3.88	%	2,009,847		19,345		3.87	%	50		(4,382)		(4,332)
Commercial and industrial loans and leases (2)	Commercial and industrial loans and leases (2)	2,848,328		27,850		3.97	%	2,460,811		28,738		4.70	%	(4,901)		4,013		(888)		Commercial and industrial loans and leases (2)	2,878,045		25,786		3.59	%	2,460,060		24,775		4.05	%	(2,977)		3,988		1,011
PPP loans	PPP loans	4,623,213		38,832		3.41	%	—		—		—	%	—		38,832		38,832		PPP loans	6,133,184		41,137		2.69	%	2,754,920		11,706		1.71	%	9,374		20,057		29,431
Non-owner occupied commercial real estate loans	Non-owner occupied commercial real estate loans	1,348,938		12,794		3.85	%	1,335,459		14,437		4.35	%	(1,777)		134		(1,643)		Non-owner occupied commercial real estate loans	1,368,695		13,187		3.86	%	1,392,131		13,179		3.81	%	199		(191)		8
Residential mortgages	Residential mortgages	373,497		3,485		3.78	%	445,953		4,401		3.97	%	(209)		(707)		(916)		Residential mortgages	346,284		3,127		3.62	%	429,609		3,771		3.53	%	95		(739)		(644)
Installment loans	Installment loans	1,323,863		29,517		9.04	%	1,259,051		28,623		9.14	%	(355)		1,249		894		Installment loans	1,467,595		34,289		9.37	%	1,288,999		27,931		8.72	%	2,224		4,134		6,358
Total loans and leases (3)	Total loans and leases (3)	15,329,111		152,117		4.02	%	9,556,791		116,080		4.89	%	(23,473)		59,510		36,037		Total loans and leases (3)	16,482,802		153,608		3.74	%	12,791,633		118,447		3.72	%	10,131		25,030		35,161
Other interest-earning assets	Other interest-earning assets	79,960		717		3.64	%	81,404		1,426		7.04	%	(684)		(25)		(709)		Other interest-earning assets	57,208		758		5.32	%	98,377		503		2.06	%	536		(281)		255
Total interest-earning assets	Total interest-earning assets	17,943,944		161,115		3.64	%	10,976,731		125,343		4.59	%	(29,984)		65,756		35,772		Total interest-earning assets	18,698,996		162,881		3.49	%	13,980,021		125,218		3.60	%	7,767		29,896		37,663
Non-interest-earning assets	Non-interest-earning assets	581,777						513,705												Non-interest-earning assets	607,952						616,683
Assets of discontinued operations	Assets of discontinued operations	—						82,970												Assets of discontinued operations	—						78,880
Total assets	Total assets	$	18,525,721					$	11,573,406											Total assets	$	19,306,948					$	14,675,584
Liabilities	Liabilities																			Liabilities
Interest checking accounts	Interest checking accounts	$	2,691,723	5,599		0.84	%	$	1,294,098	4,616		1.43	%	(2,453)		3,436		983		Interest checking accounts	$	3,503,242	6,653		0.76	%	$	2,482,222	4,605		0.75	%	64		1,984		2,048
Money market deposit accounts	Money market deposit accounts	4,435,930		6,059		0.55	%	3,635,554		16,214		1.79	%	(13,068)		2,913		(10,155)		Money market deposit accounts	4,859,614		5,650		0.47	%	3,034,457		6,449		0.85	%	(3,639)		2,840		(799)
Other savings accounts	Other savings accounts	1,414,350		2,400		0.69	%	1,141,406		5,806		2.05	%	(4,532)		1,126		(3,406)		Other savings accounts	1,456,777		2,076		0.57	%	1,177,554		5,677		1.94	%	(4,718)		1,117		(3,601)
Certificates of deposit	Certificates of deposit	666,239		1,600		0.97	%	1,524,770		7,717		2.04	%	(2,950)		(3,167)		(6,117)		Certificates of deposit	658,698		1,274		0.78	%	1,734,062		6,507		1.51	%	(2,293)		(2,940)		(5,233)
Total interest-bearing deposits (4)	Total interest-bearing deposits (4)	9,208,242		15,658		0.69	%	7,595,828		34,353		1.82	%	(24,716)		6,021		(18,695)		Total interest-bearing deposits (4)	10,478,331		15,653		0.60	%	8,428,295		23,238		1.11	%	(10,586)		3,001		(7,585)
FRB PPP liquidity facility	FRB PPP liquidity facility	3,941,718		3,402		0.35	%	—		—		—	%	—		3,402		3,402		FRB PPP liquidity facility	3,858,733		3,367		0.35	%	942,258		822		0.35	%	—		2,545		2,545
Borrowings	Borrowings	1,171,826		9,324		3.23	%	1,229,399		9,669		3.16	%	177		(522)		(345)		Borrowings	531,757		5,104		3.85	%	2,282,761		9,176		1.62	%	6,468		(10,540)		(4,072)
Total interest-bearing liabilities	Total interest-bearing liabilities	14,321,786		28,384		0.80	%	8,825,227		44,022		2.01	%	(34,465)		18,827		(15,638)		Total interest-bearing liabilities	14,868,821		24,124		0.65	%	11,653,314		33,236		1.15	%	(4,118)		(4,994)		(9,112)
Non-interest-bearing deposits (4)	Non-interest-bearing deposits (4)	2,819,871						1,573,371												Non-interest-bearing deposits (4)	2,889,781						1,890,955
Total deposits and borrowings	Total deposits and borrowings	17,141,657				0.67	%	10,398,598				1.70	%							Total deposits and borrowings	17,758,602				0.54	%	13,544,269				0.99	%
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	247,798						96,874												Other non-interest-bearing liabilities	328,251						88,913
Liabilities of discontinued operations	Liabilities of discontinued operations	—						52,579												Liabilities of discontinued operations	—						53,268
Total liabilities	Total liabilities	17,389,455						10,548,051												Total liabilities	18,086,853						13,686,450
Shareholders' equity	Shareholders' equity	1,136,266						1,025,355												Shareholders' equity	1,220,095						989,134
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	18,525,721					$	11,573,406											Total liabilities and shareholders' equity	$	19,306,948					$	14,675,584
Net interest income	Net interest income			132,731						81,321				$	4,481	$	46,929	$	51,410	Net interest income			138,757						91,982				$	11,885	$	34,890	$	46,775
Tax-equivalent adjustment (5)	Tax-equivalent adjustment (5)			292						205										Tax-equivalent adjustment (5)			289						225
Net interest earnings	Net interest earnings			$	133,023					$	81,526									Net interest earnings			$	139,046					$	92,207
Interest spread	Interest spread					2.97	%					2.89	%							Interest spread					2.95	%					2.61	%
Net interest margin	Net interest margin					3.00	%					2.98	%							Net interest margin					2.98	%					2.65	%
Net interest margin tax equivalent (5)	Net interest margin tax equivalent (5)					3.00	%					2.99	%							Net interest margin tax equivalent (5)					2.98	%					2.65	%
Net interest margin tax equivalent, excluding PPP loans (6)	Net interest margin tax equivalent, excluding PPP loans (6)					2.99	%					2.99	%							Net interest margin tax equivalent, excluding PPP loans (6)					3.30	%					2.97	%

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

(2)Includes owner occupied commercial real estate loans.

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

(4)Total costs of deposits (including interest bearing and non-interest-bearing) were ~~0.53%~~0.47% and ~~1.51%~~0.91% for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

(5)Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for ~~both~~ the three months ended ~~March 31,~~June 30, 2021 and 2020, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

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(6)Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended ~~March 31,~~June 30, 2021 and 2020, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

Net interest income increased ~~$51.4~~$46.8 million for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 as average interest-earning assets increased by ~~$7.0~~$4.7 billion, primarily related to PPP loan originations and increases in investment securities, installment loans, commercial and industrial loans and commercial loans to mortgage companies, partially offset by a decrease in multi-family loans as the loan mix improved year-over-year. The commercial loans to mortgage companies trend has been a function of greater refinance activity due to sharply lower interest rates, an increase in home purchase volumes, and market share gains from other banks.

The NIM increased by 33 basis point to 2.98% for the three months ended June 30, 2021 from 2.65% for the three months ended June 30, 2020 resulting from the Federal Reserve interest rate cuts of 225 basis points beginning in August 2019, and the shift in the mix of interest-earning assets and interest-bearing liabilities drove a 11 basis point decline in the yield on interest-earning assets and a 50 basis point decline in the cost of interest-bearing liabilities for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. The largest shift in the mix of interest-earning assets and interest-bearing liabilities was $6.3 billion ($6.1 billion average balance) of PPP loans yielding 2.69% and related PPPLF borrowings of $3.9 billion ($3.9 billion average balance) costing 0.35%. There was also PPP loan forgiveness from the first two rounds which accelerated the recognition of net deferred loan origination fees that contributed to the NIM increase. Customers' total cost of funds, including non-interest bearing deposits was 0.54% and 0.99% for the three months ended June 30, 2021 and 2020, respectively.

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

(2)Includes owner occupied commercial real estate loans.

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

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

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

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

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

The NIM ~~remained fairly constant, increasing~~increased by 119 basis point to ~~3.00% for the three months ended March 31, 2021 from~~ 2.99% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 from 2.80% for the six months ended June 30, 2020 resulting from the Federal Reserve interest rate cuts of 225 basis points beginning in August 2019, and the shift in the mix of interest-earning assets and interest-bearing liabilities drove a 9548 basis point decline in the yield on interest-earning assets and a ~~121~~80 basis point decline in the cost of interest-bearing liabilities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2020. The largest shift in the mix of interest-earning assets and interest-bearing liabilities was ~~$5.2~~$6.3 billion ($~~4.6~~5.4 billion average balance) of PPP loans yielding ~~3.41%~~3.00% and related PPPLF borrowings of ~~$3.3~~$3.9 billion ($3.9 billion average balance) costing 0.35%. There was also PPP loan forgiveness from the first two rounds which accelerated the recognition of net deferred loan origination fees that contributed to the NIM increase. Customers' total cost of funds, including non-interest bearing deposits was ~~0.53%~~0.61% and ~~1.51%~~1.30% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

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

A reconciliation of net interest margin tax equivalent and net interest margin tax equivalent, excluding PPP loans for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 ~~are~~is set forth below.

Three Months Ended
March 31,
(dollars in thousands) 2021 2020
Net interest income (GAAP) $ 132,731 $ 81,321
Tax-equivalent adjustment 292 205
Net interest income tax equivalent (Non-GAAP) 133,023 81,526
Loans receivable, PPP net interest income (34,842) —
Net interest income tax equivalent, excluding PPP loans (Non-GAAP) $ 98,181 $ 81,526
Average total interest-earning assets (GAAP) $ 17,943,944 $ 10,976,731
Average PPP loans (4,623,213) —
Adjusted average total interest-earning assets (Non-GAAP) $ 13,320,731 $ 10,976,731
Net interest margin (GAAP) 3.00 % 2.98 %
Net interest margin tax equivalent (Non-GAAP) 3.00 % 2.99 %
Net interest margin tax equivalent, excluding PPP loans (Non-GAAP) 2.99 % 2.99 %


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

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

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

PROVISION ~~(BENEFIT)~~ FOR CREDIT LOSSES ON LOANS AND LEASES

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

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Customers recorded ~~$31.8 million and $0.8 million of~~a provision for credit losses during the three months ended June 30, 2021, which resulted primarily from an increase in provision for consumer installment loans from continued growth, offset by a benefit or release of the reserve for the commercial loans from continued improvement in forecasts of macroeconomic conditions. Customers recorded a provision for credit losses of $3.3 million and $0.1 million for loans and leases and lending-related commitments, respectively, for the three months ended ~~March 31, 2020 utilizing~~June 30, 2021. Customers recorded $20.9 million of provision for credit losses for loans and leases and a credit or release of the ~~CECL methodology.~~reserve of $0.4 million for lending-related commitments, respectively, for the three months ended June 30, 2020. The ~~increase~~decrease resulted primarily from the impact of reserve build for the COVID-19

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pandemic, portfolio growth, and ~~net-charge-offs.~~net-charge-offs for the three months ended June 30, 2020. Net charge-offs for the three months ended ~~March 31,~~June 30, 2021 were $6.6 million, or 16 basis points of average loans and leases on an annualized basis, primarily due to $8.0 million of charge-offs for consumer installment loans consistent with the loan growth. Net charge-offs for the three months ended June 30, 2020 were ~~$18.7~~$10.3 million, or 7932 basis points of average loans and leases on an annualized basis, primarily due to a partial charge off of ~~$12.8~~$2.8 million for one commercial real estate collateral dependent ~~loan.~~loan and $8.3 million of charge-offs for consumer installment loans consistent with the loan growth.

Customers recorded ~~a credit to~~$0.4 million of provision for credit losses ~~(a benefit) during~~for loans and leases and $1.2 million of credit or release of the ~~three~~reserve for lending-related commitments, respectively, for the six months ended ~~March 31, 2021, which resulted primarily from continued improvement in forecasts of macroeconomic conditions.~~June 30, 2021. Customers recorded ~~a credit to~~$52.7 million and $0.4 million of provision for credit losses ~~(a benefit) of $2.9 million and $1.3 million~~ for loans and leases and lending-related commitments, respectively, for the ~~three~~six months ended ~~March 31, 2021.~~June 30, 2020. Net charge-offs for the ~~three~~six months ended ~~March 31,~~June 30, 2021 were ~~$12.5~~$19.1 million, or 3324 basis points of average loans and leases on an annualized basis, primarily due to ~~$10.9~~$20.6 million of charge-offs for consumer installment loans consistent with the loan growth. Net charge-offs for the six months ended June 30, 2020 were $29.0 million, or 52 basis points of average loans and leases on an annualized basis, primarily due to partial charge offs totaling $15.6 million for two commercial real estate collateral dependent loans and $14.6 million of charge-offs for consumer installment loans consistent with the loan growth.

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

NON-INTEREST INCOME

The table below presents the components of non-interest income for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

Three Months Ended March 31,
(dollars in thousands) 2021 2020 Change % Change
Interchange and card revenue $ 85 $ 270 $ (185) (68.5) %
Deposit fees 863 551 312 56.6 %
Commercial lease income 5,205 4,268 937 22.0 %
Bank-owned life insurance 1,679 1,762 (83) (4.7) %
Mortgage warehouse transactional fees 4,247 1,952 2,295 117.6 %
Gain (loss) on sale of SBA and other loans 1,575 11 1,564 14,218.2 %
Mortgage banking income 463 296 167 56.4 %
Gain (loss) on sale of investment securities 23,566 3,974 19,592 493.0 %
Unrealized gain (loss) on investment securities 974 (1,378) 2,352 (170.7) %
Unrealized gain (loss) on derivatives 2,537 (1,146) 3,683 (321.4) %
Loss on cash flow hedge derivative terminations (24,467) — (24,467) NM
Other 1,741 600 1,141 190.2 %
Total non-interest income $ 18,468 $ 11,160 $ 7,308 65.5 %


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

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

Commercial lease income

Commercial lease income represents income earned on commercial operating leases originated by Customers' Equipment Finance Group in which Customers is the lessor. The ~~$0.9~~$0.8 million increase in commercial lease income for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from the continued growth of Customers' equipment finance business.

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The $1.7 million increase in commercial lease income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from the continued growth of Customers' equipment finance business.

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 $1.0 million increase in bank-owned life insurance income for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 resulted from the increase in cash surrender value of existing and new policies and benefits paid by insurance carriers under the policies.

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

Mortgage warehouse transactional fees

The ~~$2.3~~$0.7 million increase in mortgage warehouse transactional fees for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from ana continued increase in refinancing activity driven by the decline in market interest rates ~~during~~that began in March 2020.

The $3.0 million increase in mortgage warehouse transactional fees for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the ~~three~~six months ended June 30, 2020 primarily resulted from a continued increase in refinancing activity driven by the decline in market interest rates that began in March ~~31,~~ 2020.

Gain (loss) on sale of SBA and other loans

The ~~$1.6~~$1.9 million increase in gain on sale of SBA and other loans for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 reflects an increase in sales of ~~$21.2~~$14.5 million inof SBA loans and $28.8 million of installment loans during the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020.

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

Gain (loss) on sale of investment securities

The ~~$19.6~~$2.5 million ~~increase~~decrease in gain on sale of investment securities for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 reflects the gains realized ~~primarily~~ from the sale of ~~$330~~$53.7 million in AFS debt securities during the three months ended ~~March 31, 2021.~~June 30, 2021 compared to $109.2 million during the three months ended June 30, 2020.

~~Table~~The $17.1 million increase in gain on sale of ~~Content~~s

investment securities for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 reflects the gains realized from the sale of $407.6 million in AFS debt securities during the six months ended June 30, 2021 compared to $109.2 million during the six months ended June 30, 2020.

Unrealized gain (loss) on investment securities

The ~~$2.4~~$0.5 million increase in unrealized gain (loss) on investment securities for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 reflects an increase in the unrealized gain of equity securities issued by a foreign entity that were held by CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd. for the three months ended ~~March 31,~~June 30, 2021.

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

Loss on sale of foreign subsidiaries

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

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

Unrealized gain (loss) on derivatives

The $3.7 million increase in unrealized gain (loss) on derivatives for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from increases of ~~$4.4~~$4.0 million in credit valuation adjustment and credit derivatives due to changes in market interest rates, partially offset by ~~$0.7~~$0.3 million decrease in interest rate swap fees.

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

Loss on cash flow hedge derivative terminations

The $24.5 million increase in loss on cash flow hedge derivative terminations for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to six months ended June 30, 2020 reflects the early terminations of derivatives designated in cash flow hedging relationships and reclassification of the realized losses from accumulated other comprehensive income to earnings because the hedged forecasted transactions were no longer probable of occurring.

Other non-interest income

The ~~$1.1~~$1.2 million increase in other non-interest income for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from a market value adjustment loss of $1.5 million on a commercial real estate loan held for sale during the three months ended June 30, 2020.

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

NON-INTEREST EXPENSE

The table below presents the components of non-interest expense for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

Three Months Ended March 31,
(dollars in thousands) 2021 2020 Change % Change
Salaries and employee benefits $ 23,971 $ 20,523 $ 3,448 16.8 %
Technology, communication and bank operations 19,988 10,539 9,449 89.7 %
Professional services 6,289 3,544 2,745 77.5 %
Occupancy 2,621 2,613 8 0.3 %
Commercial lease depreciation 4,291 3,427 864 25.2 %
FDIC assessments, non-income taxes and regulatory fees 2,719 2,867 (148) (5.2) %
Merger and acquisition related expenses 418 — 418 NM
Loan workout (261) 366 (627) (171.3) %
Advertising and promotion 561 1,424 (863) (60.6) %
Other 1,330 3,664 (2,334) (63.7) %
Total non-interest expense $ 61,927 $ 48,967 $ 12,960 26.5 %


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

Salaries and employee benefits

The ~~$3.4~~$4.8 million increase in salaries and employee benefits for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from an increase in average full-time equivalent team members needed for future growth, annual merit increases, ~~and~~ an increase in incentive accruals tied to Customers' overall ~~performance.~~performance, increase in stock-based compensation related to new awards, and compensation expense associated with an executive's retirement and other one-time benefits.

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

Technology, communication, and bank operations

The ~~$9.4~~$8.5 million increase in technology, communication, and bank operations expense for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from increases in deposit servicing fees and interchange maintenance fees paid to BM Technologies, the successor entity to BMT that was divested on January 4, 2021, due to higher deposits and debit card transactions.

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

~~Table of Content~~s

Professional services

The ~~$2.7~~$5.3 million increase in professional services for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 was primarily due to outside professional services used to support the PPP forgiveness process and our participation in the latest round of PPP.

The $8.0 million increase in professional services for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to outside professional services used to support the PPP forgiveness process and our participation in the latest round 3.of PPP.

Commercial lease depreciation

The ~~$0.9~~$0.8 million increase in commercial lease depreciation for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor.

~~Merger and acquisition related expenses~~

The ~~$0.4~~$1.6 million increase in ~~merger and acquisition related expenses~~commercial lease depreciation for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2020 primarily resulted from ~~direct costs incurred~~the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the ~~merger of BMT and MFAC that was completed on January 4, 2021.~~lessor.

Loan workout

The ~~$0.6~~$1.7 million decrease in loan workout for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from ~~a recovery from a~~expenses incurred for two commercial ~~relationship.~~

~~Advertising and promotion expenses~~

~~The $0.9 million decrease in advertising and promotion expenses for~~relationships during the three months ended ~~March 31,~~June 30, 2020.

The $2.3 million decrease in loan workout for the six months ended June 30, 2021 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2020 primarily resulted from ~~a reduction in~~expenses incurred for two commercial relationships during the ~~promotion of Customers' digital banking products and service offerings.~~six months ended June 30, 2020.

Other non-interest expense

The ~~$2.3~~$3.3 million ~~decrease~~increase in other non-interest expense for the three months ended ~~March 31,~~June 30, 2021 compared to the three months ended ~~March 31,~~June 30, 2020 primarily resulted from increases in expenses related to the participation in the latest round of PPP, consumer installment servicing, and other miscellaneous expenses. The provision or addition to the reserve for unfunded commitments for the three months ended June 30, 2021 was $0.1 million, compared to a credit or release of the reserve for unfunded commitments of ~~$1.3~~$0.4 million during the three months ended ~~March 31,~~June 30, 2020.

The $1.0 million increase in other non-interest expense for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily resulted from increases in expenses related to the participation in the latest round of PPP, consumer installment servicing, and other miscellaneous expenses. These increases were offset by a credit or release of the reserve for unfunded commitments of $1.2 million during the six months ended June 30, 2021 compared to a provision or addition to the reserve for unfunded commitments of ~~$0.8~~$0.4 million during the ~~three~~six months ended ~~March 31,~~June 30, 2020.

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INCOME TAXES

The table below presents income tax expense and the effective tax rate for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

Three Months Ended March 31,
(dollars in thousands) 2021 2020 Change % Change
Income before income tax expense $ 92,191 $ 11,728 $ 80,463 686.1 %
Income tax expense 17,560 3,274 14,286 436.3 %
Effective tax rate 19.05 % 27.92 %


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

The ~~$14.3~~$12.1 million increase in income tax expense for the three months ended ~~March 31,~~June 30, 2021, when compared to the same period in the prior year, primarily resulted from an increase in pre-tax income. The increase in the effective tax rate for the three months ended June 30, 2021, when compared to the same period in the prior year, primarily resulted from an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes.

The $26.4 million increase in income tax expense for the six months ended June 30, 2021, when compared to the same period in the prior year, primarily resulted from an increase in pre-tax income. The decrease in the effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2021, when compared to the same period in the prior year, primarily resulted from an increase in investment tax credits in 2021 and the recording of net discrete tax benefits associated with the divestiture of BMT and the recognition of a deferred tax asset related to the outside basis difference of foreign ~~subsidiaries.~~subsidiaries, offset in part by an increase in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes.

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NET LOSS FROM DISCONTINUED OPERATIONS

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

The assets and liabilities of BMT have been presented as "Assets of discontinued operations" and "Liabilities of discontinued operations" on the consolidated balance sheet at December 31, 2020. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying unaudited consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation.

The table below presents the loss from discontinued operations, net of income taxes for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.


		Three Months Ended March 31,								Three Months Ended June 30,		QTD				Six Months Ended June 30,				YTD
(dollars in thousands)	(dollars in thousands)	2021		2020		Change		% Change			(dollars in thousands)	2021		2020		Change		% Change		2021		2020		Change		% Change
Loss from discontinued operations before income taxes	Loss from discontinued operations before income taxes	$	(20,354)	$	(6,722)	$	(13,632)	202.8	%		Loss from discontinued operations before income taxes	$	—	$	(3,190)	$	3,190	(100.0)	%	$	(20,354)	$	(9,911)	$	(10,443)	105.4	%
Income tax expense (benefit) from discontinued operations	Income tax expense (benefit) from discontinued operations	17,682		(1,368)		19,050		(1,392.5)	%		Income tax expense (benefit) from discontinued operations	—		(932)		932		(100.0)	%	17,682		(2,299)		19,981		(869.1)	%
Net loss from discontinued operations	Net loss from discontinued operations	$	(38,036)	$	(5,354)	$	(32,682)	610.4	%		Net loss from discontinued operations	$	—	$	(2,258)	$	2,258	(100.0)	%	$	(38,036)	$	(7,612)	$	(30,424)	399.7	%

Loss from discontinued operations, net of ~~$20.4~~income tax expense (benefit) decreased $2.3 million for the three months ended ~~March 31,~~June 30, 2021, ~~consisted~~when compared to the three months ended June 30, 2020 as the divestiture of BMT was completed on January 4, 2021.

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

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Income tax expense from discontinued operations ~~of $17.7~~increased $20.0 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~resulted~~when compared to the six months ended June 30, 2020 resulting from the effect of the divestiture being treated as a taxable asset sale for tax purposes, offset in part by tax benefits related to the restricted stock awards in BM Technologies's common stock and vesting of restricted stock units of Customers Bancorp to certain team members of BMT.

In connection with the divestiture, Customers has also entered into various agreements with BM Technologies, including a transition services agreement, software license agreement, deposit servicing agreement, non-competition agreement and loan agreement for periods ranging from one to ten years. Customers incurred expenses of ~~$13.7~~$14.3 million and $27.9 million to BM Technologies under the deposit servicing agreement included in technology, communication and bank operations within the income from continuing operations during the three and six months ended ~~March 31,~~June 30, 2021. Refer to "NOTE 3 – DISCONTINUED OPERATIONS" to the unaudited consolidated financial statements for additional information.

PREFERRED STOCK DIVIDENDS

Preferred stock dividends were ~~$3.4~~$3.3 million and $3.6 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. There were no changes to the amount of preferred stock outstanding during the three months ended ~~March 31,~~June 30, 2021 and 2020.

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

On June 15, 2020, Series C ~~preferred stock~~Preferred Stock became floating at three-month LIBOR plus 5.30%, compared to a fixed rate of 7.00%. On March 15, 2021, Series D ~~preferred stock~~Preferred Stock became floating at three-month LIBOR plus 5.09%, ~~or 5.27%~~compared to a fixed rate of 6.50%. On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of ~~6.50%~~6.45%.

Financial Condition

General

Customers' total assets were ~~$18.8~~$19.6 billion at ~~March 31,~~June 30, 2021. This represented a ~~$378.4 million~~$1.2 billion increase from total assets of $18.4 billion at December 31, 2020. The increase in total assets was primarily driven by increases of ~~$616.7 million~~$1.7 billion in PPP loans, ~~$231.6~~$316.5 million in investment securities, ~~$33.0~~and $196.8 million in ~~other assets~~loans and ~~a decrease in ACL of $15.4 million,~~leases receivable, partially offset by decreases of ~~$208.8~~$761.1 million in loans receivable, mortgage warehouse, at fair value ~~$178.0~~and $262.9 million in cash and cash equivalents, $38.9 million in loans and leases receivable, $33.0 million in loans held for sale and $62.1 million in assets of discontinued operations. Customers completed the previously announced divestiture of BMT, the technology arm of its BankMobile segment, on January 4, 2021.

~~Table of Content~~s

equivalents.

Total liabilities were ~~$17.6~~$18.4 billion at ~~March 31,~~June 30, 2021. This represented a ~~$306.8 million~~$1.1 billion increase from $17.3 billion at December 31, 2020. The increase in total liabilities primarily resulted from increases of ~~$1.2~~$2.6 billion in total deposits ~~$115.0 million in federal funds purchased~~ and ~~$199.7~~$186.7 million in accrued interest payable and other liabilities, partially offset by decreases of ~~$1.1 billion~~$850.0 million in FHLB advances, $549.2 million in the PPPLF, and ~~$39.7~~$250.0 million in ~~liabilities~~federal funds purchased.

Table of ~~discontinued operations.~~Contents

The following table presents certain key condensed balance sheet data as of ~~March 31,~~June 30, 2021 and December 31, 2020:


(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020		Change		% Change		(dollars in thousands)	June 30, 2021		December 31, 2020		Change		% Change
Cash and cash equivalents	Cash and cash equivalents	$	515,364	$	693,354	$	(177,990)	(25.7)	%	Cash and cash equivalents	$	430,500	$	693,354	$	(262,854)	(37.9)	%
Investment securities, at fair value	Investment securities, at fair value	1,441,904		1,210,285		231,619		19.1	%	Investment securities, at fair value	1,526,792		1,210,285		316,507		26.2	%
Loans held for sale	Loans held for sale	46,106		79,086		(32,980)		(41.7)	%	Loans held for sale	34,540		79,086		(44,546)		(56.3)	%
Loans receivable, mortgage warehouse, at fair value	Loans receivable, mortgage warehouse, at fair value	3,407,622		3,616,432		(208,810)		(5.8)	%	Loans receivable, mortgage warehouse, at fair value	2,855,284		3,616,432		(761,148)		(21.0)	%
Loans receivable, PPP	Loans receivable, PPP	5,178,089		4,561,365		616,724		13.5	%	Loans receivable, PPP	6,305,056		4,561,365		1,743,691		38.2	%
Loans and leases receivable	Loans and leases receivable	7,536,489		7,575,368		(38,879)		(0.5)	%	Loans and leases receivable	7,772,142		7,575,368		196,774		2.6	%
Allowance for credit losses on loan and leases	Allowance for credit losses on loan and leases	(128,736)		(144,176)		15,440		(10.7)	%	Allowance for credit losses on loan and leases	(125,436)		(144,176)		18,740		(13.0)	%
Other assets	Other assets	371,439		338,438		33,001		9.8	%	Other assets	362,661		338,438		24,223		7.2	%
Assets of discontinued operations	Assets of discontinued operations	—		62,055		(62,055)		(100.0)	%	Assets of discontinued operations	—		62,055		(62,055)		(100.0)	%
Total assets	Total assets	18,817,660		18,439,248		378,412		2.1	%	Total assets	19,635,108		18,439,248		1,195,860		6.5	%
Total deposits	Total deposits	12,472,440		11,309,929		1,162,511		10.3	%	Total deposits	13,873,939		11,309,929		2,564,010		22.7	%

Federal funds purchased	Federal funds purchased	365,000		250,000		115,000		46.0	%	Federal funds purchased	—		250,000		(250,000)		(100.0)	%
FHLB advances	FHLB advances	850,000		850,000		—		—	%	FHLB advances	—		850,000		(850,000)		(100.0)	%
Other borrowings	Other borrowings	124,138		124,037		101		0.1	%	Other borrowings	124,240		124,037		203		0.2	%
Subordinated debt	Subordinated debt	181,464		181,394		70		—	%	Subordinated debt	181,534		181,394		140		0.1	%
FRB PPP liquidity facility	FRB PPP liquidity facility	3,284,156		4,415,016		(1,130,860)		(25.6)	%	FRB PPP liquidity facility	3,865,865		4,415,016		(549,151)		(12.4)	%
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	351,741		152,082		199,659		131.3	%	Accrued interest payable and other liabilities	338,801		152,082		186,719		122.8	%
Liabilities of discontinued operations	Liabilities of discontinued operations	—		39,704		(39,704)		(100.0)	%	Liabilities of discontinued operations	—		39,704		(39,704)		(100.0)	%
Total liabilities	Total liabilities	17,628,939		17,322,162		306,777		1.8	%	Total liabilities	18,384,379		17,322,162		1,062,217		6.1	%
Total shareholders’ equity	Total shareholders’ equity	1,188,721		1,117,086		71,635		6.4	%	Total shareholders’ equity	1,250,729		1,117,086		133,643		12.0	%
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	18,817,660	$	18,439,248	$	378,412	2.1	%	Total liabilities and shareholders’ equity	$	19,635,108	$	18,439,248	$	1,195,860	6.5	%

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. Cash and due from banks were ~~$3.1~~$36.8 million and $78.1 million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. Cash and due from banks balances vary from day to day, primarily due to variations in customers’ deposit activities with the Bank.

Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were ~~$512.2~~$393.7 million and $615.3 million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. The balance of interest-earning deposits varies from day to day, depending on several factors, such as fluctuations in customers' deposits with Customers, payment of checks drawn on customers' accounts and strategic investment decisions made to maximize Customers' net interest income, while effectively managing interest-rate risk and liquidity. The decrease in interest-earning deposits since December 31, 2020 primarily resulted from ~~lower funding needs for loan originations at March 31, 2021 as compared to December 31, 2020.~~the redeployment of excess cash into interest-earning assets.

Investment Securities

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

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At ~~March 31,~~June 30, 2021, investment securities totaled ~~$1.4~~$1.5 billion compared to $1.2 billion at December 31, 2020. The increase in investment securities primarily resulted from the purchases of asset-backed securities, collateralized loan obligations, ~~U.S. government agency securities,~~ agency-guaranteed collateralized mortgage obligations and mortgage-backed securities, private label collateralized mortgage obligations, ~~state and political subdivision debt securities,~~ commercial mortgage-backed securities and corporate notes totaling ~~$590~~$890.2 million, partially offset by the sale of ~~$354~~$407.6 million of ~~U.S. government agencies~~asset-backed securities, agency-guaranteed collateralized mortgage obligations and mortgage-backed securities, corporate notes, ~~non-agency-guaranteed collateralized mortgage obligations,~~ and maturities, calls and principal repayments totaling ~~$62.3~~$172.8 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021.

For financial reporting purposes, AFS debt securities are carried at fair value. Unrealized gains and losses on AFS debt securities are included in other comprehensive income (loss) and reported as a separate component of shareholders’ equity, net of the related tax effect. Changes in the fair value of marketable equity securities 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.

LOANS AND LEASES

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

Commercial Lending

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

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

As of ~~March 31,~~June 30, 2021, Customers had ~~$14.4~~$15.1 billion in commercial loans outstanding, totaling approximately ~~89.1%~~88.7% of its total loan and lease portfolio, which includes loans held for sale and loans receivable, mortgage warehouse, at fair value and PPP loans, compared to commercial loans outstanding of $14.2 billion, comprising approximately 89.8% of its total loan and lease portfolio at December 31, 2020. Included in the ~~$14.4~~$15.1 billion and $14.2 billion in commercial loans outstanding as of ~~March~~June 30, 2021 and December 31, ~~2021 was $5.2~~2020, respectively, were $6.3 billion and $4.6 billion of PPP ~~loans.~~loans, respectively. The PPP loans are fully guaranteed by the SBA and earn a fixed interest rate of 1.00%.

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

Customers' lending to mortgage banking businesses 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, generate fee income and attract escrow deposits. The underlying residential loans are taken as collateral for Customers' commercial loans to the mortgage companies. As of ~~March 31,~~June 30, 2021 and December 31, 2020, commercial loans to mortgage banking businesses totaled ~~$3.4~~$2.9 billion and $3.6 billion, respectively, and are reported as loans receivable, mortgage warehouse, at fair value on the consolidated balance sheet.

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Customers intends to continue to deemphasize its lower-yielding multi-family loan portfolio, and invest in high credit quality higher-yielding commercial and industrial loans with the multi-family run-off. Customers' multi-family lending group continues to focus on retaining a portfolio of high-quality multi-family loans within Customers' covered markets while cross-selling other products and services. These lending activities primarily target the refinancing of loans with other banks using conservative underwriting standards

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and provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the multi-family property, plus an assignment of all leases related to such property. As of ~~March 31,~~June 30, 2021, Customers had multi-family loans of ~~$1.7~~$1.5 billion outstanding, comprising approximately ~~10.3%~~8.8% of the total loan and lease portfolio, compared to $1.8 billion, or approximately 11.1% of the total loan and lease portfolio, at December 31, 2020.

The Equipment Finance Group offers equipment financing and leasing products and services for a broad range of asset classes. It services vendors, dealers, independent finance companies, bank-owned leasing companies and strategic direct customers in the plastics, packaging, machine tool, construction, transportation and franchise markets. As of ~~March 31,~~June 30, 2021 and December 31, 2020, Customers had ~~$304.8~~$310.0 million and $288.4 million, respectively, of equipment finance loans outstanding. As of ~~March 31,~~June 30, 2021 and December 31, 2020, Customers had ~~$107.1~~$129.0 million and $108.0 million of equipment finance leases, respectively. As of ~~March 31,~~June 30, 2021 and December 31, 2020, Customers had ~~$103.5~~$102.8 million and $102.9 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of ~~33.2~~$35.6 million and ~~28.9~~$28.9 million, respectively.

On March 27, 2020, the CARES Act was signed into law and ~~which~~ created funding for a new product called the PPP. The PPP is administered by the SBA and is intended to assist organizations with payroll related expenses. Customers, directly or through fintech partnerships, had ~~$5.2~~$6.3 billion and $4.6 billion of PPP loans outstanding as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, which are fully guaranteed by the SBA and earn a fixed interest rate of 1.00%. The average loan size of the PPP portfolio from the first two rounds is approximately $50 thousand, and less than $20 thousand from the ~~third~~latest round.

Consumer Lending

Customers provides unsecured consumer installment loans, residential mortgage, and home equity loans to customers. The installment loan portfolio consists largely of originated and purchased personal, student loan refinancing and home improvement loans. None of the loans are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660. 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 ~~March 31,~~June 30, 2021, Customers had ~~$1.8~~$1.9 billion in consumer loans outstanding, or ~~10.9%~~11.3% of the total loan and lease portfolio, compared to $1.6 billion, or 10.3% of the total loan and lease portfolio, as of December 31, 2020.

Purchases and sales of ~~consumer~~ loans were as follows for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	(amounts in thousands)	2021		2020			(amounts in thousands)	2021		2020		2021		2020
Purchases (1)	Purchases (1)						Purchases (1)

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

Residential real estate	Residential real estate	$	—	$	495		Residential real estate	—		—		—		495

Installment (2)	Installment (2)	115,849		191,761			Installment (2)	—		18,008		115,849		209,768
Total	Total	$	115,849	$	192,256		Total	$	460,456	$	18,008	$	737,336	$	210,263
Sales (3)	Sales (3)						Sales (3)

Multi-family							Multi-family	$	19,443	$	—	$	19,443	$	—
Commercial and industrial	Commercial and industrial	$	18,931	$	—		Commercial and industrial	10,059		—		28,990		—
Commercial real estate owner occupied	Commercial real estate owner occupied	2,237		—			Commercial real estate owner occupied	4,461		—		6,698		—
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	18,366		—			Commercial real estate non-owner occupied	—		—		18,366		—

Residential real estate							Residential real estate	11,623		—		28,186		—

Installment	Installment	—		1,822			Installment	28,818		—		28,818		1,822
Total	Total	$	39,534	$	1,822		Total	$	74,404	$	—	$	130,501	$	1,822

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was ~~101.0%~~102.0% and ~~100.6%~~98.5% of the loans' unpaid principal balance during the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The purchase price was 103.0% and 100.4% of the loans' unpaid principal balance during the six months ended June 30, 2021 and 2020, respectively.

(3)Amounts reported in the above table are the unpaid principal balance at time of sale. For the ~~quarters~~three months ended ~~March 31,~~June 30, 2021 and 2020, loan sales resulted in net gains of ~~$1.6~~$2.2 million and ~~$11 thousand,~~$0.3 million, respectively. For the six months ended June 30, 2021 and 2020, loan sales resulted in net gains of $4.3 million and $0.4 million, respectively.

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Loans Held for Sale

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


(amounts in thousands)	(amounts in thousands)	March 31, 2021		December 31, 2020		(amounts in thousands)	June 30, 2021		December 31, 2020
Commercial loans:	Commercial loans:					Commercial loans:
Multi-family loans, at lower of cost or fair value		$	19,251	$	—

Commercial and industrial loans, at lower of cost or fair value	Commercial and industrial loans, at lower of cost or fair value	—		55,683		Commercial and industrial loans, at lower of cost or fair value	$	—	$	55,683
Commercial real estate non-owner occupied loans, at lower of cost or fair value	Commercial real estate non-owner occupied loans, at lower of cost or fair value	—		17,251		Commercial real estate non-owner occupied loans, at lower of cost or fair value	—		17,251
Total commercial loans held for sale	Total commercial loans held for sale	19,251		72,934		Total commercial loans held for sale	—		72,934
Consumer loans:	Consumer loans:					Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value	Home equity conversion mortgages, at lower of cost or fair value	643		643		Home equity conversion mortgages, at lower of cost or fair value	507		643
Residential mortgage loans, at fair value	Residential mortgage loans, at fair value	1,205		5,509		Residential mortgage loans, at fair value	6,074		5,509
Installment loans, at lower of cost or fair value	Installment loans, at lower of cost or fair value	25,007		—		Installment loans, at lower of cost or fair value	27,959		—
Total consumer loans held for sale	Total consumer loans held for sale	26,855		6,152		Total consumer loans held for sale	34,540		6,152
Loans held for sale	Loans held for sale	$	46,106	$	79,086	Loans held for sale	$	34,540	$	79,086

At ~~March 31,~~June 30, 2021, loans held for sale totaled ~~$46.1~~$34.5 million, or ~~0.29%~~0.2% of the total loan and lease portfolio, and $79.1 million, or ~~0.50%~~0.5% of the total loan and lease portfolio, at December 31, 2020.

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

Total Loans and Leases Receivable

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

(amounts in thousands) March 31, 2021 December 31, 2020
Loans and leases receivable, mortgage warehouse, at fair value $ 3,407,622 $ 3,616,432
Loans receivable, PPP 5,178,089 4,561,365
Loans receivable:
Commercial:
Multi-family 1,640,278 1,761,301
Commercial and industrial (1)
2,220,652 2,289,441
Commercial real estate owner occupied 590,093 572,338
Commercial real estate non-owner occupied 1,194,832 1,196,564
Construction 156,837 140,905
Total commercial loans and leases receivable 5,802,692 5,960,549
Consumer:
Residential real estate 293,805 317,170
Manufactured housing 59,977 62,243
Installment 1,380,015 1,235,406
Total consumer loans receivable 1,733,797 1,614,819
Loans and leases receivable (2)
7,536,489 7,575,368
Allowance for credit losses on loans and leases (128,736) (144,176)
Total loans and leases receivable, net of allowance for credit losses on loans and leases $ 15,993,464 $ 15,608,989


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

(1)Includes direct finance equipment leases of ~~$107.1~~$129.0 million and $108.0 million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of ~~$(133.2)~~$(223.1) million and $(54.6) million at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

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Loans receivable, PPP

On March 27, 2020, the CARES Act was signed into law and ~~which~~ created funding for a new product called the PPP. The PPP is administered by the SBA and is intended to assist organizations with payroll related expenses. Customers had ~~$5.2~~$6.3 billion and $4.6 billion of PPP loans outstanding as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, which are fully guaranteed by the SBA and earn a fixed interest rate of 1.00%. Customers recognized interest income, including origination fees, of ~~$38.8~~$41.1 million and $79.9 million for the three and six months ended ~~March 31, 2021.~~June 30, 2021, respectively. Customers recognized interest income, including origination fees, of $11.7 million for the three and six months ended June 30, 2020.

Loans receivable, mortgage warehouse, at fair value

The mortgage warehouse product line primarily provides financing to mortgage companies nationwide from the time of origination of the underlying mortgage loans until the mortgage loans are sold into the secondary market. As a mortgage warehouse lender, Customers provides a form of financing to mortgage bankers by purchasing for resale the underlying residential mortgages on a short-term basis under a master repurchase agreement. These loans are reported as loans receivable, mortgage warehouse, at fair value on the consolidated balance sheets. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At ~~March 31,~~June 30, 2021, 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 credit losses. Customers' mortgage warehouse lending team members monitor these mortgage originators by obtaining financial and other relevant information to reduce these risks during the lending period. Loans receivable, mortgage warehouse, at fair value totaled ~~$3.4~~$2.9 billion and $3.6 billion at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

Credit Risk

Customers manages credit risk by maintaining diversification in its loan and lease portfolio, establishing and enforcing prudent underwriting standards 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 ACL. Credit losses are charged-off when they are identified, and provisions are added for current expected credit losses, to the ACL at least quarterly. The ACL is estimated at least quarterly.

The provision ~~(benefit)~~ for credit losses on loans and leases was ~~$(2.9)~~$3.3 million and ~~$31.8~~$20.9 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The ACL maintained for loans and leases receivable (excluding loans held for sale and loans receivable, mortgage warehouse, at fair value and PPP loans) was ~~$128.7~~$125.4 million, or ~~1.71%~~1.61% of loans and leases receivable, excluding PPP loans, at ~~March 31,~~June 30, 2021 and $144.2 million, or 1.90% of loans and leases receivable, at December 31, 2020. Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedule below.

The decrease in the ACL resulted primarily from lower ACL for the commercial loan portfolio due to continued improvement in macroeconomic forecasts at ~~March 31,~~June 30, 2021, as compared to the impact of reserve build for the COVID-19 pandemic ~~mostly attributable to~~at June 30, 2020, offset in part by the ~~commercial real estate non-owner occupied and installment portfolios, and portfolio growth at March 31, 2020. The~~ increase in ACL for the consumer installment loan portfolio ~~is mainly~~ due to loan growth. Net charge-offs were ~~$12.5~~$6.6 million for the three months ended ~~March 31,~~June 30, 2021, a decrease of ~~$6.2~~$3.7 million compared to the same period in 2020. Commercial real estate non-owner occupied charge-offs infor the three months ended ~~March 31,~~June 30, 2020 were attributable to ~~the~~ partial ~~charge-off~~charge-offs of two collateral dependent loans, which are not indicative of the overall commercial real estate portfolio. Installment charge-offs were attributable to unsecured consumer installment loans originated or purchased through arrangements with fintech companies and other market place lenders, which increased infor the three months ended ~~March 31,~~June 30, 2021 compared to the same period in 2020 consistent with the loan growth.

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A reconciliation of the coverage of ACL for loans and leases held for investment to the ACL for loans and leases held for investment, excluding PPP loans as of ~~March 31,~~June 30, 2021 and December 31, 2020 are set forth below.

(dollars in thousands) March 31, 2021 December 31, 2020
Loans and leases receivable (GAAP) $ 12,714,578 $ 12,136,733
Less: Loans receivable, PPP 5,178,089 4,561,365
Loans and leases held for investment, excluding PPP (Non-GAAP) $ 7,536,489 $ 7,575,368
ACL for loans and leases (GAAP) $ 128,736 $ 144,176
Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP) 1.71 % 1.90 %


(dollars in thousands)	June 30, 2021			December 31, 2020
Loans and leases receivable (GAAP)	$	14,077,198		$	12,136,733
Less: Loans receivable, PPP	6,305,056			4,561,365
Loans and leases held for investment, excluding PPP (Non-GAAP)	$	7,772,142		$	7,575,368

ACL for loans and leases (GAAP)	$	125,436		$	144,176

Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP)	1.61		%	1.90		%

The table below presents changes in Customers' ACL for the periods indicated.

Analysis of the Allowance for Credit Losses on Loan and Leases

Three Months Ended March 31,
(amounts in thousands) 2021 2020
Balance at beginning of the period $ 144,176 $ 56,379
Cumulative effect of change in accounting principle — 79,829
Loan and lease charge-offs (1)
Multi-family 1,132 —
Commercial and industrial 635 97
Commercial real estate owner occupied 142 —
Commercial real estate non-owner occupied — 12,797
Residential real estate 50 —
Installment 12,687 6,246
Total charge-offs 14,646 19,140
Loan and lease recoveries (1)
Commercial and industrial 260 54
Commercial real estate owner occupied 8 3
Commercial real estate non-owner occupied 10 —
Construction 5 3
Residential real estate 10 29
Installment 1,832 340
Total recoveries 2,125 429
Total net charge-offs 12,521 18,711
Provision (benefit) for credit losses on loans and leases (2,919) 31,786
Balance at the end of the period $ 128,736 $ 149,283


	Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	2021		2020		2021		2020
Balance at beginning of the period	$	128,736	$	149,283	$	144,176	$	56,379
Cumulative effect of change in accounting principle	—		—		—		79,829
Loan and lease charge-offs (1)
Multi-family	—		—		1,132		—
Commercial and industrial	2		20		637		117
Commercial real estate owner occupied	1		—		142		—
Commercial real estate non-owner occupied	—		2,801		—		15,598

Residential real estate	—		—		50		—
Installment	7,958		8,304		20,645		14,550
Total charge-offs	7,961		11,125		22,606		30,265
Loan and lease recoveries (1)

Commercial and industrial	285		25		545		79
Commercial real estate owner occupied	2		2		9		5
Commercial real estate non-owner occupied	59		—		69		—
Construction	114		113		119		116
Residential real estate	12		26		22		55
Installment	898		635		2,730		975
Total recoveries	1,370		801		3,494		1,230
Total net charge-offs	6,591		10,324		19,112		29,035
Provision for credit losses on loans and leases	3,291		20,946		372		52,732
Balance at the end of the period	$	125,436	$	159,905	$	125,436	$	159,905

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

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The ACL is based on a quarterly evaluation of the loan and lease portfolio and is maintained at a level that management considers adequate to absorb expected losses 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 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 ACL. Refer to Critical Accounting Policies herein and "NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' unaudited consolidated financial statements, also, refer to "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND

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BASIS OF PRESENTATION" to Customers' audited consolidated financial statements in its 2020 Form 10-K for further discussion on management's methodology for estimating the ACL.

Approximately ~~65%~~63% of 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”), primarily in the form of a first lien position. Current appraisals providing current value estimates of the property are received when 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 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 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 individually evaluated for impairment, the collateral value or discounted cash flow analysis is generally used to determine the estimated fair value of the underlying collateral, net of estimated selling costs, and compared to the outstanding loan balance to determine the amount of 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, net of estimated selling costs, and compared to the outstanding loan balance to estimate the required reserve.

These impairment measurements are inherently subjective as they require material estimates, including, among others, estimates of property values in appraisals, the amounts and timing of expected future cash flows on individual loans, and general considerations for historical loss experience, economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios, all of which require judgment and may be susceptible to significant change over time and as a result of changing economic conditions or other factors. Pursuant to ASC 326, individually assessed loans, consisting primarily of non-accrual and restructured loans, are considered in the methodology for determining the ACL. Individually assessed loans are generally evaluated based on the expected future cash flows or the fair value of the underlying collateral (less estimated costs to sell) if principal repayment is expected to come from the operation or sale of such collateral. Shortfalls in the underlying collateral value for loans or leases determined to be collateral dependent are charged off immediately. Subsequent to an appraisal or other fair value estimate, management will assess whether there was a further decline in the value of the collateral based on changes in market conditions or property use that would require additional impairment to be recorded to reflect the particular situation, thereby increasing the ACL on loans and leases.

Asset Quality

Customers segments the loan and lease receivables by loan product or other characteristic generally defining a shared characteristic with other loans in the same group. Charge-offs from originated and acquired loans and leases are absorbed by the ACL. ~~The~~Section 4013 of the CARES Act, as amended by the CAA, gives entities temporary relief from the accounting and disclosure requirements for TDRs. In addition, on April 7, 2020, certain regulatory banking agencies issued ~~guidance stating certain~~an interagency statement that offers practical expedients for evaluating whether loan modifications in response to ~~borrowers experiencing financial distress as a result of~~ the ~~economic impacts created by~~ COVID-19 ~~may not be required to be treated as TDRs under U.S. GAAP.~~pandemic are TDRs. For COVID-19 related loan modifications which met the loan modification criteria under either the CARES Act, as amended, or the criteria specified by the regulatory agencies, Customers elected to suspend TDR accounting for such loan modifications. At ~~March 31,~~June 30, 2021, commercial and consumer deferments related to COVID-19 were ~~$176.1~~$89.8 million and ~~$13.0~~$8.4 million, respectively. At December 31, 2020, commercial and consumer deferments related to COVID-19 were $202.1 million and $16.4 million, respectively. The schedule that follows includes both loans held for sale and loans held for investment. Customers had no pending commercial loan deferment requests as of ~~March 31,~~June 30, 2021.

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Asset Quality at ~~March 31,~~June 30, 2021

(dollars in thousands) Total Loans and Leases Current 30-89 Days Past Due 90 Days or More Past Due and Accruing Non-accrual/NPL (a) OREO (b) NPA (a)+(b) NPL to Loan and Lease Type (%) NPA to Loans and Leases + OREO (%)
Loan and Lease Type
Multi-family $ 1,640,278 $ 1,613,431 $ 6,317 $ — $ 20,530 $ — $ 20,530 1.25 % 1.25 %
Commercial & industrial 2,220,652 2,206,290 6,818 — 7,544 276 7,820 0.34 % 0.35 %
Commercial real estate owner occupied 590,093 584,931 1,920 — 3,242 — 3,242 0.55 % 0.55 %
Commercial real estate non-owner occupied 1,194,832 1,190,308 2,168 — 2,356 — 2,356 0.20 % 0.20 %
Construction 156,837 156,837 — — — — — — % — %
Total commercial loans and leases receivable 5,802,692 5,751,797 17,223 — 33,672 276 33,948 0.58 % 0.59 %
Residential 293,805 282,532 1,920 — 9,353 35 9,388 3.18 % 3.19 %
Manufactured housing 59,977 52,915 2,274 1,917 2,871 300 3,171 4.79 % 5.26 %
Installment 1,380,015 1,370,213 7,617 — 2,185 — 2,185 0.16 % 0.16 %
Total consumer loans receivable 1,733,797 1,705,660 11,811 1,917 14,409 335 14,744 0.83 % 0.85 %
Loans and leases receivable (1)
7,536,489 7,457,457 29,034 1,917 48,081 611 48,692 0.64 % 0.65 %
Loans receivable, PPP 5,178,089 5,178,089 — — — — — — % — %
Loans receivable, mortgage warehouse, at fair value 3,407,622 3,407,622 — — — — — — % — %
Total loans held for sale 46,106 45,451 12 — 643 — 643 1.39 % 1.39 %
Total portfolio $ 16,168,306 $ 16,088,619 $ 29,046 $ 1,917 $ 48,724 $ 611 $ 49,335 0.30 % 0.31 %


(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO (%)
Loan and Lease Type
Multi-family	$	1,497,485	$	1,475,890	$	—	$	—	$	21,595	$	—	$	21,595	1.44	%	1.44	%
Commercial & industrial	2,360,656		2,352,618		1,321		—		6,717		276		6,993		0.28	%	0.30	%
Commercial real estate owner occupied	653,649		650,961		—		—		2,688		—		2,688		0.41	%	0.41	%
Commercial real estate non-owner occupied	1,206,646		1,206,634		12		—		—		—		—		—	%	—	%
Construction	179,198		179,198		—		—		—		—		—		—	%	—	%
Total commercial loans and leases receivable	5,897,634		5,865,301		1,333		—		31,000		276		31,276		0.53	%	0.53	%
Residential	266,911		257,347		573		—		8,991		35		9,026		3.37	%	3.38	%
Manufactured housing	57,904		51,107		1,625		1,933		3,239		156		3,395		5.59	%	5.85	%
Installment	1,549,693		1,538,845		8,120		—		2,728		—		2,728		0.18	%	0.18	%
Total consumer loans receivable	1,874,508		1,847,299		10,318		1,933		14,958		191		15,149		0.80	%	0.81	%
Loans and leases receivable (1)	7,772,142		7,712,600		11,651		1,933		45,958		467		46,425		0.59	%	0.60	%
Loans receivable, PPP	6,305,056		6,305,056		—		—		—		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	2,855,284		2,855,284		—		—		—		—		—		—	%	—	%
Total loans held for sale	34,540		34,011		22		—		507		—		507		1.47	%	1.47	%
Total portfolio	$	16,967,022	$	16,906,951	$	11,673	$	1,933	$	46,465	$	467	$	46,932	0.27	%	0.28	%

Asset Quality at ~~March 31,~~June 30, 2021 (continued)

(dollars in thousands) Total Loans and Leases Non-accrual / NPL ACL Reserves to Loans and Leases (%) Reserves to NPLs (%)
Loan and Lease Type
Multi-family $ 1,640,278 $ 20,530 $ 8,026 0.49 % 39.09 %
Commercial & industrial 2,220,652 7,544 7,503 0.34 % 99.46 %
Commercial real estate owner occupied 590,093 3,242 5,935 1.01 % 183.07 %
Commercial real estate non-owner occupied 1,194,832 2,356 11,621 0.97 % 493.25 %
Construction 156,837 — 4,103 2.62 % — %
Total commercial loans and leases receivable 5,802,692 33,672 37,188 0.64 % 110.44 %
Residential 293,805 9,353 3,209 1.09 % 34.31 %
Manufactured housing 59,977 2,871 4,799 8.00 % 167.15 %
Installment 1,380,015 2,185 83,540 6.05 % 3,823.34 %
Total consumer loans receivable 1,733,797 14,409 91,548 5.28 % 635.35 %
Loans and leases receivable (1)
7,536,489 48,081 128,736 1.71 % 267.75 %
Loans receivable, PPP 5,178,089 — — — % — %
Loans receivable, mortgage warehouse, at fair value 3,407,622 — — — % — %
Total loans held for sale 46,106 643 — — % — %
Total portfolio $ 16,168,306 $ 48,724 $ 128,736 0.80 % 264.21 %


(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)
Loan and Lease Type
Multi-family	$	1,497,485	$	21,595	$	5,028	0.34	%	23.28	%
Commercial & industrial	2,360,656		6,717		8,127		0.34	%	120.99	%
Commercial real estate owner occupied	653,649		2,688		4,464		0.68	%	166.07	%
Commercial real estate non-owner occupied	1,206,646		—		7,374		0.61	%	—	%
Construction	179,198		—		2,643		1.47	%	—	%
Total commercial loans and leases receivable	5,897,634		31,000		27,636		0.47	%	89.15	%
Residential	266,911		8,991		2,299		0.86	%	25.57	%
Manufactured housing	57,904		3,239		4,372		7.55	%	134.98	%
Installment	1,549,693		2,728		91,129		5.88	%	3,340.51	%
Total consumer loans receivable	1,874,508		14,958		97,800		5.22	%	653.83	%
Loans and leases receivable (1)	7,772,142		45,958		125,436		1.61	%	272.94	%
Loans receivable, PPP	6,305,056		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	2,855,284		—		—		—	%	—	%
Total loans held for sale	34,540		507		—		—	%	—	%
Total portfolio	$	16,967,022	$	46,465	$	125,436	0.74	%	269.96	%

(1) Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedules that follow this table.

Customers' asset quality table contains non-GAAP financial measures ~~calculated using non-GAAP amounts. These measures all~~which exclude loans receivable, PPP from their calculations. Management uses these non-GAAP measures to present the current period presentation to historical periods in prior filings. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing ~~the~~ Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

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A reconciliation of loans and leases receivable, excluding loans receivable, PPP and other related amounts, at ~~March 31,~~June 30, 2021, are set forth below.


(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO (%)
Loans and leases receivable (GAAP)	$	16,967,022	$	16,906,951	$	11,673	$	1,933	$	46,465	$	467	$	46,932	0.27	%	0.28	%
Less: Loans receivable, PPP	6,305,056		6,305,056		—		—		—		—		—		—	%	—	%
Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	10,661,966	$	10,601,895	$	11,673	$	1,933	$	46,465	$	467	$	46,932	0.44	%	0.44	%

(dollars in thousands) Total Loans and Leases Current 30-89 Days Past Due 90 Days or More Past Due and Accruing Non-accrual/NPL (a) OREO (b) NPA (a)+(b) NPL to Loan and Lease Type (%) NPA to Loans and Leases + OREO (%)
Loans and leases receivable (GAAP) $ 16,168,306 $ 16,088,619 $ 29,046 $ 1,917 $ 48,724 $ 611 $ 49,335 0.30 % 0.31 %
Less: Loans receivable, PPP 5,178,089 5,178,089 — — — — — — % — %
Loans receivable, excluding loans receivable, PPP (Non-GAAP) $ 10,990,217 $ 10,910,530 $ 29,046 $ 1,917 $ 48,724 $ 611 $ 49,335 0.45 % 0.45 %


(dollars in thousands)	(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)		(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)
Loans and leases receivable (GAAP)	Loans and leases receivable (GAAP)	$	16,168,306	$	48,724	$	128,736	0.80	%	264.21	%	Loans and leases receivable (GAAP)	$	16,967,022	$	46,465	$	125,436	0.74	%	269.96	%
Less: Loans receivable, PPP	Less: Loans receivable, PPP	5,178,089		—		—		—	%	—	%	Less: Loans receivable, PPP	6,305,056		—		—		—	%	—	%
Loans receivable, excluding loans receivable, PPP (Non-GAAP)	Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	10,990,217	$	48,724	$	128,736	1.17	%	264.21	%	Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	10,661,966	$	46,465	$	125,436	1.18	%	269.96	%

The total loan and lease portfolio was ~~$16.2~~$17.0 billion at ~~March 31,~~June 30, 2021 compared to $15.8 billion at December 31, 2020, and ~~$48.7~~$46.5 million, or ~~0.30%~~0.27% of loans and leases, were non-performing at ~~March 31,~~June 30, 2021 compared to $70.5 million, or 0.45% of loans and leases, at December 31, 2020. The loan and lease portfolio was supported by an ACL of ~~$128.7~~$125.4 million ~~(264.21%~~(269.96% of NPLs and ~~0.80%~~0.74% of total loans and leases) and $144.2 million (204.48% of NPLs and 0.91% of total loans and leases), at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

DEPOSITS

Customers offers a variety of deposit accounts, including checking, savings, MMDA, and time deposits. Deposits are primarily obtained from Customers' geographic service area and nationwide through ~~branchless~~ digital banking, our white label relationship, deposit brokers, listing services and other relationships.

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

(dollars in thousands) March 31, 2021 December 31, 2020 Change % Change
Demand, non-interest bearing $ 2,687,628 $ 2,356,998 $ 330,630 14.0 %
Demand, interest bearing 3,228,941 2,384,691 844,250 35.4 %
Savings, including MMDA 5,889,991 5,916,309 (26,318) (0.4) %
Non-time deposits 11,806,560 10,657,998 1,148,562 10.8 %
Time, $100,000 and over 511,250 470,923 40,327 8.6 %
Time, other 154,630 181,008 (26,378) (14.6) %
Time deposits 665,880 651,931 13,949 2.1 %
Total deposits $ 12,472,440 $ 11,309,929 $ 1,162,511 10.3 %


(dollars in thousands)	June 30, 2021		December 31, 2020		Change		% Change
Demand, non-interest bearing	$	2,699,869	$	2,356,998	$	342,871	14.5	%
Demand, interest bearing	4,206,355		2,384,691		1,821,664		76.4	%
Savings, including MMDA	6,340,565		5,916,309		424,256		7.2	%
Non-time deposits	13,246,789		10,657,998		2,588,791		24.3	%
Time, $100,000 and over	501,213		470,923		30,290		6.4	%
Time, other	125,937		181,008		(55,071)		(30.4)	%
Time deposits	627,150		651,931		(24,781)		(3.8)	%
Total deposits	$	13,873,939	$	11,309,929	$	2,564,010	22.7	%

Total deposits were ~~$12.5~~$13.9 billion at ~~March 31,~~June 30, 2021, an increase of ~~$1.2~~$2.6 billion, or ~~10.3%~~22.7%, from $11.3 billion at December 31, 2020. Non-time deposits increased by ~~$1.1~~$2.6 billion, or ~~10.8%~~24.3%, to ~~$11.8~~$13.2 billion at ~~March 31,~~June 30, 2021, from $10.7 billion at December 31, 2020. This increase primarily resulted from Customers' initiative to improve its net interest margin by expanding its sources of lower-cost funding. These efforts led to increases in non-interest bearing demand deposits of ~~$0.3 billion~~$342.9 million and interest bearing demand deposits of ~~$0.8~~$1.8 billion. Savings, including MMDA ~~decreased $26.3~~increased $424.3 million, or ~~0.4%~~7.2%, to ~~$5.9~~$6.3 billion at ~~March 31,~~June 30, 2021, from $5.9 billion at December 31, 2020. Time deposits ~~increased $13.9~~decreased $24.8 million, or ~~2.1%~~3.8%, to ~~$665.9~~$627.2 million at ~~March 31,~~June 30, 2021, from $651.9 million at December 31, 2020.

At ~~March 31,~~June 30, 2021, the Bank had $0.9 billion in state and municipal deposits to which it had pledged $0.9 billion of available borrowing capacity through the FHLB to the depositor through a letter of credit arrangement.

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FHLB ADVANCES AND OTHER BORROWINGS

Borrowed funds from various sources are generally used to supplement deposit growth and meet other operating needs. Customers' borrowings include short-term and long-term advances from the FHLB, FRB, including from the PPPLF, federal funds purchased, senior unsecured notes and subordinated debt. Subordinated debt is also considered as Tier 2 capital for certain regulatory calculations.

Short-term debt

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


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

FHLB advances	FHLB advances	$	850,000	1.21	%	$	850,000	1.19	%	FHLB advances	$	—	—	%	$	850,000	1.19	%
Federal funds purchased	Federal funds purchased	365,000		0.05	%	250,000		0.09	%	Federal funds purchased	—		—	%	250,000		0.09	%
Total short-term debt	Total short-term debt	$	1,215,000			$	1,100,000			Total short-term debt	$	—			$	1,100,000

During the three months ended June 30, 2021, Customers repaid FHLB advances and federal funds purchased due to sufficient liquidity.

Long-term debt

FHLB and FRB Advances

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


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

FRB PPP Liquidity Facility advances	FRB PPP Liquidity Facility advances	$	3,284,156	0.35	%	$	4,415,016	0.35	%	FRB PPP Liquidity Facility advances	$	3,865,865	0.35	%	$	4,415,016	0.35	%
Total long-term FHLB and FRB advances	Total long-term FHLB and FRB advances	$	3,284,156			$	4,415,016			Total long-term FHLB and FRB advances	$	3,865,865			$	4,415,016

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

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

(dollars in thousands) March 31, 2021 December 31, 2020
Total maximum borrowing capacity with the FHLB $ 2,492,783 $ 2,729,516
Total maximum borrowing capacity with the FRB (1)
183,124 223,299
Qualifying loans serving as collateral against FHLB and FRB advances (1)
3,258,271 3,363,364


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

(1) Amounts reported in the above table exclude borrowings under the PPPLF, which are limited to the face value of the loans originated under the PPP. At ~~March 31,~~June 30, 2021, Customers had ~~$3.3~~$3.9 billion of borrowings under the PPPLF, with a borrowing capacity of up to ~~$5.2~~$6.3 billion, which is the remaining face value (following forgiveness) of the qualifying loans Customers has originated under the PPP. At December 31, 2020, Customers had $4.4 billion of borrowings under the PPPLF.

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Senior Notes and Subordinated Debt

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


			March 31, 2021			December 31, 2020															June 30, 2021			December 31, 2020
(dollars in thousands)	(dollars in thousands)													(dollars in thousands)
Issued by	Issued by	Ranking			Amount			Amount		Rate		Issued Amount	Date Issued		Maturity			Price		Issued by			Ranking			Amount		Amount		Rate	Issued Amount	Date Issued		Maturity	Price
Customers Bancorp	Customers Bancorp	Senior	$	24,581		$	24,552	4.500	%	$	25,000	September 2019	September 2024		100.000	%	Customers Bancorp		Senior		$	24,612		$	24,552	4.500	%	$	25,000	September 2019	September 2024	100.000	%
Customers Bancorp	Customers Bancorp	Senior	99,557			99,485		3.950	%	100,000		June 2017	June 2022		99.775	%	Customers Bancorp		Senior		99,629			99,485		3.950	%	100,000		June 2017	June 2022	99.775	%

Total other borrowings	Total other borrowings		$	124,138		$	124,037										Total other borrowings				$	124,241		$	124,037

Customers Bancorp	Customers Bancorp	Subordinated (1)(2)	$	72,267		$	72,222	5.375	%	$	74,750	December 2019	December 2034		100.000	%	Customers Bancorp		Subordinated (1)(2)		$	72,313		$	72,222	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Customers Bank	Subordinated (1)(3)	109,197			109,172		6.125	%	110,000		June 2014	June 2029		100.000	%	Customers Bank		Subordinated (1)(3)		109,221			109,172		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt	Total subordinated debt		$	181,464		$	181,394										Total subordinated debt				$	181,534		$	181,394

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

(2)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.

SHAREHOLDERS' EQUITY

The components of shareholders' equity were as follows at the dates indicated:

(dollars in thousands) March 31, 2021 December 31, 2020 Change % Change
Preferred stock $ 217,471 $ 217,471 $ — — %
Common stock 33,519 32,986 533 1.6 %
Additional paid in capital 515,318 455,592 59,726 13.1 %
Retained earnings 438,802 438,581 221 0.1 %
Accumulated other comprehensive income (loss), net 5,391 (5,764) 11,155 (193.5) %
Treasury stock (21,780) (21,780) — — %
Total shareholders' equity $ 1,188,721 $ 1,117,086 $ 71,635 6.4 %


(dollars in thousands)	June 30, 2021		December 31, 2020		Change		% Change
Preferred stock	$	217,471	$	217,471	$	—	—	%
Common stock	33,634		32,986		648		2.0	%
Additional paid in capital	519,294		455,592		63,702		14.0	%
Retained earnings	496,844		438,581		58,263		13.3	%
Accumulated other comprehensive income (loss), net	5,266		(5,764)		11,030		(191.4)	%
Treasury stock	(21,780)		(21,780)		—		—	%
Total shareholders' equity	$	1,250,729	$	1,117,086	$	133,643	12.0	%

Shareholders’ equity increased ~~$71.6~~$133.6 million, or ~~6.4%~~12.0%, to ~~$1.2~~$1.3 billion at ~~March 31,~~June 30, 2021 when compared to shareholders' equity of $1.1 billion at December 31, 2020. The increase primarily resulted from increases of ~~$59.7~~$63.7 million in additional paid in capital, ~~$11.2~~$58.3 million in retained earnings, and $11.0 million in accumulated other comprehensive ~~loss, net and $0.2 million in retained earnings.~~income (loss), net.

The increase in additional paid in capital resulted from the sale of BMT that was accounted for as a sale of non-controlling interest and the merger between BMT and MFAC was accounted for as a reverse recapitalization of $31.9 million, merger related expense of $19.6 million in the form of restricted stock awards in BM Technologies' common stock to certain team members of BMT, ~~and $8.2~~$7.9 million from ~~the~~ share-based compensation expense, and $4.3 million from the issuance of common stock under share-based compensation arrangements for the ~~three~~six months ended ~~March 31,~~June 30, 2021.

The increase in accumulated other comprehensive income (loss), net primarily resulted from an increase of $12.3 million and income tax effect of $3.2 million in the fair value of cash flow hedges due to changes in market interest rates and reclassification of $23.6 million in gains and income tax effect of $6.1 million from the sales of AFS debt securities during the three months ended March 31, 2021, partially offset by reclassification of $25.9 million in unrealized losses and income tax effect of $6.7 million resulting from the termination of derivatives designated as cash flow hedges of forecasted transactions that are deemed no longer probable of occurring during the three months ended March 31, 2021.

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The increase in retained earnings resulted from net income of ~~$36.6~~$97.9 million, offset in part by ~~$3.4~~$6.7 million in preferred stock dividends and $33.0 ~~million~~ million of special dividends in connection with the divestiture of BMT. Upon closing of the divestiture, Customers received cash consideration of $23.1 million and holders of Customers common stock who held their Customers shares as of the close of business on December 18, 2020 became entitled to receive an aggregate of 4,876,387 shares of BM Technologies' common stock. Customers distributed 0.15389 shares of BM Technologies common stock for each share of Customers common stock held as of the close of business on December 18, 2020 as special dividends. No fractional shares of BMT common stock were issued; fractional share otherwise issuable were rounded to the nearest whole share. Customers received $3.7 million of additional cash consideration in May 2021.

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The increase in accumulated other comprehensive income (loss), net primarily resulted from an increase of $12.3 million and income tax effect of $3.2 million in the fair value of cash flow hedges due to changes in market interest rates and reclassification of $27.0 million in losses and income tax effect of $7.0 million from the termination of derivatives designated as cash flow hedges of forecasted transactions that are deemed no longer probable of occurring during the six months ended June 30, 2021, partially offset by reclassification of $25.4 million in gains and income tax effect of $6.6 million resulting from the sales of AFS debt securities during the six months ended June 30, 2021.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity for a financial institution is a measure of that institution’s ability to meet depositors’ needs for funds, to satisfy or fund loan and lease commitments, and for other operating purposes. Ensuring adequate liquidity is an objective of the asset/liability management process. Customers coordinates its management of liquidity with its interest rate sensitivity and capital position, and strives to maintain a strong liquidity position.

Customers' investment portfolio provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional funding. Customers' principal sources of funds are deposits, borrowings, principal and interest payments on loans and leases, other funds from operations, and proceeds from common and preferred stock issuances. Borrowing arrangements are maintained with the FHLB and the FRB to meet short-term liquidity needs. Longer-term borrowing arrangements are also maintained with the FHLB and FRB. As of ~~March 31,~~June 30, 2021, Customers' borrowing capacity with the FHLB was ~~$2.5~~$2.4 billion, ~~of which $0.9 billion was utilized in borrowings~~ and $0.9 billion of available capacity was utilized to collateralize state and municipal deposits. During the three months ended June 30, 2021, Customers repaid FHLB advances and federal funds purchased due to sufficient liquidity. As of December 31, 2020, Customers' borrowing capacity with the FHLB was $2.7 billion, of which $0.9 billion was utilized in borrowings and $1.2 billion of available capacity was utilized to collateralize state and municipal deposits. As of ~~March 31,~~June 30, 2021 and December 31, 2020, Customers' borrowing capacity with the FRB was ~~$183.1~~$197.9 million and $223.3 million, respectively.

On January 4, 2021, Customers Bancorp completed the previously announced divestiture of BMT. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation. The table below summarizes Customers' cash flows from continuing operations for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020:


		Three Months Ended March 31,									Six Months Ended June 30,
(amounts in thousands)	(amounts in thousands)	2021		2020		Change		% Change		(amounts in thousands)	2021		2020		Change		% Change
Net cash provided by (used in) continuing operating activities	Net cash provided by (used in) continuing operating activities	$	200,384	$	(34,932)	$	235,316	(673.6)	%	Net cash provided by (used in) continuing operating activities	$	289,325	$	39,805	$	249,520	626.9	%
Net cash provided by (used in) continuing investing activities	Net cash provided by (used in) continuing investing activities	(526,654)		(433,556)		(93,098)		21.5	%	Net cash provided by (used in) continuing investing activities	(1,469,817)		(5,375,723)		3,905,906		(72.7)	%
Net cash provided by (used in) continuing financing activities	Net cash provided by (used in) continuing financing activities	171,071		512,385		(341,314)		(66.6)	%	Net cash provided by (used in) continuing financing activities	940,429		6,191,020		(5,250,591)		(84.8)	%
Net increase (decrease) in cash and cash equivalents from continuing operations	Net increase (decrease) in cash and cash equivalents from continuing operations	$	(155,199)	$	43,897	$	(199,096)	(453.6)	%	Net increase (decrease) in cash and cash equivalents from continuing operations	$	(240,063)	$	855,102	$	(1,095,165)	(128.1)	%

Cash flows provided by (used in) continuing operating activities

Cash provided by continuing operating activities of ~~$200.4~~$289.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 resulted from an increase in accrued interest payable and other liabilities of ~~$135.7~~$115.1 million, net income from continuing operations of ~~$74.6~~$136.0 million, a decrease of ~~$21.0~~$55.8 million in accrued interest receivable and other assets, partially offset by net non-cash operating adjustments of ~~$30.9~~$17.6 million.

Cash ~~used in~~provided by continuing operating activities of ~~$34.9~~$39.8 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020 resulted from an increase of ~~$99.0~~$81.8 million in accrued interest ~~receivable~~payable and other ~~assets,~~liabilities, net income from continuing operations of $33.4 million, and net non-cash operating adjustments of $38.4 million, partially offset by an increase in accrued interest ~~payable~~receivable and other ~~liabilities~~assets of ~~$38.2 million, net non-cash operating adjustments~~$113.8 million.

Table of ~~$17.4 million, and net income from continuing operations of $8.5 million.~~Contents

Cash flows provided by (used in) continuing investing activities

Cash used in continuing investing activities of ~~$526.7 million~~$1.5 billion for the ~~three~~six months ended ~~March 31,~~June 30, 2021 primarily resulted from a net increase in loans and leases, excluding mortgage warehouse loans of ~~$486.2 million~~$1.3 billion primarily from PPP loan originations, purchases of loans of ~~$117.0~~$737.3 million, ~~and~~ purchases of investment securities available for sale of ~~$589.9~~$890.2 million and purchases of bank-owned life insurance of $46.5 million, partially offset by proceeds from net

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repayments of mortgage warehouse loans of ~~$213.8~~$763.2 million, proceeds from sales of loans and leases of ~~$39.5~~$130.5 million, proceeds from sales of investment securities available for sale of ~~$353.9~~$407.6 million, proceeds from maturities, calls, and principal repayments of investment securities of $172.8 million and net proceeds from sale of FHLB, FRB, and other restricted stock of $31.5 million.

Cash used in continuing investing activities of $5.4 billion for the six months ended June 30, 2020 primarily resulted from a net increase in loans and leases, excluding mortgage warehouse loans of $4.5 billion primarily related to PPP loan originations, net originations of mortgage warehouse loans of $540.9 million, purchases of investment securities available for sale of $280.4 million, and purchases of loans of $211.1 million, partially offset by proceeds from sales of investment securities available for sale of $109.2 million and proceeds from maturities, calls and principal repayments onof investment securities of ~~$62.3 million.~~

Cash used in continuing investing activities of $433.6 million for the three months ended March 31, 2020 primarily resulted from net originations of mortgage warehouse loans of $271.1 million, purchases of loans of $193.4 million, and purchases of investment securities available for sale of $158.8 million, partially offset by a decrease in loans and leases, excluding mortgage warehouse loans of $175.0$78.5 million.

Cash flows provided by (used in) continuing financing activities

Cash provided by continuing financing activities of ~~$171.1~~$940.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 primarily resulted from net increases in deposits of ~~$1.2~~$2.6 billion, partially offset by decreases in short-term borrowed funds from the FHLB and ~~$115 million in~~ federal funds purchased ~~partially offset by~~of $1.1 billion and a net decrease in long-term borrowed funds from the PPPLF of ~~$1.1 billion~~$549.2 million primarily from the forgiveness of PPP loans from the first two rounds.

Cash provided by continuing financing activities of ~~$512.4 million~~$6.2 billion for the ~~three~~six months ended ~~March 31,~~June 30, 2020 primarily resulted from net ~~increase~~increases in ~~short-term~~long-term borrowed funds from the ~~FHLB~~PPPLF of ~~$410.0 million,~~$4.4 billion primarily to finance the PPP loan originations, and deposits of $2.3 billion, partially offset by a net ~~increase~~decrease in ~~short-term borrowed funds from the FRB of $175.0 million, and~~ federal funds purchased of ~~$167.0 million, partially offset by a decrease in deposits of $235.3 million, and preferred stock dividends paid of $3.6~~$538.0 million.

Cash flows from discontinued operations

The table below summarizes Customers' cash flows from discontinued operations for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020:

Three Months Ended
March 31,
(amounts in thousands) 2021 2020 Change % Change
Net cash provided by (used in) discontinued operating activities $ (22,791) $ (232) $ (22,559) 9,723.7 %
Net cash provided by (used in) discontinued investing activities — 62 (62) (100.0) %
Net increase (decrease) in cash and cash equivalents from discontinued operations $ (22,791) $ (170) $ (22,621) 13,306.5 %


	Six Months Ended June 30,
(amounts in thousands)	2021		2020		Change		% Change
Net cash provided by (used in) discontinued operating activities	$	(22,791)	$	(329)	$	(22,462)	6,827.4	%
Net cash provided by (used in) discontinued investing activities	—		52		(52)		(100.0)	%

Net increase (decrease) in cash and cash equivalents from discontinued operations	$	(22,791)	$	(277)	$	(22,514)	8,127.8	%

Cash flows provided by (used in) discontinued operating activities

Cash used in discontinued operating activities of $22.8 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 resulted from a net loss of $38.0 million and a decrease in accrued interest payable and other liabilities of $40.7 million, offset in part by non-cash operating activities of $20.3 million and a decrease in other assets of $35.6 million.

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CAPITAL ADEQUACY

The Bank and Customers 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 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.

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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 ~~March 31,~~June 30, 2021 and December 31, 2020, the Bank and the Bancorp met all capital adequacy requirements to which they were subject.

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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 excess of the related minimum ratios set forth in the 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 March 31, 2021:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,021,018 8.774 % $ 523,659 4.500 % N/A N/A $ 814,581 7.000 %
Customers Bank $ 1,365,443 11.745 % $ 523,182 4.500 % $ 755,708 6.500 % $ 813,839 7.000 %
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,238,489 10.643 % $ 698,212 6.000 % N/A N/A $ 989,134 8.500 %
Customers Bank $ 1,365,443 11.745 % $ 697,576 6.000 % $ 930,102 8.000 % $ 988,233 8.500 %
Total capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,447,285 12.437 % $ 930,949 8.000 % N/A N/A $ 1,221,871 10.500 %
Customers Bank $ 1,523,681 13.106 % $ 930,102 8.000 % $ 1,162,627 10.000 % $ 1,220,758 10.500 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc. $ 1,238,489 8.478 % $ 584,359 4.000 % N/A N/A $ 584,359 4.000 %
Customers Bank $ 1,365,443 9.352 % $ 584,025 4.000 % $ 730,031 5.000 % $ 584,025 4.000 %
As of December 31, 2020:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 954,839 8.079 % $ 531,844 4.500 % N/A N/A $ 827,312 7.000 %
Customers Bank $ 1,254,082 10.615 % $ 531,639 4.500 % $ 767,923 6.500 % $ 826,994 7.000 %
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,172,310 9.919 % $ 709,125 6.000 % N/A N/A $ 1,004,594 8.500 %
Customers Bank $ 1,254,082 10.615 % $ 708,852 6.000 % $ 945,136 8.000 % $ 1,004,207 8.500 %
Total capital (to risk-weighted assets)
Customers Bancorp, Inc. $ 1,401,119 11.855 % $ 945,500 8.000 % N/A N/A $ 1,240,969 10.500 %
Customers Bank $ 1,424,791 12.060 % $ 945,136 8.000 % $ 1,181,421 10.000 % $ 1,240,492 10.500 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc. $ 1,172,310 8.597 % $ 545,485 4.000 % N/A N/A $ 545,485 4.000 %
Customers Bank $ 1,254,082 9.208 % $ 544,758 4.000 % $ 680,947 5.000 % $ 544,758 4.000 %


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

The capital ratios above reflect the capital requirements under "Basel III" adopted effective first quarter 2015 and the capital conservation buffer phased in beginning January 1, 2016. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers. As of ~~March 31,~~June 30, 2021, the Bank and Customers Bancorp were in compliance with the Basel III requirements. See "NOTE 11 – REGULATORY CAPITAL" to Customers' unaudited consolidated financial statements for additional discussion regarding regulatory capital requirements.

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OFF-BALANCE SHEET ARRANGEMENTS

Customers is involved with financial instruments and other commitments with off-balance sheet risks. Financial instruments with off-balance sheet risks are incurred in the normal course of business to meet the financing needs of the Bank's customers. These financial instruments include commitments to extend credit, including unused portions of lines of credit, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the balance sheet.

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With commitments to extend credit, 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 and lease, these financial instruments are subject to the Bank’s credit policy and other underwriting standards.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the following off-balance sheet commitments, financial instruments and other arrangements were outstanding:

(amounts in thousands) March 31, 2021 December 31, 2020
Commitments to fund loans and leases $ 342,327 $ 262,153
Unfunded commitments to fund mortgage warehouse loans 2,156,029 1,933,067
Unfunded commitments under lines of credit and credit cards 1,196,988 1,009,031
Letters of credit 30,512 27,166
Other unused commitments 1,061 1,842


(amounts in thousands)	June 30, 2021		December 31, 2020
Commitments to fund loans and leases	$	233,896	$	262,153
Unfunded commitments to fund mortgage warehouse loans	2,619,979		1,933,067
Unfunded commitments under lines of credit and credit cards	1,200,497		1,009,031
Letters of credit	24,299		27,166
Other unused commitments	1,061		1,842

Commitments to fund loans and leases, unfunded commitments to fund mortgage warehouse loans, unfunded commitments under lines of credit, letters of credit, and credit cards are agreements to extend credit to or for the benefit of a customer in the ordinary course of the Bank's business.

Commitments to fund loans and leases and unfunded commitments under lines of credit may be obligations of the Bank as long as there is no violation of any condition established in the contract. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if the Bank deems it necessary upon extension of credit, is based upon management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

Mortgage warehouse loan commitments are agreements to fund the pipelines of mortgage banking businesses from closing of individual mortgage loans until their sale into the secondary market. Most of the individual mortgage loans are insured or guaranteed by the U.S. government through one of its programs such as FHA, VA, or are conventional loans eligible for sale to Fannie Mae and Freddie Mac. These commitments generally fluctuate monthly based on changes in interest rates, refinance activity, new home sales and laws and regulation.

Outstanding letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Letters of credit may obligate the Bank to fund draws under those letters of credit whether or not a customer continues to meet the conditions of the extension of credit. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan and lease facilities to customers.

Customers recognized a provision for credit ~~or credit loss benefit~~losses on unfunded commitments of ~~$1.3~~$0.1 million and a credit (benefit) to credit losses of $1.2 million during the three and six months ended ~~March 31,~~June 30, 2021 resulting in an ACL of ~~$1.0~~$1.1 million as of ~~March 31,~~June 30, 2021.

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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

The largest component of Customers' net income is net interest income, and the majority of 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 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. Customers' asset/liability committee actively seeks to monitor and control the mix of interest rate sensitive assets and interest rate sensitive liabilities.

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Customers uses two complementary methods to analyze and measure interest rate sensitivity as part of the overall management of interest rate risk; they are income scenario modeling and estimates of EVE. The combination of these two methods provides a reasonably comprehensive summary of the levels of interest rate risk of Customers' exposure to time factors and changes in interest rate environments.

Income scenario modeling is used to measure interest rate sensitivity and manage interest rate risk. Income 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 scenario modeling, Customers has estimated the net interest income for the twelve months ending ~~March 31,~~June 30, 2022 and December 31, 2021, based upon the assets, liabilities and off-balance sheet financial instruments in existence at ~~March 31,~~June 30, 2021 and December 31, 2020. Customers has also estimated changes to that estimated net interest income based upon interest rates rising or falling immediately (“rate shocks”). For upward rate shocks modeling a rising rate environment at ~~March 31,~~June 30, 2021, current market interest rates were increased immediately by 100, 200, and 300 basis points. ~~For downward rate shocks modeling a falling~~In the current interest rate environment, ~~current market~~particularly for short term rates, ~~were only decreased immediately by~~the Down 100 to Down 300 basis ~~points~~point scenarios are not shown due to the ~~limitations~~unrealistic and/or negative yield nature of the current low interest rate environment that renders the Down 200 and Down 300 rate shocks impractical. The downward rate shocks modeled will be revisited in the future if necessary and will be contingent upon additional Federal Reserve interest rate hikes.results. The following table reflects the estimated percentage change in estimated net interest income for the twelve months ending ~~March 31,~~June 30, 2022 and December 31, 2021, resulting from changes in interest rates.

Net change in net interest income


	% Change
Rate Shocks	June 30, 2021	December 31, 2020
Up 3%	2.0%	(2.7)%
Up 2%	2.3%	(1.6)%
Up 1%	0.6%	(0.8)%

% Change
Rate Shocks March 31, 2021 December 31, 2020
Up 3% 1.5% (2.7)%
Up 2% 1.4% (1.6)%
Up 1% 0.8% (0.8)%
Down 1% (0.1)% 1.4%

~~The net changes in net interest income in all scenarios are within Customers Bank's interest rate risk policy guidelines.~~

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 ~~March 31,~~June 30, 2021, current market interest rates were ~~only~~ increased immediately by 100, 200, and 300 basis points. ~~For downward rate shocks modeling a falling rate environment, current market rates were decreased immediately by 100 basis points due~~Due to the limitations of the current low interest rate environment, ~~that renders~~ the Down 100, 200 and ~~Down~~ 300 basis point rate shocks ~~impractical.~~are deemed impractical and not presented below. The downward rate shocks modeled will be revisited in the future if necessary and will be contingent upon additional Federal Reserve interest rate hikes. This method of measurement primarily evaluates the longer term repricing risks and options in Customers Bank’s balance sheet. The following table reflects the estimated EVE at risk and the ratio of EVE to EVE adjusted assets at ~~March 31,~~June 30, 2021 and December 31, 2020, resulting from shocks to interest rates.

From base
Rate Shocks March 31, 2021 December 31, 2020
Up 3% (4.0)% (18.9)%
Up 2% (0.8)% (12.2)%
Up 1% 0.5% (6.1)%
Down 1% (9.4)% (4.2)%

~~The net changes in EVE in all scenarios are within Customers Bank's interest rate risk policy guidelines.~~

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	From base
Rate Shocks	June 30, 2021	December 31, 2020
Up 3%	29.5%	(18.9)%
Up 2%	25.6%	(12.2)%
Up 1%	12.7%	(6.1)%

Management believes that the assumptions and combination of methods utilized in evaluating estimated net interest income are reasonable. However, the interest rate sensitivity of our assets, liabilities and off-balance sheet financial instruments, as well as the estimated effect of changes in interest rates on estimated net interest income, could vary substantially if different assumptions are used or actual experience differs from the assumptions used in the model.

Item 4. Controls and Procedures

(a) Management's Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, Customers Bancorp carried out an evaluation, under the supervision and with the participation of Customers Bancorp’s management, including Customers Bancorp’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Customers Bancorp’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Customers Bancorp’s disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2021.

(b) Changes in Internal Control Over Financial Reporting. During the quarter ended ~~March 31,~~June 30, 2021, there have been no changes in Customers Bancorp's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Customers Bancorp's internal control over financial reporting.

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The emergence of the COVID-19 pandemic during first quarter 2020 necessitated the execution of several Customers Bancorp contingency plans. Beginning in March 2020 and continuing through this filing date, Customers Bancorp had a substantial number of its team members working remotely under such contingency plans. The execution of these contingency plans have not materially affected, or are reasonably likely to materially affect, Customers' internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

For information on Customers' legal proceedings, refer to “NOTE 14 – LOSS CONTINGENCIES” to the 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 2020 Form 10-K. There are no material changes from the risk factors included within the 2020 Form 10-K. The risks described within the 2020 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or operating results. See “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Note Regarding Forward-Looking Statements.”

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

Issuer Purchases of Equity Securities

Customers Bancorp did not purchase any shares of its common stock during the three and six months ended ~~March 31,~~June 30, 2021 pursuant to an existing stock repurchase plan.

Dividends on Common Stock

Customers Bancorp historically has not paid any cash dividends on its shares of 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 of preferred stock and other factors deemed relevant by the Board of Directors.

In addition, as a bank holding company, Customers Bancorp is subject to general regulatory restrictions on the payment of cash dividends. Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which, depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends. Further, various federal and state statutory provisions limit the amount of dividends that bank subsidiaries can pay to their parent holding company without regulatory approval. Generally, subsidiaries are prohibited from paying dividends when doing so would cause them to fall below the regulatory minimum capital levels, and limits exist on paying dividends in excess of net income for specified periods.

Beginning January 1, 2015, the ability to pay dividends and the amounts that can be paid will be limited to the 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.

~~Special Dividends of BM Technologies, Inc. Common Stock~~

On January 4, 2021, Customers Bancorp completed the previously announced divestiture of BankMobile Technologies, Inc., a wholly owned subsidiary of Customers Bank, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of Megalith Financial Acquisition Corp., pursuant to an Agreement and Plan of Merger, dated August 6, 2020, as amended, by and among MFAC, MFAC Merger Sub Inc., BMT, Customers Bank and Customers Bancorp. In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” and began trading on the NYSE under the ticker symbol "BMTX".

Upon closing of the divestiture, Customers received cash consideration of $23.1 million and holders of Customers common stock who held their Customers shares as of the close of business on December 18, 2020 received an aggregate of 4,876,387 shares of BM Technologies' common stock in the form of a special dividend. Each holder of Customers common stock was entitled to receive 0.15389 shares of BM Technologies' common stock for each share of Customers common stock held as of the close of business on December 18, 2020. No fractional shares of BM Technologies' common stock were issued; fractional share otherwise issuable were rounded to the nearest whole share. Certain team members of BMT also received 1,348,748 shares of BM Technologies' common stock in the form of severance payments.

~~Table of Content~~s

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

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Item 6. Exhibits


Exhibit No.		Description

2.1		Asset Purchase Agreement dated as of December 15, 2015 by and among Customers Bancorp, Customers Bank, Higher One, Inc. and Higher One Holdings, Inc., incorporated by reference to Exhibit 2.3 to the Customers Bancorp Form 10-K filed with the SEC on February 26, 2016

2.2	*	Agreement and Plan of Merger by and between Megalith Financial Acquisition Corp., MFAC Merger Sub Inc., Customers Bank, and BankMobile Technologies, Inc., as the Company, incorporated by reference to Exhibit 2.1 to the Customers Bancorp 8-K filed with the SEC on August 6, 2020

2.3		First Amendment to Agreement and Plan Merger, dated November 2, 2020, by and among Megalith Financial Acquisition Corp., MFAC Merger Sub, Inc., Customers Bank, BankMobile Technologies, and Customers Bancorp, incorporated by reference to Exhibit 2.1 to the Customers Bancorp 8-K filed with the SEC on November 2, 2020

2.4		Second Amendment to Agreement and Plan Merger, dated December 8, 2020, by and among Megalith Financial Acquisition Corp., MFAC Merger Sub, Inc., Customers Bank, BankMobile Technologies, and Customers Bancorp, incorporated by reference to Exhibit 2.3 to the Customers Bancorp 8-K filed with the SEC on January 8, 2021

3.1		Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers Bancorp 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 Form 8-K filed with the SEC on April 30, 2012

3.3		Articles of Amendment to the Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on July 2, 2012

3.4		Articles of Amendment to the Amended and Restated Articles of Incorporation of Customers Bancorp, Inc., incorporated by reference to Exhibit 3.1 to the Customers Bancorp’s Form 8-K filed with the SEC on June 3, 2019

3.5		Amendment to Amended and Restated Bylaws of Customers Bancorp, Inc., incorporated by reference to Exhibit 3.1 to the Customers Bancorp’s Form 8-K filed with the SEC on June 19, 2019

3.6		Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on May 18, 2015

3.7		Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on January 29, 2016

3.8		Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series E, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on April 28, 2016

3.9		Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on September 16, 2016

4.1		Fourth Supplemental Indenture dated as of August 6, 2021 between Customers Bancorp, Inc., as Issuer, and Wilmington Trust, National Association, as Trustee, incorporated by reference to Exhibit 4.1 to Customers Bancorp’s Form 8-K filed with the SEC on August 6, 2021

4.2		Form of 2.875% Senior Note due 2031, incorporated by reference to Exhibit 4.2 to the Customers Bancorp 8-K filed with the SEC on August 6, 2021

10.1		Supplemental Executive Retirement Plan of Andrew Bowman, incorporated by reference to Exhibit 10.1 to Customers Bancorp’s Form 8-K filed with the SEC on May 18, 2021

10.2		Supplemental Executive Retirement Plan of Carla A. Leibold, incorporated by reference to Exhibit 10.2 to Customers Bancorp’s Form 8-K filed with the SEC on May 18, 2021

10.3		Supplemental Executive Retirement Plan of Samvir Sidhu, incorporated by reference to Exhibit 10.2 to Customers Bancorp’s Form 8-K filed with the SEC on May 18, 2021

10.4		Letter Agreement, dated as of June 29, 2021, by and between Customers Bancorp, Inc. and Richard A. Ehst, incorporated by reference to Exhibit 10.1 to Customers Bancorp’s Form 8-K filed with the SEC on June 30, 2021













































~~10.1~~		Transition Services Agreement, dated January 4, 2021, by and between Customers Bank and BM Technologies, Inc., incorporated by reference to Exhibit 10.1 to Customers Bancorp’s Form 8-K filed with the SEC on January 8, 2021

~~10.2~~		Software License Agreement, dated January 4, 2021, by and between Customers Bank and BM Technologies, Inc., incorporated by reference to Exhibit 10.2 to Customers Bancorp’s Form 8-K filed with the SEC on January 8, 2021

~~10.3~~		Deposit Processing Services Agreement, dated January 4, 2021, by and between Customers Bank and BM Technologies, Inc., incorporated by reference to Exhibit 10.3 to Customers Bancorp’s Form 8-K filed with the SEC on January 8, 2021

~~10.4~~		Non-Competition and Non-Solicitation Agreement, dated January 4, 2021, by and between Customers Bank and BM Technologies, Inc., incorporated by reference to Exhibit 10.4 to Customers Bancorp’s Form 8-K filed with the SEC on January 8, 2021

~~10.5~~		Loan Agreement, dated January 4, 2021, between Customers Bank, BM Technologies, Inc., and BMTX, Inc., incorporated by reference to Exhibit 10.5 to Customers Bancorp’s Form 8-K filed with the SEC on January 8, 2021

31.1		Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)

31.2		Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)

32.1		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

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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 following financial statements from the Customers’ Annual Report on Form 10-Q as of and for the year ended ~~March 31,~~June 30, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document

101.SCH						XBRL Taxonomy Extension Schema Document.

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						XBRL Taxonomy Extension Definitions Linkbase Document.

101.LAB						XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						XBRL Taxonomy Extension Presentation 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.

~~May 10,~~August 9, 2021	By:	/s/ Jay S. Sidhu
	Name:	Jay S. Sidhu
	Title:	Chairman and Chief Executive Officer (Principal Executive Officer)



~~May 10,~~August 9, 2021	By:	/s/ Carla A. Leibold
	Name:	Carla A. Leibold
	Title:	Chief Financial Officer (Principal Financial Officer)

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Part I

Item 1.	Customers Bancorp, Inc. Consolidated Financial Statements as of ~~March~~June 3 10 , ~~202~~1 2021 and for the three and six month ~~period~~s periods ended ~~March~~June 3 10 , ~~202~~1 2021 and 20 20 2020 (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4347

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7281

Item 4.	Controls and Procedures	7382

PART II

Item 1.	Legal Proceedings	7484

Item 1A.	Risk Factors	7484

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7484

Item 3.	Defaults Upon Senior Securities	7584

Item 4.	Mine Safety Disclosures	7584

Item 5.	Other Information	7584

Item 6.	Exhibits	7685

SIGNATURES		7887


	March 31, 2021 (1)
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale debt securities:
Asset-backed securities	$	381,525	$	5,717	$	(249)	$	386,993
U.S. government agencies securities	20,000		53		0		20,053
Agency-guaranteed mortgage-backed securities	37,933		9		(308)		37,634

Agency-guaranteed collateralized mortgage obligations	211,226		365		(487)		211,104
Collateralized loan obligations	162,998		139		(43)		163,094
Commercial mortgage-backed securities	13,059		0		0		13,059
Corporate notes (2)	255,126		3,422		(624)		257,924
Private label collateralized mortgage obligations	329,367		1,277		(1,955)		328,689
State and political subdivision debt securities (3)	18,481		46		0		18,527

Available for sale debt securities	$	1,429,715	$	11,028	$	(3,666)	1,437,077

Equity securities (4)							4,827
Total investment securities, at fair value							$	1,441,904