Table of ~~Content~~Conte n ts

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,~~September 30, 2022


☐			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 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.

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 ~~May 6,~~November 4, 2022, ~~32,981,204~~32,515,393 shares of Voting Common Stock were outstanding.

Table of ~~Content~~Conte n ts

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

Table of ~~Content~~Conte n ts

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 (loss)
ASC			Accounting Standards Codification
ASU			Accounting Standards Update

~~ATM~~B2B			~~Automated teller machine~~Business-to-business
Bancorp			Customers Bancorp, Inc.
Bank			Customers Bank
BBB spread			BBB rated corporate bond spreads to U.S. Treasury securities

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

~~CAA~~			~~Consolidated Appropriations Act, 2021~~
CARES Act			Coronavirus Aid, Relief and Economic Security Act
CBITTM			Customers Bank Instant Token
CCF			Customers Commercial Finance, LLC
CECL			Current expected credit losses
Commission			U.S. Securities and Exchange Commission
Company			Customers Bancorp, Inc. and subsidiaries




COVID-19			Coronavirus Disease 2019
CPI			Consumer Price Index
CRA			Community Reinvestment Act
CUBI			Symbol for Customers Bancorp, Inc. common stock traded on the NYSE
Customers			Customers Bancorp, Inc. and Customers Bank, collectively
Customers Bancorp			Customers Bancorp, Inc.
DCF			Discounted cash flow


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

ED			~~U.S. Department of Education~~

EPS			Earnings per share


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


FHLB			Federal Home Loan Bank
FICO			Fair, Isaac and Company
Fintech			Third-Party Financial Technology
FMV			Fair Market Value
~~FPRD~~			~~Final Program Review Determination~~
FRB			Federal Reserve Bank of Philadelphia

GDP			Gross domestic product



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



LIBOR			London Interbank Offered Rate
LPO			Limited Purpose Office
MFAC			Megalith Financial Acquisition Corp.
MMDA			Money market deposit accounts
NIM			Net interest margin, tax equivalent
NM			Not meaningful
NPA			Non-performing asset
NPL			Non-performing loan

NYSE			New York Stock Exchange

OCI			Other comprehensive income (loss)

OREO			Other real estate owned


PCD			Purchased Credit-Deteriorated

~~Table of Content~~s


PPP			Paycheck Protection Program
PPPLF			FRB Paycheck Protection Program Liquidity Facility
PUT			Purchase Upon Termination
Rate Shocks			Interest rates rising or falling immediately

Table of Conte n ts


ROU			Right-of-use

SAB			SEC Staff Accounting Bulletin
SBA			U.S. Small Business Administration
SBA loans			Loans originated pursuant to the rules and regulations of the SBA
SEC			U.S. Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended
Series 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
SERP			Supplemental Executive Retirement Plan
Share Repurchase Program			Share repurchase program authorized by the Board of Directors of Customers Bancorp in 2021
SOFR			Secured Overnight Financing Rate

TDR			Troubled debt restructuring
TRAC			Terminal Rental Adjustment Clause


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

Table of ~~Content~~Conte n ts

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET — UNAUDITED

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


		March 31, 2022		December 31, 2021			September 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	55,515	$	35,238	Cash and due from banks	$	41,520	$	35,238
Interest earning deposits	Interest earning deposits	219,085		482,794		Interest earning deposits	362,945		482,794
Cash and cash equivalents	Cash and cash equivalents	274,600		518,032		Cash and cash equivalents	404,465		518,032
Investment securities, at fair value (includes allowance for credit losses of $728 at March 31, 2022)		4,169,853		3,817,150
Investment securities, at fair value (includes allowance for credit losses of $253 at September 30, 2022)						Investment securities, at fair value (includes allowance for credit losses of $253 at September 30, 2022)	2,943,694		3,817,150

Loans held for sale (includes $2,496 and $15,747, respectively, at fair value)		3,003		16,254
Investment securities held to maturity						Investment securities held to maturity	886,294		—
Loans held for sale (includes $609 and $15,747, respectively, at fair value)						Loans held for sale (includes $609 and $15,747, respectively, at fair value)	5,224		16,254
Loans receivable, mortgage warehouse, at fair value	Loans receivable, mortgage warehouse, at fair value	1,755,758		2,284,325		Loans receivable, mortgage warehouse, at fair value	1,569,090		2,284,325

Loans receivable, PPP	Loans receivable, PPP	2,195,902		3,250,008		Loans receivable, PPP	1,154,632		3,250,008
Loans and leases receivable	Loans and leases receivable	10,118,855		9,018,298		Loans and leases receivable	12,607,742		9,018,298
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(145,847)		(137,804)		Allowance for credit losses on loans and leases	(130,197)		(137,804)
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	13,924,668		14,414,827		Total loans and leases receivable, net of allowance for credit losses on loans and leases	15,201,267		14,414,827
FHLB, Federal Reserve Bank, and other restricted stock	FHLB, Federal Reserve Bank, and other restricted stock	54,553		64,584		FHLB, Federal Reserve Bank, and other restricted stock	64,112		64,584
Accrued interest receivable	Accrued interest receivable	94,669		92,239		Accrued interest receivable	107,621		92,239

Bank premises and equipment, net	Bank premises and equipment, net	8,233		8,890		Bank premises and equipment, net	6,610		8,890
Bank-owned life insurance	Bank-owned life insurance	332,239		333,705		Bank-owned life insurance	336,130		333,705

Goodwill and other intangibles	Goodwill and other intangibles	3,678		3,736		Goodwill and other intangibles	3,629		3,736
Other assets	Other assets	298,212		305,611		Other assets	408,575		305,611

Total assets	Total assets	$	19,163,708	$	19,575,028	Total assets	$	20,367,621	$	19,575,028
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:	Liabilities:					Liabilities:
Deposits:	Deposits:					Deposits:
Demand, non-interest bearing	Demand, non-interest bearing	$	4,594,428	$	4,459,790	Demand, non-interest bearing	$	2,993,793	$	4,459,790
Interest bearing	Interest bearing	11,821,132		12,318,134		Interest bearing	14,528,645		12,318,134
Total deposits	Total deposits	16,415,560		16,777,924		Total deposits	17,522,438		16,777,924

Federal funds purchased	Federal funds purchased	700,000		75,000		Federal funds purchased	365,000		75,000
FHLB advances	FHLB advances	—		700,000		FHLB advances	500,000		700,000
Other borrowings	Other borrowings	223,230		223,086		Other borrowings	123,515		223,086
Subordinated debt	Subordinated debt	181,742		181,673		Subordinated debt	181,882		181,673

Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	265,770		251,128		Accrued interest payable and other liabilities	287,855		251,128

Total liabilities	Total liabilities	17,786,302		18,208,811		Total liabilities	18,980,690		18,208,811
Commitments and contingencies (NOTE 15)		0		0
Commitments and contingencies (NOTE 16)						Commitments and contingencies (NOTE 16)
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 5,700,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021		137,794		137,794
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 34,881,580 and 34,721,675 shares issued as of March 31, 2022 and December 31, 2021; 32,957,847 and 32,913,267 shares outstanding as of March 31, 2022 and December 31, 2021		34,882		34,722
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 5,700,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021						Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 5,700,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021	137,794		137,794
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 34,948,055 and 34,721,675 shares issued as of September 30, 2022 and December 31, 2021; 32,475,502 and 32,913,267 shares outstanding as of September 30, 2022 and December 31, 2021						Common stock, par value $1.00 per share; 200,000,000 shares authorized; 34,948,055 and 34,721,675 shares issued as of September 30, 2022 and December 31, 2021; 32,475,502 and 32,913,267 shares outstanding as of September 30, 2022 and December 31, 2021	34,948		34,722
Additional paid in capital	Additional paid in capital	542,402		542,391		Additional paid in capital	549,066		542,391
Retained earnings	Retained earnings	780,628		705,732		Retained earnings	898,511		705,732
Accumulated other comprehensive income (loss), net	Accumulated other comprehensive income (loss), net	(62,548)		(4,980)		Accumulated other comprehensive income (loss), net	(156,126)		(4,980)
Treasury stock, at cost (1,923,732 and 1,808,408 shares as of March 31, 2022 and December 31, 2021)		(55,752)		(49,442)
Treasury stock, at cost (2,472,553 and 1,808,408 shares as of September 30, 2022 and December 31, 2021)						Treasury stock, at cost (2,472,553 and 1,808,408 shares as of September 30, 2022 and December 31, 2021)	(77,262)		(49,442)
Total shareholders’ equity	Total shareholders’ equity	1,377,406		1,366,217		Total shareholders’ equity	1,386,931		1,366,217
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	19,163,708	$	19,575,028	Total liabilities and shareholders’ equity	$	20,367,621	$	19,575,028

See accompanying notes to the unaudited consolidated financial statements.

Table of ~~Content~~Conte n ts

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) — UNAUDITED

(amounts in thousands, except per share data)


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021					2022		2021		2022		2021
Interest income:	Interest income:							Interest income:
Loans and leases	Loans and leases	$	157,175	$	152,117			Loans and leases	$	200,457	$	233,097	$	526,573	$	538,822

Investment securities	Investment securities	20,295		7,979				Investment securities	30,546		8,905		76,283		25,211
Other	Other	6,006		1,019				Other	4,913		849		12,870		2,814
Total interest income	Total interest income	183,476		161,115				Total interest income	235,916		242,851		615,726		566,847
Interest expense:	Interest expense:							Interest expense:
Deposits	Deposits	13,712		15,658				Deposits	65,380		15,915		101,873		47,226
FHLB advances	FHLB advances	—		5,192				FHLB advances	4,684		5		7,000		6,160
Subordinated debt	Subordinated debt	2,689		2,689				Subordinated debt	2,689		2,689		8,067		8,067
FRB PPP liquidity facility, federal funds purchased and other borrowings	FRB PPP liquidity facility, federal funds purchased and other borrowings	2,376		4,845				FRB PPP liquidity facility, federal funds purchased and other borrowings	4,131		4,350		10,203		14,014
Total interest expense	Total interest expense	18,777		28,384				Total interest expense	76,884		22,959		127,143		75,467
Net interest income	Net interest income	164,699		132,731				Net interest income	159,032		219,892		488,583		491,380
Provision (benefit) for credit losses	Provision (benefit) for credit losses	15,997		(2,919)				Provision (benefit) for credit losses	(7,994)		13,164		31,850		13,536
Net interest income after provision (benefit) for credit losses	Net interest income after provision (benefit) for credit losses	148,702		135,650				Net interest income after provision (benefit) for credit losses	167,026		206,728		456,733		477,844
Non-interest income:	Non-interest income:							Non-interest income:

Interchange and card revenue	Interchange and card revenue	76		85				Interchange and card revenue	72		83		172		252

Deposit fees	Deposit fees	940		863				Deposit fees	989		994		2,893		2,748
Commercial lease income	Commercial lease income	5,895		5,205				Commercial lease income	7,097		5,213		19,584		15,729
Bank-owned life insurance	Bank-owned life insurance	8,326		1,679				Bank-owned life insurance	3,449		1,988		13,722		6,432
Mortgage warehouse transactional fees	Mortgage warehouse transactional fees	2,015		4,247				Mortgage warehouse transactional fees	1,545		3,100		5,443		10,612
Gain (loss) on sale of SBA and other loans	Gain (loss) on sale of SBA and other loans	1,507		1,575				Gain (loss) on sale of SBA and other loans	106		5,359		3,155		8,834
Loss on sale of consumer installment loans								Loss on sale of consumer installment loans	(23,465)		—		(23,465)		—
Loan fees	Loan fees	2,545		1,436				Loan fees	3,008		1,909		8,171		5,015
Mortgage banking income	Mortgage banking income	481		463				Mortgage banking income	125		425		779		1,274

Gain (loss) on sale of investment securities	Gain (loss) on sale of investment securities	(1,063)		23,566				Gain (loss) on sale of investment securities	(2,135)		6,063		(6,227)		31,441

Unrealized gain (loss) on investment securities	Unrealized gain (loss) on investment securities	(276)		974				Unrealized gain (loss) on investment securities	(259)		—		(738)		2,720

Loss on sale of foreign subsidiaries								Loss on sale of foreign subsidiaries	—		—		—		(2,840)

Unrealized gain (loss) on derivatives	Unrealized gain (loss) on derivatives	964		2,537				Unrealized gain (loss) on derivatives	563		524		2,348		2,622
Loss on cash flow hedge derivative terminations	Loss on cash flow hedge derivative terminations	—		(24,467)				Loss on cash flow hedge derivative terminations	—		—		—		(24,467)
Other	Other	(212)		305				Other	(112)		(72)		(910)		504
Total non-interest income	Total non-interest income	21,198		18,468				Total non-interest income	(9,017)		25,586		24,927		60,876
Non-interest expense:	Non-interest expense:							Non-interest expense:
Salaries and employee benefits	Salaries and employee benefits	26,607		23,971				Salaries and employee benefits	31,230		26,268		83,171		78,262
Technology, communication and bank operations	Technology, communication and bank operations	24,068		19,988				Technology, communication and bank operations	19,588		21,281		66,394		60,887
Professional services	Professional services	6,956		5,877				Professional services	6,269		6,871		20,640		19,630
Occupancy	Occupancy	3,050		2,621				Occupancy	2,605		2,704		9,934		7,807
Commercial lease depreciation	Commercial lease depreciation	4,942		4,291				Commercial lease depreciation	5,966		4,493		16,460		13,199
FDIC assessments, non-income taxes and regulatory fees	FDIC assessments, non-income taxes and regulatory fees	2,383		2,719				FDIC assessments, non-income taxes and regulatory fees	2,528		2,313		6,530		7,634
Loan servicing	Loan servicing	2,371		437				Loan servicing	3,851		4,265		10,563		6,402
Advertising and promotion	Advertising and promotion	315		561				Advertising and promotion	762		302		1,430		1,176
Merger and acquisition related expenses	Merger and acquisition related expenses	—		418				Merger and acquisition related expenses	—		—		—		418
Loan workout	Loan workout	(38)		(261)				Loan workout	217		198		358		39

Deposit relationship adjustment fees								Deposit relationship adjustment fees	—		6,216		—		6,216
Other	Other	3,153		1,305				Other	3,182		5,098		10,730		11,089
Total non-interest expense	Total non-interest expense	73,807		61,927				Total non-interest expense	76,198		80,009		226,210		212,759
Income before income tax expense	Income before income tax expense	96,093		92,191				Income before income tax expense	81,811		152,305		255,450		325,961
Income tax expense	Income tax expense	19,332		17,560				Income tax expense	17,899		36,263		56,127		73,947
Net income from continuing operations	Net income from continuing operations	$	76,761	$	74,631			Net income from continuing operations	$	63,912	$	116,042	$	199,323	$	252,014

		(continued)				(continued)

Table of ~~Content~~Conte n ts


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021				2022		2021		2022		2021
Loss from discontinued operations before income taxes	Loss from discontinued operations before income taxes	$	—	$	(20,354)		Loss from discontinued operations before income taxes	$	—	$	—	$	—	$	(20,354)
Income tax expense from discontinued operations	Income tax expense from discontinued operations	—		17,682			Income tax expense from discontinued operations	—		—		—		17,682
Net loss from discontinued operations	Net loss from discontinued operations	—		(38,036)			Net loss from discontinued operations	—		—		—		(38,036)
Net income	Net income	76,761		36,595			Net income	63,912		116,042		199,323		213,978
Preferred stock dividends	Preferred stock dividends	1,865		3,391			Preferred stock dividends	2,548		2,981		6,544		9,671

Loss on redemption of preferred stock							Loss on redemption of preferred stock	—		2,820		—		2,820
Net income available to common shareholders	Net income available to common shareholders	$	74,896	$	33,204		Net income available to common shareholders	$	61,364	$	110,241	$	192,779	$	201,487

Basic earnings per common share from continuing operations	Basic earnings per common share from continuing operations	$	2.27	$	2.23		Basic earnings per common share from continuing operations	$	1.89	$	3.40	$	5.89	$	7.44
Basic earnings per common share	Basic earnings per common share	2.27		1.04			Basic earnings per common share	1.89		3.40		5.89		6.26
Diluted earnings per common share from continuing operations	Diluted earnings per common share from continuing operations	2.18		2.17			Diluted earnings per common share from continuing operations	1.85		3.25		5.72		7.15
Diluted earnings per common share	Diluted earnings per common share	2.18		1.01			Diluted earnings per common share	1.85		3.25		5.72		6.02

See accompanying notes to the unaudited consolidated financial statements.

Table of ~~Content~~Conte n ts

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED

(amounts in thousands)


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021				2022		2021		2022		2021

Net income	Net income	$	76,761	$	36,595		Net income	$	63,912	$	116,042	$	199,323	$	213,978
Unrealized gains (losses) on available for sale debt securities:	Unrealized gains (losses) on available for sale debt securities:						Unrealized gains (losses) on available for sale debt securities:
Unrealized gains (losses) arising during the period	Unrealized gains (losses) arising during the period	(78,858)		400			Unrealized gains (losses) arising during the period	(46,450)		958		(213,532)		1,950
Income tax effect	Income tax effect	20,503		(104)			Income tax effect	12,077		(249)		55,518		(507)
Reclassification adjustments for (gains) losses included in net income	Reclassification adjustments for (gains) losses included in net income	1,063		(23,566)			Reclassification adjustments for (gains) losses included in net income	4,227		(6,063)		9,281		(31,441)
Income tax effect	Income tax effect	(276)		6,127			Income tax effect	(1,099)		1,576		(2,413)		8,174
Net unrealized gains (losses) on available for sale debt securities	Net unrealized gains (losses) on available for sale debt securities	(57,568)		(17,143)			Net unrealized gains (losses) on available for sale debt securities	(31,245)		(3,778)		(151,146)		(21,824)
Unrealized gains (losses) on cash flow hedges:	Unrealized gains (losses) on cash flow hedges:						Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period	Unrealized gains (losses) arising during the period	—		12,315			Unrealized gains (losses) arising during the period	—		—		—		12,321
Income tax effect	Income tax effect	—		(3,202)			Income tax effect	—		—		—		(3,204)
Reclassification adjustment for (gains) losses included in net income	Reclassification adjustment for (gains) losses included in net income	—		25,926			Reclassification adjustment for (gains) losses included in net income	—		—		—		26,972
Income tax effect	Income tax effect	—		(6,741)			Income tax effect	—		—		—		(7,013)
Net unrealized gains (losses) on cash flow hedges	Net unrealized gains (losses) on cash flow hedges	—		28,298			Net unrealized gains (losses) on cash flow hedges	—		—		—		29,076
Other comprehensive income (loss), net of income tax effect	Other comprehensive income (loss), net of income tax effect	(57,568)		11,155			Other comprehensive income (loss), net of income tax effect	(31,245)		(3,778)		(151,146)		7,252
Comprehensive income (loss)	Comprehensive income (loss)	$	19,193	$	47,750		Comprehensive income (loss)	$	32,667	$	112,264	$	48,177	$	221,230

See accompanying notes to the unaudited consolidated financial statements.

Table of ~~Content~~Conte n ts

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, 2022																	Three Months Ended September 30, 2022
		Preferred Stock			Common Stock														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			Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, December 31, 2021		5,700,000	$	137,794	32,913,267	$	34,722	$	542,391	$	705,732	$	(4,980)	$	(49,442)	$	1,366,217
Balance, June 30, 2022																		Balance, June 30, 2022	5,700,000	$	137,794	32,449,486	$	34,922	$	545,670	$	837,147	$	(124,881)	$	(77,262)	$	1,353,390

Net income	Net income	—	—		—	—		—		76,761		—		—		76,761		Net income	—	—		—	—		—		63,912		—		—		63,912

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—		—		—		(57,568)		—		(57,568)		Other comprehensive income (loss)	—	—		—	—		—		—		(31,245)		—		(31,245)

Preferred stock dividends (1)	Preferred stock dividends (1)	—	—		—	—		—		(1,865)		—		—		(1,865)		Preferred stock dividends (1)	—	—		—	—		—		(2,548)		—		—		(2,548)

Share-based compensation expense	Share-based compensation expense	—	—		—	—		3,703		—		—		—		3,703		Share-based compensation expense	—	—		—	—		3,336		—		—		—		3,336

Issuance of common stock under share-based compensation arrangements	Issuance of common stock under share-based compensation arrangements	—	—		159,904	160		(3,692)		—		—		—		(3,532)		Issuance of common stock under share-based compensation arrangements	—	—		26,016	26		60		—		—		—		86
Repurchase of common shares		—	—		(115,324)	—		—		—		—		(6,310)		(6,310)
Balance, March 31, 2022		5,700,000	$	137,794	32,957,847	$	34,882	$	542,402	$	780,628	$	(62,548)	$	(55,752)	$	1,377,406

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

		Three Months Ended March 31, 2021																	Three Months Ended September 30, 2021
		Preferred Stock			Common Stock														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			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
Balance, June 30, 2021																		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

Net income	Net income	—	—		—	—		—		36,595		—		—		36,595		Net income	—	—		—	—		—		116,042		—		—		116,042

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—		—		—		11,155		—		11,155		Other comprehensive income (loss)	—	—		—	—		—		—		(3,778)		—		(3,778)

Preferred stock dividends (1)	Preferred stock dividends (1)	—	—		—	—		—		(3,391)		—		—		(3,391)		Preferred stock dividends (1)	—	—		—	—		—		(2,981)		—		—		(2,981)
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
Redemption of preferred stock (2)																		Redemption of preferred stock (2)	(3,300,000)	(79,677)		—	—		—		—		—		—		(79,677)
Loss on redemption of preferred stock (2)																		Loss on redemption of preferred stock (2)	—	—		—	—		—		(2,820)		—		—		(2,820)

Share-based compensation expense	Share-based compensation expense	—	—		—	—		3,609		—		—		—		3,609		Share-based compensation expense	—	—		—	—		3,289		—		—		—		3,289

Issuance of common stock under share-based compensation arrangements	Issuance of common stock under share-based compensation arrangements	—	—		533,674	533		4,632		—		—		—		5,165		Issuance of common stock under share-based compensation arrangements	—	—		184,720	184		3,311		—		—		—		3,495

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
Balance, September 30, 2021																		Balance, September 30, 2021	5,700,000	$	137,794	32,537,976	$	33,818	$	525,894	$	607,085	$	1,488	$	(21,780)	$	1,284,299

(1)Dividends per share of ~~$0.333922~~$0.445233 and ~~$0.310297 per share~~$0.421083 were declared on Series E and F preferred stock, respectively, for the three months ended ~~March 31,~~September 30, 2022. Dividends per share of ~~$0.34478125, $0.40625, $0.403125,~~$0.346206, $0.332790, $0.335984, and $0.375 ~~per share~~ were declared on Series C, D, E, and F preferred stock, respectively, for the three months ended ~~March 31,~~September 30, 2021.

(2)Refer to NOTE 12 – SHAREHOLDERS' EQUITY for additional information about the redemption of Series C and Series D Preferred Stock.

Table of Conte n ts



	Nine Months Ended September 30, 2022
	Preferred Stock			Common Stock
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, December 31, 2021	5,700,000	$	137,794	32,913,267	$	34,722	$	542,391	$	705,732	$	(4,980)	$	(49,442)	$	1,366,217



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

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


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





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

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

	Nine Months Ended September 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	—	—		—	—		—		213,978		—		—		213,978

Other comprehensive income (loss)	—	—		—	—		—		—		7,252		—		7,252


Preferred stock dividends (1)	—	—		—	—		—		(9,671)		—		—		(9,671)
Redemption of preferred stock (2)	(3,300,000)	(79,677)		—	—		—		—		—		—		(79,677)
Loss on redemption of preferred stock (2)	—	—		—	—		—		(2,820)		—		—		(2,820)
Sale of non-controlling interest in BMT (3)	—	—		—	—		31,893		—		—		—		31,893
Distribution of investment in BM Technologies (4)	—	—		—	—		—		(32,983)		—		—		(32,983)
Restricted stock awards to certain BMT team members (5)	—	—		—	—		19,592		—		—		—		19,592
Share-based compensation expense	—	—		—	—		11,162		—		—		—		11,162

Issuance of common stock under share-based compensation arrangements	—	—		832,888	832		7,655		—		—		—		8,487

Balance, September 30, 2021	5,700,000	$	137,794	32,537,976	$	33,818	$	525,894	$	607,085	$	1,488	$	(21,780)	$	1,284,299

(1)Dividends per share of $1.160316 and $1.088391 were declared on Series E and F preferred stock, respectively, for the nine months ended September 30, 2022. Dividends per share of $1.041346, $1.075982, $1.142234, and $1.125 were declared on Series C, D, E, and F preferred stock, respectively, for the nine months ended September 30, 2021.

(2)Refer to NOTE 12 – SHAREHOLDERS' EQUITY for additional information about the redemption of Series C and Series D Preferred Stock.

(3)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)~~(4)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)~~(5)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.

910

Table of ~~Content~~Conte n ts

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(amounts in thousands)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2022		2021			2022		2021
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net income from continuing operations	Net income from continuing operations	$	76,761	$	74,631	Net income from continuing operations	$	199,323	$	252,014
Adjustments to reconcile net income to net cash provided by (used in) by continuing operating activities:
Adjustments to reconcile net income to net cash provided by (used in) continuing operating activities						Adjustments to reconcile net income to net cash provided by (used in) continuing operating activities
Provision (benefit) for credit losses	Provision (benefit) for credit losses	15,997		(2,919)		Provision (benefit) for credit losses	31,850		13,536
Depreciation and amortization	Depreciation and amortization	6,055		5,321		Depreciation and amortization	20,027		16,221

Share-based compensation expense	Share-based compensation expense	3,718		3,082		Share-based compensation expense	10,702		11,194
Deferred taxes	Deferred taxes	(22,810)		(6,198)		Deferred taxes	(436)		7,051
Net amortization (accretion) of investment securities premiums and discounts	Net amortization (accretion) of investment securities premiums and discounts	918		(14)		Net amortization (accretion) of investment securities premiums and discounts	2,139		1,171
Unrealized (gain) loss on investment securities	Unrealized (gain) loss on investment securities	276		(974)		Unrealized (gain) loss on investment securities	738		(2,720)
(Gain) loss on sale of investment securities	(Gain) loss on sale of investment securities	1,063		(23,566)		(Gain) loss on sale of investment securities	6,227		(31,441)

Loss on sale of foreign subsidiaries						Loss on sale of foreign subsidiaries	—		2,840
Impairment loss on fixed assets and leases						Impairment loss on fixed assets and leases	1,362		—
Unrealized (gain) loss on derivatives	Unrealized (gain) loss on derivatives	(964)		(2,537)		Unrealized (gain) loss on derivatives	(2,348)		(2,622)
Loss on cash flow hedge derivative terminations	Loss on cash flow hedge derivative terminations	—		24,467		Loss on cash flow hedge derivative terminations	—		24,467
Settlement of terminated cash flow hedge derivatives	Settlement of terminated cash flow hedge derivatives	—		(27,156)		Settlement of terminated cash flow hedge derivatives	—		(27,156)

(Gain) loss on sale of leased assets under lessor operating leases						(Gain) loss on sale of leased assets under lessor operating leases	350		763
Fair value adjustment on loans held for sale	Fair value adjustment on loans held for sale	—		(1,115)		Fair value adjustment on loans held for sale	—		(1,115)
(Gain) loss on sale of loans	(Gain) loss on sale of loans	(2,070)		(2,071)		(Gain) loss on sale of loans	(4,149)		(10,067)
Loss on sale of consumer installment loans						Loss on sale of consumer installment loans	23,465		—
Origination of loans held for sale	Origination of loans held for sale	(10,999)		(12,323)		Origination of loans held for sale	(28,077)		(55,093)
Proceeds from the sale of loans held for sale	Proceeds from the sale of loans held for sale	24,813		17,122		Proceeds from the sale of loans held for sale	44,209		49,674

Amortization (accretion) of loan net deferred fees, discounts and premiums	Amortization (accretion) of loan net deferred fees, discounts and premiums	(27,907)		(345)		Amortization (accretion) of loan net deferred fees, discounts and premiums	(49,601)		(149,647)

Earnings on investment in bank-owned life insurance	Earnings on investment in bank-owned life insurance	(8,326)		(1,679)		Earnings on investment in bank-owned life insurance	(13,722)		(6,432)
(Increase) decrease in accrued interest receivable and other assets	(Increase) decrease in accrued interest receivable and other assets	66,855		20,979		(Increase) decrease in accrued interest receivable and other assets	16,883		45,591
Increase (decrease) in accrued interest payable and other liabilities	Increase (decrease) in accrued interest payable and other liabilities	(6,440)		135,679		Increase (decrease) in accrued interest payable and other liabilities	16,080		136,295
Net Cash Provided By (Used In) Continuing Operating Activities	Net Cash Provided By (Used In) Continuing Operating Activities	116,940		200,384		Net Cash Provided By (Used In) Continuing Operating Activities	275,022		274,524
Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Proceeds from maturities, calls and principal repayments of investment securities		224,809		62,348

Proceeds from maturities, calls and principal repayments of investment securities available for sale						Proceeds from maturities, calls and principal repayments of investment securities available for sale	408,046		258,418
Proceeds from maturities, calls and principal repayments of investment securities held to maturity						Proceeds from maturities, calls and principal repayments of investment securities held to maturity	13,631		—
Proceed from sales of foreign subsidiaries						Proceed from sales of foreign subsidiaries	—		3,765
Proceeds from sales of investment securities available for sale	Proceeds from sales of investment securities available for sale	155,954		353,915		Proceeds from sales of investment securities available for sale	681,633		666,023
Purchases of investment securities available for sale	Purchases of investment securities available for sale	(814,246)		(589,874)		Purchases of investment securities available for sale	(929,754)		(1,423,959)

Origination of mortgage warehouse loans	Origination of mortgage warehouse loans	(7,938,526)		(16,998,093)		Origination of mortgage warehouse loans	(23,568,943)		(44,292,416)
Proceeds from repayments of mortgage warehouse loans	Proceeds from repayments of mortgage warehouse loans	8,475,173		17,211,909		Proceeds from repayments of mortgage warehouse loans	24,247,843		45,356,500
Net (increase) decrease in loans and leases, excluding mortgage warehouse loans	Net (increase) decrease in loans and leases, excluding mortgage warehouse loans	159,706		(486,158)		Net (increase) decrease in loans and leases, excluding mortgage warehouse loans	(1,639,900)		521,323
Proceeds from sales of loans and leases	Proceeds from sales of loans and leases	14,281		39,534		Proceeds from sales of loans and leases	136,920		260,851
Purchase of loans	Purchase of loans	(206,330)		(117,036)		Purchase of loans	(368,776)		(1,389,512)

Purchases of bank-owned life insurance						Purchases of bank-owned life insurance	—		(46,462)
Proceeds from bank-owned life insurance	Proceeds from bank-owned life insurance	5,850		—		Proceeds from bank-owned life insurance	11,807		1,999
Net proceeds from sale of FHLB, Federal Reserve Bank, and other restricted stock		15,205		1,948
Net (purchases of) proceeds from sale of FHLB, Federal Reserve Bank, and other restricted stock						Net (purchases of) proceeds from sale of FHLB, Federal Reserve Bank, and other restricted stock	6,880		14,184

Purchases of bank premises and equipment	Purchases of bank premises and equipment	(274)		(298)		Purchases of bank premises and equipment	(587)		(418)

Proceeds from sales of other real estate owned						Proceeds from sales of other real estate owned	—		45
Proceeds from sales of leased assets under lessor operating leases						Proceeds from sales of leased assets under lessor operating leases	2,889		5,475
Purchases of leased assets under lessor operating leases	Purchases of leased assets under lessor operating leases	(2,930)		(4,849)		Purchases of leased assets under lessor operating leases	(86,797)		(16,691)
Net Cash Provided By (Used In) Continuing Investing Activities	Net Cash Provided By (Used In) Continuing Investing Activities	88,672		(526,654)		Net Cash Provided By (Used In) Continuing Investing Activities	$	(1,085,108)	$	(80,875)
Cash Flows from Financing Activities
Net increase (decrease) in deposits		(362,364)		1,162,511

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

Net increase (decrease) in federal funds purchased		625,000		115,000
Net increase (decrease) in borrowed funds from FRB PPP liquidity facility		—		(1,130,860)

							(continued)

							Nine Months Ended September 30,
							2022		2021
Cash Flows from Financing Activities						Cash Flows from Financing Activities
Net increase (decrease) in deposits						Net increase (decrease) in deposits	$	744,514	$	5,661,096

Net increase (decrease) in short-term borrowed funds from the FHLB						Net increase (decrease) in short-term borrowed funds from the FHLB	(700,000)		(850,000)

Net increase (decrease) in federal funds purchased						Net increase (decrease) in federal funds purchased	290,000		(250,000)
Net increase (decrease) in borrowed funds from FRB PPP liquidity facility						Net increase (decrease) in borrowed funds from FRB PPP liquidity facility	—		(4,415,016)
Proceeds from long-term borrowed funds from the FHLB						Proceeds from long-term borrowed funds from the FHLB	500,000		—

Proceeds from issuance of other long-term borrowings						Proceeds from issuance of other long-term borrowings	—		98,799
Repayments of other borrowings						Repayments of other borrowings	(100,000)		—

Redemption of preferred stock						Redemption of preferred stock	—		(82,497)
Preferred stock dividends paid	Preferred stock dividends paid	(1,823)		(3,401)		Preferred stock dividends paid	(6,374)		(8,794)

Purchase of treasury stock	Purchase of treasury stock	(6,310)		—		Purchase of treasury stock	(27,820)		—
Payments of employee taxes withheld from share-based awards	Payments of employee taxes withheld from share-based awards	(3,755)		(1,988)		Payments of employee taxes withheld from share-based awards	(4,248)		(4,201)
Proceeds from issuance of common stock	Proceeds from issuance of common stock	208		6,684		Proceeds from issuance of common stock	447		11,660
Proceeds from sale of non-controlling interest in BMT	Proceeds from sale of non-controlling interest in BMT	—		23,125		Proceeds from sale of non-controlling interest in BMT	—		26,795
Net Cash Provided By (Used In) Continuing Financing Activities	Net Cash Provided By (Used In) Continuing Financing Activities	(449,044)		171,071		Net Cash Provided By (Used In) Continuing Financing Activities	696,519		187,842
Net Increase (Decrease) in Cash and Cash Equivalents From Continuing Operations	Net Increase (Decrease) in Cash and Cash Equivalents From Continuing Operations	$	(243,432)	$	(155,199)	Net Increase (Decrease) in Cash and Cash Equivalents From Continuing Operations	(113,567)		381,491
Discontinued Operations:	Discontinued Operations:					Discontinued Operations:
Net Cash Used In Operating Activities	Net Cash Used In Operating Activities	$	—	$	(22,791)	Net Cash Used In Operating Activities	—		(22,791)

Net Increase (Decrease) in Cash and Cash Equivalents From Discontinued Operations	Net Increase (Decrease) in Cash and Cash Equivalents From Discontinued Operations	—		(22,791)		Net Increase (Decrease) in Cash and Cash Equivalents From Discontinued Operations	—		(22,791)
Net Increase (Decrease) in Cash and Cash Equivalents	Net Increase (Decrease) in Cash and Cash Equivalents	(243,432)		(177,990)		Net Increase (Decrease) in Cash and Cash Equivalents	(113,567)		358,700
Cash and Cash Equivalents – Beginning	Cash and Cash Equivalents – Beginning	518,032		693,354		Cash and Cash Equivalents – Beginning	518,032		693,354
Cash and Cash Equivalents – Ending	Cash and Cash Equivalents – Ending	$	274,600	$	515,364	Cash and Cash Equivalents – Ending	$	404,465	$	1,052,054

		(continued)

		Three Months Ended March 31,
		2022		2021
Non-cash Investing and Financing Activities:	Non-cash Investing and Financing Activities:					Non-cash Investing and Financing Activities:

Transfer of investment securities available for sale to held to maturity						Transfer of investment securities available for sale to held to maturity	$	500,174	$	—
Purchases of investment securities held to maturity upon sale of consumer installment loans						Purchases of investment securities held to maturity upon sale of consumer installment loans	400,001		—
Distribution of investment in BM Technologies common stock	Distribution of investment in BM Technologies common stock	$	—	$	32,983	Distribution of investment in BM Technologies common stock	—		32,983
Transfer of loans held for investment to held for sale	Transfer of loans held for investment to held for sale	—		44,258		Transfer of loans held for investment to held for sale	4,108		17,155

Transfer of loans held for sale to held for investment						Transfer of loans held for sale to held for investment	—		55,684

Unsettled purchases of investment securities	Unsettled purchases of investment securities	—		56,620		Unsettled purchases of investment securities	—		160,000

See accompanying notes to the unaudited consolidated financial statements.

1011

Table of ~~Content~~Conte n ts

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); Harrisburg, Pennsylvania (Dauphin County); Rye Brook, New York (Westchester County); Hamilton, New Jersey (Mercer County); Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire (Rockingham County); Manhattan and Melville, New York; Washington, D.C.; Chicago, Illinois; Dallas, Texas; Orlando, Florida; Wilmington, North Carolina; and nationally for certain loan and deposit products. The Bank has 12eight full-service branches and provides commercial banking products, primarily loans and ~~deposits.~~deposits, with one branch that is scheduled to be consolidated into other existing locations in November 2022. The Bank completed the consolidation of four branches into other existing locations in a previously announced plan to consolidate five branches in Southeastern Pennsylvania. In addition, ~~Customers~~the Bank also administratively supports loan and other financial products, including equipment finance leases, to customers through its limited-purpose offices in Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire; Manhattan and Melville, New York; Philadelphia and Lancaster, Pennsylvania; Chicago, Illinois; Dallas, Texas; Orlando, Florida and Wilmington, North Carolina; and other locations. The Bank also serves specialty niche businesses nationwide, including its commercial loans to mortgage ~~banking businesses,~~companies, 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.

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, 2021 consolidated balance sheet presented in this report has been derived from Customers Bancorp’s audited 2021 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 2021 consolidated financial statements of Customers Bancorp and subsidiaries included in Customers' Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022 (the "2021 Form 10-K"). The 2021 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.policies. There have been no material changes to Customers Bancorp's significant accounting policies noted above for the three and nine months ended ~~March 31,~~September 30, 2022.

Customers Bancorp completed the divestiture of BankMobile Technologies, Inc., the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC on January 4, 2021. 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 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. See NOTE 3 – DISCONTINUED OPERATIONS for additional information.

~~Table of Content~~s

~~Accounting and Reporting Considerations related to COVID-19~~

~~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 provided $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. Customers 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~~

Section 4013 of the CARES Act, as amended by the CAA, gave 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 offered practical expedients for evaluating whether loan modifications in response to the COVID-19 pandemic were TDRs. Customers applied Section 4013 of the CARES Act and the interagency statement in connection with applicable modifications. For modifications that qualified under either the CARES Act or the interagency statement, TDR accounting and reporting was suspended. These modifications generally involved principal and/or interest payment deferrals for a period of 90 days at a time and could be extended to six months or longer for modifications that qualified under the Section 4013 of the CARES Act, as amended, if requested by the borrower as long as the reason was still related to COVID-19. These modified loans were not 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.

~~Table of Content~~s

Recently Issued Accounting Standards

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

Table of Conte n ts

Accounting Standards Adopted in 2022

Standard

Summary of Guidance

Effects on Financial Statements

~~ASU 2020-06,~~

Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity

~~Issued August 2020~~

• Provides for simplified accounting for convertible debt instruments by eliminating separation models in ASC 470-20 for convertible debt instruments with a cash conversion feature, or another beneficial conversion feature.

• Removes the requirements to consider whether a contract would be settled in registered shares, to consider whether collateral is required to be posted and to assess shareholders rights upon conversion.

~~• Effective for fiscal years beginning after December 15, 2021, including interim periods within those~~

~~fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.~~

• Customers adopted this guidance on January 1, 2022.
• The adoption of this guidance did not have any impact on Customers' financial condition, results of operations and consolidated financial statements.

~~ASU 2021-05,~~

~~Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments~~SEC Staff Accounting Bulletin ("SAB") No. 121, Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users

Issued ~~July 2021~~March 2022

• Provides ~~updates~~interpretive guidance regarding the staff's views on how an entity that has an obligation to safeguard crypto-assets for ~~accounting~~another party should account for ~~leases~~that obligation. An entity with ~~variable lease payments~~a safeguarding obligation under ASC 842.
• Allows for variable lease payments which are 1) not driven bySAB 121 recognizes a ~~reference rate and 2) not dependent upon~~safeguarding liability with an ~~estimate to be included within consideration or the investment in a lease~~accompanying safeguarding asset, measured at the ~~inception~~fair value of ~~a sales-type~~the safeguarded crypto-asset.
• The guidance also requires additional disclosures related to the nature and amount of crypto-assets the entity is responsible for holding for its customers and disclosure of the potential impact of the destruction, loss, theft, or ~~direct financing lease.~~compromise or unavailability of the cryptographic key information.
• Effective for the first interim or annual period ending after June 15, 2022, with retrospective application as of the beginning of the fiscal years beginning after December
15, 2021 andyear to which the interim ~~periods within those fiscal years. Early adoption is permitted.~~or annual period relates.

• Customers adopted this guidance ~~on January 1,~~as of June 30, 2022.
~~• The adoption of this~~ This guidance did not have any impact on ~~Customers'~~its financial condition, results of operations and consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Standard

Summary of Guidance

Effects on Financial Statements

ASU 2022-02,

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

Issued March 2022

• Eliminates the accounting guidance for TDRs by

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

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

• Effective for fiscal years beginning after December 15, 2022, including interim periods within those

fiscal years. Early adoption is permitted, including adoption in any interim period, provided the amendments are adopted as of the beginning of the fiscal year that includes the interim period of adoption. Early adoption is permitted separately for the amendments to TDRs and vintage disclosures.

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

• Customers expects this guidance will result in additional disclosures related to gross write-offs by vintage year and expansive disclosures for certain loan modifications to borrowers experiencing financial difficulty.
• Customers ~~intends to~~will adopt this guidance ~~during~~on January 1, 2023. This guidance is not expected to have a material impact on its financial condition, results of operations and consolidated financial statements.

ASU 2022-03,

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

Issued June 2022

• Clarifies that a contractual restriction on the sale of

an equity security is not considered part of the unit of account of the equity security and not considered in measuring fair value.

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

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

• Effective for fiscal years beginning after December 15, 2023, including interim periods within those

fiscal years. Early adoption ~~period~~is permitted for both interim and ~~is currently evaluating the expected impact of~~annual financial statements that have not yet been issued or made available for issuance.

• Customers will adopt this guidance on January 1, 2024. This guidance is not expected to have a material impact on its financial condition, results of operations and consolidated financial statements.

Table of ~~Content~~Conte n ts

NOTE 3 – DISCONTINUED OPERATIONS

On January 4, 2021, Customers Bancorp completed the 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).MFAC. 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 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~~was 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.

BMT's historical financial results for periods prior to the divestiture are reflected in Customers Bancorp’s consolidated financial statements as discontinued operations. 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.

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
March 31,
(amounts in thousands) 2022 2021
Discontinued operations:
Non-interest income $ — $ —
Non-interest expense — 20,354
Loss from discontinued operations before income taxes — (20,354)
Income tax expense (benefit) — 17,682
Net loss from discontinued operations $ — $ (38,036)


	Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	2022		2021		2022		2021
Discontinued operations:




Non-interest income	$	—	$	—	$	—	$	—
Non-interest expense	—		—		—		20,354
Loss from discontinued operations before income taxes	—		—		—		(20,354)
Income tax expense (benefit)	—		—		—		17,682
Net loss from discontinued operations	$	—	$	—	$	—	$	(38,036)

In connection with the divestiture, Customers 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 ~~$17.8~~$13.0 million and ~~$13.7~~$46.7 million ~~respectively,~~ to BM Technologies under the deposit servicing agreement, included within the technology, communication and bank operations expense in ~~the~~net income from continuing operations during the three and nine months ended ~~March 31,~~September 30, 2022, respectively. Customers incurred expenses of $15.1 million and ~~2021.~~$43.0 million to BM Technologies under the deposit servicing agreement during the three and nine months ended September 30, 2021, respectively. Customers held ~~$2.2~~$1.6 billion and $1.8 billion of deposits serviced by BM Technologies as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. Customers and BM Technologies also agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date. Refer to NOTE 17 — SUBSEQUENT EVENTS for additional information. The loan agreement with BM Technologies was terminated early in November 2021. The transition services agreement with BM Technologies, as amended, expired on March 31, 2022. Customers entered into a special limited agency agreement with BM Technologies, whereby Customers will originate consumer installment loans referred by BM Technologies for an initial period from April 20, 2022 to December 31, 2022, which is renewable annually.

Table of ~~Content~~Conte n ts

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,				Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands, except share and per share data)	(amounts in thousands, except share and per share data)	2022		2021			(amounts in thousands, except share and per share data)	2022		2021		2022		2021
Net income from continuing operations available to common shareholders	Net income from continuing operations available to common shareholders	$	74,896	$	71,240		Net income from continuing operations available to common shareholders	$	61,364	$	110,241	$	192,779	$	239,523
Net loss from discontinued operations	Net loss from discontinued operations	—		(38,036)			Net loss from discontinued operations	—		—		—		(38,036)
Net income available to common shareholders	Net income available to common shareholders	$	74,896	$	33,204		Net income available to common shareholders	$	61,364	$	110,241	$	192,779	$	201,487

Weighted-average number of common shares outstanding – basic	Weighted-average number of common shares outstanding – basic	32,957,033		31,883,946			Weighted-average number of common shares outstanding – basic	32,455,814		32,449,853		32,706,652		32,206,547
Share-based compensation plans	Share-based compensation plans	1,370,032		957,765			Share-based compensation plans	770,793		1,418,700		1,000,212		1,281,125

Weighted-average number of common shares – diluted	Weighted-average number of common shares – diluted	34,327,065		32,841,711			Weighted-average number of common shares – diluted	33,226,607		33,868,553		33,706,864		33,487,672

Basic earnings (loss) per common share from continuing operations	Basic earnings (loss) per common share from continuing operations	$	2.27	$	2.23		Basic earnings (loss) per common share from continuing operations	$	1.89	$	3.40	$	5.89	$	7.44
Basic earnings (loss) per common share from discontinued operations	Basic earnings (loss) per common share from discontinued operations	—		(1.19)			Basic earnings (loss) per common share from discontinued operations	—		—		—		(1.18)
Basic earnings (loss) per common share	Basic earnings (loss) per common share	2.27		1.04			Basic earnings (loss) per common share	1.89		3.40		5.89		6.26

Diluted earnings (loss) per common share from continuing operations	Diluted earnings (loss) per common share from continuing operations	$	2.18	$	2.17		Diluted earnings (loss) per common share from continuing operations	$	1.85	$	3.25	$	5.72	$	7.15
Diluted earnings (loss) per common share from discontinued operations	Diluted earnings (loss) per common share from discontinued operations	—		(1.16)			Diluted earnings (loss) per common share from discontinued operations	—		—		—		(1.13)
Diluted earnings (loss) per common share	Diluted earnings (loss) per common share	2.18		1.01			Diluted earnings (loss) per common share	1.85		3.25		5.72		6.02

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,
2022 2021
Anti-dilutive securities:
Share-based compensation awards — 277,725


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Anti-dilutive securities:
Share-based compensation awards	730,486	710,000	100,707	711,000

Table of ~~Content~~Conte n ts

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 nine months ended ~~March 31,~~September 30, 2022 and 2021. Amounts in parentheses indicate reductions to AOCI.


		Three Months Ended March 31, 2022							Three Months Ended September 30, 2022
(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, 2021		$	(4,980)	$	—	$	(4,980)
Balance - June 30, 2022								Balance - June 30, 2022	$	(124,881)	$	—	$	(124,881)

Unrealized gains (losses) arising during period, before tax	Unrealized gains (losses) arising during period, before tax	(78,858)		—		(78,858)		Unrealized gains (losses) arising during period, before tax	(46,450)		—		(46,450)
Income tax effect	Income tax effect	20,503		—		20,503		Income tax effect	12,077		—		12,077
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(58,355)		—		(58,355)		Other comprehensive income (loss) before reclassifications	(34,373)		—		(34,373)
Reclassification adjustments for (gains) losses included in net income, before tax	Reclassification adjustments for (gains) losses included in net income, before tax	1,063		—		1,063		Reclassification adjustments for (gains) losses included in net income, before tax	4,227		—		4,227
Income tax effect	Income tax effect	(276)		—		(276)		Income tax effect	(1,099)		—		(1,099)
Amounts reclassified from accumulated other comprehensive income (loss) to net income	Amounts reclassified from accumulated other comprehensive income (loss) to net income	787		—		787		Amounts reclassified from accumulated other comprehensive income (loss) to net income	3,128		—		3,128
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	(57,568)		—		(57,568)		Net current-period other comprehensive income (loss)	(31,245)		—		(31,245)
Balance - March 31, 2022		$	(62,548)	$	—	$	(62,548)
Balance - September 30, 2022								Balance - September 30, 2022	$	(156,126)	$	—	$	(156,126)

Three Months Ended March 31, 2021
(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)
Unrealized gains (losses) arising during period, before tax 400 12,315 12,715
Income tax effect (104) (3,202) (3,306)
Other comprehensive income (loss) before reclassifications 296 9,113 9,409
Reclassification adjustments for (gains) losses included in net income, before tax (23,566) 25,926 2,360
Income tax effect 6,127 (6,741) (614)
Amounts reclassified from accumulated other comprehensive income (loss) to net income (17,439) 19,185 1,746
Net current-period other comprehensive income (loss) (17,143) 28,298 11,155
Balance - March 31, 2021 $ 6,169 $ (778) $ 5,391


	Three Months Ended September 30, 2021

(amounts in thousands)	Unrealized Gains (Losses) on Available for Sale Securities (1)		Unrealized Gains (Losses) on Cash Flow Hedges (2)		Total
Balance - June 30, 2021	$	5,266	$	—	$	5,266



Unrealized gains (losses) arising during period, before tax	958		—		958
Income tax effect	(249)		—		(249)
Other comprehensive income (loss) before reclassifications	709		—		709
Reclassification adjustments for (gains) losses included in net income, before tax	(6,063)		—		(6,063)
Income tax effect	1,576		—		1,576
Amounts reclassified from accumulated other comprehensive income (loss) to net income	(4,487)		—		(4,487)
Net current-period other comprehensive income (loss)	(3,778)		—		(3,778)
Balance - September 30, 2021	$	1,488	$	—	$	1,488



	Nine Months Ended September 30, 2022
(amounts in thousands)	Unrealized Gains (Losses) Available for Sale Securities (1)		Unrealized Gains (Losses) on Cash Flow Hedges (2)		Total
Balance - December 31, 2021	$	(4,980)	$	—	$	(4,980)



Unrealized gains (losses) arising during period, before tax	(213,532)		—		(213,532)
Income tax effect	55,518		—		55,518
Other comprehensive income (loss) before reclassifications	(158,014)		—		(158,014)
Reclassification adjustments for (gains) losses included in net income, before tax	9,281		—		9,281
Income tax effect	(2,413)		—		(2,413)
Amounts reclassified from accumulated other comprehensive income (loss) to net income	6,868		—		6,868
Net current-period other comprehensive income (loss)	(151,146)		—		(151,146)
Balance - September 30, 2022	$	(156,126)	$	—	$	(156,126)

Table of Conte n ts



	Nine Months Ended September 30, 2021
(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)



Unrealized gains (losses) arising during period, before tax	1,950		12,321		14,271
Income tax effect	(507)		(3,204)		(3,711)
Other comprehensive income (loss) before reclassifications	1,443		9,117		10,560
Reclassification adjustments for (gains) losses included in net income, before tax	(31,441)		26,972		(4,469)
Income tax effect	8,174		(7,013)		1,161
Amounts reclassified from accumulated other comprehensive income (loss) to net income	(23,267)		19,959		(3,308)
Net current-period other comprehensive income	(21,824)		29,076		7,252
Balance - September 30, 2021	$	1,488	$	—	$	1,488

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

(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.

1617

Table of ~~Content~~Conte n ts

NOTE 6 — INVESTMENT SECURITIES

Investment securities at fair value

The amortized cost, ~~and~~ approximate fair value and allowance for credit losses of investment securities as of ~~March 31,~~September 30, 2022 and December 31, 2021 are summarized as follows:


		March 31, 2022 (1)											September 30, 2022 (1)
(amounts in thousands)	(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		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	$	351,847	$	(728)	$	87	$	(7,587)	$	343,619	Asset-backed securities	$	200,171	$	(253)	$	—	$	(6,657)	$	193,261

Agency-guaranteed residential mortgage-backed securities		9,242		—		—		(973)		8,269
Agency-guaranteed commercial mortgage-backed securities		2,140		—		—		(95)		2,045

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	618,998		—		833		(16,428)		603,403		Agency-guaranteed residential collateralized mortgage obligations	152,008		—		—		(13,786)		138,222
Agency-guaranteed commercial collateralized mortgage obligations		172,410		—		—		(9,811)		162,599

Collateralized loan obligations	Collateralized loan obligations	1,010,938		—		—		(6,576)		1,004,362		Collateralized loan obligations	855,959		—		10		(28,156)		827,813
Commercial mortgage-backed securities	Commercial mortgage-backed securities	148,993		—		—		(1,368)		147,625		Commercial mortgage-backed securities	138,972		—		—		(4,129)		134,843
Corporate notes ~~(2)~~	Corporate notes ~~(2)~~	607,230		—		1,376		(14,856)		593,750		Corporate notes ~~(2)~~	587,987		—		23		(55,355)		532,655
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	1,302,400		—		—		(31,993)		1,270,407		Private label collateralized mortgage obligations	1,141,340		—		—		(56,655)		1,084,685
State and political subdivision debt securities ~~(3)~~(2)	State and political subdivision debt securities ~~(3)~~(2)	8,531		—		—		(581)		7,950		State and political subdivision debt securities ~~(3)~~(2)	8,523		—				(1,172)		7,351

Available for sale debt securities	Available for sale debt securities	$	4,232,729	$	(728)	$	2,296	$	(90,268)	4,144,029		Available for sale debt securities	$	3,084,960	$	(253)	$	33	$	(165,910)	2,918,830

Equity securities ~~(4)~~(3)	Equity securities ~~(4)~~(3)									25,824		Equity securities ~~(4)~~(3)									24,864
Total investment securities, at fair value	Total investment securities, at fair value									$	4,169,853	Total investment securities, at fair value									$	2,943,694


		December 31, 2021 (1)						December 31, 2021 (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	$	297,291	$	253	$	(119)		$	297,425	Asset-backed securities	$	297,291	$	253	$	(119)	$	297,425

Agency-guaranteed residential mortgage-backed securities	Agency-guaranteed residential mortgage-backed securities	9,865		—		(312)			9,553		Agency-guaranteed residential mortgage-backed securities	9,865		—		(312)		9,553
Agency-guaranteed commercial mortgage-backed securities	Agency-guaranteed commercial mortgage-backed securities	2,162		—		(10)			2,152		Agency-guaranteed commercial mortgage-backed securities	2,162		—		(10)		2,152
Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	199,091		154		(2,315)			196,930		Agency-guaranteed residential collateralized mortgage obligations	199,091		154		(2,315)		196,930
Agency-guaranteed commercial collateralized mortgage obligations	Agency-guaranteed commercial collateralized mortgage obligations	242,668		53		(3,877)			238,844		Agency-guaranteed commercial collateralized mortgage obligations	242,668		53		(3,877)		238,844
Collateralized loan obligations	Collateralized loan obligations	1,067,770		247		(1,215)			1,066,802		Collateralized loan obligations	1,067,770		247		(1,215)		1,066,802
Commercial mortgage-backed securities	Commercial mortgage-backed securities	149,054		53		(180)			148,927		Commercial mortgage-backed securities	149,054		53		(180)		148,927
Corporate notes ~~(2)~~	Corporate notes ~~(2)~~	575,273		6,334		(1,561)			580,046		Corporate notes ~~(2)~~	575,273		6,334		(1,561)		580,046
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	1,248,142		333		(6,010)			1,242,465		Private label collateralized mortgage obligations	1,248,142		333		(6,010)		1,242,465
State and political subdivision debt securities ~~(3)~~(2)	State and political subdivision debt securities ~~(3)~~(2)	8,535		—		(104)			8,431		State and political subdivision debt securities ~~(3)~~(2)	8,535		—		(104)		8,431
Available for sale debt securities	Available for sale debt securities	$	3,799,851	$	7,427	$	(15,703)		3,791,575		Available for sale debt securities	$	3,799,851	$	7,427	$	(15,703)	3,791,575

Equity securities ~~(4)~~(3)	Equity securities ~~(4)~~(3)								25,575		Equity securities ~~(4)~~(3)							25,575
Total investment securities, at fair value	Total investment securities, at fair value								$	3,817,150	Total investment securities, at fair value							$	3,817,150

(1)Accrued interest on AFS debt securities totaled ~~$14.3~~$15.0 million and $11.0 million at ~~March 31,~~September 30, 2022 and December 31, 2021, 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)~~(3)Includes perpetual preferred stock issued by domestic banks and domestic bank holding companies and equity securities issued by fintech companies, without a

~~Table of Content~~s

readily determinable fair value, and CRA-qualified mutual fund shares at ~~March 31,~~September 30, 2022 and December 31, 2021. No impairments or measurement adjustments have been recorded on the equity securities without a readily determinable fair value since acquisition.

Table of Conte n ts

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. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, Customers recognized unrealized gains of ~~$1.0~~$2.7 million on its equity ~~securities.~~securities issued by a foreign entity that were held by CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., prior to the sale of these foreign subsidiaries. These unrealized gains and losses ~~are~~were reported as unrealized gain (loss) on investment securities within non-interest income on the consolidated statements of income.

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

Proceeds from the sale of AFS debt securities were ~~$156.0~~$126.6 million and ~~$353.9~~$681.6 million for the three and nine months ended ~~March 31,~~September 30, 2022, respectively. Proceeds from the sale of AFS debt securities were $258.4 million and $666.0 million for the three and nine months ended September 30, 2021, respectively. ~~Gross~~The following table presents gross realized gains and realized losses from the sale of AFS debt securities ~~were $2.0 million and $1.0 million~~ for the three and nine months ended ~~March 31,~~September 30, 2022 ~~respectively. Gross realized gains from the sale of AFS debt securities were $23.6 million for the three months ended March 31, 2021.~~ and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	2022		2021		2022		2021
Gross realized gains	$	—	$	6,063	$	2,563	$	31,441
Gross realized losses	(2,135)		—		(8,790)		—
Net realized gains (losses) on sale of available for sale debt securities	$	(2,135)	$	6,063	$	(6,227)	$	31,441

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.

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


		March 31, 2022					September 30, 2022
(amounts in thousands)	(amounts in thousands)	Amortized Cost		Fair Value		(amounts in thousands)	Amortized Cost		Fair Value
Due in one year or less	Due in one year or less	$	4,992	$	4,999	Due in one year or less	$	—	$	—
Due after one year through five years	Due after one year through five years	419,539		409,141		Due after one year through five years	463,431		421,935
Due after five years through ten years	Due after five years through ten years	191,230		187,560		Due after five years through ten years	133,079		118,071

Asset-backed securities	Asset-backed securities	351,847		343,619		Asset-backed securities	200,171		193,261
Collateralized loan obligations	Collateralized loan obligations	1,010,938		1,004,362		Collateralized loan obligations	855,959		827,813
Commercial mortgage-backed securities	Commercial mortgage-backed securities	148,993		147,625		Commercial mortgage-backed securities	138,972		134,843
Agency-guaranteed residential mortgage-backed securities		9,242		8,269
Agency-guaranteed commercial mortgage-backed securities		2,140		2,045

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	618,998		603,403		Agency-guaranteed residential collateralized mortgage obligations	152,008		138,222
Agency-guaranteed commercial collateralized mortgage obligations		172,410		162,599

Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	1,302,400		1,270,407		Private label collateralized mortgage obligations	1,141,340		1,084,685

Total debt securities		$	4,232,729	$	4,144,029
Total available for sale debt securities						Total available for sale debt securities	$	3,084,960	$	2,918,830

1819

Table of ~~Content~~Conte n ts

Gross unrealized losses and fair value of Customers' AFS debt securities for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~March 31,~~September 30, 2022 and December 31, 2021 were as follows:


		March 31, 2022													September 30, 2022
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
(amounts in thousands)	(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale debt securities:	Available for sale debt securities:													Available for sale debt securities:
Asset-backed securities	Asset-backed securities	$	199,725	$	(3,832)	$	—	$	—	$	199,725	$	(3,832)	Asset-backed securities	$	186,085	$	(5,811)	$	11,154	$	(846)	$	197,239	$	(6,657)
Agency-guaranteed residential mortgage-backed securities		—		—		8,269		(973)		8,269		(973)
Agency-guaranteed commercial mortgage-backed securities		2,045		(95)		—		—		2,045		(95)

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	434,524		(16,428)		—		—		434,524		(16,428)		Agency-guaranteed residential collateralized mortgage obligations	138,222		(13,786)		—		—		138,222		(13,786)
Agency-guaranteed commercial collateralized mortgage obligations		95,995		(3,764)		66,605		(6,047)		162,600		(9,811)

Collateralized loan obligations	Collateralized loan obligations	934,954		(6,457)		25,510		(119)		960,464		(6,576)		Collateralized loan obligations	787,365		(27,078)		35,670		(1,078)		823,035		(28,156)
Commercial mortgage-backed securities	Commercial mortgage-backed securities	129,365		(1,368)		—		—		129,365		(1,368)		Commercial mortgage-backed securities	130,010		(4,027)		4,847		(102)		134,857		(4,129)
Corporate notes	Corporate notes	393,997		(13,972)		14,115		(884)		408,112		(14,856)		Corporate notes	454,386		(49,635)		55,850		(5,720)		510,236		(55,355)
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	856,760		(27,386)		42,196		(4,607)		898,956		(31,993)		Private label collateralized mortgage obligations	720,076		(45,150)		129,973		(11,505)		850,049		(56,655)
State and political subdivision debt securities	State and political subdivision debt securities	7,950		(581)		—		—		7,950		(581)		State and political subdivision debt securities	—		—		7,351		(1,172)		7,351		(1,172)

Total	Total	$	3,055,315	$	(73,883)	$	156,695	$	(12,630)	$	3,212,010	$	(86,513)	Total	$	2,416,144	$	(145,487)	$	244,845	$	(20,423)	$	2,660,989	$	(165,910)


	December 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	$	54,753	$	(119)	$	—	$	—	$	54,753	$	(119)
Agency-guaranteed residential mortgage-backed securities	9,554		(312)		—		—		9,554		(312)
Agency-guaranteed commercial mortgage-backed securities	2,152		(10)		—		—		2,152		(10)
Agency-guaranteed residential collateralized mortgage obligations	173,492		(2,315)		—		—		173,492		(2,315)
Agency-guaranteed commercial collateralized mortgage obligations	118,334		(3,877)		—		—		118,334		(3,877)
Collateralized loan obligations	715,250		(1,215)		—		—		715,250		(1,215)
Commercial mortgage-backed securities	122,597		(180)		—		—		122,597		(180)
Corporate notes	188,100		(1,561)		—		—		188,100		(1,561)
Private label collateralized mortgage obligations	632,091		(5,874)		6,818		(136)		638,909		(6,010)
State and political subdivision debt securities	8,430		(104)		—		—		8,430		(104)

Total	$	2,024,753	$	(15,567)	$	6,818	$	(136)	$	2,031,571	$	(15,703)

~~Table of Content~~s

At ~~March 31,~~September 30, 2022, there were ~~160~~128 AFS debt securities with unrealized losses in the less-than-twelve-months category and 1519 AFS debt securities with unrealized ~~loss~~losses in the twelve-months-or-more category. Except for the 4four asset-backed securities where there was a deterioration in future estimated cash flows as further discussed below, the unrealized losses were principally due to changes in market interest rates that resulted in a negative impact on the respective securities' fair value and are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell any of the ~~175~~147 securities, and it is not more likely than not that Customers will be required to sell any of the ~~175~~147 securities before recovery of the amortized cost basis. At December 31, 2021, there were 117 AFS debt securities in an unrealized loss position.

Table of Conte n ts

Customers recorded an allowance for credit losses on 4four asset-backed securities where there was a deterioration in future estimated cash flows during the ~~three~~nine months ended ~~March 31,~~September 30, 2022. A discounted cash flow approach is used to determine the amount of the allowance. The cash flows expected to be collected, after considering expected prepayments, are discounted at the original effective interest rate. The amount of the allowance is limited to the difference between the amortized cost basis of the security and its estimated fair value. The following ~~table presents~~tables present the activity in the allowance for credit losses on AFS debt securities, by major security ~~type:~~type, for the periods presented:


	Asset-backed securities
(amounts in thousands)	Three Months Ended ~~March 31,~~September 30, 2022
Balance at July 1	$	411

Decrease in allowance for credit losses on previously impaired securities	(158)
Balance at September 30	$	253


	Asset-backed securities
(amounts in thousands)	Nine Months Ended September 30, 2022
Balance at January 1	$	—

Credit losses on securities for which credit losses were not previously recorded	~~728~~253

Balance at ~~March 31,~~September 30	$	~~728~~253

At March 31, 2022 and December 31, 2021, Customers Bank had pledged investment securities aggregating $16.9 million and $11.3 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.

~~At March 31,~~September 30, 2022 and December 31, 2021, no securities holding of any one issuer, other than the U.S. government and its agencies, amounted to greater than 10% of shareholders' equity.

Investment securities held to maturity

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


	September 30, 2022 (1)
(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to maturity debt securities:
Asset-backed securities	$	400,001	$	—	$	400,001	$	—	$	—	$	400,001

Agency-guaranteed residential mortgage-backed securities	7,781		—		7,781				(702)		7,079
Agency-guaranteed commercial mortgage-backed securities	1,947		—		1,947		—		(96)		1,851
Agency-guaranteed residential collateralized mortgage obligations	209,519		—		209,519		—		(16,681)		192,838
Agency-guaranteed commercial collateralized mortgage obligations	152,794		—		152,794		—		(6,189)		146,605



Private label collateralized mortgage obligations	114,252		—		114,252		—		(7,889)		106,363

Total held to maturity debt securities	$	886,294	$	—	$	886,294	$	—	$	(31,557)	$	854,737

(1)Accrued interest on HTM debt securities totaled $0.8 million at September 30, 2022, and is included in accrued interest receivable on the consolidated balance sheet.

On September 30, 2022, Customers sold consumer installment loans with a carrying value of $521.8 million, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE. As part of these sales, Customers recognized a loss on sale of $23.5 million in loss on sale of consumer installment loans within non-interest income in the consolidated statement of income. Customers provided financing to the purchaser for a portion of the sale price in the form of $400.0 million of asset-backed securities, presented in the table above, collateralized by the sold loans. Customers will act as the servicer for the sold consumer installment loans, and will receive a servicing fee.

Table of Conte n ts

At the time of the sale, and at each subsequent reporting period, Customers is required to evaluate its involvement with the VIE to determine if it holds a variable interest in the VIE and, if so, if Customers is the primary beneficiary of the VIE. If Customers is both a variable interest holder and the primary beneficiary of the VIE, it would be required to consolidate the VIE. As of September 30, 2022, Customers concluded that its investment in asset-backed securities as well as the servicing fee are considered variable interests in the VIE as there is a possibility, even if remote, that would result in Customers' interest in the asset-backed securities or the servicing fee absorbing some of the losses of the VIE.

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

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


	September 30, 2022
(amounts in thousands)	Amortized Cost		Fair Value




Asset-backed securities	$	400,001	$	400,001


Agency-guaranteed residential mortgage-backed securities	7,781		7,079
Agency-guaranteed commercial mortgage-backed securities	1,947		1,851
Agency-guaranteed residential collateralized mortgage obligations	209,519		192,838
Agency-guaranteed commercial collateralized mortgage obligations	152,794		146,605
Private label collateralized mortgage obligations	114,252		106,363
Total held to maturity debt securities	$	886,294	$	854,737

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

Credit Quality Indicators

Customers monitors the credit quality of HTM debt securities primarily through credit ratings provided by rating agencies. Investment grade debt securities are rated BBB- or higher by S&P Global Ratings, Baa3 or higher by Moody's Investors Service or equivalent ratings by other rating agencies, and are generally considered to be of low credit risk. Except for the asset-backed securities, all of the HTM debt securities held by Customers were investment grade or U.S. government agency guaranteed securities that were not rated at September 30, 2022. Customers purchased the asset-backed securities classified as HTM debt securities in connection with the sale of the consumer installment loans to a third-party sponsored VIE on September 30, 2022. These asset-backed securities are not rated by rating agencies. Customers will monitor the credit quality of these asset-backed securities by evaluating the performance of the sold consumer installment loans against the overcollateralization available for these asset-backed securities.

Table of Conte n ts

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


	September 30, 2022
(amounts in thousands)	AAA		AA		A		BBB		Not Rated		Total
Held to maturity debt securities:
Asset-backed securities	$	—	$	—	$	—	$	—	$	400,001	$	400,001

Agency-guaranteed residential mortgage-backed securities	—		—		—		—		7,781		7,781
Agency-guaranteed commercial mortgage-backed securities	—		—		—		—		1,947		1,947
Agency-guaranteed residential collateralized mortgage obligations	—		—		—		—		209,519		209,519
Agency-guaranteed commercial collateralized mortgage obligations	—		—		—		—		152,794		152,794



Private label collateralized mortgage obligations	63,767		7,077		34,189		9,219		—		114,252

Total held to maturity debt securities	$	63,767	$	7,077	$	34,189	$	9,219	$	772,042	$	886,294

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

At September 30, 2022 and December 31, 2021, Customers Bank had pledged investment securities, which were transferred from available for sale to held to maturity category in June 2022, aggregating $17.5 million and $11.3 million in fair value, respectively, as collateral primarily for unused lines of credit with another financial institution. The counterparty does not have the ability to sell or repledge these securities.

NOTE 7 – LOANS HELD FOR SALE

The composition of loans held for sale as of ~~March 31,~~September 30, 2022 and December 31, 2021 was as follows:


(amounts in thousands)	(amounts in thousands)	March 31, 2022		December 31, 2021		(amounts in thousands)	September 30, 2022		December 31, 2021
Commercial loans:						Commercial loans:

Multi-family loans, at lower of cost or fair value						Multi-family loans, at lower of cost or fair value	$	4,108	$	—

Total commercial loans held for sale						Total commercial loans held for sale	4,108		—
Consumer loans:	Consumer loans:					Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value	Home equity conversion mortgages, at lower of cost or fair value	$	507	$	507	Home equity conversion mortgages, at lower of cost or fair value	507		507
Residential mortgage loans, at fair value	Residential mortgage loans, at fair value	2,496		15,747		Residential mortgage loans, at fair value	609		15,747

Total consumer loans held for sale	Total consumer loans held for sale	3,003		16,254		Total consumer loans held for sale	1,116		16,254
Loans held for sale	Loans held for sale	$	3,003	$	16,254	Loans held for sale	$	5,224	$	16,254

Total loans held for sale as of ~~March 31,~~September 30, 2022 and December 31, 2021 included NPLs of $4.6 million and $0.5 ~~million.~~

million, respectively.

2023

Table of ~~Content~~Conte n ts

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,~~September 30, 2022 and December 31, 2021.


(amounts in thousands)	(amounts in thousands)	March 31, 2022		December 31, 2021		(amounts in thousands)	September 30, 2022		December 31, 2021
Loans and leases receivable, mortgage warehouse, at fair value	Loans and leases receivable, mortgage warehouse, at fair value	$	1,755,758	$	2,284,325	Loans and leases receivable, mortgage warehouse, at fair value	$	1,569,090	$	2,284,325

Loans receivable, PPP	Loans receivable, PPP	2,195,902		3,250,008		Loans receivable, PPP	1,154,632		3,250,008
Loans and leases receivable:	Loans and leases receivable:					Loans and leases receivable:
Commercial:	Commercial:					Commercial:
Commercial and industrial:						Commercial and industrial:

Specialty lending (1)						Specialty lending (1)	5,103,974		2,403,991
Other commercial and industrial						Other commercial and industrial	1,203,829		1,020,792
Multi-family	Multi-family	1,705,027		1,486,308		Multi-family	2,263,268		1,486,308
Commercial and industrial (1)		3,995,802		3,424,783
Commercial real estate owner occupied	Commercial real estate owner occupied	701,893		654,922		Commercial real estate owner occupied	726,670		654,922
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,140,311		1,121,238		Commercial real estate non-owner occupied	1,263,211		1,121,238
Construction	Construction	161,024		198,981		Construction	136,133		198,981
Total commercial loans and leases receivable	Total commercial loans and leases receivable	7,704,057		6,886,232		Total commercial loans and leases receivable	10,697,085		6,886,232
Consumer:	Consumer:					Consumer:
Residential real estate	Residential real estate	466,423		334,730		Residential real estate	465,772		334,730
Manufactured housing	Manufactured housing	50,669		52,861		Manufactured housing	46,990		52,861
Installment		1,897,706		1,744,475
Installment:						Installment:

Personal						Personal	1,056,432		1,392,862
Other						Other	341,463		351,613

Total consumer loans receivable	Total consumer loans receivable	2,414,798		2,132,066		Total consumer loans receivable	1,910,657		2,132,066
Loans and leases receivable	Loans and leases receivable	10,118,855		9,018,298		Loans and leases receivable	12,607,742		9,018,298

Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(145,847)		(137,804)		Allowance for credit losses on loans and leases	(130,197)		(137,804)
Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	$	13,924,668	$	14,414,827	Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	$	15,201,267	$	14,414,827

(1)Includes direct finance equipment leases of ~~$150.7~~$145.6 million and $146.5 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of ~~$(22.8)~~$(21.0) million and $(52.0) million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

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 ~~$80.7~~$92.0 million and $81.6 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At ~~March 31,~~September 30, 2022 and December 31, 2021, there were ~~$31.8~~$32.0 million and $38.9 million of individually evaluated loans that were collateral-dependent, respectively. Substantially all individually evaluated loans are collateral-dependent and consisted primarily of commercial and industrial, commercial real estate, and residential real estate loans. Collateral-dependent commercial and industrial loans were secured by accounts receivable, inventory and equipment; collateral-dependent commercial real estate loans were secured by commercial real estate assets; and residential real estate loans were secured by residential real estate assets.

Loans receivable, 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 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

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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,~~September 30, 2022 and December 31, 2021, 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.

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Loans receivable, PPP

Customers had ~~$2.2~~$1.2 billion and $3.3 billion of PPP loans outstanding as of ~~March 31,~~September 30, 2022 and December 31, 2021, 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 ~~$36.9~~$14.7 million and ~~$38.8~~$72.1 million for the three and nine months ended ~~March 31,~~September 30, 2022, respectively. Customers recognized interest income, including origination fees, of $117.1 million and $197.1 million for the three and nine months ended September 30, 2021, respectively.

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

Loans and leases receivable

The following tables summarize loans and leases receivable by loan and lease type and performance status as of ~~March 31,~~September 30, 2022 and December 31, 2021:


		March 31, 2022													September 30, 2022
(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 (2)		Total past due		Loans and leases not past due (3)		Total loans and leases (4)
Commercial and industrial, including specialty lending														Commercial and industrial, including specialty lending	$	739	$	419	$	3,950	$	5,108	$	6,302,695	$	6,307,803

Multi-family	Multi-family	$	10,690	$	—	$	16,181	$	26,871	$	1,678,156	$	1,705,027	Multi-family	—		—		1,159		1,159		2,262,109		2,263,268
Commercial and industrial		2,591		92		5,432		8,115		3,987,687		3,995,802

Commercial real estate owner occupied	Commercial real estate owner occupied	2,935		—		1,046		3,981		697,912		701,893		Commercial real estate owner occupied	115		—		2,127		2,242		724,428		726,670
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	—		—		1,302		1,302		1,139,009		1,140,311		Commercial real estate non-owner occupied	—		324		—		324		1,262,887		1,263,211
Construction	Construction	—		—		—		—		161,024		161,024		Construction	—		—		—		—		136,133		136,133
Residential real estate	Residential real estate	5,151		446		4,808		10,405		456,018		466,423		Residential real estate	746		1,313		2,377		4,436		461,336		465,772
Manufactured housing	Manufactured housing	975		280		4,488		5,743		44,926		50,669		Manufactured housing	1,416		410		3,438		5,264		41,726		46,990
Installment	Installment	7,974		4,868		4,865		17,707		1,879,999		1,897,706		Installment	10,906		8,697		6,847		26,450		1,371,445		1,397,895

Total	Total	$	30,316	$	5,686	$	38,122	$	74,124	$	10,044,731	$	10,118,855	Total	$	13,922	$	11,163	$	19,898	$	44,983	$	12,562,759	$	12,607,742


		December 31, 2021													December 31, 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 (2)		Total past due		Loans and leases not past due (3)		Total loans and leases (4)
Commercial and industrial, including specialty lending														Commercial and industrial, including specialty lending	$	2,093	$	95	$	5,929	$	8,117	$	3,416,666	$	3,424,783

Multi-family	Multi-family	$	1,682	$	2,707	$	18,235	$	22,624	$	1,463,684	$	1,486,308	Multi-family	1,682		2,707		18,235		22,624		1,463,684		1,486,308
Commercial and industrial		2,093		95		5,929		8,117		3,416,666		3,424,783

Commercial real estate owner occupied	Commercial real estate owner occupied	287		—		1,304		1,591		653,331		654,922		Commercial real estate owner occupied	287		—		1,304		1,591		653,331		654,922
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	—		—		2,815		2,815		1,118,423		1,121,238		Commercial real estate non-owner occupied	—		—		2,815		2,815		1,118,423		1,121,238
Construction	Construction	—		—		—		—		198,981		198,981		Construction	—		—		—		—		198,981		198,981
Residential real estate	Residential real estate	4,655		789		4,390		9,834		324,896		334,730		Residential real estate	4,655		789		4,390		9,834		324,896		334,730
Manufactured housing	Manufactured housing	2,308		768		4,949		8,025		44,836		52,861		Manufactured housing	2,308		768		4,949		8,025		44,836		52,861
Installment	Installment	7,349		4,295		3,783		15,427		1,729,048		1,744,475		Installment	7,349		4,295		3,783		15,427		1,729,048		1,744,475

Total	Total	$	18,374	$	8,654	$	41,405	$	68,433	$	8,949,865	$	9,018,298	Total	$	18,374	$	8,654	$	41,405	$	68,433	$	8,949,865	$	9,018,298

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

(2)Includes loans amounting to $1.5 million and $1.4 million as of September 30, 2022 and December 31, 2021, respectively, that are still accruing interest because collection is considered probable.

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(3)Loans and leases where next payment due is less than 30 days from the report date. The tables exclude PPP loans of ~~$2.2~~$1.2 billion, of which ~~$37.8~~$274.4 million were 30-59 days past due and ~~$88.3~~$178.2 million were 60 days or more past due as of ~~March 31,~~September 30, 2022, and PPP loans of $3.3 billion, of which $6.3 million were 30-59 days past due and $21.8 million were 60 days or more past due as of December 31, 2021. Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.

~~(3)~~(4)Includes PCD loans of ~~$9.4~~$8.7 million and $9.9 million at ~~March 31,~~September 30, 2022 and December 31, 2021, 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, 2022 (1)						December 31, 2021 (1)						September 30, 2022 (1)				December 31, 2021 (1)
(amounts in thousands)	(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			(amounts in thousands)	Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans		Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans
Commercial and industrial, including specialty lending															Commercial and industrial, including specialty lending	$	4,054	$	24	$	4,078	$	5,837	$	259	$	6,096

Multi-family	Multi-family	$	17,869	$	—	$	17,869	$	22,654	$	—	$	22,654		Multi-family	1,158		—		1,158		22,654		—		22,654
Commercial and industrial		5,490		—		5,490		5,837		259		6,096

Commercial real estate owner occupied	Commercial real estate owner occupied	2,191		—		2,191		2,475		—		2,475			Commercial real estate owner occupied	2,198		—		2,198		2,475		—		2,475
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,302		—		1,302		2,815		—		2,815			Commercial real estate non-owner occupied	—		—		—		2,815		—		2,815

Residential real estate	Residential real estate	8,124		—		8,124		7,727		—		7,727			Residential real estate	6,438		—		6,438		7,727		—		7,727
Manufactured housing	Manufactured housing	—		3,430		3,430		—		3,563		3,563			Manufactured housing	—		2,584		2,584		—		3,563		3,563
Installment	Installment	—		4,865		4,865		—		3,783		3,783			Installment	—		6,848		6,848		—		3,783		3,783

Total	Total	$	34,976	$	8,295	$	43,271	$	41,508	$	7,605	$	49,113		Total	$	13,848	$	9,456	$	23,304	$	41,508	$	7,605	$	49,113

(1) Presented at amortized cost basis.

Interest income recognized on nonaccrual loans was insignificant for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021. Accrued interest reversed when the loans went to nonaccrual status was insignificant during the three and nine months ended ~~March 31,~~September 30, 2022 and ~~2021, respectively.~~2021.

Allowance for credit losses on loans and leases

The changes in the ACL on loans and leases ~~for the three months ended March 31, 2022 and 2021, and the loans and leases and ACL~~ by loan and lease type for the three and nine months ended September 30, 2022 and 2021 are presented in the tables below.


(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		(amounts in thousands)	Commercial and industrial (1)		Multi-family		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Three Months Ended March 31, 2022
Ending balance, December 31, 2021		$	4,477	$	12,702	$	3,213	$	6,210	$	692	$	2,383	$	4,278	$	103,849	$	137,804

Three Months Ended September 30, 2022																				Three Months Ended September 30, 2022
Ending Balance, June 30, 2022																				Ending Balance, June 30, 2022	$	11,081	$	9,765	$	4,745	$	8,880	$	1,179	$	5,578	$	4,080	$	111,222	$	156,530
Charge-offs	Charge-offs	—		(301)		—		—		—		(4)		—		(8,865)		(9,170)		Charge-offs	(2,657)		—		—		(4,862)		—		—		—		(13,965)		$	(21,484)
Recoveries	Recoveries	337		360		7		8		113		6		—		1,113		1,944		Recoveries	76		—		—		31		10		13		—		2,857		$	2,987
Provision (benefit) for credit losses on loans and leases	Provision (benefit) for credit losses on loans and leases	2,623		(1,996)		621		(263)		134		2,300		64		11,786		15,269		Provision (benefit) for credit losses on loans and leases	6,631		4,479		1,475		7,283		425		(138)		402		(28,393)		$	(7,836)
Ending balance, March 31, 2022		$	7,437	$	10,765	$	3,841	$	5,955	$	939	$	4,685	$	4,342	$	107,883	$	145,847
Three Months Ended March 31, 2021
Ending balance, at December 31, 2020		$	12,620	$	12,239	$	9,512	$	19,452	$	5,871	$	3,977	$	5,190	$	75,315	$	144,176
Ending Balance, September 30, 2022																				Ending Balance, September 30, 2022	$	15,131	$	14,244	$	6,220	$	11,332	$	1,614	$	5,453	$	4,482	$	71,721	$	130,197
Nine Months Ended September 30, 2022																				Nine Months Ended September 30, 2022
Ending Balance, December 31, 2021																				Ending Balance, December 31, 2021	$	12,702	$	4,477	$	3,213	$	6,210	$	692	$	2,383	$	4,278	$	103,849	$	137,804
Charge-offs	Charge-offs	(1,132)		(635)		(142)		—		—		(50)		—		(12,687)		(14,646)		Charge-offs	(3,235)		(1,990)		—		(5,025)		—		(4)		—		(35,681)		$	(45,935)
Recoveries	Recoveries	—		260		8		10		5		10		—		1,832		2,125		Recoveries	1,129		337		49		43		226		58		—		4,889		$	6,731
Provision (benefit) for credit losses on loans and leases	Provision (benefit) for credit losses on loans and leases	(3,462)		(4,361)		(3,443)		(7,841)		(1,773)		(728)		(390)		19,079		(2,919)		Provision (benefit) for credit losses on loans and leases	4,535		11,420		2,958		10,104		696		3,016		204		(1,336)		$	31,597
Ending Balance, March 31, 2021		$	8,026	$	7,503	$	5,935	$	11,621	$	4,103	$	3,209	$	4,800	$	83,539	$	128,736
Ending Balance, September 30, 2022																				Ending Balance, September 30, 2022	$	15,131	$	14,244	$	6,220	$	11,332	$	1,614	$	5,453	$	4,482	$	71,721	$	130,197

Table of Conte n ts


(amounts in thousands)	Commercial and industrial (1)		Multi-family		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Three Months Ended September 30, 2021
Ending Balance, June 30, 2021	$	8,127	$	5,028	$	4,464	$	7,374	$	2,643	$	2,299	$	4,372	$	91,129	$	125,436
Charge-offs	(516)		—		(524)		(943)		—		(79)		—		(6,693)		(8,755)
Recoveries	400		—		474		—		3		25		—		749		1,651
Provision (benefit) for credit losses on loans and leases	2,849		(631)		(797)		944		(1,760)		(333)		38		12,854		13,164
Ending Balance, September 30, 2021	$	10,860	$	4,397	$	3,617	$	7,375	$	886	$	1,912	$	4,410	$	98,039	$	131,496
Nine Months Ended September 30, 2021
Ending Balance, December 31, 2020	$	12,239	$	12,620	$	9,512	$	19,452	$	5,871	$	3,977	$	5,190	$	75,315	$	144,176
Charge-offs	(1,153)		(1,132)		(666)		(943)		—		(129)		—		(27,338)		(31,361)
Recoveries	945		—		483		69		122		47		—		3,479		5,145
Provision (benefit) for credit losses on loans and leases	(1,171)		(7,091)		(5,712)		(11,203)		(5,107)		(1,983)		(780)		46,583		13,536
Ending Balance, September 30, 2021	$	10,860	$	4,397	$	3,617	$	7,375	$	886	$	1,912	$	4,410	$	98,039	$	131,496

(1) Includes specialty lending.

At ~~March 31,~~September 30, 2022, the ACL on loans and leases was ~~$145.8~~$130.2 million, ~~an increase~~a decrease of ~~$8.0~~$7.6 million from the December 31, 2021 balance of $137.8 million. The ~~increase~~decrease in ACL for the three and nine months ended ~~March 31,~~September 30, 2022 was primarily attributable to the sale of consumer installment loans to a third-party sponsored VIE, partially offset by loan growth inand deteriorating macroeconomic forecasts. Refer to NOTE 6 – INVESTMENT SECURITIES for additional information on the ~~loan portfolio for~~sale of consumer installment ~~residential, multi-family and commercial and industrial~~ loans.

Troubled Debt Restructurings

At ~~March 31,~~September 30, 2022 and December 31, 2021, there were ~~$16.6~~$16.9 million and $16.5 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-~~

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~~accrual~~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 no lease receivables that had been restructured as a TDR as of ~~March 31, 2022 and December 31, 2021, respectively.~~

Section 4013 of the CARES Act, as amended by the CAA, gave 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 offered practical expedients for evaluating whether loan modifications in response to the COVID-19 pandemic were 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. There were no commercial deferments related to COVID-19 at March 31, 2022 and December 31, 2021. Consumer deferments related to COVID-19 were $3.3 million and $6.1 million at March 31,September 30, 2022 and December 31, 2021, respectively.

The following table presents loans modified in a TDR by type of concession for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021. There were no modifications that involved forgiveness of debt for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021.


		Three Months Ended March 31,						Three Months Ended September 30,				Nine Months Ended September 30,
		2022			2021				2022		2021			2022			2021
(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

Interest-rate reductions	Interest-rate reductions	10	$	346	8	$	184			Interest-rate reductions	—	$	—	4	$	244	14	$	470	16	$	585
Other (1)	Other (1)	32	451		20	541				Other (1)	71	739		39	687		170	1,933		158	2,369
Total	Total	42	$	797	28	$	725			Total	71	$	739	43	$	931	184	$	2,403	174	$	2,954

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

As of ~~March 31,~~September 30, 2022 and December 31, 2021, there were no commitments to lend additional funds to debtors whose loans have been modified in TDRs.

Table of Conte n ts

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, 2022			March 31, 2021			September 30, 2022			September 30, 2021
(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	1	$	49	3	$	48		Manufactured housing	1	$	46	2	$	71

Residential real estate	Residential real estate	—	—		1	56			Residential real estate	1	119		—	—
Installment	Installment	23	276		16	250			Installment	34	420		19	231

Total loans	Total loans	24	$	325	20	$	354		Total loans	36	$	585	21	$	302

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.

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.

~~Table of Content~~s

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 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 2021 Form 10-K describes Customers Bancorp’s risk rating grades.

Table of Conte n ts

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,~~September 30, 2022 and December 31, 2021.


	Term Loans Amortized Cost Basis by Origination Year as of September 30, 2022
(amounts in thousands)	2022		2021		2020		2019		2018		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total






Commercial and industrial loans and leases, including specialty lending:
Pass	$	2,811,777	$	638,308	$	290,113	$	210,755	$	72,613	$	87,766	$	2,091,816	$	—	$	6,203,148
Special mention	—		6,000		—		—		—		290		2,816		—		9,106
Substandard	—		22,733		8,800		8,798		7,429		43,134		4,655		—		95,549
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans and leases	$	2,811,777	$	667,041	$	298,913	$	219,553	$	80,042	$	131,190	$	2,099,287	$	—	$	6,307,803












Multi-family loans:
Pass	$	1,257,398	$	364,730	$	131,310	$	22,364	$	114,430	$	241,843	$	—	$	—	$	2,132,075
Special mention	—		—		—		—		4,984		58,964		—		—		63,948
Substandard	—		1,508		—		—		—		65,737		—		—		67,245
Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family loans	$	1,257,398	$	366,238	$	131,310	$	22,364	$	119,414	$	366,544	$	—	$	—	$	2,263,268
Commercial real estate owner occupied loans:
Pass	$	186,167	$	203,200	$	56,956	$	92,437	$	36,062	$	129,565	$	—	$	—	$	704,387
Special mention	—		—		—		—		461		3,858		—		—		4,319
Substandard	—		—		—		134		9,447		8,383		—		—		17,964
Doubtful	—		—		—		—				—		—		—		—
Total commercial real estate owner occupied loans	$	186,167	$	203,200	$	56,956	$	92,571	$	45,970	$	141,806	$	—	$	—	$	726,670






Commercial real estate non-owner occupied:
Pass	$	279,854	$	119,817	$	144,199	$	74,694	$	63,318	$	405,022	$	—	$	—	$	1,086,904
Special mention	—		—		21,335		—		—		5,852		—		—		27,187
Substandard	—		—		—		28,833		20,753		99,534		—		—		149,120
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate non-owner occupied loans	$	279,854	$	119,817	$	165,534	$	103,527	$	84,071	$	510,408	$	—	$	—	$	1,263,211
Construction:
Pass	$	49,417	$	32,431	$	9,510	$	28,817	$	4,722	$	9,161	$	2,075	$	—	$	136,133
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total construction loans	$	49,417	$	32,431	$	9,510	$	28,817	$	4,722	$	9,161	$	2,075	$	—	$	136,133
Total commercial loans and leases receivable	$	4,584,613	$	1,388,727	$	662,223	$	466,832	$	334,219	$	1,159,109	$	2,101,362	$	—	$	10,697,085
Residential real estate loans:
Performing	$	136,267	$	144,010	$	7,420	$	16,643	$	10,471	$	75,826	$	68,839	$	—	$	459,476
Non-performing	—		—		177		372		1,378		3,713		656		—		6,296
Total residential real estate loans	$	136,267	$	144,010	$	7,597	$	17,015	$	11,849	$	79,539	$	69,495	$	—	$	465,772
Manufactured housing loans:
Performing	$	—	$	—	$	—	$	218	$	105	$	43,801	$	—	$	—	$	44,124
Non-performing	—		—		—		—		—		2,866		—		—		2,866
Total manufactured housing loans	$	—	$	—	$	—	$	218	$	105	$	46,667	$	—	$	—	$	46,990
Installment loans:
Performing	$	580,370	$	427,400	$	148,318	$	152,836	$	13,033	$	1,132	$	67,288	$	—	$	1,390,377
Non-performing	1,133		3,919		904		1,336		85		60		81		—		7,518
Total installment loans	$	581,503	$	431,319	$	149,222	$	154,172	$	13,118	$	1,192	$	67,369	$	—	$	1,397,895












Total consumer loans	$	717,770	$	575,329	$	156,819	$	171,405	$	25,072	$	127,398	$	136,864	$	—	$	1,910,657
Loans and leases receivable	$	5,302,383	$	1,964,056	$	819,042	$	638,237	$	359,291	$	1,286,507	$	2,238,226	$	—	$	12,607,742

Table of ~~Content~~Conte n ts


		Term Loans Amortized Cost Basis by Origination Year as of March 31, 2022																			Term Loans Amortized Cost Basis by Origination Year as of December 31, 2021
(amounts in thousands)	(amounts in thousands)	2022		2021		2020		2019		2018		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total		(amounts in thousands)	2021		2020		2019		2018		2017		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total

Commercial and industrial loans and leases, including specialty lending:																				Commercial and industrial loans and leases, including specialty lending:
Pass																				Pass	$	974,016	$	337,045	$	266,677	$	86,691	$	55,536	$	89,860	$	1,484,287	$	—	$	3,294,112
Special mention																				Special mention	476		1,408		3,325		4,904		36,252		92		14,662		—		61,119
Substandard																				Substandard	18,786		10,257		9,543		11,586		5,682		6,764		6,934		—		69,552
Doubtful																				Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans and leases																				Total commercial and industrial loans and leases	$	993,278	$	348,710	$	279,545	$	103,181	$	97,470	$	96,716	$	1,505,883	$	—	$	3,424,783

Multi-family loans:	Multi-family loans:																			Multi-family loans:
Pass	Pass	$	385,034	$	400,699	$	132,732	$	22,884	$	126,850	$	520,645	$	—	$	—	$	1,588,844	Pass	$	403,075	$	133,452	$	23,068	$	209,070	$	282,663	$	316,491	$	—	$	—	$	1,367,819
Special mention	Special mention	—		1,523		—		0		5,033		49,200		—		—		55,756		Special mention	—		—		—		9,936		18,489		28,776		—		—		57,201
Substandard	Substandard	—		—		—		—		—		60,427		—		—		60,427		Substandard	—		—		—		—		38,216		23,072		—		—		61,288
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family loans	Total multi-family loans	$	385,034	$	402,222	$	132,732	$	22,884	$	131,883	$	630,272	$	—	$	—	$	1,705,027	Total multi-family loans	$	403,075	$	133,452	$	23,068	$	219,006	$	339,368	$	368,339	$	—	$	—	$	1,486,308
Commercial and industrial loans and leases:
Pass		$	1,008,340	$	627,255	$	284,982	$	224,881	$	57,750	$	136,853	$	1,578,024	$	—	$	3,918,085
Special mention		—		—		57		156		—		36,223		2,524		—		38,960
Substandard		0		20,400		4,901		4,565		86		1,464		7,341		—		38,757
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial and industrial loans and leases		$	1,008,340	$	647,655	$	289,940	$	229,602	$	57,836	$	174,540	$	1,587,889	$	��	$	3,995,802
Commercial real estate owner occupied loans:	Commercial real estate owner occupied loans:																			Commercial real estate owner occupied loans:
Pass	Pass	$	60,055	$	210,933	$	59,025	$	122,135	$	60,968	$	150,564	$	672	$	—	$	664,352	Pass	$	213,102	$	59,348	$	124,626	$	60,993	$	58,073	$	99,219	$	672	$	—	$	616,033
Special mention	Special mention	—		—		—		3,010		—		2,302		—		—		5,312		Special mention	—		—		2,876		318		2,044		572		—		—		5,810
Substandard	Substandard	—		—		—		3,495		9,635		19,099		—		—		32,229		Substandard	—		—		3,750		9,682		8,824		10,823		—		—		33,079
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate owner occupied loans	Total commercial real estate owner occupied loans	$	60,055	$	210,933	$	59,025	$	128,640	$	70,603	$	171,965	$	672	$	—	$	701,893	Total commercial real estate owner occupied loans	$	213,102	$	59,348	$	131,252	$	70,993	$	68,941	$	110,614	$	672	$	—	$	654,922

Commercial real estate non-owner occupied:	Commercial real estate non-owner occupied:																			Commercial real estate non-owner occupied:
Pass	Pass	$	73,544	$	135,995	$	147,873	$	76,351	$	65,061	$	443,165	$	—	$	—	$	941,989	Pass	$	136,897	$	149,898	$	95,504	$	66,040	$	153,509	$	310,435	$	—	$	—	$	912,283
Special mention	Special mention	—		—		21,572		—		953		6,069		—		—		28,594		Special mention	—		21,694		11,113		9,373		43,215		20,540		—		—		105,935
Substandard	Substandard	—		—		—		29,184		38,409		102,135		—		—		169,728		Substandard	—		—		—		35,846		20,516		46,658		—		—		103,020
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate non-owner occupied loans	Total commercial real estate non-owner occupied loans	$	73,544	$	135,995	$	169,445	$	105,535	$	104,423	$	551,369	$	—	$	—	$	1,140,311	Total commercial real estate non-owner occupied loans	$	136,897	$	171,592	$	106,617	$	111,259	$	217,240	$	377,633	$	—	$	—	$	1,121,238
Construction:	Construction:																			Construction:
Pass	Pass	$	11,779	$	70,404	$	13,894	$	49,175	$	4,791	$	9,321	$	1,660	$	—	$	161,024	Pass	$	57,105	$	49,199	$	77,622	$	4,828	$	—	$	9,414	$	813	$	—	$	198,981
Special mention	Special mention	—		—		—		—		—		—		—		—		—		Special mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Total construction loans	Total construction loans	$	11,779	$	70,404	$	13,894	$	49,175	$	4,791	$	9,321	$	1,660	$	—	$	161,024	Total construction loans	$	57,105	$	49,199	$	77,622	$	4,828	$	—	$	9,414	$	813	$	—	$	198,981
Total commercial loans and leases receivable	Total commercial loans and leases receivable	$	1,538,752	$	1,467,209	$	665,036	$	535,836	$	369,536	$	1,537,467	$	1,590,221	$	—	$	7,704,057	Total commercial loans and leases receivable	$	1,803,457	$	762,301	$	618,104	$	509,267	$	723,019	$	962,716	$	1,507,368	$	—	$	6,886,232
Residential real estate loans:	Residential real estate loans:																			Residential real estate loans:
Performing	Performing	$	8,713	$	178,623	$	12,064	$	31,045	$	17,126	$	127,537	$	84,904	$	—	$	460,012	Performing	$	107,854	$	8,251	$	21,096	$	11,389	$	6,707	$	84,035	$	87,438	$	—	$	326,770
Non-performing	Non-performing	—		—		—		329		1,138		4,009		935		—		6,411		Non-performing	—		—		335		1,015		669		3,587		2,354		—		7,960
Total residential real estate loans	Total residential real estate loans	$	8,713	$	178,623	$	12,064	$	31,374	$	18,264	$	131,546	$	85,839	$	—	$	466,423	Total residential real estate loans	$	107,854	$	8,251	$	21,431	$	12,404	$	7,376	$	87,622	$	89,792	$	—	$	334,730
Manufactured housing loans:	Manufactured housing loans:																			Manufactured housing loans:
Performing	Performing	$	—	$	—	$	—	$	248	$	291	$	46,315	$	—	$	—	$	46,854	Performing	$	—	$	—	$	253	$	299	$	73	$	47,537	$	—	$	—	48,162
Non-performing	Non-performing	—		—		—		—		—		3,815		—		—		3,815		Non-performing	—		—		—		—		—		4,699		—		—		4,699
Total manufactured housing loans	Total manufactured housing loans	$	—	$	—	$	—	$	248	$	291	$	50,130	$	—	$	—	$	50,669	Total manufactured housing loans	$	—	$	—	$	253	$	299	$	73	$	52,236	$	—	$	—	$	52,861
Installment loans:	Installment loans:																			Installment loans:
Performing	Performing	$	311,579	$	883,638	$	325,741	$	265,764	$	25,590	$	2,082	$	78,600	$	—	$	1,892,994	Performing	$	973,525	$	390,788	$	341,582	$	31,481	$	1,601	$	1,016	$	25	$	—	$	1,740,018
Non-performing	Non-performing	—		1,834		1,065		1,534		83		115		81		—		4,712		Non-performing	1,162		1,002		2,074		156		2		61		—		—		4,457
Total installment loans	Total installment loans	$	311,579	$	885,472	$	326,806	$	267,298	$	25,673	$	2,197	$	78,681	$	—	$	1,897,706	Total installment loans	$	974,687	$	391,790	$	343,656	$	31,637	$	1,603	$	1,077	$	25	$	—	$	1,744,475

Total consumer loans	Total consumer loans	$	320,292	$	1,064,095	$	338,870	$	298,920	$	44,228	$	183,873	$	164,520	$	—	$	2,414,798	Total consumer loans	$	1,082,541	$	400,041	$	365,340	$	44,340	$	9,052	$	140,935	$	89,817	$	—	$	2,132,066
Loans and leases receivable	Loans and leases receivable	$	1,859,044	$	2,531,304	$	1,003,906	$	834,756	$	413,764	$	1,721,340	$	1,754,741	$	—	$	10,118,855	Loans and leases receivable	$	2,885,998	$	1,162,342	$	983,444	$	553,607	$	732,071	$	1,103,651	$	1,597,185	$	—	$	9,018,298

2630

Table of ~~Content~~Contes

Term Loans Amortized Cost Basis by Origination Year as of December 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 $ 403,075 $ 133,452 $ 23,068 $ 209,070 $ 282,663 $ 316,491 $ — $ — $ 1,367,819
Special mention — — — 9,936 18,489 28,776 — — 57,201
Substandard — — — — 38,216 23,072 — — 61,288
Doubtful — — — — — — — — —
Total multi-family loans $ 403,075 $ 133,452 $ 23,068 $ 219,006 $ 339,368 $ 368,339 $ — $ — $ 1,486,308
Commercial and industrial loans and leases:
Pass $ 974,016 $ 337,045 $ 266,677 $ 86,691 $ 55,536 $ 89,860 $ 1,484,287 $ — $ 3,294,112
Special mention 476 1,408 3,325 4,904 36,252 92 14,662 — 61,119
Substandard 18,786 10,257 9,543 11,586 5,682 6,764 6,934 — 69,552
Doubtful — — — — — — — — —
Total commercial and industrial loans and leases $ 993,278 $ 348,710 $ 279,545 $ 103,181 $ 97,470 $ 96,716 $ 1,505,883 $ — $ 3,424,783
Commercial real estate owner occupied loans:
Pass $ 213,102 $ 59,348 $ 124,626 $ 60,993 $ 58,073 $ 99,219 $ 672 $ — $ 616,033
Special mention — — 2,876 318 2,044 572 — — 5,810
Substandard — — 3,750 9,682 8,824 10,823 — — 33,079
Doubtful — — — — — — — — —
Total commercial real estate owner occupied loans $ 213,102 $ 59,348 $ 131,252 $ 70,993 $ 68,941 $ 110,614 $ 672 $ — $ 654,922
Commercial real estate non-owner occupied:
Pass $ 136,897 $ 149,898 $ 95,504 $ 66,040 $ 153,509 $ 310,435 $ — $ — $ 912,283
Special mention — 21,694 11,113 9,373 43,215 20,540 — — 105,935
Substandard — — — 35,846 20,516 46,658 — — 103,020
Doubtful — — — — — — — — —
Total commercial real estate non-owner occupied loans $ 136,897 $ 171,592 $ 106,617 $ 111,259 $ 217,240 $ 377,633 $ — $ — $ 1,121,238
Construction:
Pass $ 57,105 $ 49,199 $ 77,622 $ 4,828 $ — $ 9,414 $ 813 $ — $ 198,981
Special mention — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total construction loans $ 57,105 $ 49,199 $ 77,622 $ 4,828 $ — $ 9,414 $ 813 $ — $ 198,981
Total commercial loans and leases receivable $ 1,803,457 $ 762,301 $ 618,104 $ 509,267 $ 723,019 $ 962,716 $ 1,507,368 $ — $ 6,886,232
Residential real estate loans:
Performing $ 107,854 $ 8,251 $ 21,096 $ 11,389 $ 6,707 $ 84,035 $ 87,438 $ — $ 326,770
Non-performing — — 335 1,015 669 3,587 2,354 — 7,960
Total residential real estate loans $ 107,854 $ 8,251 $ 21,431 $ 12,404 $ 7,376 $ 87,622 $ 89,792 $ — $ 334,730
Manufactured housing loans:
Performing $ — $ — $ 253 $ 299 $ 73 $ 47,537 $ — $ — 48,162
Non-performing — — — — — 4,699 — — 4,699
Total manufactured housing loans $ — $ — $ 253 $ 299 $ 73 $ 52,236 $ — $ — $ 52,861
Installment loans:
Performing $ 973,525 $ 390,788 $ 341,582 $ 31,481 $ 1,601 $ 1,016 $ 25 $ — $ 1,740,018
Non-performing 1,162 1,002 2,074 156 2 61 — — 4,457
Total installment loans $ 974,687 $ 391,790 $ 343,656 $ 31,637 $ 1,603 $ 1,077 $ 25 $ — $ 1,744,475
Total consumer loans $ 1,082,541 $ 400,041 $ 365,340 $ 44,340 $ 9,052 $ 140,935 $ 89,817 $ — $ 2,132,066
Loans and leases receivable $ 2,885,998 $ 1,162,342 $ 983,444 $ 553,607 $ 732,071 $ 1,103,651 $ 1,597,185 $ — $ 9,018,298

~~Table of Content~~n ts

Loan Purchases and Sales

Purchases and sales of loans were as follows for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	(amounts in thousands)	2022		2021			(amounts in thousands)	2022		2021		2022		2021
Purchases (1)	Purchases (1)						Purchases (1)

Loans receivable, PPP							Loans receivable, PPP	$	—	$	602,175	$	—	$	1,223,662

Residential real estate	Residential real estate	$	146,874	$	—		Residential real estate	15,067		—		170,022		—

Installment (2)		59,456		115,849

Personal installment (2)							Personal installment (2)	47,778		—		123,785		109,142
Other installment (2)							Other installment (2)	74,969		50,001		74,969		56,708
Total	Total	$	206,330	$	115,849		Total	$	137,814	$	652,176	$	368,776	$	1,389,512
Sales (3)	Sales (3)						Sales (3)

Commercial and industrial		$	8,840	$	18,931
Commercial real estate owner occupied		5,441		2,237
Specialty lending							Specialty lending	$	2,200	$	—	$	2,200	$	—
Other commercial and industrial (4)							Other commercial and industrial (4)	—		6,176		22,880		35,166
Multi-family							Multi-family	—		—		2,879		19,443
Commercial real estate owner occupied (4)							Commercial real estate owner occupied (4)	—		5,728		8,960		12,426
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	—		14,549		—		42,735

Personal installment (5)							Personal installment (5)	500,001		103,897		500,001		132,715

Total	Total	$	14,281	$	39,534		Total	$	502,201	$	130,350	$	536,920	$	260,851

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was ~~98.1%~~99.9% and ~~101.0%~~99.2% of ~~loans outstanding~~the loans' unpaid principal balance for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively. The purchase price was 98.7% and 101.0% of the loans' unpaid principal balance for the nine months ended September 30, 2022 and 2021, respectively.

(2)Installment loan purchases for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021 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)For the three months ended ~~March 31,~~September 30, 2022 and 2021, loan sales resulted in net losses of $23.4 million and net gains of ~~$2.1 million and $1.6~~$5.8 million, respectively, included in gain (loss) on sale of SBA and other loans and ~~mortgage banking income~~in loss on sale of consumer installment loans (refer to (5) below) in the consolidated statements of income. For the nine months ended September 30, 2022 and 2021, loan sales resulted in net losses of $19.7 million and net gains of $10.1 million, respectively.

(4)Primarily sales of SBA loans.

(5)On September 30, 2022, Customers sold $521.8 million of consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE. Customers provided financing to the purchaser for a portion of the sales price in the form of $400.0 million of asset-backed securities. $100.7 million of the remaining sales proceeds were paid in cash. Refer to NOTE 6 – INVESTMENT SECURITIES for additional information.

Loans Pledged as Collateral

Customers has pledged eligible real estate and commercial and industrial loans as collateral for borrowings from the FHLB and FRB in the amount of ~~$3.6~~$6.6 billion and $3.7 billion at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. No PPP loans were pledged to the FRB in accordance with borrowing from the PPPLF at ~~March 31,~~September 30, 2022 and December 31, 2021.

NOTE 9 — LEASES

Lessee

Customers has operating leases for its branches, certain LPOs, and administrative offices, with remaining lease terms ranging between ~~3 months~~one month and 8 years. These operating leases comprise substantially all of Customers' obligations in which Customers is the lessee. ~~Most~~These lease agreements typically consist of initial lease terms ranging between 1 and 510 years, with options to renew the leases or extend the term up to 1510 years at Customers' sole discretion. Some operating leases include variable lease payments that are based on an index or rate, such as the CPI. Variable lease payments are not included in the liability or ROU asset and are recognized in the period in which the obligation for those payments are incurred. Customers' operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, Customers does not have any commitments that would meet the definition of a finance lease.

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

Table of Conte n ts

The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding balance sheet location:
(amounts in thousands) Classification March 31, 2022 December 31, 2021
ASSETS
Operating lease ROU assets Other assets $ 12,364 $ 12,677
LIABILITIES
Operating lease liabilities Other liabilities $ 14,003 $ 14,524

~~Table of Content~~s


(amounts in thousands)	Classification	September 30, 2022		December 31, 2021
ASSETS
Operating lease ROU assets	Other assets	$	16,827	$	12,677
LIABILITIES
Operating lease liabilities	Other liabilities	$	19,720	$	14,524

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


			Three Months Ended March 31,					Three Months Ended September 30,			Nine Months Ended September 30,
(amounts in thousands)	(amounts in thousands)	Classification	2022		2021		(amounts in thousands)	Classification	2022		2021		2022		2021
Operating lease cost (1)	Operating lease cost (1)	Occupancy expenses	$	998	$	1,117	Operating lease cost (1)	Occupancy expenses	$	1,137	$	1,147	$	3,352	$	3,394

(1) There were no variable lease costs for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, and sublease income for operating leases is immaterial.

Maturities of non-cancelable operating lease liabilities were as follows at ~~March 31,~~September 30, 2022:


(amounts in thousands)	(amounts in thousands)	March 31, 2022		(amounts in thousands)	September 30, 2022
2022	2022	$	3,238	2022	$	1,565
2023	2023	4,018		2023	5,201
2024	2024	2,991		2024	4,206
2025	2025	2,060		2025	3,291
2026	2026	1,125		2026	2,465
Thereafter	Thereafter	1,791		Thereafter	5,016
Total minimum payments	Total minimum payments	15,223		Total minimum payments	21,744
Less: interest	Less: interest	1,220		Less: interest	2,024
Present value of lease liabilities	Present value of lease liabilities	$	14,003	Present value of lease liabilities	$	19,720

Customers does not have leases where it is involved with the construction or design of an underlying asset. Customers has a signed lease that has not yet commenced as of ~~March 31,~~September 30, 2022 with future minimum lease payments of ~~$7.1~~$4.2 million. Cash paid pursuant to the operating lease liability was $1.2 million and ~~$1.1~~$3.6 million for the three and nine months ended ~~March 31,~~September 30, 2022, respectively. Cash paid pursuant to the operating lease liability was $1.3 million and $3.8 million for the three and nine months ended September 30, 2021, 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,~~September 30, 2022 and December 31, 2021:

March 31, 2022

December 31, 2021

September 30, 2022

December 31, 2021

Weighted average remaining lease term (years)

Operating leases

4.7 years

3.9 years

Operating leases

5.2 years

3.9 years

Weighted average discount rate

Operating leases

2.82

2.74

Operating leases

2.89

2.74

Equipment Lessor

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

The residual values are established by utilizing internally developed analyses, external studies, and/or third-party appraisals to establish a residual position. Expected credit losses on direct financing leases and the related estimated residual values are included in the ACL on loans and leases.

Table of Conte n ts

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

~~Table of Content~~s

The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at ~~March 31,~~September 30, 2022 and December 31, 2021:


(amounts in thousands)	(amounts in thousands)	Classification	March 31, 2022		December 31, 2021		(amounts in thousands)	Classification	September 30, 2022		December 31, 2021
ASSETS	ASSETS						ASSETS
Direct financing leases	Direct financing leases						Direct financing leases
Lease receivables	Lease receivables	Loans and leases receivable	$	139,203	$	134,855	Lease receivables	Loans and leases receivable	$	131,731	$	134,855
Guaranteed residual assets	Guaranteed residual assets	Loans and leases receivable	11,631		11,397		Guaranteed residual assets	Loans and leases receivable	11,854		11,397
Unguaranteed residual assets	Unguaranteed residual assets	Loans and leases receivable	5,820		5,665		Unguaranteed residual assets	Loans and leases receivable	6,347		5,665
Deferred initial direct costs	Deferred initial direct costs	Loans and leases receivable	623		448		Deferred initial direct costs	Loans and leases receivable	566		448
Unearned income	Unearned income	Loans and leases receivable	(5,917)		(5,383)		Unearned income	Loans and leases receivable	(4,929)		(5,383)
Net investment in direct financing leases	Net investment in direct financing leases		$	151,360	$	146,982	Net investment in direct financing leases		$	145,569	$	146,982

Operating leases	Operating leases						Operating leases
Investment in operating leases	Investment in operating leases	Other assets	$	159,177	$	158,135	Investment in operating leases	Other assets	$	241,079	$	158,135
Accumulated depreciation	Accumulated depreciation	Other assets	(43,802)		(40,749)		Accumulated depreciation	Other assets	(54,009)		(40,749)
Deferred initial direct costs	Deferred initial direct costs	Other assets	809		872		Deferred initial direct costs	Other assets	1,535		872
Net investment in operating leases	Net investment in operating leases		116,184		118,258		Net investment in operating leases		188,605		118,258
Total lease assets	Total lease assets		$	267,544	$	265,240	Total lease assets		$	334,174	$	265,240

~~COVID-19 Impact on Leases~~

~~Customers granted concessions to lessees as a result~~

Table of ~~the business impact~~Conte n ts

NOTE 10 – DEPOSITS

The components of ~~the COVID-19 pandemic. Customers had no finance or operating leases with payment deferments~~deposits at ~~March 31, 2022. At~~September 30, 2022 and December 31, 2021 were as follows:


	September 30, 2022		December 31, 2021
(amounts in thousands)
Demand, non-interest bearing	$	2,993,793	$	4,459,790
Demand, interest bearing	7,124,663		6,488,406
Savings, including money market deposit accounts	5,505,969		5,322,390


Time	1,898,013		507,338
Total deposits	$	17,522,438	$	16,777,924

The scheduled maturities for time deposits at September 30, 2022 were as follows:


(amounts in thousands)	September 30, 2022
2022	$	459,951
2023	1,357,068
2024	75,623
2025	2,415
2026	1,567
Thereafter	1,389
Total time deposits	$	1,898,013

Time deposits greater than the ~~book values~~FDIC limit of ~~finance~~$250,000 totaled $1.7 billion and ~~operating leases with payment deferments~~$259.0 million at September 30, 2022 and December 31, 2021, respectively.

Included in the demand, interest bearing balances above were ~~$22.8~~$1.4 billion and $1.7 billion of brokered demand deposits at September 30, 2022 and December 31, 2021, respectively. Included in the savings and money market deposit account ("MMDA") balances above were $715.6 million and ~~$7.4~~$480.5 million ~~respectively. The concessions did not have a material impact on interest income from leases for the three months ended March 31,~~of brokered money market deposits at September 30, 2022 and ~~2021. Additionally, Customers did not receive any concessions on its operating leases~~December 31, 2021, respectively. Included in ~~which Customers is the lessee.~~time deposits above were $1.6 billion of brokered time deposits at September 30, 2022. There were no brokered time deposits included in time deposits above as of December 31, 2021.

Demand deposit overdrafts reclassified as loans were $4.2 million and $2.8 million at September 30, 2022 and December 31, 2021, respectively.

NOTE 1011 - BORROWINGS

Short-term debt

Short-term debt at ~~March 31,~~September 30, 2022 and December 31, 2021 was as follows:


		March 31, 2022				December 31, 2021					September 30, 2022				December 31, 2021
(dollars in thousands)	(dollars in thousands)	Amount		Rate		Amount		Rate		(dollars in thousands)	Amount		Rate		Amount		Rate
FHLB advances	FHLB advances	$	—	—	%	$	700,000	0.26	%	FHLB advances	$	—	—	%	$	700,000	0.26	%
Federal funds purchased	Federal funds purchased	700,000		0.40	%	75,000		0.05	%	Federal funds purchased	365,000		3.23	%	75,000		0.05	%
Total short-term debt	Total short-term debt	$	700,000			$	775,000			Total short-term debt	$	365,000			$	775,000

3034

Table of ~~Content~~Conte n ts

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


(dollars in thousands)	(dollars in thousands)	March 31, 2022 (1)			December 31, 2021 (2)			(dollars in thousands)	September 30, 2022 (1)			December 31, 2021 (2)

FHLB advances	FHLB advances							FHLB advances
Maximum outstanding at any month end	Maximum outstanding at any month end	$	—		$	850,000		Maximum outstanding at any month end	$	775,000		$	850,000
Average balance during the period	Average balance during the period	127,778			264,704			Average balance during the period	189,175			264,704
Weighted-average interest rate during the period	Weighted-average interest rate during the period	0.32		%	2.35		%	Weighted-average interest rate during the period	2.34		%	2.35		%
Federal funds purchased	Federal funds purchased							Federal funds purchased
Maximum outstanding at any month end	Maximum outstanding at any month end	700,000			365,000			Maximum outstanding at any month end	895,000			365,000
Average balance during the period	Average balance during the period	88,611			22,110			Average balance during the period	416,344			22,110
Weighted-average interest rate during the period	Weighted-average interest rate during the period	0.33		%	0.07		%	Weighted-average interest rate during the period	1.40		%	0.07		%

(1) For the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

(2) For the year ended December 31, 2021.

At ~~March 31,~~September 30, 2022 and December 31, 2021, Customers Bank had aggregate availability under federal funds lines totaling ~~$0.7~~$1.4 billion and $1.3 billion, respectively.

Long-term debt

FHLB and FRB advances

~~There were no long-term~~Long-term FHLB and FRB advances ~~outstanding with the FHLB or FRB~~ at ~~March 31,~~September 30, 2022 and December 31, ~~2021.~~2021 were as follows:

~~Beginning in second quarter 2020, Customers began participating~~


	September 30, 2022				December 31, 2021
(dollars in thousands)	Amount		Rate		Amount		Rate
FHLB advances (1)	$	500,000	3.37	%	$	—	—	%

Total long-term FHLB and FRB advances	$	500,000			$	—

(1) Amounts reported in the ~~PPPLF, in which Federal Reserve Banks extend non-recourse loans to institutions~~above table include long-term advances from FHLB of $250 million with a fixed rate of 3.44%, maturity of June 2024 with a returnable option that ~~are eligible to make PPP loans. Only PPP loans that are guaranteed by the SBA under the PPP,~~can be repaid without penalty on certain predetermined dates at Customers Bank's option, and $250 million with ~~respect to both principal~~a fixed rate of 3.30% and interest that are originated or purchased by an eligible institution, may be pledged as collateral to the Federal Reserve Banks. During the three months ended September 30, 2021, Customers repaid the PPPLF advances. No new advances are available from the PPPLF after July 30, 2021.maturity of June 2027.

The maximum borrowing capacity with the FHLB and FRB at ~~March 31,~~September 30, 2022 and December 31, 2021 was as follows:


(amounts in thousands)	(amounts in thousands)	March 31, 2022		December 31, 2021		(amounts in thousands)	September 30, 2022		December 31, 2021
Total maximum borrowing capacity with the FHLB	Total maximum borrowing capacity with the FHLB	$	3,337,211	$	2,973,635	Total maximum borrowing capacity with the FHLB	$	3,560,959	$	2,973,635
Total maximum borrowing capacity with the FRB (1)	Total maximum borrowing capacity with the FRB (1)	214,908		183,052		Total maximum borrowing capacity with the FRB (1)	2,557,704		183,052
Qualifying loans serving as collateral against FHLB and FRB advances (1)	Qualifying loans serving as collateral against FHLB and FRB advances (1)	4,218,252		3,594,339		Qualifying loans serving as collateral against FHLB and FRB advances (1)	7,543,384		3,594,339

(1) Amounts reported in the above table exclude borrowings under the PPPLF, which are limited to the unpaid principal balance of the loans originated under the PPP. During the three months ended September 30, 2021, Customers repaid the PPPLF advances. No new advances are available from the PPPLF after July 30, 2021. Customers had no borrowings under the PPPLF at ~~March 31,~~September 30, 2022 and December 31, 2021.

3135

Table of ~~Content~~Conte n ts

Senior and Subordinated Debt

Long-term senior notes and subordinated debt at ~~March 31,~~September 30, 2022 and December 31, 2021 were as follows:


			March 31, 2022			December 31, 2021															September 30, 2022			December 31, 2021
(dollars in thousands)	(dollars in thousands)													(dollars in thousands)
Issued by	Issued by	Ranking			Carrying Amount			Carrying Amount		Rate		Issued Amount	Date Issued		Maturity			Price		Issued by			Ranking			Carrying Amount		Carrying Amount		Rate	Issued Amount	Date Issued		Maturity	Price
Customers Bancorp	Customers Bancorp	Senior (1)	$	99,844		$	98,642	2.875	%	$	100,000	August 2021	August 2031		100.000	%	Customers Bancorp		Senior (1)		$	98,753		$	98,642	2.875	%	$	100,000	August 2021	August 2031	100.000	%
Customers Bancorp	Customers Bancorp	Senior	24,702			24,672		4.500	%	25,000		September 2019	September 2024		100.000	%	Customers Bancorp		Senior		24,762			24,672		4.500	%	25,000		September 2019	September 2024	100.000	%
Customers Bancorp	Customers Bancorp	Senior	98,684			99,772		3.950	%	100,000		June 2017	June 2022		99.775	%	Customers Bancorp		Senior		—			99,772		3.950	%	100,000		June 2017	June 2022	99.775	%

Total other borrowings	Total other borrowings		$	223,230		$	223,086										Total other borrowings				$	123,515		$	223,086

Customers Bancorp	Customers Bancorp	Subordinated (2)(3)	$	72,448		$	72,403	5.375	%	$	74,750	December 2019	December 2034		100.000	%	Customers Bancorp		Subordinated (2)(3)		$	72,539		$	72,403	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Customers Bank	Subordinated (2)(4)	109,294			109,270		6.125	%	110,000		June 2014	June 2029		100.000	%	Customers Bank		Subordinated (2)(4)		109,343			109,270		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt	Total subordinated debt		$	181,742		$	181,673										Total subordinated debt				$	181,882		$	181,673

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

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

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

(4)The subordinated notes will bear an annual fixed rate of 6.125% until June 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 1112 — SHAREHOLDERS’ EQUITY

Common Stock

On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). The term of the Share Repurchase Program will extend for one additional year ~~from~~to September 27, ~~2021,~~2023, unless earlier terminated. Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise. The exact number of shares, timing for such purchases, and the price and terms at and on which such purchases are to be made will be at the discretion of the Company and will comply with all applicable regulatory limitations. Customers Bancorp did not purchase any shares of its common stock under the Share Repurchase Program during the three months ended September 30, 2022. Customers Bancorp purchased ~~115,324~~664,145 shares of its common stock for ~~$6.3~~$27.8 million under the Share Repurchase Program on various dates during the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

Preferred Stock

As of ~~March 31,~~September 30, 2022, Customers Bancorp has 2two series of preferred stock outstanding. On September 15, 2021, Customers redeemed all of the outstanding shares of Series C and Series D Preferred Stock for an aggregate payment of $82.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series C and Series D Preferred Stock of $2.8 million is included as a loss on redemption of preferred stock in the consolidated statement of income for the three and nine months ended September 30, 2021. After giving effect to the redemption, no shares of the Series C and Series D Preferred Stock remained outstanding.

3236

Table of ~~Content~~Conte n ts

The table below summarizes Customers' issuances of preferred stock that remain outstanding at September 30, 2022 and December 31, 2021 and the dividends paid per share.


(amounts in thousands except share and per share data)	(amounts in thousands except share and per share data)		Shares at		Carrying value at				Initial Fixed Rate		Date at which dividend rate becomes floating and earliest redemption date		Floating rate of Three-Month LIBOR Plus:				Dividend Paid Per Share in 2022 (1)		(amounts in thousands except share and per share data)						Shares at						Carrying value at							Initial Fixed Rate			Date at which dividend rate becomes floating and earliest redemption date			Floating rate of Three-Month LIBOR Plus:			Dividend Paid Per Share in 2022 (1)
Fixed-to-floating rate:	Fixed-to-floating rate:	Issue Date	March 31, 2022	December 31, 2021	March 31, 2022		December 31, 2021								Fixed-to-floating rate:				Issue Date				September 30, 2022			December 31, 2021			September 30, 2022			December 31, 2021

Series E	Series E	April 28, 2016	2,300,000	2,300,000	$	55,593	$	55,593	6.45	%		June 15, 2021			5.140	%				$	0.33	Series E		April 28, 2016			2,300,000			2,300,000			$	55,593		$	55,593			6.45		%	June 15, 2021			5.140		%	$	1.16
Series F	Series F	September 16, 2016	3,400,000	3,400,000	82,201		82,201		6.00	%	December 15, 2021		4.762	%			$	0.31	Series F			September 16, 2016			3,400,000			3,400,000			82,201			82,201				6.00	%		December 15, 2021			4.762	%		$	1.09
Totals	Totals		5,700,000	5,700,000	$	137,794	$	137,794											Totals						5,700,000			5,700,000			$	137,794		$	137,794

(1) For the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

On March 15, 2021, Series D Preferred Stock became floating at three-month LIBOR plus 5.09%, compared to a fixed rate of 6.50%. On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%. On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%.

NOTE 1213 — 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. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of ~~March 31,~~September 30, 2022, our regulatory capital ratios reflected 75%, or $46.2 million, benefit associated with the CECL transition provisions.

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

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,~~September 30, 2022 and December 31, 2021, 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:																	Minimum Capital Levels to be Classified as:
		Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant					Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant
(dollars in thousands)	(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2022:
As of September 30, 2022:																		As of September 30, 2022:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)																	Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,344,684	9.893	%	$	611,629	4.500	%	N/A		N/A		$	951,423	7.000	%	Customers Bancorp, Inc.	$	1,447,890	9.845	%	$	661,804	4.500	%	N/A		N/A		$	1,029,472	7.000	%
Customers Bank	Customers Bank	$	1,573,796	11.598	%	$	610,658	4.500	%	$	882,062	6.500	%	$	949,913	7.000	%	Customers Bank	$	1,676,998	11.420	%	$	660,807	4.500	%	$	954,499	6.500	%	$	1,027,922	7.000	%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)																	Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,482,477	10.907	%	$	815,505	6.000	%	N/A		N/A		$	1,155,299	8.500	%	Customers Bancorp, Inc.	$	1,585,683	10.782	%	$	882,405	6.000	%	N/A		N/A		$	1,250,073	8.500	%
Customers Bank	Customers Bank	$	1,573,796	11.598	%	$	814,211	6.000	%	$	1,085,615	8.000	%	$	1,153,466	8.500	%	Customers Bank	$	1,676,998	11.420	%	$	881,076	6.000	%	$	1,174,768	8.000	%	$	1,248,191	8.500	%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)																	Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,749,655	12.873	%	$	1,087,340	8.000	%	N/A		N/A		$	1,427,134	10.500	%	Customers Bancorp, Inc.	$	1,838,179	12.499	%	$	1,176,540	8.000	%	N/A		N/A		$	1,544,208	10.500	%
Customers Bank	Customers Bank	$	1,768,525	13.032	%	$	1,085,615	8.000	%	$	1,357,019	10.000	%	$	1,424,870	10.500	%	Customers Bank	$	1,856,955	12.646	%	$	1,174,768	8.000	%	$	1,468,460	10.000	%	$	1,541,883	10.500	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)																	Tier 1 capital (to average assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,482,477	7.723	%	$	767,836	4.000	%	N/A		N/A		$	767,836	4.000	%	Customers Bancorp, Inc.	$	1,585,683	7.650	%	$	829,133	4.000	%	N/A		N/A		$	829,133	4.000	%
Customers Bank	Customers Bank	$	1,573,796	8.211	%	$	766,712	4.000	%	$	958,391	5.000	%	$	766,712	4.000	%	Customers Bank	$	1,676,998	8.099	%	$	828,289	4.000	%	$	1,035,361	5.000	%	$	828,289	4.000	%
As of December 31, 2021:	As of December 31, 2021:																	As of December 31, 2021:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)																	Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,291,270	9.981	%	$	582,179	4.500	%	N/A		N/A		$	905,611	7.000	%	Customers Bancorp, Inc.	$	1,291,270	9.981	%	$	582,179	4.500	%	N/A		N/A		$	905,611	7.000	%
Customers Bank	Customers Bank	$	1,526,583	11.825	%	$	580,943	4.500	%	$	839,140	6.500	%	$	903,689	7.000	%	Customers Bank	$	1,526,583	11.825	%	$	580,943	4.500	%	$	839,140	6.500	%	$	903,689	7.000	%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)																	Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,429,063	11.046	%	$	776,238	6.000	%	N/A		N/A		$	1,099,671	8.500	%	Customers Bancorp, Inc.	$	1,429,063	11.046	%	$	776,238	6.000	%	N/A		N/A		$	1,099,671	8.500	%
Customers Bank	Customers Bank	$	1,526,583	11.825	%	$	774,591	6.000	%	$	1,032,788	8.000	%	$	1,097,337	8.500	%	Customers Bank	$	1,526,583	11.825	%	$	774,591	6.000	%	$	1,032,788	8.000	%	$	1,097,337	8.500	%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)																	Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,667,395	12.888	%	$	1,034,984	8.000	%	N/A		N/A		$	1,358,417	10.500	%	Customers Bancorp, Inc.	$	1,667,395	12.888	%	$	1,034,984	8.000	%	N/A		N/A		$	1,358,417	10.500	%
Customers Bank	Customers Bank	$	1,692,512	13.110	%	$	1,032,788	8.000	%	$	1,290,985	10.000	%	$	1,355,534	10.500	%	Customers Bank	$	1,692,512	13.110	%	$	1,032,788	8.000	%	$	1,290,985	10.000	%	$	1,355,534	10.500	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)																	Tier 1 capital (to average assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,429,063	7.413	%	$	771,084	4.000	%	N/A		N/A		$	771,084	4.000	%	Customers Bancorp, Inc.	$	1,429,063	7.413	%	$	771,084	4.000	%	N/A		N/A		$	771,084	4.000	%
Customers Bank	Customers Bank	$	1,526,583	7.925	%	$	770,528	4.000	%	$	963,160	5.000	%	$	770,528	4.000	%	Customers Bank	$	1,526,583	7.925	%	$	770,528	4.000	%	$	963,160	5.000	%	$	770,528	4.000	%

The Basel III Capital Rules require that we maintain a 2.500% capital conservation buffer with respect to each of common equity Tier 1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a 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 1314 — 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,~~September 30, 2022 and December 31, 2021:

Financial Instruments Recorded at Fair Value on a Recurring Basis

Investment securities:

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

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

Customers also utilizes internally and externally developed models that use unobservable inputs due to limited or no market activity of the instrument. These models use unobservable inputs that are inherently judgmental and reflect our best estimates of the assumptions a market participant would use to calculate fair value. Certain unobservable inputs in isolation may have either a directionally consistent or opposite impact on the fair value of the instrument for a given change in that input. When multiple inputs are used within the valuation techniques, a change in one input in a certain direction may be offset by an opposite change from another input. These assets are classified as Level 1, 2 or 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

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.

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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.

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.

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, Financial Instruments - Credit Losses ("ASC 326"), in which the Bank has measured impairment generally based on the fair value of the loan’s collateral or DCF analysis. Fair value is generally determined based upon independent third-party appraisals of the properties that collateralize the loans, DCF based upon the expected proceeds, sales agreements or letters of intent with third parties. These assets are generally classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

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

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The estimated fair values of Customers' financial instruments at ~~March 31,~~September 30, 2022 and December 31, 2021 were as follows.


						Fair Value Measurements at March 31, 2022											Fair Value Measurements at September 30, 2022
(amounts in thousands)	(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)		(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:	Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	274,600	$	274,600	$	274,600	$	—	$	—	Cash and cash equivalents	$	404,465	$	404,465	$	404,465	$	—	$	—
Debt securities, available for sale	Debt securities, available for sale	4,144,029		4,144,029		—		4,022,176		121,853		Debt securities, available for sale	2,918,830		2,918,830		—		2,830,944		87,886
Debt securities, held to maturity												Debt securities, held to maturity	886,294		854,737		—		454,736		400,001

Loans held for sale	Loans held for sale	3,003		3,003		—		2,496		507		Loans held for sale	5,224		5,224		—		609		4,615

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	13,924,668		13,571,137		—		1,755,758		11,815,379		Total loans and leases receivable, net of allowance for credit losses on loans and leases	15,201,267		14,905,661		—		1,569,090		13,336,571
FHLB, Federal Reserve Bank and other restricted stock	FHLB, Federal Reserve Bank and other restricted stock	46,040		46,040		—		46,040		—		FHLB, Federal Reserve Bank and other restricted stock	64,112		64,112		—		64,112		—
Derivatives	Derivatives	21,954		21,954		—		21,805		149		Derivatives	46,451		46,451		—		46,410		41

Liabilities:	Liabilities:											Liabilities:
Deposits	Deposits	$	16,415,560	$	16,343,932	$	15,969,368	$	374,564	$	—	Deposits	$	17,522,438	$	17,502,691	$	15,624,425	$	1,878,266	$	—

Federal funds purchased	Federal funds purchased	700,000		700,000		700,000		—		—		Federal funds purchased	365,000		365,000		365,000		—		—

FHLB advances												FHLB advances	500,000		480,319		—		480,319		—
Other borrowings	Other borrowings	223,230		219,130		—		219,130		—		Other borrowings	123,515		120,888		—		120,888		—
Subordinated debt	Subordinated debt	181,742		196,482		—		196,482		—		Subordinated debt	181,882		171,722		—		171,722		—
Derivatives	Derivatives	18,370		18,370		—		18,370		—		Derivatives	43,727		43,727		—		43,727		—


					Fair Value Measurements at December 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	$	518,032	$	518,032	$	518,032	$	—	$	—
Debt securities, available for sale	3,791,575		3,791,575		—		3,648,690		142,885



Loans held for sale	16,254		16,254		—		15,747		507

Total loans and leases receivable, net of allowance for credit losses on loans and leases	14,414,827		14,207,811		—		2,284,325		11,923,486
FHLB, Federal Reserve Bank and other restricted stock	64,584		64,584		—		64,584		—
Derivatives	27,295		27,295		—		27,116		179

Liabilities:
Deposits	$	16,777,924	$	16,777,236	$	16,270,586	$	506,650	$	—


Federal funds purchased	75,000		75,000		75,000		—		—
FHLB advances	700,000		700,000		—		700,000		—
Other borrowings	223,086		226,585		—		226,585		—
Subordinated debt	181,673		204,782		—		204,782		—
Derivatives	26,544		26,544		—		26,544		—

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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,~~September 30, 2022 and December 31, 2021 were as follows:


		March 31, 2022									September 30, 2022
		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	$	—	$	221,766	$	121,853	$	343,619	Asset-backed securities	$	—	$	105,375	$	87,886	$	193,261

Agency-guaranteed residential mortgage-backed securities		—		8,269		—		8,269
Agency-guaranteed commercial mortgage-backed securities		—		2,045		—		2,045

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	—		603,403		—		603,403		Agency-guaranteed residential collateralized mortgage obligations	—		138,222		—		138,222
Agency-guaranteed commercial collateralized mortgage obligations		—		162,599		—		162,599

Collateralized loan obligations	Collateralized loan obligations	—		1,004,362		—		1,004,362		Collateralized loan obligations	—		827,813		—		827,813
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		147,625		—		147,625		Commercial mortgage-backed securities	—		134,843		—		134,843
Corporate notes	Corporate notes	—		593,750		—		593,750		Corporate notes	—		532,655		—		532,655
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	—		1,270,407		—		1,270,407		Private label collateralized mortgage obligations	—		1,084,685		—		1,084,685
State and political subdivision debt securities	State and political subdivision debt securities	—		7,950		—		7,950		State and political subdivision debt securities	—		7,351		—		7,351

Derivatives	Derivatives	—		21,805		149		21,954		Derivatives	—		46,410		41		46,451
Loans held for sale – fair value option	Loans held for sale – fair value option	—		2,496		—		2,496		Loans held for sale – fair value option	—		609		—		609
Loans receivable, mortgage warehouse – fair value option	Loans receivable, mortgage warehouse – fair value option	—		1,755,758		—		1,755,758		Loans receivable, mortgage warehouse – fair value option	—		1,569,090		—		1,569,090

Total assets – recurring fair value measurements	Total assets – recurring fair value measurements	$	—	$	5,802,235	$	122,002	$	5,924,237	Total assets – recurring fair value measurements	$	—	$	4,447,053	$	87,927	$	4,534,980
Liabilities	Liabilities									Liabilities
Derivatives	Derivatives	$	—	$	18,370	$	—	$	18,370	Derivatives	$	—	$	43,727	$	—	$	43,727
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

Collateral-dependent loans	Collateral-dependent loans	$	—	$	—	$	2,485	$	2,485	Collateral-dependent loans	$	—	$	—	$	4,853	$	4,853

Total assets – nonrecurring fair value measurements	Total assets – nonrecurring fair value measurements	$	—	$	—	$	2,485	$	2,485	Total assets – nonrecurring fair value measurements	$	—	$	—	$	4,853	$	4,853

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	December 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	$	—	$	154,540	$	142,885	$	297,425

Agency-guaranteed residential mortgage–backed securities	—		9,553		—		9,553
Agency-guaranteed commercial mortgage–backed securities	—		2,152		—		2,152
Agency-guaranteed residential collateralized mortgage obligations	—		196,930		—		196,930
Agency-guaranteed commercial collateralized mortgage obligations	—		238,844		—		238,844
Collateralized loan obligations	—		1,066,802		—		1,066,802
Commercial mortgage-backed securities	—		148,927		—		148,927
Corporate notes	—		580,046		—		580,046
Private label collateralized mortgage obligations	—		1,242,465		—		1,242,465
State and political subdivision debt securities	—		8,431		—		8,431


Derivatives	—		27,116		179		27,295
Loans held for sale – fair value option	—		15,747		—		15,747
Loans receivable, mortgage warehouse – fair value option	—		2,284,325		—		2,284,325

Total assets – recurring fair value measurements	$	—	$	5,975,878	$	143,064	$	6,118,942
Liabilities
Derivatives	$	—	$	26,544	$	—	$	26,544
Measured at Fair Value on a Nonrecurring Basis:
Assets


Collateral-dependent loans	$	—	$	—	$	5,121	$	5,121

Total assets – nonrecurring fair value measurements	$	—	$	—	$	5,121	$	5,121

The changes in residential mortgage loan commitments (Level 3 assets) measured at fair value on a recurring basis for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021 are summarized in the tables below. Additional information about residential mortgage loan commitments can be found in NOTE 1415 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
Residential Mortgage Loan Commitments
Three Months Ended March 31,
(amounts in thousands) 2022 2021
Balance at January 1, $ 179 $ 200
Issuances 149 196
Settlements (179) (200)
Balance at March 31, $ 149 $ 196


	Residential Mortgage Loan Commitments
	Three Months Ended September 30,
(amounts in thousands)	2022		2021
Balance at July 1	$	98	$	301
Issuances	41		163
Settlements	(98)		(301)
Balance at September 30	$	41	$	163

3943

Table of ~~Content~~Conte n ts



	Residential Mortgage Loan Commitments
	Nine Months Ended September 30,
(amounts in thousands)	2022		2021
Balance at January 1	$	179	$	200
Issuances	288		660
Settlements	(426)		(697)
Balance at September 30	$	41	$	163

The changes in asset-backed securities (Level 3 assets) measured at fair value on a recurring basis for the three and nine months ended ~~March 31,~~September 30, 2022 are summarized in the tables below.


	Asset-backed securities
(amounts in thousands)	Three Months Ended ~~March 31,~~September 30, 2022
Balance at July 1	$	106,919

Principal payments and premium amortization	(16,852)
Decrease in allowance for credit losses	158
Change in fair value recognized in OCI	(2,339)
Balance at September 30	$	87,886


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

Principal payments and premium amortization	~~(16,349)~~(51,348)
Credit losses	~~(728)~~(253)
Change in fair value recognized in OCI	~~(3,955)~~(3,398)
Balance at ~~March 31,~~September 30	$	~~121,853~~87,886

There were no transfers between levels during the three and nine months ended ~~March 31,~~September 30, 2022 and 2021.

Table of Conte n ts

The following ~~table summarizes~~tables summarize financial assets and financial liabilities measured at fair value as of ~~March 31,~~September 30, 2022 and December 31, 2021 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~~dollars in thousands)

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range

(Weighted Average) (4)

~~March 31,~~September 30, 2022

Asset-backed securities

~~121,853~~87,886

Discounted cash flow

Discount rate

Annualized loss rate

Constant prepayment rate

4%7% - 6%7%

~~(4%~~(7%)

7%4% - 8%6%

~~(8%~~(5%)

~~16%~~22% - ~~30%~~24%

~~(19%~~(23%)

Collateral-dependent loans – real estate

~~1,809~~4,615

Collateral appraisal (1)

Liquidation expenses (2)

5%0% - 5%0%

~~(5%~~(0%)

Collateral-dependent loans – commercial and industrial

~~676~~238

Collateral appraisal (1)

Business asset valuation (3)

Liquidation expenses (2)

Business asset valuation adjustments (4)

8% - ~~26%~~8%

~~(13%~~(8%)

25% - 27%

(26%)

Residential mortgage loan commitments

~~149~~41

Adjusted market bid

Pull-through rate

~~69%~~82% - ~~88%~~100%

~~(82%~~(86%)

~~Table of Content~~s

Quantitative Information about Level 3 Fair Value Measurements

(~~amounts~~dollars in thousands)

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range

(Weighted Average) (4)

December 31, 2021

Asset-backed securities

142,885

Discounted cash flow

Discount rate

Annualized loss rate

Constant prepayment rate

4% - 5%

(5%)

4% - 4%

(4%)

17% - 33%

(19%)

Collateral-dependent loans – real estate

4,170

Collateral appraisal (1)

Liquidation expenses (2)

8% - 8%

(8%)

Collateral-dependent loans – commercial and industrial

951

Collateral appraisal (1)

Business asset valuation (3)

Liquidation expenses (2)

Business asset valuation adjustments (4)

8% - 26%

(12%)

20% - 20%

(20%)

Residential mortgage loan commitments

179

Adjusted market bid

Pull-through rate

76% - 89%

(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.

Table of Conte n ts

NOTE 1415 — 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 an accommodation 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.

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,~~these objectives, 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 AOCI 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.

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 AOCI are reclassified immediately into earnings and any subsequent changes in the fair value of such derivatives are recognized directly in earnings. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, Customers terminated 4four 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. Customers hedged its exposure to the variability in future cash flows for a variable-rate deposit, which matured in June 2021.

~~Table of Content~~s

At ~~March 31,~~September 30, 2022 and December 31, 2021, Customers had no interest rate derivative designated as cash flow hedges of interest 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,~~September 30, 2022, Customers had 14three outstanding interest rate derivatives with notional amounts totaling ~~$64.0~~$22.5 million that were designated as fair value hedges of certain AFS debt securities. During the three and nine months ended ~~March 31,~~September 30, 2022, Customers terminated 2four and thirteen interest rate derivatives with notional amounts totaling ~~$16.5~~$10.0 million and $58.0 million, respectively, that were designated as fair value hedges together with the sale of hedged AFS debt securities. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, Customers terminated 7eight 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 AFS debt securities. At December 31, 2021, Customers had 16 outstanding interest rate derivatives with notional amounts totaling $80.5 million designated as fair value hedges.

Table of Conte n ts

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


		Amortized Cost				Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items					Amortized Cost				Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items
(amounts in thousands)	(amounts in thousands)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		(amounts in thousands)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
AFS debt securities	AFS debt securities	$	64,000	$	80,500	$	3,653	$	1,750	AFS debt securities	$	22,500	$	80,500	$	1,885	$	1,750

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,~~September 30, 2022, Customers had ~~153~~147 interest rate swaps with an aggregate notional amount of ~~$1.4~~$1.3 billion and 1412 interest rate caps with an aggregated notional amount of ~~$263.2~~$242.3 million related to this program. At December 31, 2021, Customers had 153 interest rate swaps with an aggregate notional amount of $1.4 billion and 14 interest rate caps with an aggregate notional amount of $264.7 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,~~September 30, 2022 and December 31, 2021, Customers had an ~~outstanding~~aggregate notional ~~balance~~amount of residential mortgage loan commitments of ~~$6.4~~$1.8 million and $8.2 million, respectively.

Customers has also purchased and sold credit derivatives to either hedge or participate in the performance risk associated with some of its counterparties. These derivatives are not designated as hedging instruments and are reported at fair value, with changes in fair value ~~reported~~recorded directly in earnings. At ~~March 31,~~September 30, 2022 and December 31, 2021, Customers had ~~outstanding~~an aggregate notional ~~balances~~amount of credit derivatives of ~~$129.1~~$143.1 million and $129.9 million, respectively.

~~Table of Content~~s

Fair Value of Derivative Instruments on the Balance Sheet

The following tables present the fair value of Customers' derivative financial instruments as well as their presentation on the consolidated balance sheets as of ~~March 31,~~September 30, 2022 and December 31, 2021.

March 31, 2022
Derivative Assets Derivative Liabilities
(amounts in thousands) Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives designated as fair value hedges:
Interest rate swaps Other assets $ 3,653 Other liabilities $ —
Total $ 3,653 $ —
Derivatives not designated as hedging instruments:
Interest rate swaps Other assets $ 16,007 Other liabilities $ 16,158
Interest rate caps Other assets 2,090 Other liabilities 2,090
Credit contracts Other assets 55 Other liabilities 122
Residential mortgage loan commitments Other assets 149 Other liabilities —
Total $ 18,301 $ 18,370


		December 31, 2021							September 30, 2022
		Derivative Assets			Derivative Liabilities				Derivative Assets			Derivative Liabilities
(amounts in thousands)	(amounts in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		(amounts in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Derivatives designated as fair value hedges:	Derivatives designated as fair value hedges:							Derivatives designated as fair value hedges:
Interest rate swaps	Interest rate swaps	Other assets	$	1,750	Other liabilities	$	—	Interest rate swaps	Other assets	$	1,885	Other liabilities	$	—
Total	Total		$	1,750		$	—	Total		$	1,885		$	—
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Interest rate swaps		Other assets	$	24,747	Other liabilities	$	25,855
Interest rate caps		Other assets	488		Other liabilities	488
Interest rate swaps and caps								Interest rate swaps and caps	Other assets	$	44,492	Other liabilities	$	43,727

Credit contracts	Credit contracts	Other assets	131		Other liabilities	201		Credit contracts	Other assets	33		Other liabilities	—
Residential mortgage loan commitments	Residential mortgage loan commitments	Other assets	179		Other liabilities	—		Residential mortgage loan commitments	Other assets	41		Other liabilities	—

Total	Total		$	25,545		$	26,544	Total		$	44,566		$	43,727

4347

Table of ~~Content~~Conte n ts


	December 31, 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	$	1,750	Other liabilities	$	—
Total		$	1,750		$	—
Derivatives not designated as hedging instruments:
Interest rate swaps and caps	Other assets	$	25,235	Other liabilities	$	26,343

Credit contracts	Other assets	131		Other liabilities	201
Residential mortgage loan commitments	Other assets	179		Other liabilities	—

Total		$	25,545		$	26,544

Effect of Derivative Instruments on Net Income

The following table presents 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 nine months ended ~~March 31,~~September 30, 2022 and 2021.


			Amount of Income (Loss) Recognized in Earnings				Amount of Income (Loss) Recognized in Earnings
			Three Months Ended March 31,						Three Months Ended September 30,			Nine Months Ended September 30,
(amounts in thousands)	(amounts in thousands)	Income Statement Location	2022		2021			(amounts in thousands)	Income Statement Location	2022		2021		2022		2021
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	$	2,521	$	4,907		Recognized on interest rate swaps	Net interest income	$	510	$	—	$	3,530	$	4,777
Recognized on hedged AFS debt securities	Recognized on hedged AFS debt securities	Net interest income	(2,521)		(4,907)			Recognized on hedged AFS debt securities	Net interest income	(510)		—		(3,530)		(4,777)
Total	Total		$	—	$	—		Total		$	—	$	—	$	—	$	—
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Interest rate swaps		Other non-interest income	$	961	$	2,399
Interest rate caps		Other non-interest income	—		—
Interest rate swaps and caps								Interest rate swaps and caps	Non-interest income (1)	$	503	$	517	$	2,244	$	2,540

Credit contracts	Credit contracts	Other non-interest income	3		137			Credit contracts	Non-interest income (1)	60		7		104		81
Residential mortgage loan commitments	Residential mortgage loan commitments	Mortgage banking income	(31)		(4)			Residential mortgage loan commitments	Non-interest income (2)	(57)		(138)		(139)		(37)

Total	Total		$	933	$	2,532		Total		$	506	$	386	$	2,209	$	2,584

(1) Included in unrealized gain (loss) on derivatives.

(2) Included in mortgage banking income.

Effect of Derivative Instruments on Comprehensive Income

The following ~~table presents~~tables present the effect of Customers' derivative financial instruments on comprehensive income for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021.
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) 2022 2021 2022 2021
Derivatives in cash flow hedging relationships:
Interest rate swaps $ — $ 9,113 Interest expense $ — $ (1,459)
0 0
Other non-interest income (2)
— (24,467)
0 0 $ — $ (25,926)


	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 September 30,					Three Months Ended September 30,
(amounts in thousands)	2022		2021			2022		2021
Derivatives in cash flow hedging relationships:
Interest rate swaps	$	—	$	—	Interest expense	$	—	$	—

Table of Conte n ts



	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
	Nine Months Ended September 30,					Nine Months Ended September 30,
(amounts in thousands)	2022		2021			2022		2021
Derivatives in cash flow hedging relationships:
Interest rate swaps	$	—	$	9,117	Interest expense	$	—	$	(2,505)
					Non-interest income (2)	—		(24,467)
					Total	$	—	$	(26,972)

(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.

(2) ~~Includes~~Included in loss on cash flow hedge derivative terminations.

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,~~September 30, 2022, the fair value of derivatives in a net asset position (which includes accrued interest but excludes any adjustment for nonperformance-risk) related to these agreements was ~~$9.6~~$31.5 million. In addition, Customers, which has collateral posting thresholds with certain of these counterparties, had ~~posted $4.1~~received $29.8 million of cash as collateral at ~~March 31,~~September 30, 2022. Customers records cash posted or received as collateral with these counterparties, except with a central clearing entity, as a reduction or an increase in the outstanding balance of cash and cash equivalents and an increase in the balance of other ~~assets.~~assets or other liabilities.

~~Table of Content~~s

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 tables below. Interest rate swaps and interest rate caps with commercial banking customers and residential mortgage loan commitments are not subject to master netting arrangements and are excluded from the tables below. Customers has not made a policy election to offset its derivative positions.


		Gross Amounts Recognized on the Consolidated Balance Sheets				Gross Amounts Not Offset in the Consolidated Balance Sheet										Gross Amounts Recognized on the Consolidated Balance Sheets			Gross Amounts Not Offset in the Consolidated Balance Sheet				Net Amount
(amounts in thousands)	(amounts in thousands)			Financial Instruments	Cash Collateral Received/(Posted)	Net Amount		(amounts in thousands)	Gross Amounts Recognized on the Consolidated Balance Sheets			Financial Instruments						Net Amount
March 31, 2022
September 30, 2022															September 30, 2022
Interest rate derivative assets with institutional counterparties	Interest rate derivative assets with institutional counterparties	$	6,546			$	—			$	—		$	6,546	Interest rate derivative assets with institutional counterparties	$	31,495		$	—	$	(31,495)	$	—

Interest rate derivative liabilities with institutional counterparties	Interest rate derivative liabilities with institutional counterparties	$	4,115			$	—			$	(4,115)		$	—	Interest rate derivative liabilities with institutional counterparties	$	—		$	—	$	—	$	—

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, 2021
Interest rate derivative assets with institutional counterparties $ — $ — $ — $ —
Interest rate derivative liabilities with institutional counterparties $ 23,348 $ — $ (23,348) $ —

Table of Conte n ts


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

Interest rate derivative liabilities with institutional counterparties	$	23,348			$	—	$	(23,348)	$	—

NOTE 1516 — 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.

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 States Bankruptcy Court for the Central District of California. On October 28, 2020, the Trustee, as plaintiff, filed her amended adversary complaint (“Adversary Complaint”) against the 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 the Bank in the amount of $8.1 million in satisfaction of a PPP loan made by the Bank to the Debtor (the “PPP Loan Payment”). The Trustee sought 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. On December 2, 2021, the Bank filed a motion for summary judgement, arguing that the Trustee had failed to establish the elements under 11 U.S.C. §547 necessary to recover the PPP Loan Payment and other affirmative defenses to any such recovery. On February 2, 2022, the United States Bankruptcy Court for the Central District of California granted the Bank’s motion for summary judgment, finding that the PPP Loan Payment was not recoverable by the Trustee. The Trustee has elected not to appeal this decision and, on February 23, 2022, the case against the Bank was closed by the United States Bankruptcy Court for the Central District of California.

NOTE 17 – SUBSEQUENT EVENTS

On November 7, 2022, Customers agreed to extend the deposit servicing agreement with BM Technologies related to $1.6 billion of deposits serviced by BM Technologies and held by the Bank as of September 30, 2022 to the earlier of BM Technologies' successful completion of the transfer of the deposits to a new sponsor bank or June 30, 2023. Customers and BM Technologies also agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date.

Table of ~~Content~~Conte n ts

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,” “project,” 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 impact of the ongoing pandemic on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; higher inflation and its impacts; and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that 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 report on Form 10-K for the year ended December 31, 2021, 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 nine months ended ~~March 31,~~September 30, 2022. 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' 2021 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.

Customers Bancorp completed the divestiture of BankMobile Technologies, Inc., the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC on January 4, 2021. 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 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.

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Customers Bank ~~launched~~provides blockchain-based digital payments via the Customers Bank Instant Token, or CBITTM, which allows commercial clients to make instant payments in U.S. dollars. CBIT on the TassatPayTM blockchain-based instant B2B payments platform ~~which~~ serves a growing array of B2B clients who want the benefit of instant payments: including key over-the-counter desks, exchanges, liquidity providers, market makers, funds, and B2B verticals such as trading operations, real estate,

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manufacturing, and logistics. CBIT may only be created or minted by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in ~~non-interest bearing deposits~~deposit accounts at Customers Bank. CBIT is not listed or traded on any digital currency exchange. As of ~~March~~September 30, 2022 and December 31, ~~2022,~~2021, Customers Bank held ~~$1.8~~$1.9 billion of low cost deposits from customers participating in ~~CBIT.~~CBIT, which are reported as deposit liabilities in the consolidated balance sheets.

~~To further build its franchise~~The primary business purpose for the CBIT instant payment platform is to provide a closed-system for intrabank commercial transactions and ~~support~~is not intended to be a trading platform for tokens or digital assets. There are no scenarios in which the ~~growth~~transaction or redemption value of ~~its commercial lending initiatives, Customers added three new commercial verticals during 2021 within its Specialty Banking business. These three new verticals included fund finance, technology~~one CBIT would not be equal to one U.S. dollar. Each CBIT is minted with precisely one U.S. dollar equivalent, and ~~venture capital banking and financial institutions group that provide financing~~those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payment platform is always equal to the ~~private equity industry~~U.S. dollars held in the omnibus deposit account at Customers Bank and ~~cash management services to~~is reported as a deposit liability in the ~~alternative investment industry. Customers also launched a pilot digital small~~consolidated balance ~~7(a) lending within its existing SBA Lending business in third quarter~~sheet. The omnibus deposit account had an outstanding balance of $50 thousand at September 30, 2022 and no outstanding balance at December 31, 2021.

There is credit risk inherent in loans and leases requiring Customers to maintain an ACL to absorb credit losses on existing loans and leases that may become uncollectible. Customers maintains this allowance by charging a provision for credit losses on loan and leases against its operating earnings. Customers has included a detailed discussion of this process, 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, Geopolitical Conflict and Macroeconomic Uncertainties

~~In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization.~~ The spread of COVID-19 and its variants since early 2020 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 early stages of 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, resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses that 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 including the CARES Act and subsequent amendments and the Federal Reserve Board maintaining a low interest rate environment. The CARES Act included the SBA's PPP, a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. The PPP ended on May 31, 2021. Customers has helped thousands of small businesses by funding over $10 billion in PPP loans directly or through partnerships.

In response to the COVID-19 pandemic, 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 continue to experience varying degrees of financial distress. In order to protect the health of its customers and team members, and to comply with applicable government directives, Customers had modified its business practices, including directing team members to work remotely insofar as is possible and implementing its business continuity plans and protocols to the extent necessary. Since that time, Customers has launched the “Return to Workplace” initiative, and communicated a goal of having more team members return to the workplace. In that communication, Customers announced the following steps along with a continuing commitment to remain empathetic and cognizant of balancing company principles, customer support, team member support and remaining vigilant in tracking and preventing COVID-19 exposures to protect our team members and customers. Customers implemented a “ hybrid model” encouraging and tracking the movement of more team members returning to the office, released a communication requiring all team members to read, sign and acknowledge a Code of Commitment to reveal exposures to COVID-19, thereby allowing Customers to manage the possible impact with 100 percent participation of our team members. Customers has started tracking vaccination rates and less than 10 percent of our team members are not vaccinated or not planning to be vaccinated.

Customers also implemented a short-term loan modification program to provide temporary payment relief to certain of its borrowers who met the program's qualifications. This program allowed 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. On December 27, 2020, the CAA was signed into law, which extended and expanded various relief provisions of the CARES Act including the temporary relief from the accounting and disclosure requirements for TDRs until January 1, 2022. All commercial loans previously on deferments became current by December 31, 2021 from a peak of $1.2 billion. Customers had no pending commercial loan deferment requests as of December 31, 2021. As of March 31, 2022, total consumer deferments declined to $3.3 million, from a peak of $108.0 million. As of December 31, 2021, total consumer deferments were $6.1 million, or 0.1% 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.

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(dollars in thousands) March 31, 2022 December 31, 2021
Loans held for sale (GAAP) $ 3,003 $ 16,254
Loans receivable, mortgage warehouse, at fair value (GAAP) 1,755,758 2,284,325
Loans and leases receivable (GAAP) 12,314,757 12,268,306
Total loans and leases receivable (GAAP) 14,073,518 14,568,885
Less: Loans receivable, PPP 2,195,902 3,250,008
Total loans and leases, excluding PPP (Non-GAAP) $ 11,877,616 $ 11,318,877
Commercial deferments (GAAP) $ — $ —
Consumer deferments (GAAP) 3,262 6,060
Total deferments (GAAP) $ 3,262 $ 6,060
Commercial deferments to total loans and leases, excluding PPP (Non-GAAP) — % — %
Consumer deferments to total loans and leases, excluding PPP (Non-GAAP) 0.0 % 0.1 %
Total deferments to total loans and leases, excluding PPP (Non-GAAP) 0.0 % 0.1 %

The Federal Reserve Board ~~had taken a range of actions to support the flow of credit to households and businesses at the outbreak of COVID-19. The Federal Reserve Board~~also established 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, the PPPLF, which was created to bolster the effectiveness of the PPP by taking PPP loans as collateral at face value. Customers participated in some of these facilities and programs, primarily the PPPLF. Customers fully repaid the ~~borrowing~~borrowings from the PPPLF during the three months ended September 30, 2021. No new advances are available from the PPPLF after July 30, 2021. The U.S. economy has since strengthened despite the spread of COVID-19 variants, with higher inflation and housing ~~values.~~values beginning in 2021. In response, the Federal Reserve Board has begun normalizing monetary policy with its decision in late 2021 to taper its quantitative easing and raising the federal funds rate beginning in March ~~2022.~~2022, with future rate hikes expected through 2022 and beyond.

Significant uncertainties as to future economic conditions continue to exist, including higher inflation, global supply chain issues, and higher oil and commodity prices exacerbated by the military conflict between Russia and Ukraine. Customers has taken deliberate actions in response, including maintaining higher levels of ~~on-balance sheet~~ liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios. Customers has also shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates and increased its non-interest bearing and interest-bearing demand deposits to position the Bank for future interest rate hikes. Customers continues to monitor closely the impact of COVID-19 and its variants, the military conflict between Russia and Ukraine and macroeconomic uncertainties, as well as any effects that may result from the federal government's responses including future rate hikes; however, the extent to which ~~the ongoing~~ COVID-19 ~~pandemic,~~and its variants, the geopolitical conflict and macroeconomic factors will impact Customers' operations and financial results during the remainder of 2022 and into 2023 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 and Estimates

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 2021 Form 10-K and updated in this Form 10-Q for the quarterly period ended ~~March 31,~~September 30, 2022 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 judgments and assumptions used are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions management makes, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of Customers' assets.

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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,~~September 30, 2022 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 industry and state.

The ACL may be affected materially by a variety of qualitative factors that Customers considers to reflect its current judgement of various events and risks that are not measured in our statistical procedures, including uncertainty related to the economic forecasts used in the modelled 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, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to changes, sometimes materially and rapidly. Customers recognizes that this approach may not be suitable in certain economic environments such that additional analysis may be performed at management's discretion. Due in part to its subjectivity, the qualitative evaluation may be materially impacted during periods of economic uncertainty and late breaking events that could lead to a revision of reserves to reflect management's best estimate of expected credit losses.

The ACL is established in accordance with our ACL policy. The ACL Committee, which includes the 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 ~~increase~~decrease in our estimated ACL as of ~~March 31,~~September 30, 2022 as compared to our December 31, 2021 estimate was primarily attributable to the sale of $521.8 million in consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE, partially offset by loan growth ~~in the loan portfolio for~~and deteriorating macroeconomic forecasts. The sale of consumer installment ~~residential, multi-family~~loans was a part of Customers' balance sheet optimization initiatives to deploy capital efficiently in a rising interest rate and ~~commercial and industrial~~uncertain macroeconomic environment. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans. There was a ~~$15.3 million~~benefit to provision for credit losses on loans and leases of $7.8 million and a provision for credit losses on loans and leases of $31.6 million for the three and nine months ended ~~March 31,~~September 30, 2022, respectively, resulting in an ACL ending balance of ~~$147.8~~$133.1 million ($~~145.8~~130.2 million for loans and leases and ~~$2.0~~$2.9 million for unfunded lending-related commitments) as of ~~March 31,~~September 30, 2022.

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To determine the ACL as of ~~March 31,~~September 30, 2022, Customers utilized Moody's ~~March~~September 2022 Baseline forecast to generate its modelled expected losses and considered Moody's other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management's reasonable expectations of current and future economic conditions. The Baseline forecast at ~~March~~September 2022 assumed ~~decelerating~~lower growth rate in macroeconomic forecasts compared to the ~~fourth~~second quarter ~~2021~~2022 forecasts of macroeconomic conditions used by Customers; the impact of the Russian invasion of Ukraine on the U.S. economy would be ~~marginal~~limited and the disruptions to oil, natural gas and other commodity markets will be ~~limited~~temporary; COVID-19 will be endemic and ~~temporary; the COVID-19 pandemic slowly receding~~seasonal and becoming less disruptive to global supply chains, tourism and business travel, immigration and labor markets; the Federal Reserve Board front-loading rate hikes and raising the ~~target range for the~~effective fed funds rate ~~four times~~to 3.5% by ~~25 basis points each time~~the end of 2022; the CPI rising 8.0% in ~~2022;~~2022 and 3.8% in 2023; and the U.S. economy achieving full-employment with a 3.5% unemployment rate in ~~late~~ 2022 ~~or early 2023.~~and rising in 2023 as the effect of tighter monetary policy starts to be felt. Customers continues to monitor the impact of the military conflict between Russia and Ukraine, ~~the ongoing~~ COVID-19 ~~pandemic,~~and its variants, supply-chain disruptions, inflation, and related policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

As of December 31, 2021, the ACL ending balance was $139.9 million ($137.8 million for loans and leases and $2.1 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2021, Customers utilized the Moody's December 2021 Baseline forecast to generate its modelled expected losses by loan portfolio in order to reflect management's reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2021 assumed continued improvement in forecasts of macroeconomic conditions compared to the forecasts of macroeconomic conditions used by Customers in 2020; the Federal Reserve Board has accelerated its tapering process in the fourth quarter of 2021 and the first rate hike is assumed to occur in 2022; a

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continuing U.S. economic recovery from federal spending and abatement of the COVID-19 pandemic, notwithstanding the impact of the Omicron variant; and the acceleration in consumer prices is expected to peak and moderate in the near-term as the supply chain issues subside.

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 the military conflict between Russia and Ukraine worsening significantly and persisting longer, causing oil prices to rise more sharply than the Baseline projections, new infections, hospitalizations and COVID-19 deaths rising significantly again as compared to the Baseline projections, slowing growth in consumer spending on air travel, retail and hotels, worsening supply chain issues boosting inflation, the Fed’s response to raise interest rates higher than the Baseline projections, rising unemployment and the U.S. economy falling into ~~recession.~~recession in the fourth quarter of 2022. Under this scenario, as an example, the unemployment rate is estimated at ~~5.8%~~4.2% and ~~7.6%~~7.3% at the end of 2022 and 2023, respectively. These numbers represent a ~~2.2%~~0.5% and ~~4.2%~~3.4% higher unemployment estimate than the Baseline scenario ~~projections~~projection of ~~3.6%~~3.7% and ~~3.4%, respectively~~3.9% for the same time ~~periods.~~periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modelled results. This would result in an incremental quantitative impact to the ACL of approximately ~~$37.2~~$50.9 million at ~~March 31,~~September 30, 2022. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

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

For more information, see "NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' 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 nine months ended ~~March 31,~~September 30, 2022 and 2021:


		Three Months Ended March 31,								Three Months Ended September 30,		QTD				Nine Months Ended September 30,				YTD
(dollars in thousands)	(dollars in thousands)	2022		2021		Change		% Change			(dollars in thousands)	2022		2021		Change		% Change		2022		2021		Change		% Change
Net interest income	Net interest income	$	164,699	$	132,731	$	31,968	24.1	%		Net interest income	$	159,032	$	219,892	$	(60,860)	(27.7)	%	$	488,583	$	491,380	$	(2,797)	(0.6)	%
Provision (benefit) for credit losses		15,997		(2,919)		18,916		(648.0)	%
Provision for credit losses											Provision for credit losses	(7,994)		13,164		(21,158)		(160.7)	%	31,850		13,536		18,314		135.3	%
Total non-interest income	Total non-interest income	21,198		18,468		2,730		14.8	%		Total non-interest income	(9,017)		25,586		(34,603)		(135.2)	%	24,927		60,876		(35,949)		(59.1)	%
Total non-interest expense	Total non-interest expense	73,807		61,927		11,880		19.2	%		Total non-interest expense	76,198		80,009		(3,811)		(4.8)	%	226,210		212,759		13,451		6.3	%
Income before income tax expense	Income before income tax expense	96,093		92,191		3,902		4.2	%		Income before income tax expense	81,811		152,305		(70,494)		(46.3)	%	255,450		325,961		(70,511)		(21.6)	%
Income tax expense	Income tax expense	19,332		17,560		1,772		10.1	%		Income tax expense	17,899		36,263		(18,364)		(50.6)	%	56,127		73,947		(17,820)		(24.1)	%
Net income from continuing operations	Net income from continuing operations	76,761		74,631		2,130		2.9	%		Net income from continuing operations	63,912		116,042		(52,130)		(44.9)	%	199,323		252,014		(52,691)		(20.9)	%
Loss from discontinued operations before income taxes	Loss from discontinued operations before income taxes	—		(20,354)		20,354		(100.0)	%		Loss from discontinued operations before income taxes	—		—		—		NM		—		(20,354)		20,354		(100.0)	%
Income tax expense from discontinued operations	Income tax expense from discontinued operations	—		17,682		(17,682)		(100.0)	%		Income tax expense from discontinued operations	—		—		—		NM		—		17,682		(17,682)		(100.0)	%
Net loss from discontinued operations	Net loss from discontinued operations	—		(38,036)		38,036		(100.0)	%		Net loss from discontinued operations	—		—		—		NM		—		(38,036)		38,036		(100.0)	%
Net income	Net income	76,761		36,595		40,166		109.8	%		Net income	63,912		116,042		(52,130)		(44.9)	%	199,323		213,978		(14,655)		(6.8)	%
Preferred stock dividends	Preferred stock dividends	1,865		3,391		(1,526)		(45.0)	%		Preferred stock dividends	2,548		2,981		(433)		(14.5)	%	6,544		9,671		(3,127)		(32.3)	%

Loss on redemption of preferred stock											Loss on redemption of preferred stock	—		2,820		(2,820)		(100.0)	%	—		2,820		(2,820)		(100.0)	%
Net income available to common shareholders	Net income available to common shareholders	$	74,896	$	33,204	$	41,692	125.6	%		Net income available to common shareholders	$	61,364	$	110,241	$	(48,877)	(44.3)	%	$	192,779	$	201,487	$	(8,708)	(4.3)	%

Customers reported net income available to common shareholders of ~~$74.9~~$61.4 million and $192.8 million for the three and nine months ended ~~March 31,~~September 30, 2022, respectively, compared to net income available to common shareholders of ~~$33.2~~$110.2 million and $201.5 million for the three and nine months ended ~~March 31, 2021.~~September 30, 2021, respectively. Factors contributing to the change in net income available to common shareholders for the three and nine months ended ~~March 31,~~September 30, 2022 compared to the three and nine months ended ~~March 31,~~September 30, 2021 were as follows.

Net interest income

Net interest income ~~increased $32.0~~decreased $60.9 million for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 as ~~average~~interest income from PPP loans decreased from lower level of PPP loan forgiveness, which accelerated the

recognition of net deferred loan origination fees, offset in part by an increase in commercial and industrial loans and leases, primarily in specialty lending. Average interest-earning assets increased by ~~$628.4~~$987.6 million, and NIM ~~increased~~decreased by 60143 basis points to ~~3.60%~~3.16% for the three months ended ~~March 31,~~September 30, 2022 from ~~3.00%~~4.59% for the three months ended ~~March 31,~~September 30, 2021. The increase in interest-earning assets was driven by increases in ~~investment securities,~~ commercial and industrial loans and leases, primarily in specialty lending, investment securities, multi-family, installment and residential mortgage loans, offset in part by decreases in PPP loans due to PPP loan forgiveness and commercial loans to mortgage companies. The lower level of PPP loan forgiveness, which accelerated the recognition of net deferred loan origination fees, offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment drove a 38 basis point decrease in the yield on interest-earning assets and contributed to the NIM decrease. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 133 basis point increase in the cost of interest-bearing liabilities and also contributed to the NIM decrease for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was $1.2 billion ($1.3 billion average balance) of PPP loans yielding 4.31% and $7.1 billion ($6.7 billion average balance) of interest checking accounts costing 2.00%. Non-interest bearing demand deposits were $3.0 billion ($3.2 billion average balance). PPPLF borrowings costing 0.35% were fully repaid during the three months ended September 30, 2021. Customers' total cost of funds, including non-interest bearing deposits was 1.62% and 0.50% for the three months ended September 30, 2022 and 2021, respectively.

Table of Conte n ts

Net interest income decreased $2.8 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 as interest income from PPP loans decreased from lower levels of PPP loan forgiveness, which accelerated the

recognition of net deferred loan origination fees, offset in part by an increase in commercial and industrial loans and leases, primarily in specialty lending. Average interest-earning assets increased by $815.6 million, and NIM decreased by 17 basis points to 3.38% for the nine months ended September 30, 2022 from 3.55% for the nine months ended September 30, 2021. The increase in interest-earning assets was driven by increases in commercial and industrial loans and leases, primarily in specialty lending, investment securities, installment, multi-family and residential mortgage loans, offset in part by decreases in PPP loans due to PPP loan forgiveness and commercial loans to mortgage companies. The shift in the mix of interest-earning assets in a rising interest rate environment, mostly in commercial and ~~PPP loan forgiveness, which accelerated the recognition of net deferred loan origination fees, drove a 36 basis points increase in the yield on interest-earning assets~~industrial loans and ~~contributed to the NIM increase. The NIM also increased from~~leases, primarily specialty lending, and equity investment distributions, which are included in other interest ~~income.~~income, drove a 17 basis point increase in the yield on interest-earning assets. The shift in the mix of interest-bearing liabilities in a ~~lower~~rising interest rate environment drove a 2052 basis ~~points decline~~point increase in the cost of interest-bearing liabilities and contributed to the NIM decrease for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was ~~$2.2~~$1.2 billion ($~~2.6~~1.9 billion average balance) of PPP loans yielding ~~5.66%~~4.95% and ~~$5.6~~$7.1 billion ($~~5.8~~6.3 billion average balance) of ~~interest-bearing demand deposits~~interest checking accounts costing ~~0.54%~~1.17%. Non-interest bearing demand deposits ~~was $4.6~~were $3.0 billion ($~~4.9~~4.2 billion average balance). PPPLF borrowings costing 0.35% were fully repaid during the three and nine months ended September 30, 2021. Customers' total cost of funds, including non-interest bearing deposits was ~~0.43%~~0.93% and ~~0.67%~~0.57% for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, respectively.

Provision (benefit) for credit losses

The ~~$18.9~~$21.2 million ~~increase~~decrease in the provision for credit losses for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021, primarily reflects the sale of consumer installment loans to a third-party sponsored VIE, partially offset by loan growth inand deteriorating macroeconomic forecasts. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the ~~loan portfolio for~~sale of consumer installment ~~residential, multi-family and commercial and industrial~~ loans. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment represented ~~1.44%~~1.03% of total loans and leases receivable, excluding PPP loans (non-GAAP measure, please refer to the non-GAAP reconciliation within Loans and Leases - Credit Risk), at ~~March 31,~~September 30, 2022, compared to ~~1.71%~~1.65% at ~~March 31,~~September 30, 2021. Net charge-offs for the three months ended ~~March 31,~~September 30, 2022 were ~~$7.2~~$18.5 million, or 2147 basis points of average loans and leases on an annualized basis, compared to net charge-offs of ~~$12.5~~$7.1 million, or 3317 basis points on an annualized basis, for the three months ended ~~March 31,~~September 30, 2021. The ~~decrease~~increase in net charge-offs for the three months ended ~~March 31,~~September 30, 2022, compared to the three months ended ~~March 31,~~September 30, 2021, was primarily due to ~~lower~~a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit and higher charge-offs for consumer installment loans.

~~Table of Content~~s

The $18.3 million increase in the provision for credit losses for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the nine months ended September 30, 2021, primarily reflects loan growth and deteriorating macroeconomic forecasts, partially offset by the sale of consumer installment loans to a third-party sponsored VIE. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans. Net charge-offs for the nine months ended September 30, 2022 were $39.2 million, or 36 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $26.2 million, or 22 basis points of average loans and leases on an annualized basis, for the nine months ended September 30, 2021. The increase in net charge-offs for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, was primarily due to a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit, and higher charge-offs for consumer installment loans and overdrawn deposit accounts.

The provision (benefit) for credit losses for the three and nine months ended September 30, 2022 also ~~includes~~included a benefit to provision for credit losses of $0.2 million and a provision for credit losses of ~~$0.7~~$0.3 million, respectively, on certain asset-backed securities included in our investment ~~securities. See~~securities available for sale. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

Non-interest income

The ~~$2.7~~$34.6 million ~~increase~~decrease in non-interest income for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from ~~a decrease of $24.5~~$23.5 million in loss on ~~cash flow hedge derivative terminations,~~sale of consumer installment loans to a third-party sponsored VIE, and ~~increases of $6.6 million in bank-owned life insurance income, $1.1 million in loan fees and $0.7 million in commercial lease income. These increases were offset in part by~~ decreases of ~~$24.6~~$8.2 million in gain (loss) on sale of investment securities, $2.2 million in mortgage warehouse transactional fees, $1.6 million in unrealized gain (loss) on derivatives, $1.3 million in unrealized gain (loss) on investment securities, $0.5 million in other non-interest income and $0.1$5.3 million in gain (loss) on sale of SBA and other ~~loans.~~loans and $1.6 million in mortgage warehouse transactional fees. These decreases were offset in part by increases of $1.9 million in commercial lease income, $1.5 million in bank-owned life insurance income and $1.1 million in loan fees for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

Table of Conte n ts

The $35.9 million decrease in non-interest income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from $23.5 million in loss on sale of consumer installment loans to a third-party sponsored VIE, and decreases of $37.7 million in gain (loss) on sale of investment securities, $5.7 million in gain (loss) on sale of SBA and other loans, $5.2 million in mortgage warehouse transactional fees, $3.5 million in unrealized gain (loss) on investment securities and $1.4 million in other non-interest income. These decreases were offset in part by $24.5 million of loss on cash flow hedge derivative terminations and $2.8 million of loss on sale of foreign subsidiaries for the nine months ended September 30, 2021, and increases of $7.3 million in bank-owned life insurance income, $3.9 million in commercial lease income and $3.2 million in loan fees for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Non-interest expense

The ~~$11.9~~$3.8 million ~~increase~~decrease in non-interest expense for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from ~~increases~~$6.2 million in deposit relationship adjustment fees for the three months ended September 30, 2021, and decreases of ~~$4.1~~$1.9 million in other non-interest expense, $1.7 million in technology, communication and bank operations, ~~$2.6~~$0.6 million in professional services and $0.4 million in loan servicing. These decreases were offset in part by increases of $5.0 million in salaries and employee benefits, ~~$1.9~~$1.5 million in commercial lease depreciation, $0.5 million in advertising and promotion and $0.2 million in FDIC assessments, non-income taxes, and regulatory fees for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

The $13.5 million increase in non-interest expense for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from increases of $5.5 million in technology, communication and bank operations, $4.9 million in salaries and employee benefits, $4.2 million in loan servicing, ~~$1.8 million in other non-interest expense, $1.1 million in professional services and $0.7~~$3.3 million in commercial lease ~~depreciation.~~depreciation, $2.1 million in occupancy and $1.0 million in professional services. These increases were offset in part by ~~a decrease~~$6.2 million in deposit relationship adjustment fees for the nine months ended September 30, 2021, and decreases of ~~$0.4~~$1.1 million in FDIC assessments, non-income taxes, and regulatory fees for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The merger and acquisition related expenses decreased $0.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as the divestiture of BMT was completed on January 4, 2021.

Income tax expense

Customers' effective tax rate from continuing operations was ~~20.1%~~21.9% for the three months ended ~~March 31,~~September 30, 2022 compared to ~~19.0%~~23.8% for the three months ended ~~March 31,~~September 30, 2021. The ~~increase~~decrease in the effective tax rate primarily resulted from ~~reduced~~higher investment tax credits and death benefits from bank-owned life insurance policies for 2022 and a ~~benefit~~decrease in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes for 2021.

Customers' effective tax rate from continuing operations was 22.0% for the ~~recording of net discrete~~nine months ended September 30, 2022 compared to 22.7% for the nine months ended September 30, 2021. The decrease in the effective tax ~~benefits associated with the divestiture of BMT~~rate primarily resulted from higher investment tax credits and ~~the recognition of a deferred tax asset related to the outside basis difference of foreign subsidiaries included in 2021, offset in part by~~ excess tax benefits on vesting of restricted stock units and death benefits from bank-owned life insurance policies for ~~2022.~~2022, partially offset by the recognition of a deferred tax asset related to the outside basis difference of foreign subsidiaries in 2021.

Net loss from discontinued operations

On January 4, 2021, Customers Bancorp completed the divestiture of BMT, the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC. 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 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.

Customers had no loss from discontinued operations, net of income taxes for the three months ended ~~March 31,~~September 30, 2022 ~~compared to $38.0 million for the three months ended March 31,~~and 2021 as the divestiture of BMT was completed on January 4, 2021.

Customers had no loss from discontinued operations, net of income taxes for the nine months ended September 30, 2022 compared to $38.0 million for the nine months ended September 30, 2021. The $38.0 million decrease ~~was~~ primarily ~~related to~~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 during the ~~three~~nine months ended ~~March 31,~~September 30, 2021. ~~See~~Refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements for additional information.

Table of Conte n ts

Preferred stock dividends and loss on redemption of preferred stock

Preferred stock dividends were ~~$1.9~~$2.5 million and ~~$3.4~~$3.0 million for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively. Preferred stock dividends were $6.5 million and $9.7 million for the nine months ended September 30, 2022 and 2021, respectively.

On September 15, 2021, Customers redeemed all of the outstanding shares of Series C and Series D Preferred Stock for an aggregate payment of $82.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series C and Series D Preferred Stock of $2.8 million was included as a loss on redemption of preferred stock in the consolidated statement of income for the three and nine months ended September 30, 2021. After giving effect to the redemption, no shares of the Series C and Series D Preferred Stock remained outstanding. There were no changes to the amount of preferred stock outstanding during the three and nine months ended ~~March 31, 2022 and 2021.~~

~~Table of Content~~s

September 30, 2022.

On March 15, 2021, the Series D Preferred Stock became floating at three-month LIBOR plus 5.09%, compared to a fixed rate of 6.50%. On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%. On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%.

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 nine months ended ~~March 31,~~September 30, 2022 and 2021. 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.

5358

Table of ~~Content~~Conte n ts


		Three Months Ended March 31,													Three Months Ended March 31,							Three Months Ended September 30,												Three Months Ended September 30,
		2022							2021						2022 vs. 2021							2022						2021						2022 vs. 2021
(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	$	826,240	$	329	0.16	%		$	1,177,315	$	302	0.10	%	$	133	$	(106)	$	27	Interest-earning deposits	$	528,001	$	2,949	2.22	%	$	1,279,983	$	490	0.15	%	$	2,904	$	(445)	$	2,459
Investment securities (1)	Investment securities (1)	4,036,966		20,295		2.01	%		1,357,558		7,979		2.35	%	(1,279)		13,595		12,316		Investment securities (1)	3,770,922		30,546		3.24	%	1,511,319		8,905		2.36	%	4,320		17,321		21,641
Loans and leases:	Loans and leases:																				Loans and leases:

Commercial and industrial:																					Commercial and industrial:
Specialty lending loans and leases (2)																					Specialty lending loans and leases (2)	5,064,730		64,753		5.07	%	1,732,323		16,393		3.75	%	7,481		40,879		48,360
Other commercial and industrial loans (2)																					Other commercial and industrial loans (2)	1,585,136		18,794		4.70	%	1,292,297		12,259		3.76	%	3,435		3,100		6,535
Commercial loans to mortgage companies	Commercial loans to mortgage companies	1,836,647		14,006		3.09	%		3,122,098		23,791		3.09	%	—		(9,785)		(9,785)		Commercial loans to mortgage companies	1,623,624		17,092		4.18	%	2,658,020		21,065		3.14	%	5,702		(9,675)		(3,973)
Multi-family loans	Multi-family loans	1,531,846		13,766		3.64	%		1,689,174		15,848		3.80	%	(648)		(1,434)		(2,082)		Multi-family loans	2,206,953		20,427		3.67	%	1,443,846		13,259		3.64	%	110		7,058		7,168
Commercial and industrial loans and leases (2)		4,124,408		36,659		3.60	%		2,848,328		27,850		3.97	%	(2,786)		11,595		8,809
PPP loans	PPP loans	2,641,318		36,894		5.66	%		4,623,213		38,832		3.41	%	19,028		(20,966)		(1,938)		PPP loans	1,349,403		14,666		4.31	%	5,778,367		117,102		8.04	%	(38,624)		(63,812)		(102,436)
Non-owner occupied commercial real estate loans	Non-owner occupied commercial real estate loans	1,312,210		12,207		3.77	%		1,348,938		12,794		3.85	%	(254)		(333)		(587)		Non-owner occupied commercial real estate loans	1,372,244		15,595		4.51	%	1,346,629		12,656		3.73	%	2,694		245		2,939
Residential mortgages	Residential mortgages	416,417		3,680		3.58	%		373,497		3,485		3.78	%	(191)		386		195		Residential mortgages	513,694		5,008		3.87	%	325,851		2,874		3.50	%	331		1,803		2,134
Installment loans	Installment loans	1,794,145		39,963		9.03	%		1,323,863		29,517		9.04	%	(33)		10,479		10,446		Installment loans	1,938,199		44,122		9.03	%	1,615,411		37,489		9.21	%	(745)		7,378		6,633

Total loans and leases (3)	Total loans and leases (3)	13,656,991		157,175		4.67	%		15,329,111		152,117		4.02	%	22,816		(17,758)		5,058		Total loans and leases (3)	15,653,983		200,457		5.08	%	16,192,744		233,097		5.71	%	(25,078)		(7,562)		(32,640)
Other interest-earning assets	Other interest-earning assets	52,111		5,677		NM		(7)	79,960		717		3.64	%	5,294		(334)		4,960		Other interest-earning assets	68,549		1,964		11.37	%	49,780		359		2.86	%	1,425		180		1,605
Total interest-earning assets	Total interest-earning assets	18,572,308		183,476		4.00	%		17,943,944		161,115		3.64	%	16,514		5,847		22,361		Total interest-earning assets	20,021,455		235,916		4.68	%	19,033,826		242,851		5.06	%	(19,000)		12,065		(6,935)
Non-interest-earning assets	Non-interest-earning assets	557,022							581,777												Non-interest-earning assets	492,911						705,514

Total assets	Total assets	$	19,129,330						$	18,525,721											Total assets	$	20,514,366					$	19,739,340
Liabilities	Liabilities																				Liabilities
Interest checking accounts	Interest checking accounts	$	5,769,372	7,730		0.54	%		$	2,691,723	5,599		0.84	%	(2,527)		4,658		2,131		Interest checking accounts	$	6,669,787	33,685		2.00	%	$	4,537,421	7,677		0.67	%	21,030		4,978		26,008
Money market deposit accounts	Money market deposit accounts	4,880,051		4,674		0.39	%		4,435,930		6,059		0.55	%	(1,926)		541		(1,385)		Money market deposit accounts	5,789,991		24,348		1.67	%	5,131,433		5,569		0.43	%	17,979		800		18,779
Other savings accounts	Other savings accounts	880,113		784		0.36	%		1,414,350		2,400		0.69	%	(903)		(713)		(1,616)		Other savings accounts	625,908		1,818		1.15	%	1,376,077		1,750		0.50	%	1,380		(1,312)		68
Certificates of deposit	Certificates of deposit	450,644		524		0.47	%		666,239		1,600		0.97	%	(661)		(415)		(1,076)		Certificates of deposit	1,141,970		5,529		1.92	%	614,404		919		0.59	%	3,338		1,272		4,610
Total interest-bearing deposits (4)	Total interest-bearing deposits (4)	11,980,180		13,712		0.46	%		9,208,242		15,658		0.69	%	(5,979)		4,033		(1,946)		Total interest-bearing deposits (4)	14,227,656		65,380		1.82	%	11,659,335		15,915		0.54	%	45,259		4,206		49,465
Federal funds purchased	Federal funds purchased	88,611		73		0.33	%		16,333		3		0.07	%	32		38		70		Federal funds purchased	513,011		2,871		2.22	%	—		—		—	%	—		2,871		2,871
FRB PPP liquidity facility	FRB PPP liquidity facility	—		—		—	%		3,941,718		3,402		0.35	%	—		(3,402)		(3,402)		FRB PPP liquidity facility	—		—		—	%	2,788,897		2,460		0.35	%	—		(2,460)		(2,460)
Borrowings	Borrowings	532,610		4,992		3.80	%		1,155,493		9,321		3.27	%	1,321		(5,650)		(4,329)		Borrowings	874,497		8,633		3.92	%	371,077		4,584		4.90	%	(1,078)		5,127		4,049
Total interest-bearing liabilities	Total interest-bearing liabilities	12,601,401		18,777		0.60	%		14,321,786		28,384		0.80��	%	(6,489)		(3,118)		(9,607)		Total interest-bearing liabilities	15,615,164		76,884		1.95	%	14,819,309		22,959		0.62	%	52,608		1,317		53,925
Non-interest-bearing deposits (4)	Non-interest-bearing deposits (4)	4,900,983							2,819,871												Non-interest-bearing deposits (4)	3,245,963						3,335,198
Total deposits and borrowings	Total deposits and borrowings	17,502,384				0.43	%		17,141,657				0.67	%							Total deposits and borrowings	18,861,127				1.62	%	18,154,507				0.50	%
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	237,131							247,798												Other non-interest-bearing liabilities	255,735						310,519

Total liabilities	Total liabilities	17,739,515							17,389,455												Total liabilities	19,116,862						18,465,026
Shareholders' equity	Shareholders' equity	1,389,815							1,136,266												Shareholders' equity	1,397,504						1,274,314
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	19,129,330						$	18,525,721											Total liabilities and shareholders' equity	$	20,514,366					$	19,739,340
Net interest income	Net interest income			164,699							132,731				$	23,003	$	8,965	$	31,968	Net interest income			159,032						219,892				$	(71,608)	$	10,748	$	(60,860)
Tax-equivalent adjustment (5)	Tax-equivalent adjustment (5)			239							292										Tax-equivalent adjustment (5)			334						290
Net interest earnings	Net interest earnings			$	164,938						$	133,023									Net interest earnings			$	159,366					$	220,182
Interest spread	Interest spread					3.57	%						2.97	%							Interest spread					3.06	%					4.56	%
Net interest margin	Net interest margin					3.59	%						3.00	%							Net interest margin					3.16	%					4.58	%
Net interest margin tax equivalent (5)	Net interest margin tax equivalent (5)					3.60	%						3.00	%							Net interest margin tax equivalent (5)					3.16	%					4.59	%
Net interest margin tax equivalent, excluding PPP loans (6)	Net interest margin tax equivalent, excluding PPP loans (6)					3.32	%						2.99	%							Net interest margin tax equivalent, excluding PPP loans (6)					3.18	%					3.24	%

(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 ~~0.33%~~1.48% and ~~0.53%~~0.42% for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively.

(5)Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended ~~March 31,~~September 30, 2022 and 2021, 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.

5459

Table of ~~Content~~Conte n ts

(6)Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended ~~March 31,~~September 30, 2022 and 2021, 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 decreased $60.9 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 as interest income from PPP loans decreased due to lower levels of PPP loan forgiveness, which accelerated the recognition of net deferred loan origination fees, offset in part by an increase in commercial and industrial loans and leases, primarily in specialty lending. Average interest-earning assets increased by $987.6 million, primarily related to increases in commercial and industrial loans and leases, primarily specialty lending, investment securities, multi-family, installment and residential mortgage loans, partially offset by decreases in PPP loans due to PPP loan forgiveness and commercial loans to mortgage companies. Up until late 2021, the commercial loans to mortgage companies trend had 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 since early 2020. The refinancing activity has slowed since reaching its high level in early 2021, and into 2022 with rising interest rates.

The NIM decreased by 143 basis points to 3.16% for the three months ended September 30, 2022 from 4.59% for the three months ended September 30, 2021 resulting primarily from lower PPP loan forgiveness and a shift in the mix of interest-bearing liabilities in a rising interest rate environment, offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment. The lower level of PPP loan forgiveness, which accelerated the recognition of net deferred loan origination fees, drove a 38 basis point decrease in the yield on interest-earning assets and contributed to the NIM decrease. The decrease in NIM was offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment, mostly in commercial and industrial loans and leases, primarily specialty lending. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 133 basis point increase in the cost of interest-bearing liabilities and also contributed to the NIM decrease for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was $1.2 billion ($1.3 billion average balance) of PPP loans yielding 4.31% and $7.1 billion ($6.7 billion average balance) of interest checking accounts costing 2.00%. Non-interest bearing demand deposits were $3.0 billion ($3.2 billion average balance). PPPLF borrowings costing 0.35% were fully repaid during the three months ended September 30, 2021. Customers' total cost of funds, including non-interest bearing deposits was 1.62% and 0.50% for the three months ended September 30, 2022 and 2021, respectively.

Table of Conte n ts


	Nine Months Ended September 30,												Nine Months Ended September 30,
	2022						2021						2022 vs. 2021
(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	$	595,305	$	4,197	0.94	%	$	1,034,923	$	980	0.13	%	$	3,811	$	(594)	$	3,217
Investment securities (1)	3,969,809		76,283		2.56	%	1,461,070		25,211		2.30	%	3,154		47,918		51,072
Loans and leases:

Commercial and industrial:
Specialty lending loans and leases (2)	3,963,180		127,304		4.29	%	1,560,615		43,658		3.74	%	7,294		76,352		83,646
Other commercial and industrial loans (2)	1,496,772		46,768		4.18	%	1,357,028		38,631		3.81	%	3,949		4,188		8,137
Commercial loans to mortgage companies	1,785,495		46,713		3.50	%	2,837,549		65,925		3.11	%	7,514		(26,726)		(19,212)
Multi-family loans	1,863,915		51,506		3.69	%	1,560,565		44,120		3.78	%	(1,065)		8,451		7,386
PPP loans	1,946,651		72,132		4.95	%	5,515,819		197,071		4.78	%	6,786		(131,725)		(124,939)
Non-owner occupied commercial real estate loans	1,331,037		40,551		4.07	%	1,354,745		38,637		3.81	%	2,599		(685)		1,914
Residential mortgages	482,263		13,586		3.77	%	348,369		9,486		3.64	%	349		3,751		4,100
Installment loans	1,881,160		128,013		9.10	%	1,470,024		101,294		9.21	%	(1,225)		27,944		26,719



Total loans and leases (3)	14,750,473		526,573		4.77	%	16,004,714		538,822		4.50	%	31,300		(43,549)		(12,249)
Other interest-earning assets	62,955		8,673		NM (7)		62,205		1,834		3.94	%	6,817		22		6,839
Total interest-earning assets	19,378,542		615,726		4.25	%	18,562,912		566,847		4.08	%	23,791		25,088		48,879
Non-interest-earning assets	526,437						632,202

Total assets	$	19,904,979					$	19,195,114
Liabilities
Interest checking accounts	$	6,286,224	55,059		1.17	%	$	3,584,223	19,929		0.74	%	15,291		19,839		35,130
Money market deposit accounts	5,128,270		36,545		0.95	%	4,811,540		17,278		0.48	%	18,053		1,214		19,267
Other savings accounts	732,801		3,359		0.61	%	1,415,595		6,227		0.59	%	208		(3,076)		(2,868)
Certificates of deposit	710,130		6,910		1.30	%	646,257		3,792		0.78	%	2,715		403		3,118
Total interest-bearing deposits (4)	12,857,425		101,873		1.06	%	10,457,615		47,226		0.60	%	42,058		12,589		54,647
Federal funds purchased	416,344		4,374		1.40	%	29,286		15		0.07	%	2,568		1,791		4,359
FRB PPP liquidity facility	—		—		—	%	3,525,560		9,229		0.35	%	—		(9,229)		(9,229)
Borrowings	783,644		20,896		3.57	%	659,334		18,997		3.85	%	(1,465)		3,364		1,899
Total interest-bearing liabilities	14,057,413		127,143		1.21	%	14,671,795		75,467		0.69	%	54,964		(3,288)		51,676
Non-interest-bearing deposits (4)	4,206,778						3,016,837
Total deposits and borrowings	18,264,191				0.93	%	17,688,632				0.57	%
Other non-interest-bearing liabilities	250,783						295,752

Total liabilities	18,514,974						17,984,384
Shareholders' equity	1,390,005						1,210,730
Total liabilities and shareholders' equity	$	19,904,979					$	19,195,114
Net interest income			488,583						491,380				$	(31,173)	$	28,376	$	(2,797)
Tax-equivalent adjustment (5)			843						871
Net interest earnings			$	489,426					$	492,251
Interest spread					3.32	%					3.51	%
Net interest margin					3.37	%					3.54	%
Net interest margin tax equivalent (5)					3.38	%					3.55	%
Net interest margin tax equivalent, excluding PPP loans (6)					3.27	%					3.17	%

(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 0.80% and 0.47% for the nine months ended September 30, 2022 and 2021, respectively.

(5)Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2022 and 2021, 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.

Table of Conte n ts

(6)Non-GAAP tax-equivalent basis, as described in note (5) for the nine months ended September 30, 2022 and 2021, 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.

(7)Not Meaningful. Average yield on other interest-earning assets for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 was ~~44.18%~~18.42% primarily due to ~~$5.2~~$6.4 million of equity investment distributions.

Net interest income ~~increased $32.0~~decreased $2.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as ~~average~~interest income from PPP loans decreased due to lower levels of PPP loan forgiveness, which accelerated the recognition of net deferred loan origination fees, offset in part by an increase in commercial and industrial loans and leases, primarily in specialty lending. Average interest-earning assets increased by ~~$628.4~~$815.6 million, primarily related to increases in ~~investment securities,~~ commercial and industrial loans and leases, primarily specialty lending, investment securities, installment, multi-family and residential mortgage loans, partially offset by decreases in PPP loans due to PPP loan forgiveness and commercial loans to mortgage companies. ~~The~~Up until late 2021, the commercial loans to mortgage companies trend ~~has~~had largely 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 since early 2020. The refinancing activity has slowed since reaching its high level in early 2021, and into 2022 with rising interest rates.

The NIM ~~increased~~decreased by 6017 basis points to ~~3.60%~~3.38% for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 from ~~3.00%~~3.55% for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 resulting primarily from a shift in the ~~PPP loan forgiveness, as well as~~mix of interest-bearing liabilities in a rising interest rate environment, offset in part by a shift in the mix of interest-earning assets ~~and interest-bearing liabilities~~ in a ~~lower~~rising interest rate environment. The shift in the mix of interest-earning assets in a rising interest rate environment, mostly in commercial and ~~PPP loan forgiveness, which accelerated the recognition of net deferred loan origination fees, drove a 36 basis points increase in the yield on interest-earning assets~~industrial loans and ~~contributed to the NIM increase. The NIM also increased from~~leases, primarily specialty lending, and equity investment distributions, which are included in other interest ~~income.~~income, drove a 17 basis point increase in the yield on interest-earning assets. The shift in the mix of interest-bearing liabilities in a ~~lower~~rising interest rate environment drove a 2052 basis ~~points decline~~point increase in the cost of interest-bearing liabilities and contributed to the NIM decrease for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was ~~$2.2~~$1.2 billion ($~~2.6~~1.9 billion average balance) of PPP loans yielding ~~5.66%~~4.95% and ~~$5.6~~$7.1 billion ($~~5.8~~6.3 billion average balance) of ~~interest-bearing demand deposits~~interest checking accounts costing ~~0.54%~~1.17%. Non-interest bearing demand deposits ~~was $4.6~~were $3.0 billion ($~~4.9~~4.2 billion average balance). PPPLF borrowings costing 0.35% were fully repaid during the three and nine months ended September 30, 2021. Customers' total cost of funds, including non-interest bearing deposits was ~~0.43%~~0.93% and ~~0.67%~~0.57% for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, respectively.

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

A reconciliation of net interest margin tax equivalent and net interest margin tax equivalent, excluding PPP loans for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021 is set forth below.


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2022			2021				(dollars in thousands)	2022			2021			2022			2021
Net interest income (GAAP)	Net interest income (GAAP)	$	164,699		$	132,731			Net interest income (GAAP)	$	159,032		$	219,892		$	488,583		$	491,380
Tax-equivalent adjustment	Tax-equivalent adjustment	239			292				Tax-equivalent adjustment	334			290			843			871
Net interest income tax equivalent (Non-GAAP)	Net interest income tax equivalent (Non-GAAP)	164,938			133,023				Net interest income tax equivalent (Non-GAAP)	159,366			220,182			489,426			492,251
Loans receivable, PPP net interest income	Loans receivable, PPP net interest income	(34,615)			(34,842)				Loans receivable, PPP net interest income	(9,632)			(112,005)			(63,193)			(182,632)
Net interest income tax equivalent, excluding PPP loans (Non-GAAP)	Net interest income tax equivalent, excluding PPP loans (Non-GAAP)	$	130,323		$	98,181			Net interest income tax equivalent, excluding PPP loans (Non-GAAP)	$	149,734		$	108,177		$	426,233		$	309,619

Average total interest-earning assets (GAAP)	Average total interest-earning assets (GAAP)	$	18,572,308		$	17,943,944			Average total interest-earning assets (GAAP)	$	20,021,455		$	19,033,826		$	19,378,542		$	18,562,912
Average PPP loans	Average PPP loans	(2,641,318)			(4,623,213)				Average PPP loans	(1,349,403)			(5,778,367)			(1,946,651)			(5,515,819)
Adjusted average total interest-earning assets (Non-GAAP)	Adjusted average total interest-earning assets (Non-GAAP)	$	15,930,990		$	13,320,731			Adjusted average total interest-earning assets (Non-GAAP)	$	18,672,052		$	13,255,459		$	17,431,891		$	13,047,093

Net interest margin (GAAP)	Net interest margin (GAAP)	3.59		%	3.00		%		Net interest margin (GAAP)	3.16		%	4.58		%	3.37		%	3.54		%
Net interest margin tax equivalent (Non-GAAP)	Net interest margin tax equivalent (Non-GAAP)	3.60		%	3.00		%		Net interest margin tax equivalent (Non-GAAP)	3.16		%	4.59		%	3.38		%	3.55		%
Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)	Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)	3.32		%	2.99		%		Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)	3.18		%	3.24		%	3.27		%	3.17		%

5562

Table of ~~Content~~Conte n ts

PROVISION (BENEFIT) FOR CREDIT LOSSES

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. Customers recorded a benefit to provision for credit losses on loans and leases during the three months ended ~~March 31,~~September 30, 2022, which resulted primarily from ~~an increase in~~the sale of consumer installment loans to a third-party sponsored VIE, partially offset by loan growth and deteriorating macroeconomic forecasts. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans. Customers recorded a benefit to provision for credit losses of $7.8 million for loans and leases and a provision for credit losses of $0.3 million for lending-related commitments, respectively, for the ~~growth in loan portfolio for consumer installment, residential, multi-family and commercial and industrial loans.~~three months ended September 30, 2022. Customers recorded a provision for credit losses ~~on loans and leases~~ of ~~$15.3~~$13.2 million and a credit to provision for credit losses (a benefit) on lending-related commitments of $0.1 million for the three months ended March 31, 2022. Customers recorded a credit to provision for credit losses (a benefit) of $2.9 million and $1.3$0.7 million for loans and leases and lending-related commitments, respectively, for the three months ended ~~March 31,~~September 30, 2021. Net charge-offs for the three months ended ~~March 31,~~September 30, 2022 were ~~$7.2~~$18.5 million, or 2147 basis points of average loans and leases on an annualized basis, compared to net charge-offs of ~~$12.5~~$7.1 million, or 3317 basis points of average loans and leases on an annualized basis, for the three months ended ~~March 31,~~September 30, 2021. The ~~decrease~~increase in net charge-offs for the three months ended ~~March 31,~~September 30, 2022, compared to the three months ended ~~March 31,~~September 30, 2021, was primarily due to ~~lower~~a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit and higher charge-offs for consumer installment loans.

Customers recorded $31.6 million and $0.8 million of provision for credit losses for loans and leases and lending-related commitments, respectively, for the nine months ended September 30, 2022, which resulted primarily from loan growth and deteriorating macroeconomic forecasts, partially offset by the sale of consumer installment loans to a third-party sponsored VIE. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans. Customers recorded $13.5 million of provision for credit losses for loans and leases and $0.5 million of credit or release of the reserve for lending-related commitments, respectively, for the nine months ended September 30, 2021. Net charge-offs for the nine months ended September 30, 2022 were $39.2 million, or 36 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $26.2 million, or 22 basis points of average loans and leases on an annualized basis, for the nine months ended September 30, 2021. The increase in net charge-offs for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, was primarily due to a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit, higher charge-offs for consumer installment loans and overdrawn deposit accounts.

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

The provision (benefit) for credit losses for the three and nine months ended ~~March 31,~~September 30, 2022 also included a benefit to provision for credit losses of $0.2 million and a provision for credit losses of ~~$0.7~~$0.3 million, respectively, on certain asset-backed securities included in our investment ~~securities. See~~securities available for sale. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

Table of Conte n ts

NON-INTEREST INCOME

The table below presents the components of non-interest income for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021.


		Three Months Ended March 31,								Three Months Ended September 30,		QTD				Nine Months Ended September 30,				YTD
(dollars in thousands)	(dollars in thousands)	2022		2021		Change		% Change			(dollars in thousands)	2022		2021		Change		% Change		2022		2021		Change		% Change
Interchange and card revenue	Interchange and card revenue	$	76	$	85	$	(9)	(10.6)	%		Interchange and card revenue	$	72	$	83	$	(11)	(13.3)	%	$	172	$	252	$	(80)	(31.7)	%
Deposit fees	Deposit fees	940		863		77		8.9	%		Deposit fees	989		994		(5)		(0.5)	%	2,893		2,748		145		5.3	%
Commercial lease income	Commercial lease income	5,895		5,205		690		13.3	%		Commercial lease income	7,097		5,213		1,884		36.1	%	19,584		15,729		3,855		24.5	%
Bank-owned life insurance	Bank-owned life insurance	8,326		1,679		6,647		395.9	%		Bank-owned life insurance	3,449		1,988		1,461		73.5	%	13,722		6,432		7,290		113.3	%
Mortgage warehouse transactional fees	Mortgage warehouse transactional fees	2,015		4,247		(2,232)		(52.6)	%		Mortgage warehouse transactional fees	1,545		3,100		(1,555)		(50.2)	%	5,443		10,612		(5,169)		(48.7)	%
Gain (loss) on sale of SBA and other loans	Gain (loss) on sale of SBA and other loans	1,507		1,575		(68)		(4.3)	%		Gain (loss) on sale of SBA and other loans	106		5,359		(5,253)		(98.0)	%	3,155		8,834		(5,679)		(64.3)	%
Loss on sale of consumer installment loans											Loss on sale of consumer installment loans	(23,465)		—		(23,465)		NM		(23,465)		—		(23,465)		NM
Loan fees	Loan fees	2,545		1,436		1,109		77.2	%		Loan fees	3,008		1,909		1,099		57.6	%	8,171		5,015		3,156		62.9	%
Mortgage banking income	Mortgage banking income	481		463		18		3.9	%		Mortgage banking income	125		425		(300)		(70.6)	%	779		1,274		(495)		(38.9)	%

Gain (loss) on sale of investment securities	Gain (loss) on sale of investment securities	(1,063)		23,566		(24,629)		(104.5)	%		Gain (loss) on sale of investment securities	(2,135)		6,063		(8,198)		(135.2)	%	(6,227)		31,441		(37,668)		(119.8)	%
Unrealized gain (loss) on investment securities	Unrealized gain (loss) on investment securities	(276)		974		(1,250)		(128.3)	%		Unrealized gain (loss) on investment securities	(259)		—		(259)		NM		(738)		2,720		(3,458)		(127.1)	%

Loss on sale of foreign subsidiaries											Loss on sale of foreign subsidiaries	—		—		—		NM		—		(2,840)		2,840		(100.0)	%

Unrealized gain (loss) on derivatives	Unrealized gain (loss) on derivatives	964		2,537		(1,573)		(62.0)	%		Unrealized gain (loss) on derivatives	563		524		39		7.4	%	2,348		2,622		(274)		(10.5)	%
Loss on cash flow hedge derivative terminations	Loss on cash flow hedge derivative terminations	—		(24,467)		24,467		(100.0)	%		Loss on cash flow hedge derivative terminations	—		—		—		NM		—		(24,467)		24,467		(100.0)	%
Other	Other	(212)		305		(517)		(169.5)	%		Other	(112)		(72)		(40)		55.6	%	(910)		504		(1,414)		(280.6)	%
Total non-interest income	Total non-interest income	$	21,198	$	18,468	$	2,730	14.8	%		Total non-interest income	$	(9,017)	$	25,586	$	(34,603)	(135.2)	%	$	24,927	$	60,876	$	(35,949)	(59.1)	%

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 ~~$0.7~~$1.9 million increase in commercial lease income for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from the continued growth of Customers' equipment finance business.

The $3.9 million increase in commercial lease income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 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 ~~$6.6~~$1.5 million increase in bank-owned life insurance income for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 resulted from ~~the~~an increase in cash surrender value of the policies and death benefits paid by insurance carriers under the policies.

~~Table~~The $7.3 million increase in bank-owned life insurance income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 resulted from the increases in cash surrender value of ~~Content~~s

the policies and death benefits paid by insurance carriers under the policies.

Mortgage warehouse transactional fees

The ~~$2.2~~$1.6 million decrease in mortgage warehouse transactional fees for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from a lower refinancing activity due to higher interest rates. There can be no assurance that Customers will earn mortgage warehouse transactional fees in 2022 and 2023 comparable to 2021, given the lower ~~refinancing~~mortgage banking activity in a rising interest rate environment that is expected to continue into 2023.

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The $5.2 million decrease in mortgage warehouse transactional fees for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from lower refinancing activity due to higher interest rates. There can be no assurance that Customers will earn mortgage warehouse transactional fees in 2022 and 2023 comparable to 2021, given the lower mortgage banking activity in a rising interest rate ~~environment.~~environment that is expected to continue into 2023.

Gain (loss) on sale of SBA and other loans

The ~~$0.1~~$5.3 million decrease in gain on sale of SBA and other loans for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 reflects a gain on sale of a commercial lease as compared to $5.4 million in gain on sales of $103.9 million of consumer installment loans and a decrease in sales of SBA ~~loans during~~loans. There were no SBA loan sales in the three months ended ~~March 31,~~September 30, 2022, compared to sales of $11.9 million of SBA loans in the three months ended ~~March 31,~~September 30, 2021. There can be no assurance that Customers will realize gains on the sale of loans in 2022 and 2023 comparable to 2021, given the significant uncertainty in the capital ~~markets.~~markets that is expected to continue into 2023.

The $5.7 million decrease in gain on sale of SBA and other loans for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 reflects $3.2 million in gain on sales of SBA loans and a commercial lease as compared to $8.8 million in gain on sales of $130.9 million of consumer installment loans and a decrease in sales of SBA loans. There were $31.8 million of SBA loan sales in the nine months ended September 30, 2022, compared to $47.6 million of SBA loans in the nine months ended September 30, 2021. There can be no assurance that Customers will realize gains on the sale of loans in 2022 and 2023 comparable to 2021, given the significant uncertainty in the capital markets that is expected to continue into 2023.

Loss on sale of consumer installment loans

The $23.5 million increase in loss on sale of consumer installment loans for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 reflects $23.5 million of loss on sale of $521.8 million in consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

The $23.5 million increase in loss on sale of consumer installment loans for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 reflects $23.5 million of loss on sale of $521.8 million in consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

Loan fees

The $1.1 million increase in loan fees for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from an increase in fees earned on unused lines of credit and other fees from commercial borrowers.

The $3.2 million increase in loan fees for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from an increase in fees earned on unused lines of credit and other fees from commercial borrowers.

Gain (loss) on sale of investment securities

The ~~$24.6~~$8.2 million decrease in gain on sale of investment securities for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 reflects the net losses realized from the sale of ~~$156.0~~$126.6 million in AFS debt securities during the three months ended ~~March 31,~~September 30, 2022 compared to the ~~net~~ gains realized from the sale of ~~$353.9~~$258.4 million in AFS debt securities during the three months ended ~~March 31,~~September 30, 2021. There can be no assurance that Customers will realize gains on the sale of investment securities in 2022 and 2023 comparable to 2021, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

The $37.7 million decrease in gain on sale of investment securities for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 reflects the net losses realized from the sale of $681.6 million in AFS debt securities during the nine months ended September 30, 2022 compared to the gains realized from the sale of $666.0 million in AFS debt securities during the nine months ended September 30, 2021. There can be no assurance that Customers will realize gains on the sale of investment securities in 2022 and 2023 comparable to 2021, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

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Unrealized gain (loss) on investment securities

The ~~$1.3~~$0.3 million ~~decrease~~increase in unrealized ~~gain (loss)~~loss on investment securities for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily reflects the unrealized loss on CRA-qualified mutual fund shares for the three months ended September 30, 2022. Customers sold all 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 in June 2021.

The $3.5 million decrease in ~~the~~ unrealized gain ofon investment securities for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily reflects decreases in the net unrealized gains in CRA-qualified mutual fund shares and equity securities issued by a foreign entity that were held by CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd. for the nine months ended September 30, 2021.

Loss on sale of foreign subsidiaries

The $2.8 million decrease in loss on sale of foreign subsidiaries for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 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.

~~Unrealized gain (loss) on derivatives~~

The $1.6 million decrease in unrealized gain (loss) on derivatives for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily resulted from decreases of $0.7 million in credit valuation adjustment and credit derivatives due to changes in market interest rates and $0.8 million in interest rate swap fees.

Loss on cash flow hedge derivative terminations

The $24.5 million decrease in loss on cash flow hedge derivative terminations for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 compared to ~~three~~nine months ended ~~March 31,~~September 30, 2021 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 during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 because the hedged forecasted transactions were no longer probable of occurring.

Other non-interest income

The ~~$0.5 million~~$40 thousand decrease in other non-interest income for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from ~~a decrease~~decreases in SERP income due to changes in capital ~~markets.~~markets and gains from the sales of commercial lease assets.

The $1.4 million decrease in other non-interest income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from decreases in SERP income due to changes in capital markets and gains from the sales of commercial lease assets, partially offset by an increase in other customer fees.

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NON-INTEREST EXPENSE

The table below presents the components of non-interest expense for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021.


		Three Months Ended March 31,								Three Months Ended September 30,		QTD				Nine Months Ended September 30,				YTD
(dollars in thousands)	(dollars in thousands)	2022		2021		Change		% Change			(dollars in thousands)	2022		2021		Change		% Change		2022		2021		Change		% Change
Salaries and employee benefits	Salaries and employee benefits	$	26,607	$	23,971	$	2,636	11.0	%		Salaries and employee benefits	$	31,230	$	26,268	$	4,962	18.9	%	$	83,171	$	78,262	$	4,909	6.3	%
Technology, communication and bank operations	Technology, communication and bank operations	24,068		19,988		4,080		20.4	%		Technology, communication and bank operations	19,588		21,281		(1,693)		(8.0)	%	66,394		60,887		5,507		9.0	%
Professional services	Professional services	6,956		5,877		1,079		18.4	%		Professional services	6,269		6,871		(602)		(8.8)	%	20,640		19,630		1,010		5.1	%
Occupancy	Occupancy	3,050		2,621		429		16.4	%		Occupancy	2,605		2,704		(99)		(3.7)	%	9,934		7,807		2,127		27.2	%
Commercial lease depreciation	Commercial lease depreciation	4,942		4,291		651		15.2	%		Commercial lease depreciation	5,966		4,493		1,473		32.8	%	16,460		13,199		3,261		24.7	%
FDIC assessments, non-income taxes and regulatory fees	FDIC assessments, non-income taxes and regulatory fees	2,383		2,719		(336)		(12.4)	%		FDIC assessments, non-income taxes and regulatory fees	2,528		2,313		215		9.3	%	6,530		7,634		(1,104)		(14.5)	%
Loan servicing	Loan servicing	2,371		437		1,934		442.6	%		Loan servicing	3,851		4,265		(414)		(9.7)	%	10,563		6,402		4,161		65.0	%
Advertising and promotion	Advertising and promotion	315		561		(246)		(43.9)	%		Advertising and promotion	762		302		460		152.3	%	1,430		1,176		254		21.6	%
Merger and acquisition related expenses	Merger and acquisition related expenses	—		418		(418)		(100.0)	%		Merger and acquisition related expenses	—		—		—		NM		—		418		(418)		(100.0)	%
Loan workout	Loan workout	(38)		(261)		223		(85.4)	%		Loan workout	217		198		19		9.6	%	358		39		319		817.9	%

Deposit relationship adjustment fees											Deposit relationship adjustment fees	—		6,216		(6,216)		(100.0)	%	—		6,216		(6,216)		(100.0)	%
Other	Other	3,153		1,305		1,848		141.6	%		Other	3,182		5,098		(1,916)		(37.6)	%	10,730		11,089		(359)		(3.2)	%
Total non-interest expense	Total non-interest expense	$	73,807	$	61,927	$	11,880	19.2	%		Total non-interest expense	$	76,198	$	80,009	$	(3,811)	(4.8)	%	$	226,210	$	212,759	$	13,451	6.3	%

Salaries and employee benefits

The ~~$2.6~~$5.0 million increase in salaries and employee benefits for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from $1.4 million in severance, an increase in average full-time equivalent team members needed for future growth, annual merit increases and commissions, offset in part by a decrease in stock based compensation.

The $4.9 million increase in salaries and employee benefits for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from $1.4 million in severance, an increase in ~~incentive accruals tied to Customers' overall performance.~~average full-time equivalent team members needed for future growth and annual merit increases, offset in part by decreases in incentives and stock based compensation and compensation expense associated with an executive's retirement and other one-time benefits during the nine months ended September 30, 2021.

Technology, communication, and bank operations

The ~~$4.1~~$1.7 million ~~increase~~decrease in technology, communication, and bank operations expense for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from ~~increases~~decreases in deposit servicing fees ~~from higher deposits, that were~~and interchange maintenance fees paid to BM Technologies due to lower deposits and debit card transactions, partially offset by $1.0 million increase in software licenses and fees paid for software as a service.

The $5.5 million increase in technology, communication, and bank operations expense for the ~~successor entity~~nine months ended September 30, 2022 compared to ~~BMT that was divested on January 4, 2021.~~the nine months ended September 30, 2021 primarily resulted from an increase in deposit servicing fees paid to BM Technologies due to higher deposits and $2.3 million increase in software licenses and fees paid for software as a service, offset in part by a decrease in interchange maintenance fees paid to BM Technologies due to lower debit card transactions.

Customers incurred expenses of ~~$17.8~~$13.0 million and ~~$13.7~~$15.1 million 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 months ended ~~March 31,~~September 30, 2022 and 2021, respectively. Customers incurred expenses of $46.7 million and $43.0 million to BM Technologies under the deposit servicing agreement during the nine months ended September 30, 2022 and 2021, respectively. The deposit ~~service~~servicing agreement iswas scheduled to expire on December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. Customers and BM Technologies also agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date. For

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additional information refer to NOTE 17 — SUBSEQUENT EVENTS in Customers' unaudited consolidated financial statements. As of September 30, 2022 and ~~will not be renewed. As of March~~December 31, ~~2022,~~2021, Customers held ~~$2.2~~$1.6 billion and $1.8 billion of deposits serviced by BM Technologies, which are expected to leave Customers Bank by ~~December 31, 2022. See~~June 30, 2023. Refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements for additional information.

Professional services

The ~~$1.1~~$0.6 million ~~increase~~decrease in professional services for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 was primarily due to a decrease in outside professional services used to support the PPP loan forgiveness process, partially offset by higher legal fees.

The $1.0 million increase in professional services for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to an increase in outside professional services used to support the PPP loan forgiveness process.

Occupancy

The $0.1 million decrease in occupancy for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to decreases in depreciation and amortization and maintenance of bank premises and equipment, partially offset by an increase in impairment of ROU assets, bank premises and equipment related to consolidation of office locations.

The $2.1 million increase in occupancy for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to impairment charges of $1.4 million for ROU assets, bank premises and equipment related to consolidation of branch locations and other offices and increased depreciation and amortization during the nine months ended September 30, 2022.

Commercial lease depreciation

The ~~$0.7~~$1.5 million increase in commercial lease depreciation for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor.

The $3.3 million increase in commercial lease depreciation for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor.

FDIC assessments, non-income taxes, and regulatory fees

The $0.2 million increase in FDIC assessments, non-income taxes, and regulatory fees for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 primarily resulted from higher FDIC assessment rates. In October 2022, FDIC issued a final rule to increase the initial base deposit insurance assessment rate by 2 basis points for all insured depository institutions beginning in 2023.

The $1.1 million decrease in FDIC assessments, non-income taxes, and regulatory fees for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from a decrease in FDIC assessment rates. In October 2022, FDIC issued a final rule to increase the initial base deposit insurance assessment rate by 2 basis points for all insured depository institutions beginning in 2023.

Loan servicing

The ~~$1.9~~$0.4 million ~~increase~~decrease in loan servicing for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from ~~servicing fees paid to third party servicers associated with the participation in the latest round of PPP, the~~lower PPP forgiveness, ~~process, and~~partially offset by the growth in consumer installment ~~loans.~~

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~~Merger~~loans and ~~acquisition related expenses~~residential mortgages.

The ~~$0.4~~$4.2 million ~~decrease~~increase in ~~merger~~loan servicing for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from the growth in consumer installment loans and ~~acquisition related expenses~~residential mortgages, partially offset by lower PPP forgiveness.

Advertising and promotion

The $0.5 million increase in advertising and promotion for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31, 2022~~September 30, 2021 primarily resulted from ~~direct costs incurred~~increased spending on advertising agencies and media.

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The $0.3 million increase in advertising and promotion for the ~~merger of BMT~~nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from increased spending on advertising agencies and ~~MFAC that was completed on January 4,~~media.

Deposit relationship adjustment fees

The $6.2 million decrease in deposit relationship adjustment fees for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 resulted from a make-whole fee paid to a single high-cost deposit customer to amend a long-term deposit contract during the three months ended September 30, 2021.

The $6.2 million decrease in deposit relationship adjustment fees for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 resulted from a make-whole fee paid to a single high-cost deposit customer to amend a long-term deposit contract during the nine months ended September 30, 2021.

Other non-interest expense

The ~~$1.8~~$1.9 million ~~increase~~decrease in other non-interest expense for the three months ended ~~March 31,~~September 30, 2022 compared to the three months ended ~~March 31,~~September 30, 2021 primarily resulted from a decrease in ~~credit~~loan origination expenses associated with the latest round of PPP loan originations, litigation settlement of $1.2 million in the three months ended September 30, 2021 and a decrease in a provision or ~~release of~~addition to the reserve for unfunded ~~commitment.~~commitments. A ~~credit~~provision or ~~release of~~addition to the reserve for unfunded commitments for the three months ended ~~March 31,~~September 30, 2022 was ~~$0.1~~$0.3 million, compared to a provision or addition to the reserve for unfunded commitments of $0.7 million for the three months ended September 30, 2021.

The $0.4 million decrease in other non-interest expense for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from a decrease in loan origination expenses associated with the latest round of PPP loan originations and litigation settlement of $1.2 million in the nine months ended September 30, 2021, partially offset by an increase in the reserve for unfunded commitments. A provision or addition to the reserve for unfunded commitments for the nine months ended September 30, 2022 was $0.8 million, compared to a credit or release of the reserve for unfunded commitments of ~~$1.3~~$0.5 million ~~during~~for the ~~three~~nine months ended ~~March 31,~~September 30, 2021.

INCOME TAXES

The table below presents income tax expense from continuing operations and the effective tax rate for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021.


		Three Months Ended March 31,										Three Months Ended September 30,		QTD						Nine Months Ended September 30,				YTD
(dollars in thousands)	(dollars in thousands)	2022			2021			Change		% Change			(dollars in thousands)	2022			2021			Change		% Change		2022			2021			Change		% Change
Income before income tax expense	Income before income tax expense	$	96,093		$	92,191		$	3,902	4.2	%		Income before income tax expense	$	81,811		$	152,305		$	(70,494)	(46.3)	%	$	255,450		$	325,961		$	(70,511)	(21.6)	%
Income tax expense	Income tax expense	19,332			17,560			1,772		10.1	%		Income tax expense	17,899			36,263			(18,364)		(50.6)	%	56,127			73,947			(17,820)		(24.1)	%
Effective tax rate	Effective tax rate	20.12		%	19.05		%						Effective tax rate	21.88		%	23.81		%					21.97		%	22.69		%

The ~~$1.8~~$18.4 million ~~increase~~decrease in income tax expense for the three months ended ~~March 31,~~September 30, 2022, when compared to the same period in the prior year, primarily resulted from ~~an increase~~a decrease in ~~projected~~ pre-tax ~~income for 2022.~~income. The ~~increase~~decrease in the effective tax rate for the three months ended ~~March 31,~~September 30, 2022, when compared to the same period in the prior year, primarily resulted from ~~reduced~~higher investment tax credits and death benefits from bank-owned life insurance policies for 2022 and a ~~benefit~~decrease in compensation expense associated with an executive's retirement that exceeded the limit for tax deduction purposes for 2021.

The $17.8 million decrease in income tax expense for the ~~recording of net discrete tax benefits associated with the divestiture of BMT and the recognition of a deferred tax asset related~~nine months ended September 30, 2022, when compared to the ~~outside basis difference of foreign subsidiaries included~~same period in ~~2021, offset~~the prior year, primarily resulted from a decrease in ~~part by~~pre-tax income. The decrease in effective tax rate for nine months ended September 30, 2022, when compared to the same period in the prior year, primarily resulted from higher investment tax credits and excess tax benefits on vesting of restricted stock units and death benefits from bank-owned life insurance policies for ~~2022.~~2022, partially offset by the recognition of a deferred tax asset related to the outside basis difference of foreign subsidiaries in 2021.

NET LOSS FROM DISCONTINUED OPERATIONS

On January 4, 2021, Customers Bancorp completed the divestiture of BMT, the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC. 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.

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The table below presents the loss from discontinued operations, net of income taxes for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021.


		Three Months Ended March 31,								Three Months Ended September 30,		QTD				Nine Months Ended September 30,			YTD
(dollars in thousands)	(dollars in thousands)	2022		2021		Change		% Change			(dollars in thousands)	2022		2021		Change		% Change	2022		2021		Change		% Change
Loss from discontinued operations before income taxes	Loss from discontinued operations before income taxes	$	—	$	(20,354)	$	20,354	(100.0)	%		Loss from discontinued operations before income taxes	$	—	$	—	$	—	NM	$	—	$	(20,354)	$	20,354	(100.0)	%
Income tax expense from discontinued operations	Income tax expense from discontinued operations	—		17,682		(17,682)		(100.0)	%		Income tax expense from discontinued operations	—		—		—		NM	—		17,682		(17,682)		(100.0)	%
Net loss from discontinued operations	Net loss from discontinued operations	$	—	$	(38,036)	$	38,036	(100.0)	%		Net loss from discontinued operations	$	—	$	—	$	—	NM	$	—	$	(38,036)	$	38,036	(100.0)	%

Loss from discontinued operations, net of income taxes decreased $38.0 million ~~decrease was~~for the nine months ended September 30, 2022, when compared to the nine months ended September 30, 2021 primarily ~~related~~due to restricted stock awards ofin 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 during the ~~three~~nine months ended ~~March 31,~~September 30, 2021.

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In connection with the divestiture, Customers 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 ~~$17.8~~$13.0 million and ~~$13.7~~$15.1 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 months ended ~~March 31,~~September 30, 2022 and 2021, respectively. Customers incurred expenses of $46.7 million and $43.0 million to BM Technologies under the deposit servicing agreement for the nine months ended September 30, 2022 and 2021, respectively. The deposit ~~service~~servicing agreement iswas scheduled to expire on December 31, 2022. On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. Customers and BM Technologies also agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date. Refer to NOTE 17 — SUBSEQUENT EVENTS for additional information. As of September 30, 2022 and ~~will not be renewed. As of March~~December 31, ~~2022,~~2021, Customers held ~~$2.2~~$1.6 billion and $1.8 billion of deposits serviced by BM Technologies, which are expected to leave Customers Bank by ~~December 31, 2022.~~the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. The loan agreement with BM Technologies was terminated early in November 2021. The transition services agreement with BM Technologies, as amended, expired on March 31, 2022. Customers entered into a special limited agency agreement with BM Technologies, whereby Customers will originate consumer installment loans referred by BM Technologies for an initial period from April 20, 2022 to December 31, 2022, which is renewable annually. Refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements for additional information.

PREFERRED STOCK DIVIDENDS AND LOSS ON REDEMPTION OF PREFERRED STOCK

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Financial Condition

General

~~Customers' total~~Total assets were ~~$19.2~~$20.4 billion at ~~March 31,~~September 30, 2022. This represented a ~~$411.3~~$792.6 million ~~decrease~~increase from total assets of $19.6 billion at December 31, 2021. The ~~decrease~~increase in total assets was primarily driven by increases of $3.6 billion in loans and leases receivable and $886.3 million in investment securities held to maturity, partially offset by decreases of ~~$1.1~~$2.1 billion in loans receivable, PPP, ~~$528.6~~$873.5 million in investment securities, at fair value, $715.2 million in loans receivable, mortgage warehouse, at fair value and ~~$243.4~~$113.6 million in cash and cash ~~equivalents, partially offset by increases of $1.1 billion in loans and leases receivable and $352.7 million in investment securities.~~equivalents.

Total liabilities were ~~$17.8~~$19.0 billion at ~~March 31,~~September 30, 2022. This represented a ~~$422.5~~$771.9 million ~~decrease~~increase from $18.2 billion at December 31, 2021. The ~~decrease~~increase in total liabilities primarily resulted from ~~decreases~~increases of ~~$362.4~~$744.5 million in total deposits and ~~$700.0 million in FHLB advances, partially offset by increases of $625.0~~$290.0 million in federal funds purchased, ~~and $14.6~~partially offset by decreases of $200.0 million in ~~accrued interest payable~~FHLB advances and $99.6 million in other ~~liabilities.~~borrowings.

The following table presents certain key condensed balance sheet data as of ~~March 31,~~September 30, 2022 and December 31, 2021:


(dollars in thousands)	(dollars in thousands)	March 31, 2022		December 31, 2021		Change		% Change		(dollars in thousands)	September 30, 2022		December 31, 2021		Change		% Change
Cash and cash equivalents	Cash and cash equivalents	$	274,600	$	518,032	$	(243,432)	(47.0)	%	Cash and cash equivalents	$	404,465	$	518,032	$	(113,567)	(21.9)	%
Investment securities, at fair value	Investment securities, at fair value	4,169,853		3,817,150		352,703		9.2	%	Investment securities, at fair value	2,943,694		3,817,150		(873,456)		(22.9)	%
Investment securities held to maturity										Investment securities held to maturity	886,294		—		886,294		NM
Loans held for sale	Loans held for sale	3,003		16,254		(13,251)		(81.5)	%	Loans held for sale	5,224		16,254		(11,030)		(67.9)	%
Loans receivable, mortgage warehouse, at fair value	Loans receivable, mortgage warehouse, at fair value	1,755,758		2,284,325		(528,567)		(23.1)	%	Loans receivable, mortgage warehouse, at fair value	1,569,090		2,284,325		(715,235)		(31.3)	%

Loans receivable, PPP	Loans receivable, PPP	2,195,902		3,250,008		(1,054,106)		(32.4)	%	Loans receivable, PPP	1,154,632		3,250,008		(2,095,376)		(64.5)	%
Loans and leases receivable	Loans and leases receivable	10,118,855		9,018,298		1,100,557		12.2	%	Loans and leases receivable	12,607,742		9,018,298		3,589,444		39.8	%
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(145,847)		(137,804)		(8,043)		5.8	%	Allowance for credit losses on loans and leases	(130,197)		(137,804)		7,607		(5.5)	%
Bank-owned life insurance	Bank-owned life insurance	332,239		333,705		(1,466)		(0.4)	%	Bank-owned life insurance	336,130		333,705		2,425		0.7	%
Other assets	Other assets	298,212		305,611		(7,399)		(2.4)	%	Other assets	408,575		305,611		102,964		33.7	%

Total assets	Total assets	19,163,708		19,575,028		(411,320)		(2.1)	%	Total assets	20,367,621		19,575,028		792,593		4.0	%
Total deposits	Total deposits	16,415,560		16,777,924		(362,364)		(2.2)	%	Total deposits	17,522,438		16,777,924		744,514		4.4	%

Federal funds purchased	Federal funds purchased	700,000		75,000		625,000		833.3	%	Federal funds purchased	365,000		75,000		290,000		NM
FHLB advances	FHLB advances	—		700,000		(700,000)		(100.0)	%	FHLB advances	500,000		700,000		(200,000)		(28.6)	%
Other borrowings	Other borrowings	223,230		223,086		144		0.1	%	Other borrowings	123,515		223,086		(99,571)		(44.6)	%
Subordinated debt	Subordinated debt	181,742		181,673		69		—	%	Subordinated debt	181,882		181,673		209		0.1	%

Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	265,770		251,128		14,642		5.8	%	Accrued interest payable and other liabilities	287,855		251,128		36,727		14.6	%

Total liabilities	Total liabilities	17,786,302		18,208,811		(422,509)		(2.3)	%	Total liabilities	18,980,690		18,208,811		771,879		4.2	%
Total shareholders’ equity	Total shareholders’ equity	1,377,406		1,366,217		11,189		0.8	%	Total shareholders’ equity	1,386,931		1,366,217		20,714		1.5	%
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	19,163,708	$	19,575,028	$	(411,320)	(2.1)	%	Total liabilities and shareholders’ equity	$	20,367,621	$	19,575,028	$	792,593	4.0	%

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 ~~$55.5~~$41.5 million and $35.2 million at ~~March 31,~~September 30, 2022 and December 31, 2021, 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 ~~$219.1~~$362.9 million and $482.8 million at ~~March 31,~~September 30, 2022 and December 31, 2021, 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 from December 31, 2021 primarily resulted from recent deposits that were deployed into higher interest-earning assets.

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Investment ~~Securities~~securities, at fair value

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 by agencies of the United States government, asset-backed securities, collateralized loan obligations, commercial mortgage-backed securities, private label collateralized mortgage obligations, state and political subdivision debt securities, corporate notes and certain equity securities. 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.

At ~~March 31,~~September 30, 2022, investment securities, at fair value totaled ~~$4.2~~$2.9 billion compared to $3.8 billion at December 31, 2021. The ~~increase~~decrease in investment securities primarily resulted from the sale of $681.6 million of asset-backed securities, agency-guaranteed collateralized mortgage obligations, collateralized loan obligations, commercial mortgage-backed securities, private label collateralized mortgage obligations and corporate notes, the transfer of certain agency-guaranteed mortgage-backed securities and collateralized mortgage obligations and private label collateralized mortgage obligations totaling $500.2 million to investment securities held to maturity in June 2022, maturities, calls and principal repayments totaling $408.0 million and a decline in the fair value of AFS debt securities, or unrealized losses of $213.5 million due to changes in market interest rates, partially offset by the purchases of asset-backed securities, collateralized loan obligations, agency-guaranteed collateralized mortgage obligations, private label collateralized mortgage obligations and corporate notes totaling $814.2 million, partially offset by the sale of $156.0 million of asset-backed securities, agency-guaranteed collateralized mortgage obligations, collateralized loan obligations, corporate notes, and maturities, calls and principal repayments totaling $224.8$929.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

For financial reporting purposes, AFS debt securities are carried at fair value. Unrealized gains and losses on AFS debt securities, other than credit losses, are included in other comprehensive income (loss) and reported as a separate component of shareholders’ equity, net of the related tax effect. Changes in the fair value of equity securities with a readily determinable fair value and securities reported at fair value based on a fair value option election are recorded in non-interest income in the period in which they occur. Customers recorded a provision for credit losses of ~~$0.7~~$0.3 million on certain asset-backed securities included in our investment securities during the ~~three~~nine months ended ~~March 31,~~September 30, 2022. ~~See~~Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

Investment securities held to maturity

At September 30, 2022, investment securities held to maturity totaled $886.3 million from the transfer of $500.2 million in AFS debt securities, primarily agency-guaranteed mortgage-backed securities and collateralized mortgage obligations and private label collateralized mortgage obligations in June 2022 and $400.0 million of asset-backed securities investment in a VIE in connection with the sale of consumer installment loans, partially offset by maturities, calls and principal repayments totaling $13.6 million for the nine months ended September 30, 2022.

On September 30, 2022, Customers sold $521.8 million of consumer installment loans inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE. As part of these sales, the Customers recognized a loss on sale of $23.5 million in loss on sale of consumer installment loans within non-interest income in the consolidated statement of income. Customers provided financing to the purchaser for a portion of the sale price in the form of $400.0 million of asset-backed securities collateralized by the sold loans. Customers accounts for its investment in the asset-backed securities as HTM debt securities on the consolidated balance sheet. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

The following table sets forth information about the maturities and weighted-average yield of the investment securities held to maturity. The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security adjusted for prepayment estimates, and considers the contractual coupon, amortization of premiums, accretion of discounts and amortization of unrealized losses upon transfer from investment securities available for sale to held to maturity, along with the unrealized loss in accumulated other comprehensive income. Yields are not reported on a tax-equivalent basis.

Table of Conte n ts


	September 30, 2022
	Within one year		After one but within five years		After five but within ten years		No specific maturity		Total
Asset-backed securities	—	%	—	%	—	%	5.50	%	5.50	%

Agency-guaranteed residential mortgage-backed securities	—		—		—		1.80		1.80
Agency-guaranteed commercial mortgage-backed securities	—		—		—		1.77		1.77
Agency-guaranteed residential collateralized mortgage obligations	—		—		—		1.45		1.45
Agency-guaranteed commercial collateralized mortgage obligations	—		—		—		2.09		2.09



Private label collateralized mortgage obligations	—		—		—		2.30		2.30

Weighted-average yield	—	%	—	%	—	%	2.24	%	2.24	%

The agency-guaranteed mortgage-backed securities and collateralized mortgage obligations in the portfolio were issued by Fannie Mae, Freddie Mac and Ginnie Mae, and contain guarantees for the collection of principal and interest on the underlying mortgages. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

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); Harrisburg, Pennsylvania (Dauphin County); Rye Brook, New York (Westchester County); Hamilton, New Jersey (Mercer County); Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire (Rockingham County); Manhattan and Melville, New York; Washington, D.C.; Chicago, Illinois; Dallas, Texas; Orlando, Florida and Wilmington, North Carolina. The portfolio of loans to mortgage ~~banking businesses~~companies 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 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 and medical loans through arrangements with fintech companies and other market place lenders nationwide.

Commercial Lending

Customers' commercial lending is divided into six groups: Business Banking, Small and Middle Market Business Banking, Specialty Banking, Multi-Family and Commercial Real Estate Lending, Mortgage Banking Lending, and SBA Lending. 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. To further build its franchise and support the growth of its commercial lending initiatives, Customers added three new verticals during 2021 within its Specialty Banking business which included fund finance, technology and venture capital banking and financial institutions group. These three new verticals provide financing to the private equity industry and cash management services to the alternative investment industry. Prior to adding these new verticals, its Specialty Banking business included lending to mortgage banking companies, equipment finance, warehouse lending, healthcare lending and real estate specialty finance. Customers also launched a pilot digital small balance 7(a) lending within its existing SBA Lending business in third quarter 2021.

As of ~~March 31,~~September 30, 2022, Customers had ~~$11.7~~$13.4 billion in commercial loans outstanding, totaling approximately ~~82.8%~~87.5% of its total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage warehouse, at fair value and PPP loans, compared to commercial loans outstanding of $12.4 billion, comprising approximately 85.3% of its total loan and lease portfolio at December 31, 2021. Included in the ~~$11.7~~$13.4 billion and $12.4 billion in commercial loans outstanding as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively, were ~~$2.2~~$1.2 billion and $3.3 billion of PPP loans, respectively. The PPP loans are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and earn a fixed interest rate of 1.00%.

~~Table of Content~~s

The commercial lending group focuses primarily on companies with annual revenues ranging from $1 million to $100 million, which typically have credit requirements between $0.5 million and $10 million. The small and middle market business banking platform originates loans, including SBA loans, through the branch network sales force and a team of dedicated relationship managers. The support administration of this platform is centralized, including technology, risk management, product management, marketing, performance tracking and overall strategy. Credit and sales training has been established for Customers' sales force, ensuring that it has small business experts in place providing appropriate financial solutions to the small business owners in its communities. The division approach focuses on industries that offer high asset quality and are deposit rich to drive profitability. Customers' SBA Lending includes digital small balance 7(a) lending.

Table of Conte n ts

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

Customers' lending to mortgage ~~banking businesses~~companies primarily provides financing to mortgage bankers for residential mortgage originations from loan closing until sale in the secondary market. The underlying residential loans are taken as collateral for Customers' commercial loans to the mortgage companies. As of ~~March 31,~~September 30, 2022 and December 31, 2021, commercial loans to mortgage ~~banking businesses~~companies totaled ~~$1.8~~$1.6 billion and $2.3 billion, respectively, and are reported as loans receivable, mortgage warehouse, at fair value on the consolidated balance sheet.

The Equipment Finance Group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The Equipment Finance Group is primarily focused on serving the following segments: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. As of September 30, 2022 and December 31, 2021, Customers had $520.0 million and $378.7 million, respectively, of equipment finance loans outstanding. As of September 30, 2022 and December 31, 2021, Customers had $145.6 million and $146.5 million of equipment finance leases outstanding, respectively. As of September 30, 2022 and December 31, 2021, Customers had $188.6 million and $117.4 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $54.0 million and $40.7 million, respectively.

Customers had been deemphasizing its multi-family loan portfolio, and investing in high credit quality higher-yielding commercial and industrial loans with the multi-family run-off. Customers began to grow the multi-family loan portfolio in late 2021. Customers' multi-family lending group is focused on retaining a portfolio of high-quality multi-family loans within Customers' covered markets. These lending activities primarily target the refinancing of loans with other banks using conservative underwriting standards 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,~~September 30, 2022, Customers had multi-family loans of ~~$1.7~~$2.3 billion outstanding, comprising approximately ~~12.1%~~14.8% of the total loan and lease portfolio, compared to $1.5 billion, or approximately 10.2% of the total loan and lease portfolio, at December 31, 2021.

The Equipment Finance Group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. CCF is primarily focused on serving the following segments: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. As of March 31, 2022 and December 31, 2021, Customers had $406.9 million and $378.7 million, respectively, of equipment finance loans outstanding. As of March 31, 2022 and December 31, 2021, Customers had $150.7 million and $146.5 million of equipment finance leases outstanding, respectively. As of March 31, 2022 and December 31, 2021, Customers had $115.4 million and $117.4 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $43.8 million and $40.7 million, respectively.

Customers, directly or through fintech partnerships and acquisitions, had ~~$2.2~~$1.2 billion and $3.3 billion of PPP loans outstanding as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively, which are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and earn a fixed interest rate of 1.00%. The average loan size of the PPP portfolio from the first two rounds is approximately $50 thousand and approximately $20 thousand from the latest round.

Consumer Lending

Customers provides unsecured consumer installment loans, residential mortgage and home equity loans to customers nationwide primarily through relationships with fintech companies. The installment loan portfolio consists largely of originated and purchased personal, student loan refinancing, ~~and~~ home improvement and medical loans. ~~Customers has executed digitally over $1.3 billion in direct personal loan originations.~~ 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,~~September 30, 2022, Customers had ~~$2.4~~$1.9 billion in consumer loans outstanding, or ~~17.2%~~12.5% of the total loan and lease portfolio, compared to $2.1 billion, or 14.7% of the total loan and lease portfolio, as of December 31, 2021.

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Purchases and sales of loans were as follows for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	(amounts in thousands)	2022		2021			(amounts in thousands)	2022		2021		2022		2021
Purchases (1)	Purchases (1)						Purchases (1)

Loan receivable, PPP							Loan receivable, PPP	$	—	$	602,175	$	—	$	1,223,662

Residential real estate	Residential real estate	$	146,874	$	—		Residential real estate	15,067		—		170,022		—

Installment (2)		59,456		115,849

Personal installment (2)							Personal installment (2)	47,778		—		123,785		109,142
Other installment (2)							Other installment (2)	74,969		50,001		74,969		56,708
Total	Total	$	206,330	$	115,849		Total	$	137,814	$	652,176	$	368,776	$	1,389,512
Sales (3)	Sales (3)						Sales (3)

Commercial and industrial (4)		$	8,840	$	18,931
Specialty lending							Specialty lending	$	2,200	$	—	$	2,200	$	—
Other commercial and industrial (4)							Other commercial and industrial (4)	—		6,176		22,880		35,166
Multi-family							Multi-family	—		—		2,879		19,443
Commercial real estate owner occupied (4)	Commercial real estate owner occupied (4)	5,441		2,237			Commercial real estate owner occupied (4)	—		5,728		8,960		12,426
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	—		14,549		—		42,735

Personal installment (5)							Personal installment (5)	500,001		103,897		500,001		132,715

Total	Total	$	14,281	$	39,534		Total	$	502,201	$	130,350	$	536,920	$	260,851

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was ~~98.1%~~99.9% and 99.2% of the loans' unpaid principal balance for the three months ended September 30, 2022 and 2021, respectively. The purchase price was 98.7% and 101.0% of the loans' unpaid principal balance ~~during~~for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, respectively.

(3)For the three months ended ~~March 31,~~September 30, 2022 and 2021, loan sales resulted in net losses of $23.4 million and net gains of ~~$2.1 million and $1.6~~$5.8 million, respectively, included in gain (loss) on sale of SBA and other loans and ~~mortgage banking income~~loss on sale of consumer installment loans (refer to (5) below) in the consolidated statements of income. For the nine months ended September 30, 2022 and 2021, loan sales resulted in net gains of $19.7 million and $10.1 million, respectively.

(4)Primarily sales of SBA loans.

(5)On September 30, 2022, Customers sold $521.8 million of consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE. Customers provided financing to the purchaser for a portion of the sales price in the form of $400.0 million of asset-backed securities. $100.7 million of the remaining sales proceeds were paid in cash. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

Loans Held for Sale

The composition of loans held for sale as of ~~March 31,~~September 30, 2022 and December 31, 2021 was as follows:


(amounts in thousands)	(amounts in thousands)	March 31, 2022		December 31, 2021		(amounts in thousands)	September 30, 2022		December 31, 2021
Commercial loans:						Commercial loans:
Multi-family loans, at lower of cost or fair value						Multi-family loans, at lower of cost or fair value	$	4,108	$	—

Total commercial loans held for sale						Total commercial loans held for sale	4,108		—
Consumer loans:	Consumer loans:					Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value	Home equity conversion mortgages, at lower of cost or fair value	$	507	$	507	Home equity conversion mortgages, at lower of cost or fair value	507		507
Residential mortgage loans, at fair value	Residential mortgage loans, at fair value	2,496		15,747		Residential mortgage loans, at fair value	609		15,747

Total consumer loans held for sale	Total consumer loans held for sale	3,003		16,254		Total consumer loans held for sale	1,116		16,254
Loans held for sale	Loans held for sale	$	3,003	$	16,254	Loans held for sale	$	5,224	$	16,254

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

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Total Loans and Leases Receivable

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


(amounts in thousands)	(amounts in thousands)	March 31, 2022		December 31, 2021		(amounts in thousands)	September 30, 2022		December 31, 2021
Loans and leases receivable, mortgage warehouse, at fair value	Loans and leases receivable, mortgage warehouse, at fair value	$	1,755,758	$	2,284,325	Loans and leases receivable, mortgage warehouse, at fair value	$	1,569,090	$	2,284,325

Loans receivable, PPP	Loans receivable, PPP	2,195,902		3,250,008		Loans receivable, PPP	1,154,632		3,250,008
Loans and leases receivable:	Loans and leases receivable:					Loans and leases receivable:
Commercial:	Commercial:					Commercial:
Commercial and industrial:						Commercial and industrial:

Specialty lending (1)						Specialty lending (1)	5,103,974		2,403,991
Other commercial and industrial						Other commercial and industrial	1,203,829		1,020,792
Multi-family	Multi-family	1,705,027		1,486,308		Multi-family	2,263,268		1,486,308
Commercial and industrial (1)		3,995,802		3,424,783
Commercial real estate owner occupied	Commercial real estate owner occupied	701,893		654,922		Commercial real estate owner occupied	726,670		654,922
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,140,311		1,121,238		Commercial real estate non-owner occupied	1,263,211		1,121,238
Construction	Construction	161,024		198,981		Construction	136,133		198,981
Total commercial loans and leases receivable	Total commercial loans and leases receivable	7,704,057		6,886,232		Total commercial loans and leases receivable	10,697,085		6,886,232
Consumer:	Consumer:					Consumer:
Residential real estate	Residential real estate	466,423		334,730		Residential real estate	465,772		334,730
Manufactured housing	Manufactured housing	50,669		52,861		Manufactured housing	46,990		52,861
Installment		1,897,706		1,744,475

Installment:						Installment:
Personal						Personal	1,056,432		1,392,862
Other						Other	341,463		351,613

Total consumer loans receivable	Total consumer loans receivable	2,414,798		2,132,066		Total consumer loans receivable	1,910,657		2,132,066
Loans and leases receivable	Loans and leases receivable	10,118,855		9,018,298		Loans and leases receivable	12,607,742		9,018,298
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(145,847)		(137,804)		Allowance for credit losses on loans and leases	(130,197)		(137,804)
Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	$	13,924,668	$	14,414,827	Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	$	15,201,267	$	14,414,827

(1)Includes direct finance equipment leases of ~~$150.7~~$145.6 million and $146.5 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of ~~$(22.8)~~$(21.0) million and $(52.0) million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

Loans receivable, PPP

Customers had ~~$2.2~~$1.2 billion and $3.3 billion of PPP loans outstanding as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively, which are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and earn a fixed interest rate of 1.00%. Customers recognized interest income, including origination fees, of ~~$36.9~~$14.7 million and ~~$38.8~~$72.1 million for the three and nine months ended ~~March 31,~~September 30, 2022, respectively. Customers recognized interest income, including origination fees, of $117.1 million and $197.1 million for the three and nine months ended September 30, 2021, respectively.

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,~~September 30, 2022, 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 ~~$1.8~~$1.6 billion and $2.3 billion at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

6577

Table of ~~Content~~Conte n ts

On June 30, 2022, one of Customers’ commercial mortgage warehouse borrowers filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. As of September 30, 2022, Customers had an outstanding loan balance with the borrower of $6.0 million in an unsecured working capital loan that was fully guaranteed by an affiliate of the primary shareholder of the borrower. Customers' loan to the borrower subject to a master repurchase agreement secured by first lien residential mortgages was fully repaid during the three months ended September 30, 2022.

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 ~~$15.3~~a benefit to provision for credit losses of $7.8 million and a ~~benefit~~provision for credit losses of ~~$2.9~~$13.2 million for the three months ended ~~March 31,~~September 30, 2022 and 2021, respectively. The provision for credit losses on loans and leases was $31.6 million and $13.5 million for the nine months ended September 30, 2022 and 2021, 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 ~~$145.8~~$130.2 million, or ~~1.44%~~1.03% of loans and leases receivable, excluding PPP loans, at ~~March 31,~~September 30, 2022 and $137.8 million, or 1.53% of loans and leases receivable, excluding PPP loans, at December 31, 2021. 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 ~~increase~~decrease in the ACL resulted primarily from ~~higher ACL for~~ the sale of consumer installment loans to a third-party sponsored VIE, partially offset by loan growth inand deteriorating macroeconomic forecasts. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the ~~loan portfolio for~~sale of consumer installment ~~residential, multi-family loans and commercial and industrial~~ loans. Net charge-offs were ~~$7.2~~$18.5 million for the three months ended ~~March 31,~~September 30, 2022, ~~a decrease~~an increase of ~~$5.3~~$11.4 million compared to the same period in 2021. Net charge-offs were $39.2 million for the nine months ended September 30, 2022, an increase of $13.0 million compared to the same period in 2021. The increase in net charge-offs was primarily due to a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit, higher charge-offs for consumer installment loans and overdrawn deposit accounts. Installment charge-offs were attributable to unsecured consumer installment loans originated or purchased through arrangements with fintech companies and other market place lenders. Please refer to the table of changes in Customers' ACL for annualized net-charge offs to average loans by loan type for the periods indicated.

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,~~September 30, 2022 and December 31, 2021 is set forth below.


(dollars in thousands)	(dollars in thousands)	March 31, 2022			December 31, 2021			(dollars in thousands)	September 30, 2022			December 31, 2021
Loans and leases receivable (GAAP)	Loans and leases receivable (GAAP)	$	12,314,757		$	12,268,306		Loans and leases receivable (GAAP)	$	13,762,374		$	12,268,306
Less: Loans receivable, PPP	Less: Loans receivable, PPP	2,195,902			3,250,008			Less: Loans receivable, PPP	1,154,632			3,250,008
Loans and leases held for investment, excluding PPP (Non-GAAP)	Loans and leases held for investment, excluding PPP (Non-GAAP)	$	10,118,855		$	9,018,298		Loans and leases held for investment, excluding PPP (Non-GAAP)	$	12,607,742		$	9,018,298

ACL for loans and leases (GAAP)	ACL for loans and leases (GAAP)	$	145,847		$	137,804		ACL for loans and leases (GAAP)	$	130,197		$	137,804

Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP)	Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP)	1.44		%	1.53		%	Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP)	1.03		%	1.53		%

6678

Table of ~~Content~~Conte n ts

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

(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 March 31, 2022
Ending balance, December 31, 2021 $ 4,477 $ 12,702 $ 3,213 $ 6,210 $ 692 $ 2,383 $ 4,278 $ 103,849 $ 137,804
Charge-offs (1)
— (301) — — — (4) — (8,865) (9,170)
Recoveries (1)
337 360 7 8 113 6 — 1,113 1,944
Provision (benefit) for credit losses on loans and leases 2,623 (1,996) 621 (263) 134 2,300 64 11,786 15,269
Ending balance, March 31, 2022 $ 7,437 $ 10,765 $ 3,841 $ 5,955 $ 939 $ 4,685 $ 4,342 $ 107,883 $ 145,847
Three Months Ended March 31, 2021
Ending balance, at December 31, 2020 $ 12,620 $ 12,239 $ 9,512 $ 19,452 $ 5,871 $ 3,977 $ 5,190 $ 75,315 $ 144,176
Charge-offs (1)
(1,132) (635) (142) — — (50) — (12,687) (14,646)
Recoveries (1)
— 260 8 10 5 10 — 1,832 2,125
Provision (benefit) for credit losses on loans and leases (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
Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended March 31, 2022 0.09 % 0.01 % 0.00 % 0.00 % 0.24 % 0.00 % — % (1.75) % (0.32) %
Three Months Ended March 31, 2021 (0.27) % (0.07) % (0.09) % 0.00 % 0.01 % (0.05) % — % (3.33) % (0.67) %


(amounts in thousands)	Commercial and industrial (2)			Multi-family			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Construction			Residential real estate			Manufactured housing			Installment			Total
Three Months Ended September 30, 2022
Ending Balance, June 30, 2022	$	11,081		$	9,765		$	4,745		$	8,880		$	1,179		$	5,578		$	4,080		$	111,222		$	156,530

Charge-offs (1)	(2,657)			—			—			(4,862)			—			—			—			(13,965)			(21,484)
Recoveries (1)	76			—			—			31			10			13			—			2,857			2,987
Provision (benefit) for credit losses on loans and leases	6,631			4,479			1,475			7,283			425			(138)			402			(28,393)			(7,836)
Ending Balance, September 30, 2022	$	15,131		$	14,244		$	6,220		$	11,332		$	1,614		$	5,453		$	4,482		$	71,721		$	130,197
Nine Months Ended September 30, 2022
Ending Balance, December 31, 2021	$	12,702		$	4,477		$	3,213		$	6,210		$	692		$	2,383		$	4,278		$	103,849		$	137,804
Charge-offs (1)	(3,235)			(1,990)			—			(5,025)			—			(4)			—			(35,681)			(45,935)
Recoveries (1)	1,129			337			49			43			226			58			—			4,889			6,731
Provision (benefit) for credit losses on loans and leases	4,535			11,420			2,958			10,104			696			3,016			204			(1,336)			31,597
Ending Balance, September 30, 2022	$	15,131		$	14,244		$	6,220		$	11,332		$	1,614		$	5,453		$	4,482		$	71,721		$	130,197

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

Table of Conte n ts


(amounts in thousands)	Commercial and industrial (2)			Multi-family			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Construction			Residential real estate			Manufactured housing			Installment			Total
Three Months Ended September 30, 2021
Ending Balance, June 30, 2021	$	8,127		$	5,028		$	4,464		$	7,374		$	2,643		$	2,299		$	4,372		$	91,129		$	125,436
Charge-offs (1)	(516)			—			(524)			(943)			—			(79)			—			(6,693)			(8,755)
Recoveries (1)	400			—			474			—			3			25			—			749			1,651
Provision (benefit) for credit losses on loans and leases	2,849			(631)			(797)			944			(1,760)			(333)			38			12,854			13,164
Ending Balance, September 30, 2021	$	10,860		$	4,397		$	3,617		$	7,375		$	886		$	1,912		$	4,410		$	98,039		$	131,496
Nine Months Ended September 30, 2021
Ending Balance, December 31, 2020	$	12,239		$	12,620		$	9,512		$	19,452		$	5,871		$	3,977		$	5,190		$	75,315		$	144,176
Charge-offs (1)	(1,153)			(1,132)			(666)			(943)			—			(129)			—			(27,338)			(31,361)
Recoveries (1)	945			—			483			69			122			47			—			3,479			5,145
Provision (benefit) for credit losses on loans and leases	(1,171)			(7,091)			(5,712)			(11,203)			(5,107)			(1,983)			(780)			46,583			13,536
Ending Balance, September 30, 2021	$	10,860		$	4,397		$	3,617		$	7,375		$	886		$	1,912		$	4,410		$	98,039		$	131,496

Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended September 30, 2021	(0.02)		%	—		%	(0.03)		%	(0.32)		%	0.01		%	(0.08)		%	—		%	(1.48)		%	(0.36)		%
Nine Months Ended September 30, 2021	(0.01)		%	(0.10)		%	(0.04)		%	(0.10)		%	0.10		%	(0.04)		%	—		%	(2.19)		%	(0.46)		%

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

(2)Includes specialty lending.

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 and Estimates herein and "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' unaudited consolidated financial statements, also, refer to "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' audited consolidated financial statements in its 2021 Form 10-K for further discussion on management's methodology for estimating the ACL.

Approximately ~~51%~~44% 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

~~Table of Content~~s

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.

Table of Conte n ts

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 product or other characteristic generally defining a shared characteristic with other loans or leases in the same group. Charge-offs from originated and acquired loans and leases are absorbed by the ACL. Section 4013 of the CARES Act, as amended by the CAA, gave 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 offered practical expedients for evaluating whether loan modifications in response to the COVID-19 pandemic were 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. There were no commercial deferments related to COVID-19 at March 31, 2022 and December 31, 2021. Consumer deferments related to COVID-19 were $3.3 million and $6.1 million at March 31, 2022 and December 31, 2021, respectively. The schedule that follows includes both loans held for sale and loans held for investment.

Asset Quality at ~~March 31,~~September 30, 2022


(dollars in thousands)	(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)		(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)
Loan and Lease Type	Loan and Lease Type																			Loan and Lease Type
Commercial and industrial, including specialty lending																				Commercial and industrial, including specialty lending	$	6,307,803	$	6,300,457	$	2,658	$	610	$	4,078	$	—	$	4,078	0.06	%	0.06	%

Multi-family	Multi-family	$	1,705,027	$	1,676,468	$	10,690	$	—	$	17,869	$	—	$	17,869	1.05	%	1.05	%	Multi-family	2,263,268		2,262,110		—		—		1,158		—		1,158		0.05	%	0.05	%
Commercial and industrial		3,995,802		3,986,728		2,978		606		5,490		—		5,490		0.14	%	0.14	%
Commercial real estate owner occupied	Commercial real estate owner occupied	701,893		696,835		2,867		—		2,191		—		2,191		0.31	%	0.31	%	Commercial real estate owner occupied	726,670		724,357		115		—		2,198		—		2,198		0.30	%	0.30	%
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,140,311		1,139,009		—		—		1,302		—		1,302		0.11	%	0.11	%	Commercial real estate non-owner occupied	1,263,211		1,262,887		324		—		—		—		—		—	%	—	%
Construction	Construction	161,024		161,024		—		—		—		—		—		—	%	—	%	Construction	136,133		136,133		—		—		—		—		—		—	%	—	%
Total commercial loans and leases receivable	Total commercial loans and leases receivable	7,704,057		7,660,064		16,535		606		26,852		—		26,852		0.35	%	0.35	%	Total commercial loans and leases receivable	10,697,085		10,685,944		3,097		610		7,434		—		7,434		0.07	%	0.07	%
Residential	Residential	466,423		453,692		4,607		—		8,124		35		8,159		1.74	%	1.75	%	Residential	465,772		457,619		1,715		—		6,438		35		6,473		1.38	%	1.39	%
Manufactured housing	Manufactured housing	50,669		44,926		1,254		1,059		3,430		51		3,481		6.77	%	6.86	%	Manufactured housing	46,990		41,727		1,826		853		2,584		11		2,595		5.50	%	5.52	%
Installment	Installment	1,897,706		1,879,999		12,842		—		4,865		—		4,865		0.26	%	0.26	%	Installment	1,397,895		1,371,444		19,603		—		6,848		—		6,848		0.49	%	0.49	%

Total consumer loans receivable	Total consumer loans receivable	2,414,798		2,378,617		18,703		1,059		16,419		86		16,505		0.68	%	0.68	%	Total consumer loans receivable	1,910,657		1,870,790		23,144		853		15,870		46		15,916		0.83	%	0.83	%
Loans and leases receivable (1)	Loans and leases receivable (1)	10,118,855		10,038,681		35,238		1,665		43,271		86		43,357		0.43	%	0.43	%	Loans and leases receivable (1)	12,607,742		12,556,734		26,241		1,463		23,304		46		23,350		0.18	%	0.19	%
Loans receivable, PPP (2)	Loans receivable, PPP (2)	2,195,902		2,195,902		—		—		—		—		—		—	%	—	%	Loans receivable, PPP (2)	1,154,632		1,154,632		—		—		—		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	Loans receivable, mortgage warehouse, at fair value	1,755,758		1,755,758		—		—		—		—		—		—	%	—	%	Loans receivable, mortgage warehouse, at fair value	1,569,090		1,569,090		—		—		—		—		—		—	%	—	%

Total loans held for sale	Total loans held for sale	3,003		2,496		—		—		507		—		507		16.88	%	16.88	%	Total loans held for sale	5,224		609		—		—		4,615		—		4,615		88.34	%	88.34	%
Total portfolio	Total portfolio	$	14,073,518	$	13,992,837	$	35,238	$	1,665	$	43,778	$	86	$	43,864	0.31	%	0.31	%	Total portfolio	$	15,336,688	$	15,281,065	$	26,241	$	1,463	$	27,919	$	46	$	27,965	0.18	%	0.18	%

6881

Table of ~~Content~~Conte n ts

Asset Quality at ~~March 31,~~September 30, 2022 (continued)


(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 (%)
Loan and Lease Type	Loan and Lease Type							Loan and Lease Type
Commercial and industrial, including specialty lending													Commercial and industrial, including specialty lending	$	6,307,803	$	4,078	$	15,131	0.24	%	371.04	%

Multi-family	Multi-family	$	1,705,027	$	17,869	$	7,437		0.44	%	41.62	%	Multi-family	2,263,268		1,158		14,244		0.63	%	1,230.05	%
Commercial and industrial		3,995,802		5,490		10,765			0.27	%	196.08	%
Commercial real estate owner occupied	Commercial real estate owner occupied	701,893		2,191		3,841			0.55	%	175.31	%	Commercial real estate owner occupied	726,670		2,198		6,220		0.86	%	282.98	%
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,140,311		1,302		5,955			0.52	%	457.37	%	Commercial real estate non-owner occupied	1,263,211		—		11,332		0.90	%	—	%
Construction	Construction	161,024		—		939			0.58	%	—	%	Construction	136,133		—		1,614		1.19	%	—	%
Total commercial loans and leases receivable	Total commercial loans and leases receivable	7,704,057		26,852		28,937			0.38	%	107.76	%	Total commercial loans and leases receivable	10,697,085		7,434		48,541		0.45	%	652.96	%
Residential	Residential	466,423		8,124		4,685			1.00	%	57.67	%	Residential	465,772		6,438		5,453		1.17	%	84.70	%
Manufactured housing	Manufactured housing	50,669		3,430		4,342			8.57	%	126.59	%	Manufactured housing	46,990		2,584		4,482		9.54	%	173.45	%
Installment	Installment	1,897,706		4,865		107,883			5.68	%	2,217.53	%	Installment	1,397,895		6,848		71,721		5.13	%	1,047.33	%

Total consumer loans receivable	Total consumer loans receivable	2,414,798		16,419		116,910			4.84	%	712.04	%	Total consumer loans receivable	1,910,657		15,870		81,656		4.27	%	514.53	%
Loans and leases receivable (1)	Loans and leases receivable (1)	10,118,855		43,271		145,847			1.44	%	337.05	%	Loans and leases receivable (1)	12,607,742		23,304		130,197		1.03	%	558.69	%
Loans receivable, PPP (2)	Loans receivable, PPP (2)	2,195,902		—		—			—	%	—	%	Loans receivable, PPP (2)	1,154,632		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	Loans receivable, mortgage warehouse, at fair value	1,755,758		—		—			—	%	—	%	Loans receivable, mortgage warehouse, at fair value	1,569,090		—		—		—	%	—	%

Total loans held for sale	Total loans held for sale	3,003		507		—			—	%	—	%	Total loans held for sale	5,224		4,615		—		—	%	—	%
Total portfolio	Total portfolio	$	14,073,518	$	43,778	$	145,847		1.04	%	333.15	%	Total portfolio	$	15,336,688	$	27,919	$	130,197	0.85	%	466.34	%

(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.

(2) The tables exclude PPP loans of ~~$2.2~~$1.2 billion, of which ~~$37.8~~$274.4 million were 30-59 days past due and ~~$88.3~~$178.2 million were 60 days or more past due as of ~~March 31,~~September 30, 2022, and PPP loans of $3.3 billion, of which $6.3 million were 30-59 days past due and $21.8 million were 60 days or more past due as of December 31, 2021. Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.

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

A reconciliation of total loans and lease portfolio, excluding loans receivable, PPP and other related amounts, at ~~March 31,~~September 30, 2022, is set forth below.


(dollars in thousands)	(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)		(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)
Loans and leases receivable (GAAP)	Loans and leases receivable (GAAP)	$	14,073,518	$	13,992,837	$	35,238	$	1,665	$	43,778	$	86	$	43,864	0.31	%	0.31	%	Loans and leases receivable (GAAP)	$	15,336,688	$	15,281,065	$	26,241	$	1,463	$	27,919	$	46	$	27,965	0.18	%	0.18	%
Less: Loans receivable, PPP (1)	Less: Loans receivable, PPP (1)	2,195,902		2,195,902		—		—		—		—		—		—	%	—	%	Less: Loans receivable, PPP (1)	1,154,632		1,154,632		—		—		—		—		—		—	%	—	%
Loans receivable, excluding loans receivable, PPP (Non-GAAP)	Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	11,877,616	$	11,796,935	$	35,238	$	1,665	$	43,778	$	86	$	43,864	0.37	%	0.37	%	Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	14,182,056	$	14,126,433	$	26,241	$	1,463	$	27,919	$	46	$	27,965	0.20	%	0.20	%


(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)	$	14,073,518	$	43,778	$	145,847	1.04	%	333.15	%	Loans and leases receivable (GAAP)	$	15,336,688	$	27,919	$	130,197	0.85	%	466.34	%
Less: Loans receivable, PPP (1)	Less: Loans receivable, PPP (1)	2,195,902		—		—		—	%	—	%	Less: Loans receivable, PPP (1)	1,154,632		—		—		—	%	—	%
Loans receivable, excluding loans receivable, PPP (Non-GAAP)	Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	11,877,616	$	43,778	$	145,847	1.23	%	333.15	%	Loans receivable, excluding loans receivable, PPP (Non-GAAP)	$	14,182,056	$	27,919	$	130,197	0.92	%	466.34	%

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

The total loan and lease portfolio was ~~$14.1~~$15.3 billion at ~~March 31,~~September 30, 2022 compared to $14.6 billion at December 31, 2021, and ~~$43.8~~$27.9 million, or ~~0.31%~~0.18% of loans and leases, were non-performing at ~~March 31,~~September 30, 2022 compared to $49.6 million, or 0.34% of loans and leases, at December 31, 2021. The loan and lease portfolio was supported by an ACL of ~~$145.8~~$130.2 million ~~(333.15%~~(466.34% of NPLs and ~~1.04%~~0.85% of total loans and leases) and $137.8 million (277.72% of NPLs and 0.95% of total loans and leases), at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

6982

Table of ~~Content~~Conte n ts

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 digital banking, our white label relationship, deposit brokers, listing services and other relationships. In 2021, Customers began accepting non-interest bearing demand deposits from new customers for the TassatPay instant blockchain payments ~~platform which launched in October 2021.~~platform. Customers Bank provides blockchain-based digital payments via CBIT, which allows clients to make instant payments in U.S. dollars. CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in ~~non-interest bearing deposits~~deposit accounts at Customers Bank. As of ~~March~~September 30, 2022 and December 31, ~~2022,~~2021, Customers Bank held ~~$1.8~~$1.9 billion of deposits from customers participating in ~~CBIT.~~CBIT, which are reported as deposit liabilities in the consolidated balance sheets. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payment platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The omnibus deposit account established for the CBIT instant payment platform had an outstanding balance of $50 thousand at September 30, 2022 and no outstanding balance at December 31, 2021.

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


(dollars in thousands)	(dollars in thousands)	March 31, 2022		December 31, 2021		Change		% Change		(dollars in thousands)	September 30, 2022		December 31, 2021		Change		% Change
Demand, non-interest bearing	Demand, non-interest bearing	$	4,594,428	$	4,459,790	$	134,638	3.0	%	Demand, non-interest bearing	$	2,993,793	$	4,459,790	$	(1,465,997)	(32.9)	%
Demand, interest bearing	Demand, interest bearing	5,591,468		6,488,406		(896,938)		(13.8)	%	Demand, interest bearing	7,124,663		6,488,406		636,257		9.8	%
Savings, including MMDA	Savings, including MMDA	5,783,472		5,322,390		461,082		8.7	%	Savings, including MMDA	5,505,969		5,322,390		183,579		3.4	%
Non-time deposits	Non-time deposits	15,969,368		16,270,586		(301,218)		(1.9)	%	Non-time deposits	15,624,425		16,270,586		(646,161)		(4.0)	%

Time deposits	Time deposits	446,192		507,338		(61,146)		(12.1)	%	Time deposits	1,898,013		507,338		1,390,675		274.1	%
Total deposits	Total deposits	$	16,415,560	$	16,777,924	$	(362,364)	(2.2)	%	Total deposits	$	17,522,438	$	16,777,924	$	744,514	4.4	%

Total deposits were ~~$16.4~~$17.5 billion at ~~March 31,~~September 30, 2022, ~~a decrease~~an increase of ~~$362.4~~$744.5 million, or ~~2.2%~~4.4%, from $16.8 billion at December 31, 2021. ~~Interest~~Time deposits increased by $1.4 billion, or 274.1%, to $1.9 billion at September 30, 2022, from $507.3 million at December 31, 2021, interest bearing demand deposits ~~decreased~~increased by ~~$896.9~~$636.3 million or ~~13.8%~~9.8%, to ~~$5.6~~$7.1 billion at ~~March 31,~~September 30, 2022, from $6.5 billion at December 31, 2021 and ~~time deposits decreased~~savings, including MMDA increased by ~~$61.1~~$183.6 million, or ~~12.1%~~3.4%, to ~~$446.2 million~~$5.5 billion at ~~March 31,~~September 30, 2022, from ~~$507.3 million~~$5.3 billion at December 31, 2021. These ~~decreases~~increases were partially offset by ~~increases~~a decrease in non-interest bearing demand deposits of ~~$134.6 million,~~$1.5 billion, or ~~3.0%~~32.9%, to ~~$4.6~~$3.0 billion at ~~March 31,~~September 30, 2022 from $4.5 billion at December 31, 2021, ~~and savings, including~~primarily due to a transfer by a customer participating in CBIT to a MMDA ~~of $461.1 million, or 8.7%, to $5.8 billion~~during the three months ended September 30, 2022.

Total deposits at ~~March 31,~~September 30, 2022 ~~from $5.3 billion at~~and December 31, ~~2021. The shift in the mix~~2021 include $1.6 billion and $1.8 billion, respectively, of deposits ~~primarily resulted from~~serviced by BM Technologies under a deposit servicing agreement, which are expected to leave Customers Bank by June 30, 2023. The deposit servicing agreement was scheduled to expire on December 31, 2022. On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. Customers and BM Technologies also agreed to remove Customers' ~~initiative~~obligation under the deposit servicing agreement to ~~improve its net interest margin by expanding its sources~~pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of ~~lower-cost funding.~~the deposit servicing agreement remain in effect through the new termination date. For additional information refer to NOTE 17 — SUBSEQUENT EVENTS in Customers' unaudited consolidated financial statements.

The total amount of estimated uninsured deposits totaled ~~$11.4~~$12.5 billion and $12.1 billion at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. Time deposits greater than the FDIC limit of $250,000 totaled ~~$169.3 million~~$1.7 billion and $259.0 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

At ~~March 31,~~September 30, 2022, the Bank had ~~$141.5~~$61.1 million in state and municipal deposits to which it had pledged ~~$123.4~~$61.4 million of available borrowing capacity through the FHLB to the depositors through a letter of credit arrangement.

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.

Table of Conte n ts

Short-term debt

Short-term debt at ~~March 31,~~September 30, 2022 and December 31, 2021 was as follows:


		March 31, 2022				December 31, 2021					September 30, 2022				December 31, 2021
(dollars in thousands)	(dollars in thousands)	Amount		Rate		Amount		Rate		(dollars in thousands)	Amount		Rate		Amount		Rate

FHLB advances	FHLB advances	$	—	—	%	$	700,000	0.26	%	FHLB advances	$	—	—	%	$	700,000	0.26	%
Federal funds purchased	Federal funds purchased	700,000		0.40	%	75,000		0.05	%	Federal funds purchased	365,000		3.23	%	75,000		0.05	%
Total short-term debt	Total short-term debt	$	700,000			$	775,000			Total short-term debt	$	365,000			$	775,000

Long-term debt

FHLB and FRB Advances

~~There were no long-term~~Long-term FHLB and FRB advances ~~outstanding with the FHLB or FRB~~ at ~~March 31,~~September 30, 2022 and December 31, ~~2021.~~2021 were as follows.

~~Table of Content~~s


	September 30, 2022				December 31, 2021
(dollars in thousands)	Amount		Rate		Amount		Rate
FHLB advances (1)	$	500,000	3.37	%	$	—	—	%

Total long-term FHLB and FRB advances	$	500,000			$	—

~~Beginning in second quarter 2020, Customers began participating~~(1) Amounts reported in the ~~PPPLF, in which Federal Reserve Banks extend non-recourse loans to institutions~~above table include long-term advances from FHLB of $250 million with a fixed rate of 3.44%, maturity of June 2024 with a returnable option that ~~are eligible to make PPP loans. Only PPP loans that are guaranteed by the SBA under the PPP,~~can be repaid without penalty on certain predetermined dates at Customers Bank's option, and $250 million with ~~respect to both principal~~a fixed rate of 3.30% and interest that are originated or purchased by an eligible institution, may be pledged as collateral to the Federal Reserve Banks. During the three months ended September 30, 2021, Customers repaid the PPPLF advances. No new advances are available from the PPPLF after July 30, 2021.maturity of June 2027.

The maximum borrowing capacity with the FHLB and FRB at ~~March 31,~~September 30, 2022 and December 31, 2021 was as follows:
(dollars in thousands) March 31, 2022 December 31, 2021
Total maximum borrowing capacity with the FHLB $ 3,337,211 $ 2,973,635
Total maximum borrowing capacity with the FRB (1)
214,908 183,052
Qualifying loans serving as collateral against FHLB and FRB advances (1)
4,218,252 3,594,339


(dollars in thousands)	September 30, 2022		December 31, 2021
Total maximum borrowing capacity with the FHLB	$	3,560,959	$	2,973,635
Total maximum borrowing capacity with the FRB (1)	2,557,704		183,052
Qualifying loans serving as collateral against FHLB and FRB advances (1)	7,543,384		3,594,339

Table of Conte n ts

Senior Notes and Subordinated Debt

Long-term senior notes and subordinated debt at ~~March 31,~~September 30, 2022 and December 31, 2021 were as follows:


			March 31, 2022			December 31, 2021															September 30, 2022			December 31, 2021
(dollars in thousands)	(dollars in thousands)													(dollars in thousands)
Issued by	Issued by	Ranking			Carrying Amount			Carrying Amount		Rate		Issued Amount	Date Issued		Maturity			Price		Issued by			Ranking			Carrying Amount		Carrying Amount		Rate	Issued Amount	Date Issued		Maturity	Price
Customers Bancorp	Customers Bancorp	Senior (1)	$	99,844		$	98,642	2.875	%	$	100,000	August 2021	August 2031		100.000	%	Customers Bancorp		Senior (1)		$	98,753		$	98,642	2.875	%	$	100,000	August 2021	August 2031	100.000	%
Customers Bancorp	Customers Bancorp	Senior	24,702			24,672		4.500	%	25,000		September 2019	September 2024		100.000	%	Customers Bancorp		Senior		24,762			24,672		4.500	%	25,000		September 2019	September 2024	100.000	%
Customers Bancorp	Customers Bancorp	Senior	98,684			99,772		3.950	%	100,000		June 2017	June 2022		99.775	%	Customers Bancorp		Senior		—			99,772		3.950	%	100,000		June 2017	June 2022	99.775	%

Total other borrowings	Total other borrowings		$	223,230		$	223,086										Total other borrowings				$	123,515		$	223,086

Customers Bancorp	Customers Bancorp	Subordinated (2)(3)	$	72,448		$	72,403	5.375	%	$	74,750	December 2019	December 2034		100.000	%	Customers Bancorp		Subordinated (2)(3)		$	72,539		$	72,403	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Customers Bank	Subordinated (2)(4)	109,294			109,270		6.125	%	110,000		June 2014	June 2029		100.000	%	Customers Bank		Subordinated (2)(4)		109,343			109,270		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt	Total subordinated debt		$	181,742		$	181,673										Total subordinated debt				$	181,882		$	181,673

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

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

SHAREHOLDERS' EQUITY

The components of shareholders' equity were as follows at the dates indicated:
(dollars in thousands) March 31, 2022 December 31, 2021 Change % Change
Preferred stock $ 137,794 $ 137,794 $ — — %
Common stock 34,882 34,722 160 0.5 %
Additional paid in capital 542,402 542,391 11 — %
Retained earnings 780,628 705,732 74,896 10.6 %
Accumulated other comprehensive income (loss), net (62,548) (4,980) (57,568) 1,156.0 %
Treasury stock (55,752) (49,442) (6,310) 12.8 %
Total shareholders' equity $ 1,377,406 $ 1,366,217 $ 11,189 0.8 %

~~Table of Content~~s


(dollars in thousands)	September 30, 2022		December 31, 2021		Change		% Change
Preferred stock	$	137,794	$	137,794	$	—	—	%
Common stock	34,948		34,722		226		0.7	%
Additional paid in capital	549,066		542,391		6,675		1.2	%
Retained earnings	898,511		705,732		192,779		27.3	%
Accumulated other comprehensive income (loss), net	(156,126)		(4,980)		(151,146)		NM
Treasury stock	(77,262)		(49,442)		(27,820)		56.3	%
Total shareholders' equity	$	1,386,931	$	1,366,217	$	20,714	1.5	%

Shareholders’ equity increased ~~$11.2~~$20.7 million, or ~~0.8%~~1.5%, to $1.4 billion at ~~March 31,~~September 30, 2022 when compared to shareholders' equity of $1.4 billion at December 31, 2021. The increase primarily resulted from an increase of ~~$74.9~~$192.8 million in retained earnings, which was partially offset by a decrease of ~~$57.6~~$151.1 million in accumulated other comprehensive income (loss), net and an increase of ~~$6.3~~$27.8 million in treasury stock.

The increase in common stock and additional paid in capital resulted primarily from the issuance of common stock under share-based compensation arrangements for the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

The increase in retained earnings resulted from net income of ~~$76.8~~$199.3 million, partially offset by preferred stock dividends of ~~$1.9~~$6.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

The decrease in accumulated other comprehensive income (loss), net primarily resulted from a decrease of ~~$78.9~~$213.5 million in the fair value of AFS debt securities and income tax effect of ~~$20.5~~$55.5 million due to changes in market interest rates, partially offset by reclassification of ~~$1.1~~$9.3 million in net losses and income tax effect of ~~$0.3~~$2.4 million resulting from the sales of AFS debt securities during the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

Table of Conte n ts

On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). The term of the Share Repurchase Program will extend for one additional year ~~from~~to September 27, ~~2021,~~2023, unless earlier terminated. Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise. The exact number of shares, timing for such purchases, and the price and terms at and on which such purchases are to be made will be at the discretion of the Company and will comply with all applicable regulatory limitations. Customers Bancorp purchased ~~115,324~~664,145 shares of its common stock for ~~$6.3~~$27.8 million pursuant to the Share Repurchase Program during the ~~three~~nine months ended ~~March 31,~~September 30, 2022. Refer to "NOTE 1112 – SHAREHOLDERS' EQUITY" to Customers' unaudited consolidated financial statements for additional information on the repurchase of common shares.

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 that is sufficient to meet Customers' short-term and long-term needs, commitments and contractual obligations.

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

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.

Customers recognized a ~~credit to~~ provision for credit losses ~~(a benefit)~~ on unfunded lending-related commitments of ~~$0.1~~$0.3 million and $0.8 million during the three and nine months ended ~~March 31,~~September 30, 2022, respectively, resulting in an ACL of ~~$2.0~~$2.9 million as of ~~March 31,~~September 30, 2022. Customers had an ACL on unfunded lending-related commitments of $2.1 million as of December 31, 2021.

Customers' contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, federal funds purchased, short-term and long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of ~~March 31,~~September 30, 2022. ~~See~~These obligations and commitments include the transfer of deposits serviced by BM Technologies under the deposit service agreement, described further below under cash flows from discontinued operations, which are expected to leave Customers Bank on the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. Customers repaid $100.0 million of the 3.950% senior notes that matured in June 2022. Refer to "NOTE 9 – LEASES", "NOTE 10 – DEPOSITS" and "NOTE 1011 – BORROWINGS" to Customers' unaudited consolidated financial statements for additional information.

Customers' investment portfolio, including debt securities available for sale and held to maturity provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional 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,~~September 30, 2022, Customers' borrowing capacity with the FHLB was ~~$3.3~~$3.6 billion, of which ~~$123.4~~$500.0 million was utilized in borrowings and $61.4 million of available capacity was utilized to collateralize state and municipal deposits. As of December 31, 2021, Customers' borrowing capacity with the FHLB was $3.0 billion, of which $700.0 million was utilized in borrowings and $475.3 million of available capacity was utilized to collateralize state and municipal deposits. As of ~~March 31,~~September 30, 2022 and December 31, 2021, Customers' borrowing capacity with the FRB was ~~$214.9 million~~$2.6 billion and $183.1 million, respectively.

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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. As of ~~March 31,~~September 30, 2022, Customers had ~~$2.2~~$1.2 billion of PPP loans outstanding, which are eligible for forgiveness by the federal government. As of ~~March 31,~~September 30, 2022 and December 31, 2021, Customers had no borrowings under the PPPLF. No new advances are available from the PPPLF after July 30, 2021.

~~In October 2021,~~

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Customers Bank ~~launched~~provides blockchain-based digital payments via CBIT, ~~on the TassatPay blockchain-based~~which allows clients to make instant ~~B2B~~ payments platform, which serves a growing array of B2B clients who want the benefit of instant payments: including key over-the-counter desks, exchanges, liquidity providers, market makers, funds, and B2B verticals such as trading operations, real estate, manufacturing, and logistics.in U.S. dollars. CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in ~~non-interest bearing deposits~~deposit accounts at Customers Bank. CBIT is not listed or traded on any digital currency exchange. As of ~~March 31,~~September 30, 2022 and December 31, 2021, Customers Bank held ~~$1.8 billion and~~ $1.9 billion of deposits from customers participating in CBIT, ~~respectively.~~which are reported as deposit liabilities in the consolidated balance sheets. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payment platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The omnibus deposit account had an outstanding balance of $50 thousand at September 30, 2022 and no outstanding balance at December 31, 2021.

The table below summarizes Customers' cash flows from continuing operations for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021:


		Three Months Ended March 31,									Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2022		2021		Change		% Change		(dollars in thousands)	2022		2021		Change		% Change
Net cash provided by (used in) continuing operating activities	Net cash provided by (used in) continuing operating activities	$	116,940	$	200,384	$	(83,444)	(41.6)	%	Net cash provided by (used in) continuing operating activities	$	275,022	$	274,524	$	498	0.2	%
Net cash provided by (used in) continuing investing activities	Net cash provided by (used in) continuing investing activities	88,672		(526,654)		615,326		(116.8)	%	Net cash provided by (used in) continuing investing activities	(1,085,108)		(80,875)		(1,004,233)		NM
Net cash provided by (used in) continuing financing activities	Net cash provided by (used in) continuing financing activities	(449,044)		171,071		(620,115)		(362.5)	%	Net cash provided by (used in) continuing financing activities	696,519		187,842		508,677		270.8	%
Net increase (decrease) in cash and cash equivalents from continuing operations	Net increase (decrease) in cash and cash equivalents from continuing operations	$	(243,432)	$	(155,199)	$	(88,233)	56.9	%	Net increase (decrease) in cash and cash equivalents from continuing operations	$	(113,567)	$	381,491	$	(495,058)	(129.8)	%

Cash flows provided by (used in) continuing operating activities

Cash provided by continuing operating activities of ~~$116.9~~$275.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 resulted from net income from continuing operations of ~~$76.8~~$199.3 million, ~~and~~net non-cash operating adjustments of $42.7 million, a decrease in accrued interest receivable and other assets of ~~$66.9~~$16.9 million ~~partially offset by a decrease in accrued interest payable~~ and ~~other liabilities of $6.4 million and net non-cash operating adjustments of $20.2 million.~~

~~Cash provided by continuing operating activities of $200.4 million for the three months ended March 31, 2021 resulted from~~ an increase in accrued interest payable and other liabilities of ~~$135.7~~$16.1 million.

Cash provided by continuing operating activities of $274.5 million for the nine months ended September 30, 2021 resulted from net income from continuing operations of ~~$74.6~~$252.0 million, an increase in accrued interest payable and other liabilities of $136.3 million and a decrease of ~~$21.0~~$45.6 million in accrued interest receivable and other assets, partially offset by net non-cash operating adjustments of ~~$30.9~~$159.4 million.

Cash flows provided by (used in) continuing investing activities

Cash provided by continuing investing activities of $88.7 million for the three months ended March 31, 2022 primarily resulted from purchases of investment securities available for sale of $814.2 million and purchases of loans of $206.3 million, partially offset by proceeds from net repayments of mortgage warehouse loans of $536.6 million, proceeds from maturities, calls, and principal repayments of investment securities of $224.8 million, proceeds from sales of investment securities available for sale of $156.0 million, a net decrease in loans and leases, excluding mortgage warehouse loans of $159.7 million primarily from PPP loan forgiveness, proceeds from sales of loans and leases of $14.3 million, and net proceeds from sale of FHLB, FRB, and other restricted stock of $15.2 million.

~~Cash~~ used in continuing investing activities of ~~$526.7 million~~$1.1 billion for the ~~three~~nine months ended ~~March 31, 2021~~September 30, 2022 primarily resulted from a net increase in loans and leases, excluding mortgage warehouse loans of ~~$486.2 million primarily related to PPP loan originations,~~$1.6 billion, purchases of investment securities available for sale of ~~$589.9~~$929.8 million, purchases of loans of $368.8 million and purchases of ~~loans~~leased assets under lessor operating leases of ~~$117.0~~$86.8 million, partially offset by proceeds from sales of investment securities available for sale of ~~$353.9~~$681.6 million, proceeds from net repayments of mortgage warehouse loans of ~~$213.8~~$678.9 million, proceeds from maturities, calls, and principal repayments of investment securities available for sale of ~~$62.3~~$408.0 million and proceeds from sales of loans and leases of ~~$39.5~~$136.9 million, which included the cash proceeds of the sale of $521.8 million of consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans.

Cash used in continuing investing activities of $80.9 million for the nine months ended September 30, 2021 primarily resulted from purchases of investment securities available for sale of $1.4 billion, purchases of PPP and other loans of $1.4 billion and purchases of bank-owned life insurance of $46.5 million, partially offset by proceeds from net repayments of mortgage warehouse loans of $1.1 billion, proceeds from sales of investment securities available for sale of $666.0 million, a net decrease in loans and leases, excluding mortgage warehouse loans of $521.3 million primarily from PPP loan forgiveness, proceeds from sales of loans and leases of $260.9 million, proceeds from maturities, calls and principal repayments of investment securities available for sale of $258.4 million and net proceeds from sale of FHLB, FRB, and other restricted stock of $14.2 million.

Cash flows provided by (used in) continuing financing activities

Cash ~~used in~~provided by continuing financing activities of ~~$449.0~~$696.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 primarily resulted from a net increase in deposits of $744.5 million, proceeds from long-term borrowed funds from the FHLB of $500.0 million, a net increase in federal funds purchased of $290.0 million, partially offset by a net decrease in short-term borrowed funds from the FHLB of $700.0 million, ~~a net decrease~~repayments of other borrowings of $100.0 million upon maturity of the Customers Bancorp 3.950% senior notes in ~~deposits of $362.4 million~~June 2022 and purchases of treasury stock of ~~$6.3 million, partially offset by a net increase in federal funds purchased of $625.0~~$27.8 million.

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Cash provided by continuing financing activities of ~~$171.1~~$187.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 primarily resulted from net increases in deposits of ~~$1.2~~$5.7 billion and ~~$115.0~~the proceeds from issuance of the 2.875% fixed-to-floating rate senior notes of $98.8 million, ~~in federal funds purchased,~~ partially offset by a net decrease in long-term borrowed funds from the PPPLF of ~~$1.1~~$4.4 billion, ~~primarily~~the redemption of preferred stock of $82.5 million and decreases in short-term borrowed funds from the ~~forgiveness~~FHLB and federal funds purchased of ~~PPP loans~~$1.1 billion. Customers fully repaid the borrowings from the ~~first two rounds.~~PPPLF during the nine months ended September 30, 2021 due to increased PPP forgiveness and funding from deposits.

Cash flows from discontinued operations

Customers Bancorp completed the divestiture of BMT on January 4, 2021. 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. In connection with the divestiture, Customers 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. The deposit ~~service~~servicing agreement iswas scheduled to expire on December 31, 2022. On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. Customers and BM Technologies also agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date. For additional information refer to NOTE 17 — SUBSEQUENT EVENTS in Customers' unaudited consolidated financial statements. As of September 30, 2022 and ~~will not be renewed. As of March~~December 31, ~~2022,~~2021, Customers held ~~$2.2~~$1.6 billion and $1.8 billion of deposits serviced by BM Technologies, respectively, which are expected to leave Customers Bank by ~~December 31, 2022.~~the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. The loan agreement with BM Technologies was terminated early in November 2021. Customers entered into a special limited agency agreement with BM Technologies, whereby Customers will originate consumer installment loans referred by BM Technologies for an initial period from April 20, 2022 to December 31, 2022, which is renewable annually. For additional information refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements.

The table below summarizes Customers' cash flows from discontinued operations for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021:


		Three Months Ended March 31,									Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2022		2021		Change		% Change		(dollars in thousands)	2022		2021		Change		% Change
Net cash provided by (used in) discontinued operating activities	Net cash provided by (used in) discontinued operating activities	$	—	$	(22,791)	$	22,791	(100.0)	%	Net cash provided by (used in) discontinued operating activities	$	—	$	(22,791)	$	22,791	(100.0)	%

Net increase (decrease) in cash and cash equivalents from discontinued operations	Net increase (decrease) in cash and cash equivalents from discontinued operations	$	—	$	(22,791)	$	22,791	(100.0)	%	Net increase (decrease) in cash and cash equivalents from discontinued operations	$	—	$	(22,791)	$	22,791	(100.0)	%

Cash flows provided by (used in) discontinued operating activities

Cash used in discontinued operating activities of $22.8 million for the ~~three~~nine months ended ~~March 31,~~September 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.

CAPITAL ADEQUACY

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

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rule, which is reflected in the regulatory capital data presented below. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of ~~March 31,~~September 30, 2022, our regulatory capital ratios reflected 75%, or $46.2 million, benefit associated with the CECL transition provisions.

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

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capital to average assets (as defined in the regulations). At ~~March 31,~~September 30, 2022 and December 31, 2021, the Bank and the Bancorp met all capital adequacy requirements to which they were subject.

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


						Minimum Capital Levels to be Classified as:																	Minimum Capital Levels to be Classified as:
		Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant					Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant
(dollars in thousands)	(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of March 31, 2022:
As of September 30, 2022:																		As of September 30, 2022:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)																	Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,344,684	9.893	%	$	611,629	4.500	%	N/A		N/A		$	951,423	7.000	%	Customers Bancorp, Inc.	$	1,447,890	9.845	%	$	661,804	4.500	%	N/A		N/A		$	1,029,472	7.000	%
Customers Bank	Customers Bank	$	1,573,796	11.598	%	$	610,658	4.500	%	$	882,062	6.500	%	$	949,913	7.000	%	Customers Bank	$	1,676,998	11.420	%	$	660,807	4.500	%	$	954,499	6.500	%	$	1,027,922	7.000	%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)																	Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,482,477	10.907	%	$	815,505	6.000	%	N/A		N/A		$	1,155,299	8.500	%	Customers Bancorp, Inc.	$	1,585,683	10.782	%	$	882,405	6.000	%	N/A		N/A		$	1,250,073	8.500	%
Customers Bank	Customers Bank	$	1,573,796	11.598	%	$	814,211	6.000	%	$	1,085,615	8.000	%	$	1,153,466	8.500	%	Customers Bank	$	1,676,998	11.420	%	$	881,076	6.000	%	$	1,174,768	8.000	%	$	1,248,191	8.500	%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)																	Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,749,655	12.873	%	$	1,087,340	8.000	%	N/A		N/A		$	1,427,134	10.500	%	Customers Bancorp, Inc.	$	1,838,179	12.499	%	$	1,176,540	8.000	%	N/A		N/A		$	1,544,208	10.500	%
Customers Bank	Customers Bank	$	1,768,525	13.032	%	$	1,085,615	8.000	%	$	1,357,019	10.000	%	$	1,424,870	10.500	%	Customers Bank	$	1,856,955	12.646	%	$	1,174,768	8.000	%	$	1,468,460	10.000	%	$	1,541,883	10.500	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)																	Tier 1 capital (to average assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,482,477	7.723	%	$	767,836	4.000	%	N/A		N/A		$	767,836	4.000	%	Customers Bancorp, Inc.	$	1,585,683	7.650	%	$	829,133	4.000	%	N/A		N/A		$	829,133	4.000	%
Customers Bank	Customers Bank	$	1,573,796	8.211	%	$	766,712	4.000	%	$	958,391	5.000	%	$	766,712	4.000	%	Customers Bank	$	1,676,998	8.099	%	$	828,289	4.000	%	$	1,035,361	5.000	%	$	828,289	4.000	%
As of December 31, 2021:	As of December 31, 2021:																	As of December 31, 2021:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)																	Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,291,270	9.981	%	$	582,179	4.500	%	N/A		N/A		$	905,611	7.000	%	Customers Bancorp, Inc.	$	1,291,270	9.981	%	$	582,179	4.500	%	N/A		N/A		$	905,611	7.000	%
Customers Bank	Customers Bank	$	1,526,583	11.825	%	$	580,943	4.500	%	$	839,140	6.500	%	$	903,689	7.000	%	Customers Bank	$	1,526,583	11.825	%	$	580,943	4.500	%	$	839,140	6.500	%	$	903,689	7.000	%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)																	Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,429,063	11.046	%	$	776,238	6.000	%	N/A		N/A		$	1,099,671	8.500	%	Customers Bancorp, Inc.	$	1,429,063	11.046	%	$	776,238	6.000	%	N/A		N/A		$	1,099,671	8.500	%
Customers Bank	Customers Bank	$	1,526,583	11.825	%	$	774,591	6.000	%	$	1,032,788	8.000	%	$	1,097,337	8.500	%	Customers Bank	$	1,526,583	11.825	%	$	774,591	6.000	%	$	1,032,788	8.000	%	$	1,097,337	8.500	%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)																	Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,667,395	12.888	%	$	1,034,984	8.000	%	N/A		N/A		$	1,358,417	10.500	%	Customers Bancorp, Inc.	$	1,667,395	12.888	%	$	1,034,984	8.000	%	N/A		N/A		$	1,358,417	10.500	%
Customers Bank	Customers Bank	$	1,692,512	13.110	%	$	1,032,788	8.000	%	$	1,290,985	10.000	%	$	1,355,534	10.500	%	Customers Bank	$	1,692,512	13.110	%	$	1,032,788	8.000	%	$	1,290,985	10.000	%	$	1,355,534	10.500	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)																	Tier 1 capital (to average assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,429,063	7.413	%	$	771,084	4.000	%	N/A		N/A		$	771,084	4.000	%	Customers Bancorp, Inc.	$	1,429,063	7.413	%	$	771,084	4.000	%	N/A		N/A		$	771,084	4.000	%
Customers Bank	Customers Bank	$	1,526,583	7.925	%	$	770,528	4.000	%	$	963,160	5.000	%	$	770,528	4.000	%	Customers Bank	$	1,526,583	7.925	%	$	770,528	4.000	%	$	963,160	5.000	%	$	770,528	4.000	%

The Basel III Capital Rules require that we maintain a 2.500% capital conservation buffer with respect to each of common equity Tier 1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a capital conservation buffer of less than the required amount is subject to limitations on

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capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. As of ~~March 31,~~September 30, 2022, the Bank and the Bancorp were in compliance with the Basel III requirements. See "NOTE 1213 – REGULATORY CAPITAL" to Customers' unaudited consolidated financial statements for additional discussion regarding regulatory capital requirements.

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

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growth and distribution of bank loans and leases, investments, and deposits, and their use may also affect rates charged on loans and leases or paid for deposits.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

The largest component of 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.

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,~~September 30, 2023 and December 31, 2022, based upon the assets, liabilities and off-balance sheet financial instruments in existence at ~~March 31,~~September 30, 2022 and December 31, 2021. 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,~~September 30, 2022, current market interest rates were increased immediately by 100, 200, and 300 basis points. ~~In the current interest~~For downward rate shocks modeling a falling rate environment ~~particularly for short term~~on September 30, 2022, current market interest rates ~~the Down~~were decreased immediately by 100, ~~to Down~~200 and 300 basis ~~point scenarios are not shown due to the unrealistic and/or negative yield nature of the results.~~points. The following table reflects the estimated percentage change in estimated net interest income for the twelve months ending ~~March 31,~~September 30, 2023 and December 31, 2022, resulting from changes in interest rates.

Net change in net interest income

% Change

Rate Shocks

March 31, 2022

December 31, 2021

Rate Shocks

September 30, 2022

December 31, 2021

Up 3%

7.1%

16.0%

Up 3%

8.1%

16.0%

Up 2%

5.1%

10.8%

Up 2%

5.5%

10.8%

Up 1%

2.9%

5.7%

Up 1%

2.1%

5.7%

Down 1%

(5.2)%

N/A

Down 2%

(8.3)%

N/A

Down 3%

(13.3)%

N/A

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,~~September 30, 2022, current market interest rates were increased immediately by 100, 200, and 300 basis points. ~~Due to the limitations of the current low interest~~For downward rate shocks modeling a falling rate environment ~~the Down~~on September 30, 2022, current market interest rates were decreased immediately by 100, 200 and 300 basis point rate shocks 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.points. This method of measurement primarily evaluates the longer term repricing risks and options in Customers Bank’s balance sheet. The following table reflects the estimated EVE at risk and the ratio of EVE to EVE adjusted assets at ~~March 31,~~September 30, 2022 and December 31, 2021, resulting from shocks to interest

Table of Conte n ts

rates.

From Base

Rate Shocks

March 31, 2022

December 31, 2021

Rate Shocks

September 30, 2022

December 31, 2021

Up 3%

14.0%

100.7%

Up 3%

(18.2)%

100.7%

Up 2%

13.8%

79.8%

Up 2%

(11.4)%

79.8%

Up 1%

9.4%

51.5%

Up 1%

(6.0)%

51.5%

Down 1%

(8.6)%

N/A

Down 2%

(39.1)%

N/A

Down 3%

(61.1)%

N/A

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.

~~Table of Content~~s

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,~~September 30, 2022.

(b) Changes in Internal Control Over Financial Reporting. During the quarter ended ~~March 31,~~September 30, 2022, 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.

The emergence of the COVID-19 pandemic during first quarter 2020 necessitated the execution of several Customers Bancorp contingency plans. Beginning in March 2020, Customers Bancorp had a substantial number of its team members working remotely under such contingency plans. Since that time, Customers has launched the “Return to Workplace” initiative, and communicated a goal of having more team members return to the workplace. In that communication, Customers announced the following action steps along with a continuing commitment to remain empathetic and cognizant of balancing company principles, customer support, team members support and remaining vigilant on tracking and preventing COVID-19 exposures to protect our team members and customers. Customers implemented a “ hybrid model” encouraging and tracking the movement of more team members returning to the office, released a communication requiring all team members to read, sign and acknowledge a Code of Commitment to reveal exposures to COVID-19, thereby allowing Customers to manage the possible impact with 100 percent participation of our team members. Customers has started tracking vaccination rates and less than 10 percent of our team members are not vaccinated or not planning to be vaccinated. The execution of the contingency plans did not materially affect Customers' internal control over financial reporting.

7791

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

For information on Customers' legal proceedings, refer to “NOTE 1516 – 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 2021 Form 10-K. There are no material changes from the risk factors included within the 2021 Form ~~10-K.~~10-K, except for the risk factors involving third-party service providers as discussed below. The risks described within the 2021 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.”

We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have a material adverse effect on us.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party servicers. We outsource many of our major technology and business process functions, such as data processing, loan servicing and deposit processing systems to third-party service providers. If we do not effectively select, implement and monitor our outsourcing relationships, or if the third-party service providers do not adequately perform their services or are unable to continue to provide services to us as a result of their own operational or technological limitations or financial or other difficulties, our operations may be materially and adversely affected. While we select third-party service providers carefully, we do not control their operations and if they encounter difficulties, including disruptions in communications, failures to handle current or increased transaction volumes, cyberattacks, security breaches, data corruption or similar events, our ability to operate effectively may be adversely affected. Certain of our third-party service providers have experienced performance issues, including a vendor that was engaged to assist us in servicing PPP loans and has since filed for Chapter 11 bankruptcy protection. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on us.In addition, the termination of third-party software licenses or service agreements on which any of our information technology and telecommunications systems are based, or other disruption in our relationships with third-party service providers, could adversely affect our operations, and securing replacement licenses and/or engaging alternative third-party service providers and integrating the related technology and services into our systems could result in increased costs and operational difficulties.

We continue to evaluate and implement upgrades and changes to our information technology systems, some of which are significant. Upgrades involve replacing existing systems with successor systems, making changes to existing systems or acquiring new systems with new functionality. We are aware of inherent risks associated with replacing these systems, including accurately capturing data and system disruptions, and believe we are taking appropriate action to mitigate the risks through testing, training, and staging implementation, as well as ensuring appropriate commercial contracts are in place with third-party vendors supplying or supporting our information technology initiatives. However, there can be no assurances that we will successfully launch these systems as planned or that they will be implemented without disruptions to our operations. Information technology system disruptions, if not anticipated and appropriately mitigated, or failure to successfully implement new or upgraded systems, could have a material adverse effect on our results of operations. Also, we may have to make a significant investment to repair or replace these systems and could suffer loss of critical data and interruptions or delays in our operations.

In addition, we provide our customers with the ability to bank remotely, including online, over the Internet, through apps and over the telephone. The secure transmission of confidential information over the Internet and other remote channels is a critical element of remote banking. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security breaches. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses or to alleviate problems caused by security breaches or viruses. To the extent that our activities or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could materially and adversely affect us.

Table of Conte n ts

Additionally, financial products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively and in a cost-efficient manner is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes available. Certain competitors may have greater resources to invest in technology and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so could have a material adverse impact on our business and therefore on our financial condition and results of operations.

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

Issuer Purchases of Equity Securities

On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). The term of the Share Repurchase Program will extend for one additional year ~~from~~to September 27, ~~2021,~~2023, unless earlier terminated. Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise. The exact number of shares, timing for such purchases, and the price and terms at and on which such purchases are to be made will be at the discretion of the Company and will comply with all applicable regulatory limitations. The common shares repurchased during the three and nine months ended ~~March 31,~~September 30, 2022 pursuant to the Share Repurchase Program were as follows:


Period	Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares purchased as part of publicly announced plans or programs	Maximum Number of Shares that may yet be purchased under the plans or programs	Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares purchased as part of publicly announced plans or programs	Maximum Number of Shares that may yet be purchased under the plans or programs
January 1 - January 31, 2022	January 1 - January 31, 2022	66,255	$	56.11	66,255	2,641,282	January 1 - January 31, 2022	66,255	$	56.11	66,255	2,641,282
February 1 - February 28, 2022	February 1 - February 28, 2022	—	—		—	2,641,282	February 1 - February 28, 2022	—	—		—	2,641,282
March 1 - March 31, 2022	March 1 - March 31, 2022	49,069	52.85		49,069	2,592,213	March 1 - March 31, 2022	49,069	52.85		49,069	2,592,213
April 1 - April 30, 2022							April 1 - April 30, 2022	—	—		—	2,592,213
May 1 - May 31, 2022							May 1 - May 31, 2022	548,821	39.19		548,821	2,043,392
June 1 - June 30, 2022							June 1 - June 30, 2022	—	—		—	2,043,392
July 1 - July 31, 2022							July 1 - July 31, 2022	—	—		—	2,043,392
August 1 - August 31, 2022							August 1 - August 31, 2022	—	—		—	2,043,392
September 1 - September 30, 2022							September 1 - September 30, 2022	—	—		—	2,043,392
Total	Total	115,324	$	54.72	115,324	2,592,213	Total	664,145	$	41.89	664,145	2,043,392

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.

7893

Table of ~~Content~~Conte n ts

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~The foregoing summary of the First Amendment to Deposit Processing Services Agreement, dated November 7, 2022, by and between the Bank and BM Technologies is not complete and is qualified in its entirety by reference to the full text of this agreement, which is attached as Exhibit 10.1 to this Form 10-Q and is incorporated herein by reference.

7994

Table of ~~Content~~Conte n ts

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~~2.2		First Amendment to Agreement and Plan Merger, dated November 2, 2020, by and among Megalith Financial Acquisition Corp., MFAC Merger Sub, Inc., Customers Bank, BankMobile Technologies, and Customers Bancorp, incorporated by reference to Exhibit 2.1 to the Customers Bancorp 8-K filed with the SEC on November 2, 2020

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

3.1		Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers Bancorp 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 E, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on April 28, 2016

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

~~4.1~~		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% Fixed-to-Floating Rate Senior Note, 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 Lyle Cunningham, incorporated by reference to Exhibit 10.1 to Customers Bancorp's Form 8-K filed with the SEC on May 6, 2022~~





















































10.1		First Amendment to Deposit Processing Services Agreement, dated November 7, 2022, by and between Customers Bank and BM Technologies, Inc.

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

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

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

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

101		The following financial statements from the Customers’ Quarterly Report on Form 10-Q as of and for the quarterly period ended ~~March 31,~~September 30, 2022, 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.

~~Table of Content~~s


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.

8195

Table of ~~Content~~Conte n ts

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 9,~~November 8, 2022	By:	/s/ Jay S. Sidhu
	Name:	Jay S. Sidhu
	Title:	Chairman and Chief Executive Officer (Principal Executive Officer)



~~May 9,~~November 8, 2022	By:	/s/ Carla A. Leibold
	Name:	Carla A. Leibold
	Title:	Chief Financial Officer (Principal Financial Officer)

8296


Part I

Item 1.	Customers Bancorp, Inc. Consolidated Financial Statements as of ~~March~~September 3 1 ~~, 202~~2 30, 2022 and for the three and nine month ~~period~~periods ended ~~March~~September 3 1 ~~, 202~~2 30, 2022 and ~~202~~1 2021 (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4651

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7690

Item 4.	Controls and Procedures	7791

PART II

Item 1.	Legal Proceedings	7892

Item 1A.	Risk Factors	7892

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7893

Item 3.	Defaults Upon Senior Securities	7994

Item 4.	Mine Safety Disclosures	7994

Item 5.	Other Information	7994

Item 6.	Exhibits	8095

SIGNATURES		8296