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目錄s

美國

證券交易委員會

華盛頓特區 20549

 

表格 10-Q

☒			根據1934年證券交易法第13或15(d)條的季度報告
			截至2024年6月30日季度結束 2024年9月30日

☐			根據1934年證券交易法第13或15(d)條規定的過渡報告
			到                      在權利益分享區間內，                     .

001-35542

（委員會檔案號碼）

（依憑章程所載的完整登記名稱）

Customers Bancorp, Inc.

賓夕法尼亞

27-2290659

(成立地或組織其他管轄區)

(國稅局雇主身份識別號碼)

701 Reading Avenue

西雷丁, 賓夕法尼亞州 19611

(總部辦公地址)

(610) 933-2000

(註冊人電話號碼，包括區號)

N/A

(如與上次報告不同，列明前名稱、前地址及前財政年度)

 

 

根據法案第12(b)條登記的證券：

每個班級的標題

交易符號

每個已註冊的交易所的名稱

每股面值為1.00美元的投票普通股

CUBI

紐約證券交易所

固定至浮動利率非累積永久優先股 每股面值為1.00美元的E系列優先股

CUBI/市盈率

紐約證券交易所

固定至浮動利率非累積永久優先股 F系列優先股，每股面值1.00美元

CUBI/PF

紐約證券交易所

到期日為2034年的5.375％次級票據

CUBB

紐約證券交易所

根據該法案第12(g)條註冊的證券：無

請在核選記號區域表明：（1）本登記申請人在過去12個月（或申請人需要提交此項申報的較短期間）內已提交證券交易所法案第13條或第15(d)條要求提交的所有報告，且（2）本申請人在過去90日內已遵守上述提交要求。Yes  x    否 ¨

請在勾選符號上註明，是否在過去的12個月內（或更短的時間內，如果註冊人需提交此類文件），根據Regulation S-t第405條規定向本章第232.405條提交所需提交的每個交互式資料檔案。Yes  x沒有¨

標示勾選符號表明申報人是否為大型加速存款機構、加速存款機構、非加速存款機構、較小的報表公司或新興成長公司。請參閱《交易所法》第120億2條中對“大型加速存款機構”、“加速存款機構”、“較小的報表公司”和“新興成長公司”的定義。

大型加速歸檔人

x

加速彙編申報人

☐

非加速歸檔人

o

小型報告公司

☐

新興成長公司

☐

如果該企業為新興成長型企業，請在是否選擇不使用證交法第13(a)條所提供之符合任何新的或修訂財務會計標準的延長過渡期的方格中打勾。

o

請以核對標記指出登記人是否為外殼公司（根據《交易所法》120億2條的定義） 是☐沒有x

________________________________________ 

2024年11月7日， 31,349,258 仍然有普通股票的股份流通。

---

目錄s

CUSTOMERS BANCORP, INC. 及其子公司

目錄

第一部分
項目 1.			Customers Bancorp, Inc. 截至2024年9月30日的綜合基本報表，以及截至2024年和2023年9月30日結束的三個月和九個月期間的報表（未經審計）			5
項目 2。			管理層對財務狀況和業績的討論與分析			51
項目 3。			有關市場風險的定量和定性披露			83
項目 4.			內部控制及程序			84
第二部分
項目 1.			法律訴訟			85
第1項事項			風險因素			85
項目 2。			股票權益的未註冊銷售和資金用途			85
項目 3。			優先證券違約			86
項目 4.			礦業安全披露			86
項目5。			其他資訊			86
第六項。			展品			87
簽名						88

2

---

目錄s

縮寫和首字母縮寫詞彙表

本報告可能使用以下縮寫和首字母縮略語，包括管理層對財務狀況和營運成果的討論、未經審計的合併財務報表和未經審計的合併財務報表附註。

2024年股份回購計劃			2024年由Customers Bancorp董事會授權的股份回購計劃
前十字韌帶			信用損失準備
AFS			可供出售
其他綜合損益			其他綜合損益（損失）累積額
ASC			Accounting Standards Codification
ASU			會計準則更新
企業對企業			企業對企業
Bancorp			Customers Bancorp, Inc.
銀行			Customers 銀行
BBb 債券型差額			BBb 信用評級企業債券與美國國債差額
Bm 科技			Bm 科技股份有限公司
BOLI			銀行持有的壽險保險
CBITTM			Customers Bank 即時令牌
CECL			Current expected credit losses
CODM			最高營運決策人
」提交給美國證券交易委員會（「			美國證券交易委員會
公司			customers bancorp及其子公司
COVID-19			2019冠狀病毒疾病
CPI意指美國勞工部勞動統計局（或其後繼的相等指數）公布的城市工賦和職員工消費物價指數，基期為1982-84年，基數為100，在美國。			消費者價格指數
CRA			社區再投資法
CUBI			Customers Bancorp, Inc.普通股在紐交所交易的標的
客戶			Customers Bancorp, Inc.和Customers Bank共同
Customers Bancorp			Customers Bancorp, Inc.
折現現金流量模型（“DCF”）			貼現現金流
每股收益			每股收益
EVE			權益的經濟價值
證券交易所法案			1934年證券交易所法案
金融會計準則委員會			金融會計準則委員會
FDIC(美國)聯邦存款保險公司			聯邦存款保險公司
聯邦基金			美國聯邦儲備理事會的有效聯邦基金利率
美國聯邦儲備 聯邦儲備委員會			美國聯邦準備系統理事會
FHLB			聯邦住宅貸款銀行
FICO			費爾、艾薩克和公司
金融科技			第三方金融科技
FMV			公平市值
聯邦儲備局			費城聯邦儲備銀行
國內生產總值			國內生產總值
Higher One			Higher One Holdings, Inc.
hk銀行			持有至到期
LIBOR			倫敦銀行同業拆息利率
LPO			具限制用途的辦公室
MMDA			貨幣市場存款帳戶
淨利息差（NIM）			凈利息收益率，稅後等效
NM			無意義
不良資產			不良資產
NPL			不良貸款
紐交所			紐約證券交易所
OCI			其他綜合收益（虧損）
房地產業			其他擁有的房地產
PCD			已購入信用惡化
PPP			薪資保護計劃
看跌			終止後購買

3

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目錄s

利率震盪			利率立即上升或下降
租賃資產			租賃權
SBA			美國小型企業管理局
SBA貸款			根據SBA的規則和條例所產生的貸款
美國證券交易委員會			美國證券交易委員會
證券法			1933年證券法，經修訂
E系列優先股			固定浮動利率非累積永久優先股，E系列
F系列優先股			固定浮動利率非累積永久優先股，F系列
SERP			補充執行養老計劃
股份回購計劃			Customers bancorp於2021年獲得董事會授權的股份回購計劃
SOFR			隔夜拆款利率
TRAC			終端租賃調整條款
美國通用會計原則			美國公認會計原則
VIE			變量利益實體

4

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目錄s

CUSTOMERS BANCORP, INC. 及其子公司

綜合資產負債表 — 未經審核

(金額以千計，股數和每股數據除外)

			九月三十日， 2024						12月31日, 2023
資產
現金及應收銀行款項			$	39,429					$	45,210
利息收入存款			3,048,593						3,801,136
現金及現金等價物			3,088,022						3,846,346
按公允價值衡量的投資證券（包括$的信貸損失準備）4,639 及3,952，分別為)			2,412,069						2,405,640
持有到期日投資證券			1,064,437						1,103,170
待售貸款（包含 $219,621 及189,277分別按公允價值評估）			275,420						340,317
應收貸款及租賃			12,527,283						11,963,855
按公正價值評估的抵押金融貸款			1,250,413						897,912
放款和租賃的信貸虧損補貼			(133,158)						(135,311)
貸款及應收租賃款總額，扣除應收貸款及租賃款信用損失準備			13,644,538						12,726,456
聯邦住宅貸款銀行、美聯儲銀行和其他限制股票			95,035						109,548
應計利息應收款			115,588						114,766
銀行樓宇和設備，淨值			6,730						7,371
銀行持有的壽險保險			295,531						292,193
商譽和其他無形資產			3,629						3,629
其他資產			455,083						366,829
總資產			$	21,456,082					$	21,316,265
負債和股東權益
負債：
存款：
需求，不含利息的軸承			$	4,670,809					$	4,422,494
帶息			13,398,580						13,497,742
總存款			18,069,389						17,920,236
聯邦房屋抵押貸款銀行(FHLb)資金預付			1,117,229						1,203,207
其他借款			99,033						123,840
次順位債務			182,439						182,230
應付應計利息及其他負債			186,812						248,358
總負債			19,654,902						19,677,871
承諾和可能負擔（附註15）
股東權益：
優先股，面額 $1.00 每股；清算優先股$25.00 每股。 100,000,000 授權股份數， 5,700,000 於2024年9月30日及2023年12月31日期間已發行並流通的股份			137,794						137,794
普通股，面額 $1.00 每股； 200,000,000 已授權股份； 35,734,517 和 35,459,342截至2024年9月30日和2023年12月31日，已發行股份； 31,342,107 和 31,440,906 於2024年9月30日和2023年12月31日止，流通股數			35,734						35,459
額外資本贈与金			571,609						564,538
保留盈餘			1,302,745						1,159,582
累積其他綜合收益（虧損），淨額			(106,082)						(136,569)
库存股（4,392,410 和 4,018,436 於 2024 年 9 月 30 日和 2023 年 12 月 31 日的股份			(140,620)						(122,410)
股東權益總額			1,801,180						1,638,394
負債總額及股東權益			$	21,456,082					$	21,316,265

請見未經審計的合併財務報表附註。

5

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目錄s

CUSTOMERS BANCORP，INC.及其子公司

合併損益表（未經審計）

（金額爲千美元，除每股數據外）

			截至三個月 9月30日,												截至九個月 9月30日,
			2024						2023						2024						2023
利息收入：
貸款和租賃			$	228,659					$	271,107					$	670,923					$	757,064
投資證券			46,265						54,243						140,653						149,585
計息存款			44,372						43,800						142,695						81,819
待售貸款			10,907						4,664						36,626						27,514
其他			1,910						2,526						7,031						5,463
總利息收入			332,113						376,340						997,928						1,021,445
利息支出：
按金			155,829						145,825						458,338						426,130
FHLB墊款			12,590						26,485						39,512						61,140
FRb advances			—						—						—						6,286
從屬債務			3,537						2,689						8,960						8,067
其他借款			1,612						1,568						4,535						4,879
利息支出總額			173,568						176,567						511,345						506,502
淨利息收入			158,545						199,773						486,583						514,943
信用損失準備			17,066						17,856						52,257						61,088
經計提信貸損失後的淨利息收入			141,479						181,917						434,326						453,855
非息收入：
商業租賃收入			10,093						8,901						30,058						27,144
貸款費用			8,011						6,029						18,524						14,290
銀行擁有的人壽保險			2,049						1,973						7,317						9,617
抵按金融交易費用			1,087						1,018						3,091						3,468
貸款和租賃出售的淨收益（損失）			(14,548)						(348)						(14,776)						(1,109)
看漲資本調用信用額度損失			—						—						—						(5,037)
投資證券出售的淨收益（虧損）			—						(429)						(749)						(429)
股權法投資未實現收益			—						—						11,041						—
其他			1,865						631						6,319						3,949
總非利息收入			8,557						17,775						60,825						51,893
非利息支出：
薪水和員工福利			47,717						33,845						128,689						99,310
科技、通訊和銀行業務			13,588						15,667						51,719						48,663
商業租賃折舊			7,811						7,338						23,610						22,541
專業服務			9,048						8,569						21,505						25,357
貸款服務			3,778						3,858						11,325						13,296
入住率			2,987						2,471						8,454						7,750
FDIC評估、非收入稅和監管費用			7,902						8,551						31,607						21,059
廣告和促銷			908						650						2,844						2,245
法律和解費用			—						4,096						—						4,096
其他			10,279						4,421						26,886						14,579
非利息支出總額			104,018						89,466						306,639						258,896
稅前收入			46,018						110,226						188,512						246,852
所得稅費用（利益）			(725)						23,470						33,958						58,801
淨利潤			46,743						86,756						154,554						188,051
優先股送轉			3,806						3,803						11,391						10,826
淨利潤可供普通股股東			$	42,937					$	82,953					$	143,163					$	177,225
普通股每股基本收益			$	1.36					$	2.65					$	4.54					$	5.63
稀釋每股收益			1.31						2.58						4.37						5.53

請見未經審計的合併財務報表附註。

6

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目錄s

CUSTOMERS BANCORP，INC.及其子公司

綜合收益(損失)綜合收益表 — 未經審計

（金額以千爲單位）

			截至三個月 9月30日,												截至九個月 9月30日,
			2024						2023						2024						2023
淨利潤			$	46,743					$	86,756					$	154,554					$	188,051
可供出售債務證券的未實現收益（損失）：
期間內發生的未實現收益（損失）：			32,810						23,666						36,439						14,535
所得稅影響			(8,432)						(6,011)						(9,351)						(3,692)
重新分類調整（收益）損失包含在淨利潤中			—						(429)						749						(429)
所得稅影響			—						109						(193)						109
從可供出售轉爲持有至到期的證券的未實現損失攤銷			1,209						1,379						3,821						3,700
所得稅影響			(311)						(350)						(978)						(939)
可供出售債務證券的未實現收益（損失）			25,276						18,364						30,487						13,284
其他綜合收益(損失)，淨稅後影響			25,276						18,364						30,487						13,284
綜合收益（損失）			$	72,019					$	105,120					$	185,041					$	201,335

請見未經審計的合併財務報表附註。

7

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目錄s

CUSTOMERS BANCORP，INC.及其子公司

股東權益變動表合併報表——未經審計

(金額以千爲單位，除已發行股份數據外)

			截至2024年9月30日的三個月
			優先股												普通股
			所擁有的B類普通股的數量 優先股 股票 未解決						優先股 股票						所擁有的B類普通股的數量 普通 股票 未解決						普通 股票						額外的 實收資本 資本						保留 收益						累計 其他 綜合 收入（損失）						國庫 股票						總計
餘額，2024年6月30日			5,700,000						$	137,794					31,667,655						$	35,686					$	567,345					$	1,259,808					$	(131,358)					$	(122,410)					$	1,746,865
淨利潤			—						—						—						—						—						46,743						—						—						46,743
其他綜合收益（損失）			—						—						—						—						—						—						25,276						—						25,276
優先股股利 (1)			—						—						—						—						—						(3,806)						—						—						(3,806)
股份-based薪酬費用			—						—						—						—						3,739						—						—						—						3,739
根據基於股票的補償安排發行普通股			—						—						48,426						48						525						—						—						—						573
回購普通股			—						—						(373,974)						—						—						—						—						(18,210)						(18,210)
餘額，2024年9月30日			5,700,000						$	137,794					31,342,107						$	35,734					$	571,609					$	1,302,745					$	(106,082)					$	(140,620)					$	1,801,180
			截至2023年9月30日的三個月
			優先股												普通股
			所擁有的B類普通股的數量 優先股 股票 未解決						優先股						所擁有的B類普通股的數量 普通 股票 未解決						普通 股票						額外的 實收資本 資本						保留 收益						累計 其他 綜合 收入（損失）						國庫 股票						總計
餘額，2023年6月30日			5,700,000						$	137,794					31,282,318						$	35,301					$	555,737					$	1,018,406					$	(168,176)					$	(122,410)					$	1,456,652
淨利潤			—						—						—						—						—						86,756						—						—						86,756
其他綜合收益（損失）			—						—						—						—						—						—						18,364						—						18,364
優先股股利 (1)			—						—						—						—						—						(3,803)						—						—						(3,803)
股份-based薪酬費用			—						—						—						—						3,510						—						—						—						3,510
根據基於分享的補償安排發行普通股			—						—						28,936						29						99						—						—						—						128
餘額，2023年9月30日			5,700,000						$	137,794					31,311,254						$	35,330					$	559,346					$	1,101,359					$	(149,812)					$	(122,410)					$	1,561,607

(1)每股分紅派息$0.678761 and $0.654873 分別針對2024年9月30日止的三個月，宣告了E系列和F系列優先股的每股分紅派息$0.6831 and $0.658950 分別針對2023年9月30日止的三個月，宣告了E系列和F系列優先股的每股分紅派息$

8

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目錄s

			截至2024年9月30日的九個月
			優先股												普通股
			優先股票流通分享						優先股						普通股票流通分享						普通股						超額實收資本						留存收益						累計其他綜合收益（損失）						庫藏股						總計
2023年12月31日餘額			5,700,000						$	137,794					31,440,906						$	35,459					$	564,538					$	1,159,582					$	(136,569)					$	(122,410)					$	1,638,394
淨利潤			—						—						—						—						—						154,554						—						—						154,554
其他綜合收益（損失）			—						—						—						—						—						—						30,487						—						30,487
優先股股利 (1)			—						—						—						—						—						(11,391)						—						—						(11,391)
股份-based薪酬費用			—						—						—						—						10,985						—						—						—						10,985
基於股票補償安排的普通股發行			—						—						275,175						275						(3,914)						—						—						—						(3,639)
回購普通股			—						—						(373,974)						—						—						—						—						(18,210)						(18,210)
餘額，2024年9月30日			5,700,000						$	137,794					31,342,107						$	35,734					$	571,609					$	1,302,745					$	(106,082)					$	(140,620)					$	1,801,180
			截至2023年9月30日的九個月
			優先股												普通股
			已發行的優先股						優先股						已發行普通股股份						普通股						超額實收資本						留存收益						累計其他綜合收益（損失）						庫藏股						總計
2022年12月31日餘額			5,700,000						$	137,794					32,373,697						$	35,012					$	551,721					$	924,134					$	(163,096)					$	(82,604)					$	1,402,961
淨利潤			—						—						—						—						—						188,051						—						—						188,051
其他綜合收益（損失）			—						—						—						—						—						—						13,284						—						13,284
優先股股利 (1)			—						—						—						—						—						(10,826)						—						—						(10,826)
股份-based薪酬費用			—						—						—						—						9,979						—						—						—						9,979
通過基於股份的補償安排發行普通股			—						—						317,440						318						(2,354)						—						—						—						(2,036)
回購普通股			—						—						(1,379,883)						—						—						—						—						(39,806)						(39,806)
餘額，2023年9月30日			5,700,000						$	137,794					31,311,254						$	35,330					$	559,346					$	1,101,359					$	(149,812)					$	(122,410)					$	1,561,607

(1)每股分紅 $2.060879 and $1.988429 分別宣佈了截至2024年9月30日九個月的E和F系列優先股的每股派息$。1.941704 and $1.869779 分別宣佈了截至2023年9月30日九個月的E和F系列優先股的每股派息$。

請見未經審計的合併財務報表附註。

9

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目錄s

CUSTOMERS BANCORP，INC.及其子公司

合併現金流量表 — 未經審計

（金額以千爲單位）

			截至九個月 9月30日,
			2024						2023
經營活動產生的現金流量
持續經營的淨收入			$	154,554					$	188,051
調整淨利潤以便於(使用於)經營活動的現金流量:
信用損失準備			52,257						61,088
折舊和攤銷			24,458						24,226
股份-based薪酬費用			10,722						10,048
遞延所得稅			(697)						21,999
投資證券溢價和折價的淨攤銷（攤回）			(3,281)						(8,859)
投資證券未實現（收益）損失			(324)						197
投資證券出售的淨（收益）損失			749						429
權益法下投資的未實現收益			(11,041)						—
固定資產和租賃的減值損失			—						124
衍生產品的未實現收益（損失）			(1,089)						(344)
終止公允價值套期保值衍生品的結算			—						4,630
(收益)出租資產出售虧損（出租人經營租賃）			(1,693)						439
用於銷售的貸款公允價值調整			607						—
貸款和租賃物出售的淨收益（損失）			14,776						869
出售看漲信用額度的損失			—						5,037
待售貸款的發起和購買			(1,034,072)						(470,318)
貸款待售的銷售收入和償還款項			952,271						454,867
貸款淨遞延費用、折現和溢價的攤銷（攤提）			(21,580)						(74,016)
銀行擁有壽險投資收益			(7,317)						(9,617)
應計利息應收款及其他資產的增減			(56,371)						917
應計利息應付款及其他負債增加（減少）			(61,274)						33,339
經營活動產生的淨現金流量			11,655						243,106
投資活動產生的現金流量
可供出售投資證券到期款、贖回款及本金償還所得款項			457,970						228,503
持有到期投資證券的贖回款、贖回款及本金償還所得款項			217,338						175,896
可供出售投資證券的銷售收益			240,847						4,075
可供出售投資證券的購買			(665,800)						—
購買持有到期投資證券			(14,844)						(73,074)
股權法投資的購買			(5,000)						—
抵按金融貸款的發起			(16,495,064)						(15,385,554)
抵按金融貸款償還款項			16,141,964						15,766,489
貸款和租賃增加減少，不包括抵按金融貸款			(538,621)						1,586,922
貸款和租賃出售收入			34,426						409,503
貸款購買			(121,222)						(702,409)
銀行持有壽險收益			5,110						56,645
出售FHLb、聯儲局銀行和其他限制股票的款項淨額			15,508						(51,667)
購買銀行場地和設備款項			(992)						(521)
固定資產出售收益			—						73
出售其他房地產款項淨額			79						33
出售租賃資產的收入（作爲出租人經營租賃的資產）			14,576						2,515
購買租賃資產的款項（作爲出租人經營租賃的資產）			(31,299)						(20,257)
投資活動提供的淨現金			(745,024)						1,997,172
			（續）
			截至九個月 9月30日,
			2024						2023
籌資活動產生的現金流量
存款淨增(減)			128,395						36,624
美國住房抵押貸款銀行從短期借款基金中淨增加（減少）			—						(300,000)
從美國住房抵押貸款銀行和聯邦儲備銀行獲得的長期借款基金			155,000						2,565,000
歸還給美國住房抵押貸款銀行和聯邦儲備銀行的長期借款基金			(250,000)						(1,525,000)
其他長期借款的償還			(25,000)						—
支付的優先股股息			(11,501)						(10,823)
購買庫存			(18,210)						(39,806)
支付來自基於股份獎勵的稅款代扣的員工稅款			(5,150)						(2,429)
普通股發行收入			1,511						324
7,626,654			(24,955)						723,890
現金及現金等價物淨增(減)			(758,324)						2,964,168
現金及現金等價物 - 起初			3,846,346						455,806
現金及現金等價物-期末			$	3,088,022					$	3,419,974
非現金投融資活動：
購買投資證券，用於消費分期貸款出售後持有到期			$	160,029					$	436,841
將持有的投資貸款轉爲待售			55,724						309,076
將持有待售的貸款轉爲投資			5,210						14,377

請見未經審計的合併財務報表附註。

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目錄s

客戶 BANCORP, INC.和子公司

附註 合併未經審計的財務報表

注1——業務描述

customers bancorp公司是一家銀行控股公司，通過其全資子公司Customers 銀行從事銀行業務，統稱爲「Customers」

客戶 Bancorp 及其全資子公司、銀行和非銀行子公司爲伯克斯縣和賓夕法尼亞州東南部（雄鹿縣、切斯特縣和費城縣）、紐約（威徹斯特和薩福克縣以及曼哈頓）、新澤西州漢密爾頓、馬薩諸塞州波士頓、羅德島州普羅維登斯、新罕布什爾州朴茨茅斯、伊利諾伊州芝加哥、德克薩斯州達拉斯、北卡羅來納州明頓威爾以及全國的某些貸款和存款產品的企業和居民提供服務。該銀行有 七 分支機構並提供商業銀行產品，主要是貸款和存款。此外，該銀行還通過其有限用途辦公室向客戶提供行政支持，包括設備融資租賃。該銀行還通過與金融科技公司的關係爲全國專業企業提供服務，包括抵押貸款融資、商業設備融資、小企業管理局貸款、專業貸款和消費貸款。

該銀行受到賓夕法尼亞銀行和證券部以及聯邦儲備銀行的監管，並且定期接受這些監管機構的審查。

注2 —重要會計政策和呈現基礎

呈現基礎

未經審計的臨時合併基本報表已經根據美國公認會計原則和證券交易委員會的規則與規定編制。這些未經審計的臨時合併基本報表反映了管理層認爲在呈現Customers Bancorp及其子公司於所提供的臨時期間的財務狀況、運營結果和現金流量所需的所有正常及重複的調整。根據證券交易委員會的規則與規定，通常包括在年度合併基本報表中的某些信息和附註披露已從這些未經審計的臨時合併基本報表中省略。報告中提供的截至2023年12月31日的合併資產負債表是根據Customers Bancorp的2023年審計合併基本報表提取的。管理層認爲披露足夠客觀地呈現截至所述日期和期間的合併基本報表。這些未經審計的臨時合併基本報表應與Customers Bancorp及其子公司的2023年合併基本報表結合閱讀，該合併基本報表包含在2023年2月29日提交給證券交易委員會的Customers年度報告Form 10-k中（「2023 Form 10-K」）。2023 Form 10-k描述了Customers Bancorp的重要會計政策。截止至2024年9月30日的三個月和九個月內，Customers Bancorp的重要會計政策沒有發生重大變化。

最近頒佈的會計準則

以下是客戶採用的最新會計準則，以及FASB發佈但尚未生效的準則。

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目錄s

2024年採納的會計準則

標準

指導摘要

對基本報表的影響

ASU 2022-03, 公允價值計量(Topic 820): 適用合同銷售限制的股票公允價值計量 發行於2022年6月

• 澄清股權安全協議的出售並不被視爲股權安全的帳戶單元的一部分，也不計入公允價值測量中 • 禁止將對股權安全的銷售約束作爲獨立的帳戶單元進行確認和計量 • 提供了適用於受合同銷售限制約束的權益證券的披露要求。 • 自2023年12月15日之後開始的財政年度起生效，包括這些財政年度內的中期時段。允許提前採納，適用於尚未發佈或提供發行的中期和年度財務報表。

• 客戶於2024年1月1日採納了這一指南。這一指南對客戶的財務狀況、經營成果和綜合財務報表沒有重大影響。

ASU 2023-02, Investments - Equity Method and Joint Ventures（主題323）：使用比例攤銷方法會計處理稅收信貸結構投資 於2023年3月發佈

• 提供選擇，根據比例攤銷方法會計處理稅收信貸投資，無論涉及的稅收信貸計劃如何，只要滿足某些條件。 • 自2023年12月15日之後開始的財政年度起生效，包括這些財政年度內的中期時段。允許對任何中期時段進行提前採納，僅限包括該中期時段的財政年度的開始。

• 客戶在2024年1月1日採納了這項指導。 這項指導對客戶的財務狀況、經營業績和綜合財務報表沒有重大影響。

尚未頒佈的會計準則

標準

指引摘要

基本報表的影響

ASU 2023-07, 分部報告（主題 280）：報告服務部門（主題 280）變更披露方式，通過升級對意義重大的分部費用的披露來改進分部報告披露要求。該準則適用於 2023 年 12 月 15 日之後的財年和 2024 年 12 月 15 日之後的財年間隔期。該準則必須適用於財務報表中呈現的所有期間的追溯。該公司目前正在評估該標準對合並財務報表的影響。 發佈於2023年11月

• 要求公開實體，包括只有一個報告分部的公開實體，年度和中間期披露本ASU修改要求的所有披露和ASC 280中的所有現有披露。 • 要求披露包括每一個報告分部損益內的重要分部費用，該費用定期提供給CODm，報告分部其他項目的金額以及其組成的說明，CODm的職務和職位名稱以及CODm如何使用報告的報告分部利潤或損失的解釋。 • 如果公司首席運營決策者在評估板塊績效並決定如何分配資源時使用多個衡量板塊盈虧的尺度，可以報告多個板塊盈虧的數額，但至少其中一個報告的板塊盈虧數額必須與公司合併財務報表中相應金額的計量原則一致。 • 適用於2023年12月15日後開始的財政年度和2024年12月15日後開始的財政年度內的中間期。允許提前採納。

• 客戶將在截至2024年12月31日的年度合併財務報表中採納此ASU，並提供新要求的披露。

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目錄s

標準

指南摘要

對基本報表的影響

ASU 2023-08， 無形資產 - 商譽和其他 - 加密資產（子主題 250-60） 發行於2023年12月

• 要求符合某些標準的加密資產在每個報告期均按公允價值後續計量，並將變動計入淨利潤。 • 要求按公允價值計量的加密資產在資產負債表中與其他無形資產分開列示，並在損益表中將加密資產的重新計量變動與其他無形資產的賬面金額變動分別列示。 • 要求將作爲非現金對價在正常業務過程中收到的加密資產產生的現金收款，幾乎立即轉換爲現金，作爲現金流量表中的經營活動。 • 自2024年12月15日之後開始的財政年度有效，包括這些財政年度內的中期期間。允許提前採用尚未發佈的中期和年度基本報表。

• 客戶預計此ASU不會對客戶的財務狀況、運營結果和合並基本報表產生重大影響。

ASU 2023-09， 所得稅（主題740）：改進所得稅披露。該標準要求上市的業務實體在每年披露稅率調節表的特定類別，併爲滿足數量門限的調節項目提供其他信息（如果這些調節項目的影響相當於或大於將稅前收入（或損失）與適用的法定所得稅率相乘所得金額的5%）。它還要求所有實體每年披露按聯邦、州和外國稅種分解的所支付的所得稅（扣除退款），以及按所支付的所得稅（扣除退款）在個別司法管轄區分解的金額，當所支付的所得稅（扣除退款）相當於或大於所支付的總所得稅（扣除退款）的5%時。最後，該標準取消了要求所有實體披露未識別稅務負債餘額在未來12個月內合理可能變動範圍的性質和估計，或聲明無法估算範圍的要求。該標準對公司自2026年1月1日開始的年度適用。可以提前採納該標準。該標準應以前瞻性基礎應用。允許追溯適用。公司目前正在評估該標準可能對其財務報表產生的影響。 發行於2023年12月

• 要求公共實體每年披露特定調節項目的表格調節，包括超過按法定所得稅稅率乘以稅前持續經營收入計算的金額的五個百分點的項目，在有效稅率與法定稅率的所得稅率調節中。 • 要求按照聯邦、州和外國稅收以及收入稅支付等於或大於總支付所得稅的五個百分點的各個司法管轄區，披露已支付的所得稅，扣除已收到的退款。 • 對於在2024年12月15日後開始的財政年度生效。允許提前採納尚未發佈的年度基本報表。

• 客戶目前正在評估此ASU對客戶合併基本報表的預期影響。

ASU 2024-03， 收益表 - 報告綜合收益 - 費用分解披露（子主題220-40） 2024年11月發佈

• 要求在每個中期和年度報告期間的基本報表附註中披露關於某些成本和費用的特定信息，包括庫存採購、員工薪酬、折舊、無形資產攤銷和貶值、耗竭以及作爲石油和燃料幣生產活動的一部分所確認的攤銷。 • 要求在與其他分解要求相同的披露中，披露根據美國通用會計原則已經要求披露的某些金額。 • 要求對未單獨定量分解的相關費用標題中剩餘金額的定性描述進行披露。 • 需要披露銷售費用的總額，並在年度報告期內，實體對銷售費用的定義。 • 對2026年12月15日後開始的財政年度生效。允許提前採用。

• 客戶目前正在評估此ASU對客戶合併基本報表的預期影響。

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目錄s

注3 —每股收益

以下是客戶每股普通股收益計算的元件和結果

			三個月已結束 九月三十日												九個月已結束 九月三十日
（金額以千計，股票和每股數據除外）			2024						2023						2024						2023
普通股股東可獲得的淨收益			$	42,937					$	82,953					$	143,163					$	177,225
已發行普通股的加權平均數——基本			31,567,797						31,290,581						31,563,660						31,452,700
基於股份的薪酬計劃			1,198,691						884,503						1,209,705						583,759
普通股的加權平均數——攤薄後			32,766,488						32,175,084						32,773,365						32,036,459
普通股每股基本收益			$	1.36					$	2.65					$	4.54					$	5.63
攤薄後的每股普通股收益			1.31						2.58						4.37						5.53

以下是可能在未來期間稀釋每普通股基本收益的證券，這些證券未納入稀釋後每普通股收益的計算，因爲某些股票補償獎勵的績效條件尚未滿足，或者這樣做會對所示期間產生反稀釋效果。

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Anti-dilutive securities:
Share-based compensation awards			—						319,973						—						685,951

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NOTE 4 — 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 September 30, 2024 and 2023. Amounts in parentheses indicate reductions to AOCI.

																											Unrealized Gains (Losses) Available for Sale Securities (1)
																											Three Months Ended September 30,
(amounts in thousands)																											2024						2023
Balance at July 1																											$	(131,358)					$	(168,176)
Unrealized gains (losses) arising during period, before tax																											32,810						23,666
Income tax effect																											(8,432)						(6,011)
Other comprehensive income (loss) before reclassifications																											24,378						17,655
Reclassification adjustments for (gains) losses included in net income, before tax																											—						(429)
Income tax effect																											—						109
Amounts reclassified from accumulated other comprehensive income (loss) to net income																											—						(320)
Amortization of unrealized loss on securities transferred from available for sale to held to maturity																											1,209						1,379
Income tax effect																											(311)						(350)
Amortization of unrealized loss on securities transferred from available for sale to held to maturity																											898						1,029
Net current-period other comprehensive income (loss)																											25,276						18,364
Balance at September 30																											$	(106,082)					$	(149,812)

																											Unrealized Gains (Losses) Available for Sale Securities (1)
																											Nine Months Ended September 30,
(amounts in thousands)																											2024						2023
Balance at January 1																											$	(136,569)					$	(163,096)
Unrealized gains (losses) arising during period, before tax																											36,439						14,535
Income tax effect																											(9,351)						(3,692)
Other comprehensive income (loss) before reclassifications																											27,088						10,843
Reclassification adjustments for (gains) losses included in net income, before tax																											749						(429)
Income tax effect																											(193)						109
Amounts reclassified from accumulated other comprehensive income (loss) to net income																											556						(320)
Amortization of unrealized loss on securities transferred from available for sale to held to maturity																											3,821						3,700
Income tax effect																											(978)						(939)
Amortization of unrealized loss on securities transferred from available for sale to held to maturity																											2,843						2,761
Net current-period other comprehensive income (loss)																											30,487						13,284
Balance at September 30																											$	(106,082)					$	(149,812)

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

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NOTE 5 — INVESTMENT SECURITIES

Investment securities at fair value

The amortized cost, approximate fair value and allowance for credit losses of investment securities at fair value as of September 30, 2024 and December 31, 2023 are summarized as follows:

			September 30, 2024 (1)
(amounts in thousands)			Amortized Cost						Allowance for Credit Losses						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Available for sale debt securities:
Asset-backed securities			$	40,179					$	(307)					$	—					$	(2,202)					$	37,670
Agency-guaranteed residential mortgage-backed securities			216,821						—						4,357						—						221,178
Agency-guaranteed residential collateralized mortgage obligations			201,529						—						1,277						(7,933)						194,873
Agency-guaranteed commercial collateralized mortgage obligations			96,200						—						1,361						(618)						96,943
Collateralized loan obligations			315,096						—						100						(4,767)						310,429
Commercial mortgage-backed securities			78,711						—						—						(1,637)						77,074
Corporate notes			660,626						(4,332)						646						(61,969)						594,971
Private label collateralized mortgage obligations			879,555						—						1,573						(36,533)						844,595
Available for sale debt securities			$	2,488,717					$	(4,639)					$	9,314					$	(115,659)					2,377,733
Equity securities (2)																											34,336
Total investment securities, at fair value																											$	2,412,069

			December 31, 2023 (1)
(amounts in thousands)			Amortized Cost						Allowance for Credit Losses						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Available for sale debt securities:
Asset-backed securities			$	97,359					$	(483)					$	15					$	(4,262)					$	92,629
Agency-guaranteed residential collateralized mortgage obligations			129,589						—						—						(12,681)						116,908
Collateralized loan obligations			500,109						—						1						(11,018)						489,092
Commercial mortgage-backed securities			125,885						—						—						(4,249)						121,636
Corporate notes			636,880						(3,469)						79						(50,456)						583,034
Private label collateralized mortgage obligations			1,034,841						—						1,201						(62,481)						973,561
Available for sale debt securities			$	2,524,663					$	(3,952)					$	1,296					$	(145,147)					2,376,860
Equity securities (2)																											28,780
Total investment securities, at fair value																											$	2,405,640

(1)Accrued interest on AFS debt securities totaled $19.4 million and $14.7 million at September 30, 2024 and December 31, 2023, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

(2)Includes perpetual preferred stock issued by domestic banks and domestic bank holding companies and equity securities issued by fintech companies, without a readily determinable fair value, and CRA-qualified mutual fund shares at September 30, 2024 and December 31, 2023. No impairments or measurement adjustments have been recorded on the equity securities without a readily determinable fair value since acquisition.

Customers’ transactions with unconsolidated VIEs include sales of consumer installment loans and investments in the 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.

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Proceeds from the sale of AFS debt securities were $0.1 million and $240.8 million for the three and nine months ended September 30, 2024, respectively. Proceeds from the sale of AFS debt securities were $4.1 million for the three and nine months ended September 30, 2023. The following table presents gross realized gains and realized losses from the sale of AFS debt securities for the three and nine months ended September 30, 2024 and 2023:

			Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands)			2024						2023						2024						2023
Gross realized gains			$	—					$	—					$	176					$	—
Gross realized losses			—						(429)						(925)						(429)
Net realized gains (losses) on sale of available for sale debt securities			$	—					$	(429)					$	(749)					$	(429)

These gains (losses) were determined using the specific identification method and were reported as net 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:

			September 30, 2024
(amounts in thousands)			Amortized Cost						Fair Value
Due in one year or less			$	41,523					$	29,940
Due after one year through five years			531,379						484,726
Due after five years through ten years			87,724						80,305
Asset-backed securities			40,179						37,670
Agency-guaranteed residential mortgage-backed securities			216,821						221,178
Agency-guaranteed residential collateralized mortgage obligations			201,529						194,873
Agency-guaranteed commercial collateralized mortgage obligations			96,200						96,943
Collateralized loan obligations			315,096						310,429
Commercial mortgage-backed securities			78,711						77,074
Private label collateralized mortgage obligations			879,555						844,595
Total available for sale debt securities			$	2,488,717					$	2,377,733

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 September 30, 2024 and December 31, 2023 were as follows:

			September 30, 2024
			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			$	—					$	—					$	30,960					$	(1,241)					$	30,960					$	(1,241)
Agency-guaranteed residential collateralized mortgage obligations			—						—						109,456						(7,933)						109,456						(7,933)
Agency-guaranteed commercial collateralized mortgage obligations			45,080						(618)						—						—						45,080						(618)
Collateralized loan obligations			37,164						(284)						250,635						(4,483)						287,799						(4,767)
Commercial mortgage-backed securities			—						—						77,074						(1,637)						77,074						(1,637)
Corporate notes			59,408						(766)						319,371						(26,637)						378,779						(27,403)
Private label collateralized mortgage obligations			175,651						(3,367)						586,700						(33,166)						762,351						(36,533)
Total			$	317,303					$	(5,035)					$	1,374,196					$	(75,097)					$	1,691,499					$	(80,132)

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			December 31, 2023
			Less Than 12 Months												12 Months or More												Total
(amounts in thousands)			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Available for sale debt securities:
Asset-backed securities			$	—					$	—					$	64,029					$	(4,027)					$	64,029					$	(4,027)
Agency-guaranteed residential collateralized mortgage obligations			—						—						116,908						(12,681)						116,908						(12,681)
Collateralized loan obligations			29,241						(392)						438,551						(10,626)						467,792						(11,018)
Commercial mortgage-backed securities			—						—						121,636						(4,249)						121,636						(4,249)
Corporate notes			23,243						(1,147)						424,768						(33,764)						448,011						(34,911)
Private label collateralized mortgage obligations			303,750						(11,243)						613,007						(51,417)						916,757						(62,660)
Total			$	356,234					$	(12,782)					$	1,778,899					$	(116,764)					$	2,135,133					$	(129,546)

At September 30, 2024, there were 21 AFS debt securities with unrealized losses in the less-than-twelve-months category and 92 AFS debt securities with unrealized losses in the twelve-months-or-more category. Except for two asset-backed securities and 20 corporate notes where there was a change in future estimated cash flows as further discussed below, the unrealized losses were principally due to changes in market interest rates and credit spreads that resulted in a negative impact on the respective securities’ fair value and expected to be recovered when market prices recover or at maturity. Customers does not intend to sell any of the 113 securities, and it is not more likely than not that Customers will be required to sell any of the 113 securities before recovery of the amortized cost basis. At December 31, 2023, there were 119 AFS debt securities in an unrealized loss position.

Customers recorded an allowance for credit losses on two asset-backed securities and 20 corporate notes where there was a change in future estimated cash flows during the three and nine months ended September 30, 2024 and on four asset-backed securities and twelve corporate notes during the three and nine months ended September 30, 2023. 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 tables present the activity in the allowance for credit losses on AFS debt securities, by major security type, for the periods presented:

			Three Months Ended September 30,
			2024																		2023
(amounts in thousands)			Asset-backed securities						Corporate notes						Total						Asset-backed securities						Corporate notes						Total
Balance at July 1			$	367					$	4,972					$	5,339					$	1,563					$	1,876					$	3,439
Credit losses on securities for which credit losses were not previously recorded			24						—						24						—						564						564
Credit losses on previously impaired securities			—						12						12						442						69						511
Decrease in allowance for credit losses on previously impaired securities			(84)						(652)						(736)						(250)						(24)						(274)
Reduction due to sales			—						—						—						—						(391)						(391)
Balance at September 30			$	307					$	4,332					$	4,639					$	1,755					$	2,094					$	3,849

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			Nine Months Ended September 30,
			2024																		2023
(amounts in thousands)			Asset-backed securities						Corporate notes						Total						Asset-backed securities						Corporate notes						Total
Balance at January 1			$	483					$	3,469					$	3,952					$	578					$	—					$	578
Credit losses on securities for which credit losses were not previously recorded			24						635						659						—						2,485						2,485
Credit losses on previously impaired securities			—						613						613						1,488						—						1,488
Decrease in allowance for credit losses on previously impaired securities			(200)						(385)						(585)						(311)						—						(311)
Reduction due to sales			—						—						—						—						(391)						(391)
Balance at September 30			$	307					$	4,332					$	4,639					$	1,755					$	2,094					$	3,849

At September 30, 2024 and December 31, 2023, no AFS investment securities holding of any one issuer, other than the U.S. government and its agencies, amounted to greater than 10% of shareholders’ equity.

At September 30, 2024 and December 31, 2023, Customers Bank had pledged AFS investment securities aggregating $1.3 billion and $1.2 billion in fair value, respectively, as collateral primarily for immediately available liquidity from the FRB. The counterparty does not have the ability to sell or repledge these securities.

Investment securities held to maturity

The amortized cost, approximate fair value and allowance for credit losses of investment securities held to maturity as of September 30, 2024 and December 31, 2023 are summarized as follows:

			September 30, 2024 (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			$	538,832					$	—					$	538,832					$	1,628					$	(184)					$	540,276
Agency-guaranteed residential mortgage-backed securities			6,920						—						6,920						—						(522)						6,398
Agency-guaranteed commercial mortgage-backed securities			1,790						—						1,790						—						(271)						1,519
Agency-guaranteed residential collateralized mortgage obligations			174,098						—						174,098						—						(11,221)						162,877
Agency-guaranteed commercial collateralized mortgage obligations			159,050						—						159,050						—						(19,426)						139,624
Private label collateralized mortgage obligations			183,747						—						183,747						789						(7,716)						176,820
Total held to maturity debt securities			$	1,064,437					$	—					$	1,064,437					$	2,417					$	(39,340)					$	1,027,514

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			December 31, 2023 (1)
(amounts in thousands)			Amortized Cost						Allowance for Credit Losses						Net Carrying Value						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Held to maturity debt securities:
Asset-backed securities			$	575,990					$	—					$	575,990					$	202					$	(2,064)					$	574,128
Agency-guaranteed residential mortgage-backed securities			7,039						—						7,039						—						(649)						6,390
Agency-guaranteed commercial mortgage-backed securities			1,850						—						1,850						—						(134)						1,716
Agency-guaranteed residential collateralized mortgage obligations			186,636						—						186,636						—						(19,049)						167,587
Agency-guaranteed commercial collateralized mortgage obligations			146,765						—						146,765						—						(23,178)						123,587
Private label collateralized mortgage obligations			184,890						—						184,890						—						(11,859)						173,031
Total held to maturity debt securities			$	1,103,170					$	—					$	1,103,170					$	202					$	(56,933)					$	1,046,439

(1)Accrued interest on HTM debt securities totaled $2.6 million and $2.7 million at September 30, 2024 and December 31, 2023, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

During the three and nine months ended September 30, 2024, Customers sold consumer installment loans that were classified as held for sale with a carrying value of $202.5 million, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third party sponsored VIEs. As part of the sales, Customers recognized a loss on sale of $0.3 million, inclusive of transaction costs, in net gain (loss) on sale of loans and leases within non-interest income in the consolidated statement of income. Customers provided financing to the purchasers for a portion of the sale price in the form of $160.0 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 to the VIEs, and will receive servicing fees. Customers recognized servicing assets of $2.1 million upon sale.

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

At the time of the sale, and at each subsequent reporting period, Customers is required to evaluate its involvement with the VIEs to determine if it holds a variable interest in the VIEs and, if so, if Customers is the primary beneficiary of the VIEs. If Customers is both a variable interest holder and the primary beneficiary of the VIEs, it would be required to consolidate the VIEs. As of September 30, 2024 and December 31, 2023, Customers concluded that its investments in asset-backed securities as well as the servicing fees are considered variable interests in the VIEs as there is a possibility, even if remote, that would result in Customers’ interests in the asset-backed securities or the servicing fees absorbing some of the losses of the VIEs.

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

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

			September 30, 2024
(amounts in thousands)			Amortized Cost						Fair Value
Asset-backed securities			$	538,832					$	540,276
Agency-guaranteed residential mortgage-backed securities			6,920						6,398
Agency-guaranteed commercial mortgage-backed securities			1,790						1,519
Agency-guaranteed residential collateralized mortgage obligations			174,098						162,877
Agency-guaranteed commercial collateralized mortgage obligations			159,050						139,624
Private label collateralized mortgage obligations			183,747						176,820
Total held to maturity debt securities			$	1,064,437					$	1,027,514

Customers recorded no allowance for credit losses on investment securities classified as held to maturity at September 30, 2024 and December 31, 2023. 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 that are highly rated with sufficient overcollateralization are estimated to have no expected credit losses. Customers recorded no allowance for its investments in the asset-backed securities. Customers considered the seniority of its beneficial interests, which include overcollateralization of these asset-backed securities in the estimate of the ACL at September 30, 2024 and December 31, 2023. The unrealized losses on HTM debt securities with no ACL were primarily due to changes in market interest rates that resulted in a negative impact on the respective securities’ fair value and are expected to be recovered when market prices recover or at maturity.

Credit Quality Indicator

Customers monitors the credit quality of HTM debt securities primarily through credit ratings provided by rating agencies. Investment grade debt securities are rated BBB- or higher by S&P Global Ratings, Baa3 or higher by Moody’s Investors Service or equivalent ratings by other rating agencies, and are generally considered to be of low credit risk. Except for the asset-backed securities and a private label collateralized mortgage obligation, all of the HTM debt securities held by Customers were investment grade or U.S. government agency guaranteed securities that were not rated at September 30, 2024 and December 31, 2023. The asset-backed securities and a private label collateralized mortgage obligation are not rated by rating agencies. Customers monitors the credit quality of these asset-backed securities and a private label collateralized mortgage obligation by evaluating the performance of the sold consumer installment loans and other underlying loans against the overcollateralization available for these securities.

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

			September 30, 2024
(amounts in thousands)			AAA						AA																																																Not Rated						Total
Held to maturity debt securities:
Asset-backed securities			$	—					$	—																																															$	538,832					$	538,832
Agency-guaranteed residential mortgage-backed securities			—						—																																																6,920						6,920
Agency-guaranteed commercial mortgage-backed securities			—						—																																																1,790						1,790
Agency-guaranteed residential collateralized mortgage obligations			—						—																																																174,098						174,098
Agency-guaranteed commercial collateralized mortgage obligations			—						—																																																159,050						159,050
Private label collateralized mortgage obligations			100,287						9,301																																																74,159						183,747
Total held to maturity debt securities			$	100,287					$	9,301																																															$	954,849					$	1,064,437

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, 2024 and December 31, 2023, there were no HTM debt securities past due under the terms of their agreements or in nonaccrual status.

At September 30, 2024 and December 31, 2023, Customers Bank had pledged HTM investment securities aggregating $412.3 million and $398.4 million in fair value, respectively, as collateral primarily for immediately available liquidity from the FRB and unused lines of credit with another financial institution. The counterparties do not have the ability to sell or repledge these securities.

NOTE 6 – LOANS HELD FOR SALE

The composition of loans held for sale as of September 30, 2024 and December 31, 2023 was as follows:

(amounts in thousands)			September 30, 2024						December 31, 2023
Residential mortgage loans, at fair value			$	2,523					$	1,215
Personal installment loans, at lower of cost or fair value			55,799						151,040
Other installment loans, at fair value			217,098						188,062
Total loans held for sale			$	275,420					$	340,317

Total loans held for sale included NPLs of $5.3 million and $0.5 million as of September 30, 2024 and December 31, 2023, respectively.

During the three and nine months ended September 30, 2024, Customers sold $202.5 million of personal and other installment loans that were classified as held for sale, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs. Customers provided financing to the purchasers for a portion of the sales price in the form of $160.0 million of asset-backed securities while $40.2 million of the remaining sales proceeds were paid in cash.

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

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

The following table presents loans and leases receivable as of September 30, 2024 and December 31, 2023.

(amounts in thousands)			September 30, 2024						December 31, 2023
Loans and leases receivable:
Commercial:
Commercial and industrial:
Specialized lending (1)			$	5,468,507					$	5,006,693
Other commercial and industrial (2)			1,204,426						1,279,147
Multifamily			2,115,978						2,138,622
Commercial real estate owner occupied			981,904						797,319
Commercial real estate non-owner occupied			1,326,591						1,177,650
Construction			174,509						166,393
Total commercial loans and leases receivable			11,271,915						10,565,824
Consumer:
Residential real estate			500,786						484,435
Manufactured housing			34,481						38,670
Installment:
Personal			453,739						555,533
Other			266,362						319,393
Total consumer loans receivable			1,255,368						1,398,031
Loans and leases receivable			12,527,283						11,963,855
Loans receivable, mortgage finance, at fair value			1,250,413						897,912
Allowance for credit losses on loans and leases			(133,158)						(135,311)
Total loans and leases receivable, net of allowance for credit losses on loans and leases (3)			$	13,644,538					$	12,726,456

(1)Includes direct finance and sales-type equipment leases of $254.3 million and $205.7 million at September 30, 2024 and December 31, 2023, respectively.

(2)Includes PPP loans of $30.5 million and $74.7 million at September 30, 2024 and December 31, 2023, respectively.

(3)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(18.1) million and $(22.7) million at September 30, 2024 and December 31, 2023, respectively.

Customers’ total loans and leases receivable includes loans receivable reported at fair value based on an election made to account for these loans at fair value, and loans and leases receivable predominately reported at their outstanding unpaid principal balance, net of charge-offs, deferred costs and fees, unamortized premiums and discounts, and evaluated for impairment. The total amount of accrued interest recorded for total loans was $89.2 million and $95.0 million at September 30, 2024 and December 31, 2023, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At September 30, 2024 and December 31, 2023, there were $31.7 million and $15.8 million of individually evaluated loans that were collateral-dependent, respectively. Substantially all individually evaluated loans were collateral-dependent and consisted primarily of commercial and industrial, commercial real estate, and residential real estate loans. Collateral-dependent commercial and industrial loans were secured by accounts receivable, inventory and equipment; collateral-dependent commercial real estate loans were secured by commercial real estate assets; and residential real estate loans were secured by residential real estate assets.

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Loans and leases receivable

The following tables summarize loans and leases receivable by loan and lease type and performance status as of September 30, 2024 and December 31, 2023:

			September 30, 2024
(amounts in thousands)			30-59 Days past due (1)						60-89 Days past due (1)						90 Days or more past due (2)						Total past due						Loans and leases not past due (3)(4)						Total loans and leases (4)
Commercial and industrial, including specialized lending			$	540					$	660					$	3,519					$	4,719					$	6,637,746					$	6,642,465
Multifamily			—						—						11,834						11,834						2,104,144						2,115,978
Commercial real estate owner occupied			—						391						8,591						8,982						972,922						981,904
Commercial real estate non-owner occupied			293						701						62						1,056						1,325,535						1,326,591
Construction			—						—						—						—						174,509						174,509
Residential real estate			3,320						5,944						3,995						13,259						487,527						500,786
Manufactured housing			623						200						2,263						3,086						31,395						34,481
Installment			5,266						7,297						6,328						18,891						701,210						720,101
Total			$	10,042					$	15,193					$	36,592					$	61,827					$	12,434,988					$	12,496,815

			December 31, 2023
(amounts in thousands)			30-59 Days past due (1)						60-89 Days past due (1)						90 Days or more past due (2)						Total past due						Loans and leases not past due (3)(4)						Total loans and leases (4)
Commercial and industrial, including specialized lending			$	1,516					$	322					$	4,153					$	5,991					$	6,205,114					$	6,211,105
Multifamily			16,003						—						—						16,003						2,122,619						2,138,622
Commercial real estate owner occupied			449						3,814						5,827						10,090						787,229						797,319
Commercial real estate non-owner occupied			16,653						—						—						16,653						1,160,997						1,177,650
Construction			—						—						—						—						166,393						166,393
Residential real estate			10,504						2,255						3,764						16,523						467,912						484,435
Manufactured housing			1,152						343						2,869						4,364						34,306						38,670
Installment			9,255						7,866						7,211						24,332						850,594						874,926
Total			$	55,532					$	14,600					$	23,824					$	93,956					$	11,795,164					$	11,889,120

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

(2)Includes loans amounting to $0.4 million and $0.5 million as of September 30, 2024 and December 31, 2023, respectively, that are still accruing interest because collection is considered probable.

(3)Loans and leases where next payment due is less than 30 days from the report date. The tables exclude PPP loans of $30.5 million, of which $0.5 million were 30-59 days past due and $17.1 million were 60 days or more past due as of September 30, 2024, and PPP loans of $74.7 million, of which $0.7 million were 30-59 days past due and $48.5 million were 60 days or more past due as of December 31, 2023. Claims for guarantee payments are submitted to the SBA for eligible PPP loans that are more than 60 days past due.

(4)Includes PCD loans of $127.0 million and $157.2 million at September 30, 2024 and December 31, 2023, 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.

			September 30, 2024																		December 31, 2023
(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 specialized lending			$	4,598					$	17					$	4,615					$	3,365					$	1,071					$	4,436
Multifamily			11,834						—						11,834						—						—						—
Commercial real estate owner occupied			4,590						4,023						8,613						5,869						—						5,869
Commercial real estate non-owner occupied			763						—						763						—						—						—
Residential real estate			7,467						530						7,997						6,685						117						6,802
Manufactured housing			—						1,869						1,869						—						2,331						2,331
Installment			—						6,328						6,328						—						7,211						7,211
Total			$	29,252					$	12,767					$	42,019					$	15,919					$	10,730					$	26,649

Interest income recognized on nonaccrual loans was insignificant for the three and nine months ended September 30, 2024 and 2023. Accrued interest reversed when the loans went to nonaccrual status was insignificant for the three and nine months ended September 30, 2024 and 2023.

Loans receivable, mortgage finance, at fair value

Mortgage finance loans consist of commercial loans to mortgage companies. These mortgage finance 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 finance 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 finance loans is estimated as the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The interest rates on these loans are variable, and the lending transactions are short-term, with an average life under 30 days from purchase to sale. The primary goal of these lending transactions is to provide liquidity to mortgage companies.

At September 30, 2024 and December 31, 2023, all of Customers’ mortgage finance 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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Allowance for credit losses on loans and leases

The changes in the ACL on loans and leases by loan and lease type for the three and nine months ended September 30, 2024 and 2023 are presented in the tables below.

(amounts in thousands)			Commercial and industrial (1)(2)						Multifamily						Commercial real estate owner occupied						Commercial real estate non-owner occupied						Construction						Residential real estate						Manufactured housing						Installment												Total
Three Months Ended September 30, 2024
Ending Balance, June 30, 2024			$	23,721					$	20,652					$	8,431					$	17,966					$	1,856					$	5,884					$	4,094					$	49,832											$	132,436
Charge-offs			(6,538)						(2,167)						(4)						—						—						(19)						—						(12,496)												(21,224)
Recoveries			1,482						—						—						—						3						40						—						2,655												4,180
Provision (benefit) for credit losses on loans and leases			6,526						(395)						2,486						(663)						(253)						(68)						(13)						10,146												17,766
Ending Balance, September 30, 2024			$	25,191					$	18,090					$	10,913					$	17,303					$	1,606					$	5,837					$	4,081					$	50,137											$	133,158
Nine Months Ended September 30, 2024
Ending Balance, December 31, 2023			$	23,503					$	16,343					$	9,882					$	16,859					$	1,482					$	6,586					$	4,239					$	56,417											$	135,311
Charge-offs			(19,282)						(4,073)						(26)						—						—						(38)						—						(43,356)												(66,775)
Recoveries			4,889						—						—						—						10						61						—						8,092												13,052
Provision (benefit) for credit losses on loans and leases			16,081						5,820						1,057						444						114						(772)						(158)						28,984												51,570
Ending Balance, September 30, 2024			$	25,191					$	18,090					$	10,913					$	17,303					$	1,606					$	5,837					$	4,081					$	50,137											$	133,158

(amounts in thousands)			Commercial and industrial (1)(2)						Multifamily						Commercial real estate owner occupied						Commercial real estate non-owner occupied						Construction						Residential real estate						Manufactured housing						Installment												Total
Three Months Ended September 30, 2023
Ending Balance, June 30, 2023			$	29,092					$	15,400					$	10,215					$	13,495					$	2,639					$	6,846					$	4,338					$	57,631											$	139,656
Charge-offs			(9,008)						(1,999)						(39)						—						—						(42)						—						(18,932)												(30,020)
Recoveries			6,034						—						—						—						—						29						—						6,459												12,522
Provision (benefit) for credit losses on loans and leases			(1,132)						2,469						187						2,324						491						(31)						(258)						13,005												17,055
Ending Balance, September 30, 2023			$	24,986					$	15,870					$	10,363					$	15,819					$	3,130					$	6,802					$	4,080					$	58,163											$	139,213
Nine Months Ended September 30, 2023
Ending Balance, December 31, 2022			$	17,582					$	14,541					$	6,454					$	11,219					$	1,913					$	6,094					$	4,430					$	68,691											$	130,924
Allowance for credit losses on FDIC PCD loans, net of charge-offs (3)			2,576						—						—						—						—						—						—						—												2,576
Charge-offs			(9,600)						(3,447)						(39)						(4,527)						—						(69)						—						(52,031)												(69,713)
Recoveries			6,439						—						34						27						116						34						—						11,350												18,000
Provision (benefit) for credit losses on loans and leases			7,989						4,776						3,914						9,100						1,101						743						(350)						30,153												57,426
Ending Balance, September 30, 2023			$	24,986					$	15,870					$	10,363					$	15,819					$	3,130					$	6,802					$	4,080					$	58,163											$	139,213

(1)    Includes specialized lending.

(2)    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.

(3)    Represents $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of a venture banking loan portfolio (included within specialized lending) from the FDIC on June 15, 2023, net of $6.2 million of charge-offs for certain of these PCD loans upon acquisition.

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At September 30, 2024, the ACL on loans and leases was $133.2 million, a decrease of $2.2 million from the December 31, 2023 balance of $135.3 million. The decrease in ACL for the three and nine months ended September 30, 2024 was primarily attributable to slight improvements in macroeconomic forecasts and a decrease in consumer installment loan balances held for investment.

Loan Modifications for Borrowers Experiencing Financial Difficulty

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

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

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

The following table presents the amortized cost of loans that were modified to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2024 and 2023, disaggregated by class of financing receivable and type of modification granted.

			Three Months Ended September 30, 2024
(dollars in thousands)			Interest Rate Reduction						Term Extension						Payment Deferral						Debt Forgiveness						Interest Rate Reduction and Term Extension						Total						Percentage of Total by Financing Class
Commercial and industrial, including specialized lending			$	—					$	—					$	4,800					$	—					$	—					$	4,800					0.07		%
Manufactured housing			—						18						—						—						79						97						0.28		%
Personal installment			266						1,770						55						37						—						2,128						0.47		%
Total			$	266					$	1,788					$	4,855					$	37					$	79					$	7,025

									Three Months Ended September 30, 2023
(dollars in thousands)									Term Extension						Payment Deferral						Debt Forgiveness						Interest Rate Reduction and Term Extension						Total						Percentage of Total by Financing Class
Manufactured housing									$	—					$	—					$	—					$	99					$	99					0.25		%
Personal installment									3,863						210						28						—						4,101						0.42		%
Total									$	3,863					$	210					$	28					$	99					$	4,200

			Nine Months Ended September 30, 2024
(dollars in thousands)			Interest Rate Reduction						Term Extension						Payment Deferral						Debt Forgiveness						Interest Rate Reduction and Term Extension						Total						Percentage of Total by Financing Class
Commercial and industrial, including specialized lending			$	—					$	2,000					$	8,049					$	—					$	—					$	10,049					0.15		%
Multifamily			—						—						10,713						—						—						10,713						0.51		%
Residential real estate			—						—						52						—						—						52						0.01		%
Manufactured housing			—						96						—						—						128						224						0.65		%
Personal installment			266						4,970						178						93						—						5,507						1.21		%
Total			$	266					$	7,066					$	18,992					$	93					$	128					$	26,545

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									Nine Months Ended September 30, 2023
(dollars in thousands)									Term Extension						Payment Deferral						Debt Forgiveness						Interest Rate Reduction and Term Extension						Total						Percentage of Total by Financing Class
Commercial real estate owner occupied									$	169					$	—					$	—					$	—					$	169					0.02		%
Manufactured housing									6						—						—						113						119						0.30		%
Personal installment									10,910						442						222						—						11,574						1.20		%
Total									$	11,085					$	442					$	222					$	113					$	11,862

As of September 30, 2024, there were no commitments to lend additional funds to debtors experiencing financial difficulty whose loans have been modified during the three and nine months ended September 30, 2024.

The following table summarizes the impacts of loan modifications made to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2024 and 2023.

			Three Months Ended September 30, 2024																								Three Months Ended September 30, 2023
			Weighted Average																								Weighted Average
(dollars in thousands)			Interest Rate Reduction (%)						Term Extension (in months)						Payment Deferral (in months)						Debt Forgiven						Interest Rate Reduction (%)						Term Extension (in months)						Payment Deferral (in months)						Debt Forgiven
Commercial and industrial, including specialized lending			—%						0						10						$	—					—%						0						0						$	—
Manufactured housing			3.8						115						0						—						4.4						31						0						—
Personal installment			13.6						5						7						12						—						6						6						20

			Nine Months Ended September 30, 2024																								Nine Months Ended September 30, 2023
			Weighted Average																								Weighted Average
(dollars in thousands)			Interest Rate Reduction (%)						Term Extension (in months)						Payment Deferral (in months)						Debt Forgiven						Interest Rate Reduction (%)						Term Extension (in months)						Payment Deferral (in months)						Debt Forgiven
Commercial and industrial, including specialized lending			—		%				1						8						$	—					—		%				0						0						$	—
Multifamily			—						0						5						—						—						0						0						—
Commercial real estate owner occupied			—						0						0						—						—						4						0						—
Residential real estate			—						0						5						—						—						0						0						—
Manufactured housing			4.0						78						0						—						4.3						30						0						—
Personal installment			13.6						5						7						153						—						6						6						183

The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored to understand the effectiveness of modification efforts. Loans are considered to be in payment default at 90 days or more past due. The following table presents an aging analysis of loan modifications made to borrowers experiencing financial difficulty in the twelve months ended September 30, 2024 and the nine months ended ended September 30, 2023.

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			September 30, 2024
(dollars in thousands)			30-59 Days past due						60-89 Days past due						90 Days or more past due						Current						Total
Commercial and industrial, including specialized lending			$	—					$	—					$	230					$	22,395					$	22,625
Multifamily			—						—						—						10,713						10,713
Residential real estate			—						—						—						52						52
Manufactured housing			19						24						37						269						349
Personal installment			436						331						665						7,393						8,825
Total			$	455					$	355					$	932					$	40,822					$	42,564

			September 30, 2023 (1)
(dollars in thousands)			30-59 Days past due						60-89 Days past due						90 Days or more past due						Current						Total
Commercial real estate owner occupied			$	—					$	—					$	169					$	—					$	169
Manufactured housing			—						—						—						119						119
Personal installment			837						565						354						9,820						11,576
Total			$	837					$	565					$	523					$	9,939					$	11,864

(1)    Customers adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023, therefore, the September 30, 2023 balances only include loans since ASU 2022-02 became effective.

The loans to borrowers experiencing financial difficulty that were modified during the twelve months ended September 30, 2024 that subsequently defaulted were not material. During the nine months ended September 30, 2023, the loans that were made to borrowers experiencing financial difficulty that subsequently defaulted were not material. Customers’ ACL is influenced by loan level characteristics that inform the assessed propensity to default. As such, the provision for credit losses is impacted by changes in such loan level characteristics, such as payment performance. Loans made to borrowers experiencing financial difficulty can be classified as either accrual or nonaccrual.

Credit Quality Indicators

The ACL represents management’s estimate of expected losses in Customers’ loans and leases receivable portfolio, excluding mortgage finance loans reported at fair value pursuant to a fair value option election and PPP loans receivable. Commercial and industrial including specialized lending, multifamily, 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, manufactured housing and installment loans are evaluated based on the payment activity of the loan.

To facilitate the monitoring of credit quality within the commercial and industrial including specialized lending, multifamily, 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 2023 Form 10-K describes Customers Bancorp’s risk rating grades.

Risk ratings are not established for certain consumer loans, including residential real estate, home equity, manufactured housing, and installment loans, mainly because these portfolios consist of a larger number of homogeneous loans with smaller balances. Instead, these portfolios are evaluated for risk mainly based upon aggregate payment history through the monitoring of delinquency levels and trends and are classified as performing and non-performing. PPP loans of $30.5 million and $74.7 million at September 30, 2024 and December 31, 2023, respectively, are excluded in the tables below as these loans are fully guaranteed by the SBA, provided that the eligibility criteria are met. The following tables present the credit ratings of loans and leases receivable and current period gross write-offs as of September 30, 2024 and December 31, 2023.

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			Term Loans Amortized Cost Basis by Origination Year as of September 30, 2024
(amounts in thousands)			2024						2023						2022						2021						2020						Prior						Revolving loans amortized cost basis						Revolving loans converted to term						Total
Commercial and industrial loans and leases, including specialized lending:
Pass			$	1,288,705					$	790,316					$	1,591,974					$	328,477					$	114,778					$	32,650					$	1,952,229					$	392,242					$	6,491,371
Special mention			12,755						250						30,397						3,926						—						67						29,747						4,417						81,559
Substandard			—						958						7,832						12,076						3,576						37,379						4,076						3,638						69,535
Doubtful			—						—						—						—						—						—						—						—						—
Total commercial and industrial loans and leases			$	1,301,460					$	791,524					$	1,630,203					$	344,479					$	118,354					$	70,096					$	1,986,052					$	400,297					$	6,642,465
Commercial and industrial loans and leases charge-offs:
Three Months Ended September 30, 2024 (1)			$	94					$	—					$	13					$	52					$	742					$	5,637					$	—					$	—					$	6,538
Nine Months Ended September 30, 2024 (1)			312						702						5,685						4,147						2,429						6,007						—						—						19,282
Multifamily loans:
Pass			$	76,380					$	823					$	1,202,986					$	301,976					$	125,476					$	303,992					$	—					$	—					$	2,011,633
Special mention			—						—						6,770						—						—						42,662						—						—						49,432
Substandard			—						—						—						—						—						54,913						—						—						54,913
Doubtful			—						—						—						—						—						—						—						—						—
Total multifamily loans			$	76,380					$	823					$	1,209,756					$	301,976					$	125,476					$	401,567					$	—					$	—					$	2,115,978
Multifamily loans charge-offs:
Three Months Ended September 30, 2024			$	—					$	—					$	—					$	—					$	—					$	2,167					$	—											$	2,167
Nine Months Ended September 30, 2024			—						—						—						—						—						4,073						—						—						4,073
Commercial real estate owner occupied loans:
Pass			$	218,625					$	64,100					$	238,103					$	197,298					$	52,820					$	147,520					$	7,640					$	74					$	926,180
Special mention			—						—						—						—						—						10,924						—						11,197						22,121
Substandard			—						2,944						703						15,310						—						14,646						—						—						33,603
Doubtful			—						—						—						—						—						—						—						—						—
Total commercial real estate owner occupied loans			$	218,625					$	67,044					$	238,806					$	212,608					$	52,820					$	173,090					$	7,640					$	11,271					$	981,904
Commercial real estate owner occupied loans charge-offs:
Three Months Ended September 30, 2024			$	—					$	—					$	—					$	—					$	—					$	4					$	—					$	—					$	4
Nine Months Ended September 30, 2024			—						—						—						—						—						26						—						—						26
Commercial real estate non-owner occupied loans:
Pass			$	100,123					$	30,427					$	413,675					$	97,555					$	182,789					$	424,192					$	214					$	—					$	1,248,975
Special mention			—						12,000						4,308						—						—						438						—						—						16,746
Substandard			—						—						—						—						701						60,169						—						—						60,870
Doubtful			—						—						—						—						—						—						—						—						—
Total commercial real estate non-owner occupied loans			$	100,123					$	42,427					$	417,983					$	97,555					$	183,490					$	484,799					$	214					$	—					$	1,326,591
Commercial real estate non-owner occupied loans charge-offs:
Three Months Ended September 30, 2024			$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Nine Months Ended September 30, 2024			—						—						—						—						—						—						—						—						—
Construction loans:
Pass			$	9,235					$	18,651					$	133,969					$	—					$	—					$	4,486					$	—					$	—					$	166,341
Special mention			—						8,168						—						—						—						—						—						—						8,168
Substandard			—						—						—						—						—						—						—						—						—
Doubtful			—						—						—						—						—						—						—						—						—
Total construction loans			$	9,235					$	26,819					$	133,969					$	—					$	—					$	4,486					$	—					$	—					$	174,509

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			Term Loans Amortized Cost Basis by Origination Year as of September 30, 2024
(amounts in thousands)			2024						2023						2022						2021						2020						Prior						Revolving loans amortized cost basis						Revolving loans converted to term						Total
Construction loans charge-offs:
Three Months Ended September 30, 2024			$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Nine Months Ended September 30, 2024			—						—						—						—						—						—						—						—						—
Total commercial loans and leases receivable			$	1,705,823					$	928,637					$	3,630,717					$	956,618					$	480,140					$	1,134,038					$	1,993,906					$	411,568					$	11,241,447
Total commercial loans and leases receivable charge-offs:
Three Months Ended September 30, 2024			$	94					$	—					$	13					$	52					$	742					$	7,808					$	—					$	—					$	8,709
Nine Months Ended September 30, 2024			312						702						5,685						4,147						2,429						10,106						—						—						23,381
Residential real estate loans:
Performing			$	41,200					$	21,946					$	165,563					$	124,381					$	5,957					$	80,700					$	53,214					$	—					$	492,961
Non-performing			141						280						1,394						1,695						233						4,082						—						—						7,825
Total residential real estate loans			$	41,341					$	22,226					$	166,957					$	126,076					$	6,190					$	84,782					$	53,214					$	—					$	500,786
Residential real estate loans charge-offs:
Three Months Ended September 30, 2024			$	—					$	—					$	—					$	—					$	—					$	19					$	—					$	—					$	19
Nine Months Ended September 30, 2024			—						—						—						—						—						38						—						—						38
Manufactured housing loans:
Performing			$	—					$	—					$	—					$	—					$	—					$	32,969					$	—					$	—					$	32,969
Non-performing			—						—						—						—						—						1,512						—						—						1,512
Total manufactured housing loans			$	—					$	—					$	—					$	—					$	—					$	34,481					$	—					$	—					$	34,481
Manufactured housing loans charge-offs:
Three Months Ended September 30, 2024			$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Nine Months Ended September 30, 2024			—						—						—						—						—						—						—						—						—
Installment loans:
Performing			$	81,762					$	174,647					$	240,433					$	109,349					$	35,925					$	28,770					$	43,757					$	8					$	714,651
Non-performing			39						1,880						1,552						1,119						308						442						110						—						5,450
Total installment loans			$	81,801					$	176,527					$	241,985					$	110,468					$	36,233					$	29,212					$	43,867					$	8					$	720,101
Installment loans charge-offs:
Three Months Ended September 30, 2024			$	425					$	2,432					$	5,219					$	3,311					$	553					$	556					$	—					$	—					$	12,496
Nine Months Ended September 30, 2024			2,307						5,837						17,450						12,099						2,286						3,377						—						—						43,356
Total consumer loans			$	123,142					$	198,753					$	408,942					$	236,544					$	42,423					$	148,475					$	97,081					$	8					$	1,255,368
Total consumer loans charge-offs:
Three Months Ended September 30, 2024			$	425					$	2,432					$	5,219					$	3,311					$	553					$	575					$	—					$	—					$	12,515
Nine Months Ended September 30, 2024			2,307						5,837						17,450						12,099						2,286						3,415						—						—						43,394
Loans and leases receivable			$	1,828,965					$	1,127,390					$	4,039,659					$	1,193,162					$	522,563					$	1,282,513					$	2,090,987					$	411,576					$	12,496,815
Loans and leases receivable charge-offs:
Three Months Ended September 30, 2024			$	519					$	2,432					$	5,232					$	3,363					$	1,295					$	8,383					$	—					$	—					$	21,224
Nine Months Ended September 30, 2024			$	2,619					$	6,539					$	23,135					$	16,246					$	4,715					$	13,521					$	—					$	—					$	66,775

(1)    Charge-offs for the three and nine months ended September 30, 2024 included $0.8 million and $5.0 million, respectively, of commercial and industrial loans originated under the PPP that were subsequently determined to be ineligible for SBA forgiveness and guarantee and were ultimately deemed uncollectible.

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			Term Loans Amortized Cost Basis by Origination Year as of December 31, 2023
(amounts in thousands)			2023						2022						2021						2020						2019						Prior						Revolving loans amortized cost basis						Revolving loans converted to term						Total
Commercial and industrial loans and leases, including specialized lending:
Pass			$	1,184,923					$	1,909,592					$	483,039					$	170,384					$	59,213					$	63,480					$	1,722,559					$	384,947					$	5,978,137
Special mention			18,000						3,377						5,127						1,986						—						595						7,916						2,903						39,904
Substandard			14,738						39,258						61,533						26,660						4,803						42,062						4,010						—						193,064
Doubtful			—						—						—						—						—						—						—						—						—
Total commercial and industrial loans and leases			$	1,217,661					$	1,952,227					$	549,699					$	199,030					$	64,016					$	106,137					$	1,734,485					$	387,850					$	6,211,105
Commercial and industrial loans and leases charge-offs:
For the Year Ended December 31, 2023 (1)(2)			$	1,483					$	381					$	3,169					$	10,348					$	24					$	1,510					$	—					$	—					$	16,915
Multifamily loans:
Pass			$	845					$	1,229,198					$	371,016					$	127,493					$	43,046					$	253,806					$	—					$	—					$	2,025,404
Special mention			—						—						—						—						6,468						67,035						—						—						73,503
Substandard			—						—						—						—						—						39,715						—						—						39,715
Doubtful			—						—						—						—						—						—						—						—						—
Total multifamily loans			$	845					$	1,229,198					$	371,016					$	127,493					$	49,514					$	360,556					$	—					$	—					$	2,138,622
Multifamily loans charge-offs:
For the Year Ended December 31, 2023			$	—					$	—					$	—					$	—					$	—					$	3,574					$	—					$	—					$	3,574
Commercial real estate owner occupied loans:
Pass			$	41,011					$	254,878					$	180,289					$	77,821					$	44,382					$	120,248					$	—					$	11,318					$	729,947
Special mention			—						—						15,432						—						35,691						47						—						—						51,170
Substandard			—						—						—						—						347						15,855						—						—						16,202
Doubtful			—						—						—						—						—						—						—						—						—
Total commercial real estate owner occupied loans			$	41,011					$	254,878					$	195,721					$	77,821					$	80,420					$	136,150					$	—					$	11,318					$	797,319
Commercial real estate owner occupied loans charge-offs:
For the Year Ended December 31, 2023			$	—					$	—					$	—					$	—					$	—					$	39					$	—					$	—					$	39
Commercial real estate non-owner occupied loans:
Pass			$	12,906					$	325,881					$	109,521					$	152,227					$	88,586					$	367,996					$	—					$	—					$	1,057,117
Special mention			—						—						—						20,702						—						9,148						—						—						29,850
Substandard			—						10,910						—						—						8,113						71,660						—						—						90,683
Doubtful			—						—						—						—						—						—						—						—						—
Total commercial real estate non-owner occupied loans			$	12,906					$	336,791					$	109,521					$	172,929					$	96,699					$	448,804					$	—					$	—					$	1,177,650
Commercial real estate non-owner occupied loans charge-offs:
For the Year Ended December 31, 2023			$	—					$	—					$	—					$	—					$	—					$	4,527					$	—					$	—					$	4,527
Construction loans:
Pass			$	17,594					$	138,797					$	2,567					$	—					$	—					$	4,580					$	—					$	1,100					$	164,638
Special mention			1,755						—						—						—						—						—						—						—						1,755
Substandard			—						—						—						—						—						—						—						—						—
Doubtful			—						—						—						—						—						—						—						—						—
Total construction loans			$	19,349					$	138,797					$	2,567					$	—					$	—					$	4,580					$	—					$	1,100					$	166,393
Construction loans charge-offs:
For the Year Ended December 31, 2023			$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Total commercial loans and leases receivable			$	1,291,772					$	3,911,891					$	1,228,524					$	577,273					$	290,649					$	1,056,227					$	1,734,485					$	400,268					$	10,491,089

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			Term Loans Amortized Cost Basis by Origination Year as of December 31, 2023
(amounts in thousands)			2023						2022						2021						2020						2019						Prior						Revolving loans amortized cost basis						Revolving loans converted to term						Total
Total commercial loans and leases receivable charge-offs:
For the Year Ended December 31, 2023			$	1,483					$	381					$	3,169					$	10,348					$	24					$	9,650					$	—					$	—					$	25,055
Residential real estate loans:
Performing			$	22,613					$	173,424					$	131,621					$	6,458					$	15,508					$	71,433					$	56,844					$	—					$	477,901
Non-performing			—						350						1,236						229						545						3,993						181						—						6,534
Total residential real estate loans			$	22,613					$	173,774					$	132,857					$	6,687					$	16,053					$	75,426					$	57,025					$	—					$	484,435
Residential real estate loans charge-offs:
For the Year Ended December 31, 2023			$	—					$	—					$	—					$	—					$	—					$	69					$	—					$	—					$	69
Manufactured housing loans:
Performing			$	—					$	—					$	—					$	—					$	98					$	36,464					$	—					$	—					$	36,562
Non-performing			—						—						—						—						—						2,108						—						—						2,108
Total manufactured housing loans			$	—					$	—					$	—					$	—					$	98					$	38,572					$	—					$	—					$	38,670
Manufactured housing loans charge-offs:
For the Year Ended December 31, 2023			$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
Installment loans:
Performing			$	253,958					$	307,566					$	158,381					$	50,354					$	39,953					$	3,448					$	51,480					$	—					$	865,140
Non-performing			2,634						4,102						1,751						546						477						86						190						—						9,786
Total installment loans			$	256,592					$	311,668					$	160,132					$	50,900					$	40,430					$	3,534					$	51,670					$	—					$	874,926
Installment loans charge-offs:
For the Year Ended December 31, 2023			$	7,728					$	24,605					$	23,984					$	5,590					$	6,797					$	1,238					$	—					$	—					$	69,942
Total consumer loans			$	279,205					$	485,442					$	292,989					$	57,587					$	56,581					$	117,532					$	108,695					$	—					$	1,398,031
Total consumer loans charge-offs:
For the Year Ended December 31, 2023			$	7,728					$	24,605					$	23,984					$	5,590					$	6,797					$	1,307					$	—					$	—					$	70,011
Loans and leases receivable			$	1,570,977					$	4,397,333					$	1,521,513					$	634,860					$	347,230					$	1,173,759					$	1,843,180					$	400,268					$	11,889,120
Loans and leases receivable charge-offs:
For the Year Ended December 31, 2023			$	9,211					$	24,986					$	27,153					$	15,938					$	6,821					$	10,957					$	—					$	—					$	95,066

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

(2)    Charge-offs for the year ended December 31, 2023 included $10.7 million of commercial and industrial loans originated under the PPP that were subsequently determined to be ineligible for SBA forgiveness and guarantee and were ultimately deemed uncollectible.

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Loan Purchases and Sales

Purchases and sales of loans held for investment were as follows for the three and nine months ended September 30, 2024 and 2023:

			Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands)			2024						2023						2024						2023
Purchases (1)
Specialized lending			$	—					$	—					$	—					$	631,252
Other commercial and industrial			602						4,977						8,005						15,285
Commercial real estate owner occupied			—						—						—						2,867
Residential real estate			—						—						—						4,238
Personal installment (2)			69,976						—						113,217						—
Other installment (2)			—						96,758						—						96,758
Total			$	70,578					$	101,735					$	121,222					$	750,400
Sales (3)
Specialized lending (4)			$	—					$	—					$	—					$	287,185
Other commercial and industrial (5)			—						6,725						23,708						54,083
Commercial real estate owner occupied (5)			—						5,671						—						24,522
Commercial real estate non-owner occupied			—						—						—						16,000
Personal installment			53,021						—						53,021						—
Other installment			—						—						—						154,042
Total			$	53,021					$	12,396					$	76,729					$	535,832

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 95.9% and 100.0% of the loans’ unpaid principal balance for the three months ended September 30, 2024 and 2023, respectively. The purchase price was 97.5% and 87.7% of the loans’ unpaid principal balance for the nine months ended September 30, 2024 and 2023, respectively.

(2)Installment loan purchases for the three and nine months ended September 30, 2024 consist of third-party originated unsecured consumer loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

(3)For the three months ended September 30, 2024 and 2023, sales of loans held for investment resulted in no gain or loss and net losses of $0.2 million, respectively, included in net gain (loss) on sale of loans and leases in the consolidated statements of income. For the nine months ended September 30, 2024 and 2023, sales of loans held for investment resulted in net losses of $0.2 million and net gains of $0.2 million, respectively.

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

(5)Primarily sales of SBA loans for the three and nine months ended September 30, 2023.

Loans Pledged as Collateral

Customers has pledged eligible commercial and residential real estate, multifamily, commercial and industrial, PPP and consumer installment loans as collateral for borrowings outstanding or available immediately from the FHLB and FRB in the amount of $7.8 billion and $7.0 billion at September 30, 2024 and December 31, 2023, respectively.

NOTE 8 — LEASES

Lessee

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

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.

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

(amounts in thousands)			Classification						September 30, 2024						December 31, 2023
ASSETS
Operating lease ROU assets			Other assets						$	35,901					$	15,644
LIABILITIES
Operating lease liabilities			Other liabilities						$	37,993					$	18,048

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

									Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands)			Classification						2024						2023						2024						2023
Operating lease cost (1)			Occupancy expenses						$	1,792					$	1,260					$	4,277					$	3,775

(1) There were no variable lease costs for the three and nine months ended September 30, 2024 and 2023, and sublease income for operating leases was immaterial.

Maturities of non-cancelable operating lease liabilities were as follows at September 30, 2024:

(amounts in thousands)			September 30, 2024
2024			$	1,507
2025			5,668
2026			6,328
2027			5,833
2028			5,207
Thereafter			21,187
Total minimum payments			45,730
Less: interest			7,737
Present value of lease liabilities			$	37,993

Customers does not have leases where it is involved with the construction or design of an underlying asset. Cash paid pursuant to the operating lease liabilities was $1.3 million and $3.8 million for the three and nine months ended September 30, 2024, respectively. Cash paid pursuant to the operating lease liabilities was $1.3 million and $4.4 million for the three and nine months ended September 30, 2023, respectively. These payments were reported as cash flows used in operating activities in the statement of cash flows.

The following table summarizes the weighted average remaining lease term and discount rate for Customers’ operating leases at September 30, 2024 and December 31, 2023:

September 30, 2024

December 31, 2023

Weighted average remaining lease term (years)

Operating leases

8.6 years

5.6 years

Weighted average discount rate

Operating leases

4.08

%

3.28

%

Equipment Lessor

Customers’ commercial equipment financing group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The commercial equipment financing group is primarily focused on serving the following industries: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. Lease terms typically range from 24 months to 120 months. The commercial equipment financing group offers the following products: Loans, Capital Lease, PUT, TRAC, Split-TRAC, and FMV. Customers’ commercial equipment financing group leases equipments under direct finance, sales-type or operating leases.

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

Direct finance and sales-type equipment leases, are included in commercial and industrial loans and leases receivable and are recorded at the discounted amounts of lease payments receivable and the estimated residual value of the leased assets. Interest income on direct finance and sales-type leases is recognized over the term of the leases using the effective interest method. Any difference between the lower of the fair value of the underlying leased asset or the sum of the lease receivables and the carrying amount of the underlying leased asset would result to a gain or loss at the lease commencement date. Customers’ direct finance and sales-type lease activity primarily relates to leasing of new equipments.

During the three and nine months ended September 30, 2024, Customers’ commercial equipment financing group executed leases of commercial clean vehicles that qualified for investment tax credits. Customers accounted for these leases as sales-type leases and were included in loans and leases receivable on the balance sheet. Customers recognized a loss on sales-type leases of $14.3 million within net gain (loss) on sale of loans and leases and the corresponding investment tax credits within income tax expense (benefit) in the statements of income for the three and nine months ended September 30, 2024.

Customers recognized interest income from its sales-type and direct financing leases of $9.9 million and $7.1 million for the three months ended September 30, 2024 and 2023. Customers recognized interest income from its sales-type and direct financing leases of $27.0 million and $21.4 million for the nine months ended September 30, 2024 and 2023.

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

The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at September 30, 2024 and December 31, 2023:

(amounts in thousands)			Classification						September 30, 2024						December 31, 2023
ASSETS
Direct financing and sales-type leases
Lease receivables			Loans and leases receivable						$	243,859					$	190,559
Guaranteed residual assets			Loans and leases receivable						21,878						15,783
Unguaranteed residual assets			Loans and leases receivable						10,467						10,010
Deferred initial direct costs			Loans and leases receivable						1,348						1,213
Unearned income			Loans and leases receivable						(23,208)						(11,891)
Net investment in direct financing and sales-type leases									$	254,344					$	205,674
Operating leases
Investment in operating leases			Other assets						$	287,575					$	282,208
Accumulated depreciation			Other assets						(88,636)						(77,672)
Deferred initial direct costs			Other assets						957						1,192
Net investment in operating leases									199,896						205,728
Total lease assets									$	454,240					$	411,402

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Maturities of operating and direct financing and sales-type lease receivables were as follows at September 30, 2024:

(amounts in thousands)			Operating leases						Direct financing and sales-type leases
2024			$	11,314					$	19,302
2025			41,979						63,374
2026			47,551						56,173
2027			34,377						47,608
2028			57,173						29,881
Thereafter			35,968						27,521
Total minimum payments			$	228,362					243,859
Less: interest									23,208
Present value of lease receivables									$	220,651

NOTE 9 – DEPOSITS

The components of deposits at September 30, 2024 and December 31, 2023 were as follows:

			September 30, 2024						December 31, 2023
(amounts in thousands)
Demand, non-interest bearing			$	4,670,809					$	4,422,494
Demand, interest bearing			5,606,500						5,580,527
Savings, including money market deposit accounts			5,360,996						4,629,336
Time			2,431,084						3,287,879
Total deposits			$	18,069,389					$	17,920,236

The scheduled maturities for time deposits at September 30, 2024 were as follows:

(amounts in thousands)			September 30, 2024
2024			$	145,935
2025			771,882
2026			550,209
2027			305,184
2028			397,761
Thereafter			260,113
Total time deposits			$	2,431,084

Time deposits greater than the FDIC limit of $250,000 totaled $643.0 million and $186.3 million at September 30, 2024 and December 31, 2023, respectively.

Demand deposit overdrafts reclassified as loans were $1.2 million at September 30, 2024 and December 31, 2023.

At September 30, 2024 and December 31, 2023, the Bank had $1.5 billion and $1.1 billion in deposits, respectively, to which it had pledged $1.4 billion and $1.1 billion of available borrowing capacity through the FHLB to the depositors through a standby letter of credit arrangement, respectively.

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NOTE 10 - BORROWINGS

Short-term debt

There was no short-term debt outstanding at September 30, 2024 and December 31, 2023.

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

(dollars in thousands)			September 30, 2024 (1)						December 31, 2023 (2)
FRB advances
Maximum outstanding at any month end			$	—					$	—
Average balance during the period			—						120,099
Weighted-average interest rate during the period			—		%				5.23		%
FHLB advances
Maximum outstanding at any month end			150,000						—
Average balance during the period			11,496						87,407
Weighted-average interest rate during the period			5.74		%				5.16		%
Federal funds purchased
Maximum outstanding at any month end			—						—
Average balance during the period			—						3,781
Weighted-average interest rate during the period			—		%				4.97		%

(1)    For the nine months ended September 30, 2024.

(2)    For the year ended December 31, 2023.

At September 30, 2024 and December 31, 2023, Customers Bank had aggregate availability under federal funds lines totaling $1.7 billion.

Long-term debt

FHLB and FRB advances

Long-term FHLB and FRB advances at September 30, 2024 and December 31, 2023 were as follows:

			September 30, 2024																		December 31, 2023
(dollars in thousands)			Amount									Rate									Amount						Rate
FHLB advances (1)			$	1,117,229		(2)						4.24		%	(3)						$	1,203,207					3.91		%
Total long-term FHLB and FRB advances			$	1,117,229																	$	1,203,207

(1)    Amounts reported in the above table include fixed rate long-term advances from FHLB of $950.0 million with maturities ranging from March 2025 to March 2028, and variable rate long-term advances from FHLB of $155.0 million with maturities ranging from March 2028 to June 2029 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank's option, at September 30, 2024.

(2)    Includes $12.2 million and $3.2 million of unamortized basis adjustments from interest rate swaps designated as fair value hedges of long-term advances from FHLB at September 30, 2024 and December 31, 2023, respectively. Refer to NOTE 14 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES for additional information.

(3)    Excludes the effect of interest rate swaps designated as fair value hedges of long-term advances from FHLB.

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Maturities of long-term FHLB advances were as follows at September 30, 2024:

			September 30, 2024
(dollars in thousands)			Amount (1)						Rate
2024			$	—					—		%
2025			200,000						4.45		%
2026			200,000						4.32		%
2027			450,000						3.70		%
2028			180,000						4.75		%
Thereafter			75,000						5.55		%
Total long-term FHLB advances			$	1,105,000

(1)    Amounts reported in the above table include variable rate long-term advances from FHLB of $155.0 million with maturities ranging from March 2028 to June 2029 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank's option.

The maximum borrowing capacity with the FHLB and FRB at September 30, 2024 and December 31, 2023 was as follows:

(amounts in thousands)			September 30, 2024						December 31, 2023
Total maximum borrowing capacity with the FHLB			$	3,565,068					$	3,474,347
Total maximum borrowing capacity with the FRB			4,180,824						3,436,000
Qualifying loans and securities serving as collateral against FHLB and FRB advances			9,508,135						8,575,137

Senior and Subordinated Debt

Long-term senior notes and subordinated debt at September 30, 2024 and December 31, 2023 were as follows:

(dollars in thousands)												Carrying Amount
Issued by						Ranking						September 30, 2024						December 31, 2023						Rate						Issued Amount						Date Issued						Maturity						Price
Customers Bancorp						Senior (1)						$	99,033					$	98,928					2.875		%				$	100,000					August 2021						August 2031						100.000		%
Customers Bancorp						Senior						—						24,912						4.500		%				25,000						September 2019						September 2024						100.000		%
Total other borrowings												$	99,033					$	123,840
Customers Bancorp						Subordinated (2)(3)						$	72,902					$	72,766					5.375		%				$	74,750					December 2019						December 2034						100.000		%
Customers Bank						Subordinated (2)(4)						109,537						109,464						6.125		%				110,000						June 2014						June 2029						100.000		%
Total subordinated debt												$	182,439					$	182,230

(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 had an annual fixed rate of 6.125% until June 26, 2024. From June 26, 2024 until maturity, the notes bear an annual interest rate equal to the three-month LIBOR plus 344.3 basis points. Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate in order to calculate the annual interest rate after June 26, 2024. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.

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NOTE 11 — SHAREHOLDERS’ EQUITY

Common Stock

On June 26, 2024, the Board of Directors of Customers Bancorp authorized a new common stock repurchase program (the “2024 Share Repurchase Program”) to repurchase up to 497,509 shares of the Company’s common stock. The term of the 2024 Share Repurchase Program will extend for one year from June 26, 2024, unless earlier terminated. Purchases of shares under the 2024 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 Company’s previously authorized common stock repurchase program (the “Share Repurchase Program”), authorized on August 25, 2021, subsequently expired on September 27, 2023. At expiration, the Share Repurchase Program had 497,509 shares that had not been repurchased.

Customers Bancorp purchased 373,974 shares of its common stock for $18.2 million under the 2024 Share Repurchase Program during the three and nine months ended September 30, 2024. Customers Bancorp purchased no shares and 1,379,883 shares of its common stock for $39.8 million under the previously authorized Share Repurchase Program during the three and nine months ended September 30, 2023, respectively.

Preferred Stock

As of September 30, 2024 and December 31, 2023, Customers Bancorp has two series of preferred stock outstanding. The table below summarizes Customers’ issuances of preferred stock that remain outstanding at September 30, 2024 and December 31, 2023 and the dividends paid per share.

(amounts in thousands except share and per share data)												Shares at												Carrying value at																		Initial Fixed Rate						Date at which dividend rate becomes floating and earliest redemption date						Floating rate of Three-Month SOFR (2) Plus:						Dividend Paid Per Share in 2024 (1)
Fixed-to-floating rate:						Issue Date						September 30, 2024						December 31, 2023						September 30, 2024						December 31, 2023
Series E						April 28, 2016						2,300,000						2,300,000						$	55,593					$	55,593											6.45		%				June 15, 2021						5.140		%				$	2.06
Series F						September 16, 2016						3,400,000						3,400,000						82,201						82,201												6.00		%				December 15, 2021						4.762		%				$	1.99
Totals												5,700,000						5,700,000						$	137,794					$	137,794

(1)    For the nine months ended September 30, 2024.

(2)    Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate on Series E and F Preferred Stock, plus 5.14% and 4.762%, respectively, beginning with dividends declared on October 25, 2023.

NOTE 12 — REGULATORY CAPITAL

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

In first quarter 2020, the U.S federal banking regulatory agencies permitted banking organizations to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 31, 2020, the U.S. federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows banking organizations to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. Customers has elected to adopt the interim final rule, which is reflected in the regulatory capital data presented below. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of September 30, 2024, our regulatory capital ratios reflected 25%, or $15.4 million, benefit associated with the CECL transition provisions.

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Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Bancorp to maintain minimum amounts and ratios (set forth in the following table) of common equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). At September 30, 2024 and December 31, 2023, the Bank and the Bancorp satisfied all capital 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 as set forth in the following table:

															Minimum Capital Levels to be Classified as:
			Actual												Adequately Capitalized												Well Capitalized												Basel III Compliant
(dollars in thousands)			Amount						Ratio						Amount						Ratio						Amount						Ratio						Amount						Ratio
As of September 30, 2024:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	1,777,683					12.463		%				$	641,885					4.500		%				N/A						N/A						$	998,488					7.000		%
Customers Bank			$	1,943,059					13.636		%				$	641,212					4.500		%				$	926,125					6.500		%				$	997,441					7.000		%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	1,915,476					13.429		%				$	855,847					6.000		%				N/A						N/A						$	1,212,450					8.500		%
Customers Bank			$	1,943,059					13.636		%				$	854,949					6.000		%				$	1,139,932					8.000		%				$	1,211,178					8.500		%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	2,191,266					15.362		%				$	1,141,129					8.000		%				N/A						N/A						$	1,497,732					10.500		%
Customers Bank			$	2,145,947					15.060		%				$	1,139,932					8.000		%				$	1,424,916					10.000		%				$	1,496,161					10.500		%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.			$	1,915,476					8.947		%				$	856,386					4.000		%				N/A						N/A						$	856,386					4.000		%
Customers Bank			$	1,943,059					9.082		%				$	855,807					4.000		%				$	1,069,759					5.000		%				$	855,807					4.000		%
As of December 31, 2023:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	1,661,149					12.230		%				$	611,200					4.500		%				N/A						N/A						$	950,755					7.000		%
Customers Bank			$	1,868,360					13.773		%				$	610,453					4.500		%				$	881,765					6.500		%				$	949,594					7.000		%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	1,798,942					13.245		%				$	814,933					6.000		%				N/A						N/A						$	1,154,489					8.500		%
Customers Bank			$	1,868,360					13.773		%				$	813,937					6.000		%				$	1,085,250					8.000		%				$	1,153,078					8.500		%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	2,076,550					15.289		%				$	1,086,578					8.000		%				N/A						N/A						$	1,426,133					10.500		%
Customers Bank			$	2,073,202					15.283		%				$	1,085,250					8.000		%				$	1,356,562					10.000		%				$	1,424,390					10.500		%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.			$	1,798,942					8.375		%				$	859,189					4.000		%				N/A						N/A						$	859,189					4.000		%
Customers Bank			$	1,868,360					8.708		%				$	858,225					4.000		%				$	1,072,782					5.000		%				$	858,225					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 13 — 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.

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

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

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

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

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

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

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

The following methods and assumptions were used to estimate the fair values of Customers’ financial instruments as of September 30, 2024 and December 31, 2023:

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.

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

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

Loans held for sale - Consumer other installment loans (fair value option):

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

Loans receivable - Mortgage finance loans (fair value option):

The fair value of mortgage finance 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.

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 September 30, 2024 and December 31, 2023 were as follows:

															Fair Value Measurements at September 30, 2024
(amounts in thousands)			Carrying Amount						Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents			$	3,088,022					$	3,088,022					$	3,088,022					$	—					$	—
Debt securities, available for sale			2,377,733						2,377,733						—						2,360,908						16,825
Debt securities, held to maturity			1,064,437						1,027,514						—						487,238						540,276
Loans held for sale			275,420						275,420						—						2,523						272,897
Total loans and leases receivable, net of allowance for credit losses on loans and leases			13,644,538						13,511,102						—						1,250,413						12,260,689
FHLB, Federal Reserve Bank, and other restricted stock			95,035						95,035						—						95,035						—
Derivatives			15,546						15,546						—						15,474						72
Liabilities:
Deposits			$	18,069,389					$	18,096,656					$	15,638,305					$	2,458,351					$	—
FHLB advances			1,117,229						1,121,074						—						1,121,074						—
Other borrowings			99,033						78,000						—						78,000						—
Subordinated debt			182,439						157,542						—						157,542						—
Derivatives			21,486						21,486						—						21,486						—

															Fair Value Measurements at December 31, 2023
(amounts in thousands)			Carrying Amount						Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents			$	3,846,346					$	3,846,346					$	3,846,346					$	—					$	—
Debt securities, available for sale			2,376,860						2,376,860						—						2,341,911						34,949
Debt securities, held to maturity			1,103,170						1,046,439						—						472,311						574,128
Loans held for sale			340,317						340,317						—						1,215						339,102
Total loans and leases receivable, net of allowance for credit losses on loans and leases			12,726,456						12,513,386						—						897,912						11,615,474
FHLB, Federal Reserve Bank, and other restricted stock			109,548						109,548						—						109,548						—
Derivatives			17,931						17,931						—						17,906						25
Liabilities:
Deposits			$	17,920,236					$	17,922,005					$	14,632,357					$	3,289,648					$	—
FHLB advances			1,203,207						1,188,517						—						1,188,517						—
Other borrowings			123,840						103,674						—						103,674						—
Subordinated debt			182,230						164,233						—						164,233						—
Derivatives			27,110						27,110						—						27,110						—

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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 September 30, 2024 and December 31, 2023 were as follows:

			September 30, 2024
			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			$	—					$	20,845					$	16,825					$	37,670
Agency-guaranteed residential mortgage-backed securities			—						221,178						—						221,178
Agency-guaranteed residential collateralized mortgage obligations			—						194,873						—						194,873
Agency-guaranteed commercial collateralized mortgage obligations			—						96,943						—						96,943
Collateralized loan obligations			—						310,429						—						310,429
Commercial mortgage-backed securities			—						77,074						—						77,074
Corporate notes			—						594,971						—						594,971
Private label collateralized mortgage obligations			—						844,595						—						844,595
Derivatives			—						15,474						72						15,546
Loans held for sale – fair value option			—						2,523						217,098						219,621
Loans receivable, mortgage finance – fair value option			—						1,250,413						—						1,250,413
Total assets – recurring fair value measurements			$	—					$	3,629,318					$	233,995					$	3,863,313
Liabilities
Derivatives			$	—					$	21,486					$	—					$	21,486
Measured at Fair Value on a Nonrecurring Basis:
Assets
Collateral-dependent loans			$	—					$	—					$	18,003					$	18,003
Total assets – nonrecurring fair value measurements			$	—					$	—					$	18,003					$	18,003

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			December 31, 2023
			Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
Measured at Fair Value on a Recurring Basis:
Assets
Available for sale debt securities:
Asset-backed securities			$	—					$	57,680					$	34,949					$	92,629
Agency-guaranteed residential collateralized mortgage obligations			—						116,908						—						116,908
Collateralized loan obligations			—						489,092						—						489,092
Commercial mortgage-backed securities			—						121,636						—						121,636
Corporate notes			—						583,034						—						583,034
Private label collateralized mortgage obligations			—						973,561						—						973,561
Derivatives			—						17,906						25						17,931
Loans held for sale – fair value option			—						1,215						188,062						189,277
Loans receivable, mortgage finance – fair value option			—						897,912						—						897,912
Total assets – recurring fair value measurements			$	—					$	3,258,944					$	223,036					$	3,481,980
Liabilities
Derivatives			$	—					$	27,110					$	—					$	27,110
Measured at Fair Value on a Nonrecurring Basis:
Assets
Collateral-dependent loans			$	—					$	—					$	2,373					$	2,373
Total assets – nonrecurring fair value measurements			$	—					$	—					$	2,373					$	2,373

The changes in asset-backed securities (Level 3 assets) measured at fair value on a recurring basis for the three and nine months ended September 30, 2024 and 2023 are summarized in the tables below.

			Asset-backed securities
(amounts in thousands)			Three Months Ended September 30,
			2024						2023
Balance at July 1			$	21,862					$	51,825
Principal payments and premium amortization			(5,704)						(10,023)
Increase in allowance for credit losses			(24)						(442)
Decrease in allowance for credit losses			84						250
Change in fair value recognized in OCI			607						755
Balance at September 30			$	16,825					$	42,365

			Asset-backed securities
(amounts in thousands)			Nine Months Ended September 30,
			2024						2023
Balance at January 1			$	34,949					$	73,266
Principal payments and premium amortization			(19,652)						(31,683)
Increase in allowance for credit losses			(24)						(1,488)
Decrease in allowance for credit losses			200						311
Change in fair value recognized in OCI			1,352						1,959
Balance at September 30			$	16,825					$	42,365

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The changes in other installment loans (Level 3 assets) measured at fair value on a recurring basis, based on an election made to account for the loans at fair value for the three and nine months ended September 30, 2024 and 2023 are summarized in the tables below.

			Other Installment Loans
(amounts in thousands)			Three Months Ended September 30,
			2024						2023
Balance at July 1			$	247,442					$	—
Originations			223,625						—
Sales			(200,041)						—
Principal payments			(53,928)						—
Change in fair value recognized in earnings			—						—
Balance at September 30			$	217,098					$	—

			Other Installment Loans
(amounts in thousands)			Nine Months Ended September 30,
			2024						2023
Balance at January 1			$	188,062					$	—
Originations			704,081						—
Sales			(518,271)						—
Principal payments			(156,774)						—
Change in fair value recognized in earnings			—						—
Balance at September 30			$	217,098					$	—

There were no transfers between levels during the three and nine months ended September 30, 2024 and 2023.

The following tables summarize financial assets and financial liabilities measured at fair value as of September 30, 2024 and December 31, 2023 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

(dollars in thousands)

Fair Value Estimate

Valuation Technique

Unobservable Input

Range  (Weighted Average)

September 30, 2024

Asset-backed securities

$

16,825

Discounted cash flow

Discount rate Annualized loss rate Constant prepayment rate

9% - 10% (9%) 3% - 13% (5%) 19% - 20% (20%)

Quantitative Information about Level 3 Fair Value Measurements

(dollars in thousands)

Fair Value Estimate

Valuation Technique

Unobservable Input

Range  (Weighted Average)

December 31, 2023

Asset-backed securities

$

34,949

Discounted cash flow

Discount rate Annualized loss rate Constant prepayment rate

12% - 14% (13%) 3% - 13% (5%) 11% - 30% (26%)

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NOTE 14 — 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.

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, deposits and FHLB advances 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 of certain fixed rate AFS debt securities 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. Interest rate swaps designated as fair value hedges of certain deposits and FHLB advances involve the payment of variable-rate amounts to a counterparty in exchange for Customers receiving fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. 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 net interest income.

At September 30, 2024, Customers had 43 outstanding interest rate derivatives with notional amounts totaling $2.3 billion that were designated as fair value hedges of certain AFS debt securities, deposits and FHLB advances. During the three and nine months ended September 30, 2024, Customers entered into 12 and 37 interest rate derivatives with notional amounts totaling $431.6 million and $1.8 billion, respectively, that were designated as fair value hedges of certain deposits and FHLB advances. During the nine months ended September 30, 2023, Customers entered into five interest rate derivatives with notional amounts totaling $1.0 billion, two of which were terminated with notional amounts totaling $550.0 million that were designated as fair value hedges of certain deposits and FHLB advances resulting in $4.6 million of basis adjustments being amortized over the remaining terms of the hedged items as a reduction in interest expense. At December 31, 2023, Customers had six outstanding interest rate derivatives with notional amounts totaling $472.5 million that were designated as fair value hedges of certain AFS debt securities and FHLB advances.

As of September 30, 2024 and December 31, 2023, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges.

						Amortized Cost												Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items
(amounts in thousands)						September 30, 2024						December 31, 2023						September 30, 2024						December 31, 2023
AFS debt securities						$	22,500					$	22,500					$	202					$	941
Deposits						1,614,617						300,000						22,191						1,432
FHLB advances						1,200,000						700,000						12,229						3,206

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 September 30, 2024, Customers had 130 interest rate swaps with an aggregate notional amount of $1.3 billion and two interest rate caps with an aggregated notional amount of $55.6 million related to this program. At December 31, 2023, Customers had 132 interest rate swaps with an aggregate notional amount of $1.2 billion and two interest rate caps with an aggregate notional amount of $55.6 million related to this program.

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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 September 30, 2024 and December 31, 2023.

September 30, 2024

Derivative Assets

Derivative Liabilities

(amounts in thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives not designated as hedging instruments:

Interest rate swaps and caps (1)

Other assets

$

15,473

Other liabilities

$

21,474

December 31, 2023

Derivative Assets

Derivative Liabilities

(amounts in thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives not designated as hedging instruments:

Interest rate swaps and caps (1)

Other assets

$

17,903

Other liabilities

$

27,097

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

Effect of Derivative Instruments on 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 September 30, 2024 and 2023.

									Amount of Income (Loss) Recognized in Earnings
									Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands)			Income Statement Location						2024						2023						2024						2023
Derivatives designated as fair value hedges:
Recognized on interest rate swaps			Net interest income						$	42,717					$	6,377					$	54,453					$	13,209
Recognized on hedged AFS debt securities			Net interest income						(306)						(196)						(739)						(446)
Recognized on hedged deposits			Net interest income						(23,444)						—						(25,130)						—
Recognized on hedged FHLB advances			Net interest income						(18,967)						(6,181)						(28,584)						(12,763)
Total									$	—					$	—					$	—					$	—
Derivatives not designated as hedging instruments:
Interest rate swaps and caps			Other non-interest income						$	374					$	192					$	1,109					$	332

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 September 30, 2024, the fair value of derivatives in a net asset position related to these agreements was $5.6 million. In addition, Customers, which has collateral posting thresholds with certain of these counterparties, had received $6.1 million of cash as collateral at September 30, 2024. 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 or other liabilities.

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Disclosures about Offsetting Assets and Liabilities

The following tables present derivative instruments that are subject to enforceable master netting arrangements. Customers’ interest rate swaps and interest rate caps with institutional counterparties are subject to master netting arrangements and are included in the tables below. Interest rate swaps and interest rate caps with commercial banking customers 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 Sheet																		Gross Amounts Not Offset in the Consolidated Balance Sheet												Net Amount
(amounts in thousands)									Financial Instruments						Cash Collateral Received/Posted
September 30, 2024
Interest rate derivative assets with institutional counterparties			$	10,647																	$	(5,079)					$	(5,568)					$	—
Interest rate derivative liabilities with institutional counterparties			$	5,079																	$	(5,079)					$	—					$	—

			Gross Amounts Recognized on the Consolidated Balance Sheet																		Gross Amounts Not Offset in the Consolidated Balance Sheet												Net Amount
(amounts in thousands)									Financial Instruments						Cash Collateral Received/Posted
December 31, 2023
Interest rate derivative assets with institutional counterparties			$	17,439																	$	(500)					$	(16,939)					$	—
Interest rate derivative liabilities with institutional counterparties			$	500																	$	(500)					$	—					$	—

NOTE 15 — 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.

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

Cautionary Note Regarding Forward-Looking Statements

This report and all attachments hereto, as well as other written or oral communications made from time to time by us, may contain forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “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: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, such as the FDIC special assessments; the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to our reputation; effects of competition on deposit rates and growth, loan rates and growth and net interest margin; failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks; public health crises and pandemics and their effects on the economic and business environments in which we operate; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and military conflicts, including the war between Russia and Ukraine and escalating conflict in the Middle East, which could impact the economic conditions in the United States; 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 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, 2023, 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 September 30, 2024. 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’ 2023 Form 10-K.

Overview

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

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There is credit risk inherent in loans and leases requiring Customers to maintain an ACL to absorb credit losses on existing loans and leases that may become uncollectible. Customers maintains this allowance by charging a provision for credit losses on loan and leases against its operating earnings. Customers has included a detailed discussion of this process in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements in its 2023 Form 10-K, as well as several tables describing its ACL in “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ unaudited consolidated financial statements.

Impact of Macroeconomic and Banking Industry Uncertainties and Military Conflicts

Inflation remains slightly elevated in 2024. The Federal Reserve raised interest rates significantly throughout 2022 and into 2023 in attempts to bring the inflation to its long run target rate of two percent. The Federal Reserve has stated that inflation is moving sustainably toward two percent, and that the risks to achieving its employment and inflation goals are roughly in balance. In light of the progress on inflation and the balance of risks, the Federal Reserve has begun lowering the federal funds rate. However, significant uncertainties exist as to the extent and timing of future rate cuts and their effects on the economic conditions.

Significant uncertainties as to future economic conditions continue to exist, including risks of higher inflation and sustained higher interest rate environment, elevated liquidity risk to the U.S. banking system and the exposure to the U.S. commercial real estate market, particularly to the regional banks, disruptions to global supply chain and labor markets and higher oil and commodity prices exacerbated by the military conflicts between Russia and Ukraine and in the Middle East. Customers has maintained higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios and shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates during the period of high interest rates. As the interest rates begin to decline, Customers has been reducing the Bank's asset sensitivity through derivative hedging and investment securities portfolio rebalancing. Customers remains focused on growing its non-interest bearing and lower-cost interest-bearing deposits. Customers’ exposure to higher risk commercial real estate such as the office sector is minimal, representing approximately 1% of the loan portfolio as of September 30, 2024. The Bank’s debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity. The Bank had approximately $5.2 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $3.1 billion as of September 30, 2024. The Bank’s estimated FDIC insured deposits represented approximately 66% of our deposits (inclusive of accrued interest) as of September 30, 2024. When including collateralized and affiliate deposits as FDIC insured, this number increased to 75% of our deposits as of September 30, 2024. Customers continues to monitor closely the impact of uncertainties affecting the macroeconomic conditions, the U.S. banking system, particularly regional banks, the military conflicts between Russia and Ukraine and in the Middle East, as well as any effects that may result from the federal government’s responses including future rate and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, the geopolitical conflicts and developments in the U.S. banking system will impact Customers’ operations and financial results during the remainder of 2024 and into 2025 is highly uncertain.

New Accounting Pronouncements

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

Critical Accounting Policies and Estimates

Customers has adopted various accounting policies that govern the application of 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 2023 Form 10-K. Certain accounting policies 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.

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.

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Allowance for Credit Losses

Customers’ ACL at September 30, 2024 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 judgment of various events and risks that are not measured in our statistical procedures, including uncertainty related to the economic forecasts used in the modelled credit loss estimates, nature and volume of the loan and lease portfolio, credit underwriting policy exceptions, peer comparison, industry data, and model and data limitations. The qualitative allowance for economic forecast risk is further informed by multiple alternative scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to changes, sometimes materially and rapidly. Customers recognizes that this approach may not be suitable in certain economic environments such that additional analysis may be performed at management’s discretion. Due in part to its subjectivity, the qualitative evaluation may be materially impacted during periods of economic uncertainty and late breaking events that could lead to a revision of reserves to reflect management’s best estimate of expected credit losses.

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

The net decrease in our estimated ACL as of September 30, 2024 as compared to December 31, 2023 resulted primarily from slight improvements in macroeconomic forecasts and lower consumer installment loan balances held for investment. The provision for credit losses on loans and leases was $17.8 million and $51.6 million for the three and nine months ended September 30, 2024, respectively, for an ending ACL balance of $138.8 million ($133.2 million for loans and leases and $5.6 million for unfunded lending-related commitments) as of September 30, 2024.

To determine the ACL as of September 30, 2024, Customers utilized Moody’s September 2024 Baseline forecast to generate its modelled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at September 2024 assumed slight improvements in macroeconomic forecasts from the second quarter 2024 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board lowering interest rates by 0.25 percentage point twice in 2024; failures of several regional banks in the first half of 2023 and recent issues around other banks are not symptomatic of a broader problem in the U.S. financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or further undermine economic growth; the military conflict between Russia and Ukraine continuing for the foreseeable future but its impact on energy, agriculture and other commodity markets and the global economy continues to fade; the war in Israel not spreading to other parts of the Middle East and disrupting global energy markets; the CPI rising 2.9% in 2024 and 2.4% in 2025; and the unemployment rate rising to 4.1% in 2024 and 2025. Customers continues to monitor the impact of the U.S. banking system weaknesses, military conflicts between Russia and Ukraine and in the Middle East, inflation, and monetary and fiscal policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

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As of December 31, 2023, the ACL ending balance was $138.2 million ($135.3 million for loans and leases and $2.9 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2023, Customers utilized the Moody’s December 2023 Baseline forecast to generate its modelled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2023 assumed lower growth rates in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2022; the Federal Reserve Board not raising the effective fed funds rate further as it has reached its terminal range of 5.25% to 5.5%, and easing gradually beginning in mid-2024; the federal government avoiding a shutdown in the fourth quarter 2023 and remaining in continuous operation through 2024; recent U.S. bank failures are not symptomatic of a broader problem in the U.S. financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or the U.S. economy; the military conflict between Russia and Ukraine continuing for the foreseeable future but its fallout on energy, agriculture and other commodity markets and the global economy fading; the war in Israel not broadening to a regional conflict and disrupting global energy markets; the CPI rising 2.8% in 2024 and 2.4% in 2025; and the unemployment rate rising to 4.0% in 2024 and 4.1% in 2025.

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 elevated interest rates weakening credit-sensitive consumer spending and confidence much more than expected; concerns about bank failures raising fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards; the Federal Reserve keeping the fed funds rate at the target range throughout the second quarter of 2024 but easing beginning in the third quarter 2024 as the economy weakens, and below the target range under the Baseline scenario beginning in the first quarter of 2025; military conflict between Russia and Ukraine persisting longer than expected; worries grow that the military conflict in Israel leading to a wider military conflict; unemployment beginning to increase significantly in the fourth quarter of 2024 and the U.S. economy falling into recession in the fourth quarter of 2024. Under this scenario, as an example, the unemployment rate is estimated at 4.5% and 7.9% in 2024 and 2025, respectively. These numbers represent a 0.4% and 3.8% higher unemployment estimate than the Baseline scenario projection of 4.1% for the same time periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modelled results. This would result in an incremental quantitative impact to the ACL of approximately $64 million at September 30, 2024. 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 worsening of the U.S. banking system could severely impact our current expectations. If the credit quality of Customers’ customer base materially deteriorates or the risk profile of a market, industry, or group of customers changes materially, Customers’ net income and capital could be materially adversely affected which, in turn could have a material adverse effect on Customers’ financial condition and results of operations. The extent to which the geopolitical instability, risks of rising inflation and worsening of the U.S. banking system have and will continue to negatively impact Customers’ businesses, financial condition, liquidity and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time.

For more information, refer to “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ unaudited consolidated financial statements.

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Results of Operations

The following table sets forth the condensed statements of income for the three and nine months ended September 30, 2024 and 2023:

			Three Months Ended September 30,												QTD												Nine Months Ended September 30,												YTD
(dollars in thousands)			2024						2023						Change						% Change						2024						2023						Change						% Change
Net interest income			$	158,545					$	199,773					$	(41,228)					(20.6)		%				$	486,583					$	514,943					$	(28,360)					(5.5)		%
Provision for credit losses			17,066						17,856						(790)						(4.4)		%				52,257						61,088						(8,831)						(14.5)		%
Total non-interest income			8,557						17,775						(9,218)						(51.9)		%				60,825						51,893						8,932						17.2		%
Total non-interest expense			104,018						89,466						14,552						16.3		%				306,639						258,896						47,743						18.4		%
Income before income tax expense (benefit)			46,018						110,226						(64,208)						(58.3)		%				188,512						246,852						(58,340)						(23.6)		%
Income tax expense (benefit)			(725)						23,470						(24,195)						(103.1)		%				33,958						58,801						(24,843)						(42.2)		%
Net income			46,743						86,756						(40,013)						(46.1)		%				154,554						188,051						(33,497)						(17.8)		%
Preferred stock dividends			3,806						3,803						3						0.1		%				11,391						10,826						565						5.2		%
Net income available to common shareholders			$	42,937					$	82,953					$	(40,016)					(48.2)		%				$	143,163					$	177,225					$	(34,062)					(19.2)		%

Customers reported net income available to common shareholders of $42.9 million and $143.2 million for the three and nine months ended September 30, 2024, respectively, compared to net income available to common shareholders of $83.0 million and $177.2 million for the three and nine months ended September 30, 2023, respectively. Factors contributing to the change in net income available to common shareholders for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 were as follows:

Net interest income

Net interest income decreased $41.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to higher-than-expected purchase discount accretion of approximately $27 million recognized on the venture banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs during the three months ended September 30, 2023 and higher interest expense on deposits, offset in part by lower interest expense from lower average balances of borrowings. Average interest-earning assets decreased by $790.4 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The decrease in interest-earning assets was primarily driven by decreases in investment securities, commercial and industrial loans and consumer installment loans as Customers continued its de-risking strategy and the build out of our held for sale strategy. NIM decreased by 64 basis points to 3.06% for the three months ended September 30, 2024 from 3.70% for the three months ended September 30, 2023. The NIM decrease was primarily attributable to higher-than-expected purchase discount accretion of approximately $27 million recognized on the venture banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs during the three months ended September 30, 2023, and higher market interest rates on deposits which drove a 27 basis point increase in the cost of interest-bearing liabilities for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Customers’ total cost of funds, including non-interest bearing deposits was 3.59% and 3.48% for the three months ended September 30, 2024 and 2023, respectively.

Net interest income decreased $28.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to lower interest income in specialized lending, other commercial and industrial loans and leases and consumer installment loans and higher interest expense on deposits, offset in part by lower interest expense from lower average balances of borrowings. Average interest-earning assets decreased by $332.3 million, primarily related to decreases in specialized lending, PPP loans included in other commercial and industrial loans and leases and consumer installment loans as Customers continued its de-risking strategy and the build out of our held for sale strategy and investment securities, partially offset by an increase in interest-earning deposits. NIM decreased by 12 basis points to 3.16% for the nine months ended September 30, 2024 from 3.28% for the nine months ended September 30, 2023. The NIM decrease was primarily attributable to higher-than-expected purchase discount accretion of approximately $27 million recognized on the venture banking loan portfolio acquired from the FDIC due to loan maturities and increased payoffs during the three months ended September 30, 2023 and higher market interest rates on deposits, which drove a 49 basis point increase in the cost of interest-bearing liabilities. Customers’ total cost of funds, including non-interest bearing deposits was 3.55% and 3.42% for the nine months ended September 30, 2024 and 2023, respectively.

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Provision for credit losses

The $0.8 million decrease in the provision for credit losses included $0.7 million increase in provision for credit losses on loans and leases for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, which primarily reflects higher balances in commercial and industrial loan balances held for investment, partially offset by lower consumer installment loan balances held for investment. 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 1.06% of total loans and leases receivable at September 30, 2024, compared to 1.10% of total loans and leases receivable at September 30, 2023. Net charge-offs for the three months ended September 30, 2024 were $17.0 million, or 50 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $17.5 million, or 50 basis points on an annualized basis, for the three months ended September 30, 2023. The decrease in net charge-offs for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was primarily due to lower charge-offs for consumer installment loans, partially offset by higher charge-offs for commercial and industrial loans.

The $8.8 million decrease in the provision for credit losses included $5.9 million decrease in provision for credit losses on loans and leases for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily reflects the recognition of slight improvements in macroeconomic forecasts and lower consumer installment loan balances held for investment. Net charge-offs for the nine months ended September 30, 2024 were $53.7 million, or 54 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $51.7 million, or 47 basis points on an annualized basis, for the nine months ended September 30, 2023. The net charge-offs of $51.7 million for nine months ended September 30, 2023 excluded $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the venture banking loan portfolio on June 15, 2023. The increase in net charge-offs for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, excluding the charge-offs for certain PCD loans acquired from the FDIC, was primarily due to higher charge-offs for commercial and industrial loans, partially offset by decreases in charge-offs for non-owner occupied commercial real estate and consumer installment loans.

The provision for credit losses for the three months ended September 30, 2024 and 2023 also included a benefit to provision for credit losses of $0.7 million and a provision of $0.8 million, respectively, on certain asset-backed securities and corporate notes included in our investment securities available for sale. The provision for credit losses on certain asset-backed securities and corporate notes included in our investment securities available for sale was $0.7 million and $3.7 million for the nine months ended September 30, 2024 and 2023, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Non-interest income

The $9.2 million decrease in non-interest income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from an increase of $14.2 million in net loss on sale of loans and leases, which included a loss of $14.3 million on leases of commercial clean vehicles that were accounted for as sales-type leases during the three months ended September 30, 2024, partially offset by increases of $2.0 million in loan fees and $1.2 million in commercial lease income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. These commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the three months ended September 30, 2024. Refer to “NOTE 8 — LEASES” to Customers’ unaudited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles.

The $8.9 million increase in non-interest income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from $11.0 million of unrealized gain on equity method investment with a fair value of $16.0 million purchased at a discount for the nine months ended September 30, 2024, $5.0 million of loss on sale of capital call lines of credit for the nine months ended September 30, 2023, and increases of $4.2 million in loan fees and $2.9 million in commercial lease income. These increases were offset in part by an increase of $13.7 million in net loss on sale of loans and leases, which included a loss of $14.3 million on leases of commercial clean vehicles that were accounted for as sales-type leases during the nine months ended September 30, 2024, and a decrease of $2.3 million in bank-owned life insurance income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. These commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the nine months ended September 30, 2024. Refer to “NOTE 8 — LEASES” to Customers’ unaudited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles.

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Non-interest expense

The $14.6 million increase in non-interest expense for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from increases of $13.9 million in salaries and employee benefits, $5.9 million in other non-interest expense and $0.5 million in professional services. These increases were offset in part by a legal settlement expense of $4.1 million for the three months ended September 30, 2023, and decreases of $2.1 million in technology, communication and bank operations and $0.6 million in FDIC assessments, non-income taxes and regulatory fees for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

The $47.7 million increase in non-interest expense for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from increases of $29.4 million in salaries and employee benefits, $10.5 million in FDIC assessments, non-income taxes and regulatory fees, $12.3 million in other non-interest expense and $3.1 million in technology, communication and bank operations. These increases were offset in part by a legal settlement expense of $4.1 million for the nine months ended September 30, 2023, and a decrease of $3.9 million in professional services for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Included in the $10.5 million increase in FDIC assessments, non-income taxes and regulatory fees for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was $4.2 million in FDIC premiums related to periods prior to 2024 and $0.7 million related to an increase in industry-wide FDIC special assessment associated with the bank failures of March 2023. Included in the $3.1 million increase in technology, communication and bank operations for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was $7.1 million of deposit servicing-related fees related to periods prior to 2024.

Income tax expense (benefit)

Customers’ effective tax rate was (1.58)% for the three months ended September 30, 2024 compared to 21.29% for the three months ended September 30, 2023. The decrease in the effective tax rate primarily resulted from an increase in estimated income tax credits for the year ending December 31, 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the three months ended September 30, 2024. These investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases.

Customers’ effective tax rate was 18.01% for the nine months ended September 30, 2024 compared to 23.82% for the nine months ended September 30, 2023. The decrease in the effective tax rate primarily resulted from an increase in estimated income tax credits for the year ending December 31, 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the nine months ended September 30, 2024, partially offset by tax expense on surrendered bank-owned life insurance policies of $4.1 million for the nine months ended September 30, 2023. These investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases.

Preferred stock dividends

Preferred stock dividends were $3.8 million and $3.8 million for the three months ended September 30, 2024 and 2023, respectively. Preferred stock dividends were $11.4 million and $10.8 million for the nine months ended September 30, 2024 and 2023, respectively. There were no changes to the amount of preferred stock outstanding during the three and nine months ended September 30, 2024 and 2023.

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 September 30, 2024 and 2023. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

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			Three Months Ended September 30,																																				Three Months Ended September 30,
			2024																		2023																		2024 vs. 2023
(dollars in thousands)			Average Balance						Interest Income or Expense						Average Yield or Cost (%)						Average Balance						Interest Income or Expense						Average Yield or Cost (%)						Due to rate						Due to volume						Total
Assets
Interest-earning deposits			$	3,224,940					$	44,372					5.47		%				$	3,211,753					$	43,800					5.41		%				$	417					$	155					$	572
Investment securities (1)			3,706,974						46,265						4.97		%				4,240,116						54,243						5.12		%				(1,508)						(6,470)						(7,978)
Loans and leases:
Commercial and industrial:
Specialized lending loans and leases (2)			5,805,389						124,667						8.54		%				5,717,252						157,671						10.94		%				(35,367)						2,363						(33,004)
Other commercial and industrial loans (2)(3)			1,533,057						24,654						6.40		%				1,779,778						28,616						6.38		%				87						(4,049)						(3,962)
Mortgage finance loans			1,267,656						17,723						5.56		%				1,159,698						16,916						5.79		%				(698)						1,505						807
Multifamily loans			2,071,340						21,147						4.06		%				2,141,384						21,292						3.94		%				599						(744)						(145)
Non-owner occupied commercial real estate loans			1,411,533						21,065						5.94		%				1,425,831						21,208						5.90		%				113						(256)						(143)
Residential mortgages			525,285						6,082						4.61		%				528,022						5,965						4.48		%				153						(36)						117
Installment loans			1,029,812						24,228						9.36		%				1,147,069						24,103						8.34		%				2,746						(2,621)						125
Total loans and leases (4)			13,644,072						239,566						6.99		%				13,899,034						275,771						7.87		%				(31,102)						(5,103)						(36,205)
Other interest-earning assets			118,914						1,910						6.39		%				134,416						2,526						7.45		%				(340)						(276)						(616)
Total interest-earning assets			20,694,900						332,113						6.39		%				21,485,319						376,340						6.96		%				(30,519)						(13,708)						(44,227)
Non-interest-earning assets			535,504																		492,691
Total assets			$	21,230,404																	$	21,978,010
Liabilities
Interest checking accounts			$	5,787,026					65,554						4.51		%				$	5,758,215					58,637						4.04		%				6,631						286						6,917
Money market deposit accounts			3,676,994						42,128						4.56		%				2,181,184						22,983						4.18		%				2,241						16,904						19,145
Other savings accounts			1,563,970						18,426						4.69		%				1,077,298						11,582						4.27		%				1,223						5,621						6,844
Certificates of deposit			2,339,937						29,721						5.05		%				4,466,522						52,623						4.67		%				3,944						(26,846)						(22,902)
Total interest-bearing deposits (5)			13,367,927						155,829						4.64		%				13,483,219						145,825						4.29		%				11,305						(1,301)						10,004
Borrowings			1,334,905						17,739						5.29		%				2,328,955						30,742						5.24		%				289						(13,292)						(13,003)
Total interest-bearing liabilities			14,702,832						173,568						4.70		%				15,812,174						176,567						4.43		%				10,091						(13,090)						(2,999)
Non-interest-bearing deposits (5)			4,557,815																		4,347,977
Total deposits and borrowings			19,260,647												3.59		%				20,160,151												3.48		%
Other non-interest-bearing liabilities			195,722																		306,822
Total liabilities			19,456,369																		20,466,973
Shareholders’ equity			1,774,035																		1,511,037
Total liabilities and shareholders’ equity			$	21,230,404																	$	21,978,010
Net interest income									158,545																		199,773												$	(40,610)					$	(618)					$	(41,228)
Tax-equivalent adjustment									392																		405
Net interest earnings									$	158,937																	$	200,178
Interest spread															2.80		%																3.48		%
Net interest margin															3.05		%																3.70		%
Net interest margin tax equivalent (6)															3.06		%																3.70		%

(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 PPP loans.

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

(5)Total costs of deposits (including interest bearing and non-interest-bearing) were 3.46% and 3.24% for the three months ended September 30, 2024 and 2023, respectively.

(6)Tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended September 30, 2024 and 2023, presented to approximate interest income as a taxable asset.

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Net interest income decreased $41.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to lower interest income on commercial and industrial loans and leases, primarily in specialized lending and higher interest expense on deposits, offset in part by lower average balances of borrowings. The decrease in net interest income in specialized lending was primarily attributable to higher-than-expected purchase discount accretion of approximately $27 million recognized on the venture banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs during the three months ended September 30, 2023. Average interest-earning assets decreased by $790.4 million, primarily related to decreases in investment securities, commercial and industrial loans and consumer installment loans. Total consumer installment loans decreased for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, as consumer installment loans held for investment decreased primarily for risk management purposes and the build out of our held for sale strategy in 2024 in which we accumulate loans with the intent to sell in the future. During the three months ended September 30, 2024, Customers sold $202.5 million of consumer installment loans that were classified as held for sale, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, to two third-party sponsored VIEs. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs.

NIM decreased by 64 basis points to 3.06% for the three months ended September 30, 2024 from 3.70% for the three months ended September 30, 2023 resulting primarily from higher-than-expected purchase discount accretion of approximately $27 million recognized on the venture banking loan portfolio acquired from the FDIC due to loan maturities and increased payoffs during the three months ended September 30, 2023, and higher market interest rates on deposits which drove a 27 basis point increase in the cost of interest-bearing liabilities for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Customers’ total cost of funds, including non-interest bearing deposits was 3.59% and 3.48% for the three months ended September 30, 2024 and 2023, respectively.

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			Nine Months Ended September 30,																																				Nine Months Ended September 30,
			2024																		2023																		2024 vs. 2023
(dollars in thousands)			Average Balance						Interest Income or Expense						Average Yield or Cost (%)						Average Balance						Interest Income or Expense						Average Yield or Cost (%)						Due to rate						Due to volume						Total
Assets
Interest-earning deposits			$	3,471,011					$	142,695					5.49		%				$	2,100,435					$	81,819					5.21		%				$	4,632					$	56,244					$	60,876
Investment securities (1)			3,736,770						140,653						5.03		%				4,074,464						149,585						4.90		%				3,842						(12,774)						(8,932)
Loans and leases:
Commercial and industrial:
Specialized lending loans and leases (2)			5,507,963						361,234						8.76		%				5,748,053						383,138						8.91		%				(6,293)						(15,611)						(21,904)
Other commercial and industrial loans (2)(3)			1,575,815						76,487						6.48		%				2,081,688						105,398						6.77		%				(4,332)						(24,579)						(28,911)
Mortgage finance loans			1,151,173						45,640						5.30		%				1,240,403						53,934						5.81		%				(4,558)						(3,736)						(8,294)
Multifamily loans			2,100,501						63,863						4.06		%				2,176,294						62,857						3.86		%				3,221						(2,215)						1,006
Non-owner occupied commercial real estate loans			1,385,685						61,714						5.95		%				1,434,459						61,284						5.71		%				2,543						(2,113)						430
Residential mortgages			522,876						17,745						4.53		%				535,502						17,298						4.32		%				851						(404)						447
Installment loans			1,131,633						80,866						9.55		%				1,517,632						100,669						8.87		%				7,287						(27,090)						(19,803)
Total loans and leases (4)			13,375,646						707,549						7.07		%				14,734,031						784,578						7.12		%				(5,452)						(71,577)						(77,029)
Other interest-earning assets			112,365						7,031						8.36		%				119,187						5,463						6.13		%				1,896						(328)						1,568
Total interest-earning assets			20,695,792						997,928						6.44		%				21,028,117						1,021,445						6.49		%				(7,707)						(15,810)						(23,517)
Non-interest-earning assets			487,991																		537,160
Total assets			$	21,183,783																	$	21,565,277
Liabilities
Interest checking accounts			$	5,682,240					191,132						4.49		%				$	6,181,097					178,984						3.87		%				27,301						(15,153)						12,148
Money market deposit accounts			3,419,880						117,106						4.57		%				2,208,853						63,444						3.84		%				13,816						39,846						53,662
Other savings accounts			1,708,625						61,008						4.77		%				966,539						27,707						3.83		%				8,067						25,234						33,301
Certificates of deposit			2,374,982						89,092						5.01		%				4,663,548						155,995						4.47		%				17,041						(83,944)						(66,903)
Total interest-bearing deposits (5)			13,185,727						458,338						4.64		%				14,020,037						426,130						4.06		%				58,539						(26,331)						32,208
Federal funds purchased			—						—						—		%				5,055						188						4.97		%				—						(188)						(188)
Borrowings			1,431,520						53,007						4.95		%				2,160,332						80,184						4.96		%				(162)						(27,015)						(27,177)
Total interest-bearing liabilities			14,617,247						511,345						4.67		%				16,185,424						506,502						4.18		%				56,385						(51,542)						4,843
Non-interest-bearing deposits (5)			4,626,580																		3,642,832
Total deposits and borrowings			19,243,827												3.55		%				19,828,256												3.42		%
Other non-interest-bearing liabilities			221,278																		271,387
Total liabilities			19,465,105																		20,099,643
Shareholders’ equity			1,718,678																		1,465,634
Total liabilities and shareholders’ equity			$	21,183,783																	$	21,565,277
Net interest income									486,583																		514,943												$	(64,092)					$	35,732					$	(28,360)
Tax-equivalent adjustment									1,179																		1,170
Net interest earnings									$	487,762																	$	516,113
Interest spread															2.89		%																3.08		%
Net interest margin															3.15		%																3.27		%
Net interest margin tax equivalent (6)															3.16		%																3.28		%

(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 PPP loans.

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

(5)Total costs of deposits (including interest bearing and non-interest-bearing) were 3.44% and 3.23% for the nine months ended September 30, 2024 and 2023, respectively.

(6)Tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2024 and 2023, presented to approximate interest income as a taxable asset.

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Net interest income decreased $28.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to lower interest income in specialized lending, other commercial and industrial loans and leases and consumer installment loans and higher interest expense on deposits, offset in part by lower interest expense from lower average balances of borrowings. The decrease in interest income in specialized lending was attributable to higher-than-expected purchase discount accretion of approximately $27 million recognized on the venture banking loan portfolio acquired from the FDIC on June 15, 2023 due to loan maturities and increased payoffs during the nine months ended September 30, 2023. Average interest-earning assets decreased by $332.3 million, primarily in specialized lending, PPP loans included in other commercial and industrial loans and leases, consumer installment loans as Customers continued its de-risking strategy and the build out of our held for sale strategy and investment securities, partially offset by an increase in interest-earning deposits. During the nine months ended September 30, 2024, Customers sold $202.5 million of consumer installment loans that were classified as held for sale, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, to two third-party sponsored VIEs. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs.

NIM decreased by 12 basis points to 3.16% for the nine months ended September 30, 2024 from 3.28% for the nine months ended September 30, 2023 resulting primarily from higher-than-expected purchase discount accretion of approximately $27 million recognized on the venture banking loan portfolio acquired from the FDIC due to loan maturities and increased payoffs during the nine months ended September 30, 2023 and higher market interest rates on deposits, which drove a 49 basis point increase in the cost of interest-bearing liabilities. Customers’ total cost of funds, including non-interest bearing deposits was 3.55% and 3.42% for the nine months ended September 30, 2024 and 2023, respectively.

PROVISION FOR CREDIT LOSSES

The provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management’s assessment of expected lifetime losses in the loan and lease portfolio at the balance sheet date. Customers recorded a provision for credit losses on loans and leases during the three months ended September 30, 2024, which resulted primarily from higher balances in commercial and industrial loan balances held for investment, partially offset by lower consumer installment loan balances held for investment. Customers recorded a provision for credit losses of $17.8 million for loans and leases and $0.6 million for lending-related commitments, respectively, for the three months ended September 30, 2024. Customers recorded a provision for credit losses of $17.1 million for loans and leases and $48 thousand for lending-related commitments, respectively, for the three months ended September 30, 2023. Net charge-offs for the three months ended September 30, 2024 were $17.0 million, or 50 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $17.5 million, or 50 basis points of average loans and leases on an annualized basis, for the three months ended September 30, 2023. The decrease in net charge-offs for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was primarily due to lower charge-offs for consumer installment loans, partially offset by higher charge-offs for commercial and industrial loans.

Customers recorded a provision for credit losses of $51.6 million for loans and leases and $2.7 million for lending-related commitments, respectively, for the nine months ended September 30, 2024, which resulted primarily from the recognition of slight improvements in macroeconomic forecasts and lower consumer installment loan balances held for investment. Customers recorded a provision for credit losses of $57.4 million for loans and leases and $24 thousand for lending-related commitments, respectively, for the nine months ended September 30, 2023. Net charge-offs for the nine months ended September 30, 2024 were $53.7 million, or 54 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $51.7 million, or 47 basis points of average loans and leases on an annualized basis, for the nine months ended September 30, 2023. The net charge-offs of $51.7 million for the nine months ended September 30, 2023 excluded $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the venture banking loan portfolio on June 15, 2023. The increase in net charge-offs for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, excluding the charge-offs for certain PCD loans acquired from the FDIC, was primarily due to higher charge-offs for commercial and industrial loans, partially offset by decreases in charge-offs for non-owner occupied commercial real estate and consumer installment loans.

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

The provision for credit losses for the three months ended September 30, 2024 and 2023 also included a benefit to provision for credit losses of $0.7 million and a provision of $0.8 million, respectively, on certain asset-backed securities and corporate notes included in our investment securities available for sale. The provision for credit losses on certain asset-backed securities and corporate notes included in our investment securities available for sale was $0.7 million and $3.7 million for the nine months ended September 30, 2024 and 2023, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

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NON-INTEREST INCOME

The table below presents the components of non-interest income for the three and nine months ended September 30, 2024 and 2023.

			Three Months Ended September 30,												QTD												Nine Months Ended September 30,												YTD
(dollars in thousands)			2024						2023						Change						% Change						2024						2023						Change						% Change
Commercial lease income			$	10,093					$	8,901					$	1,192					13.4		%				$	30,058					$	27,144					$	2,914					10.7		%
Loan fees			8,011						6,029						1,982						32.9		%				18,524						14,290						4,234						29.6		%
Bank-owned life insurance			2,049						1,973						76						3.9		%				7,317						9,617						(2,300)						(23.9)		%
Mortgage finance transactional fees			1,087						1,018						69						6.8		%				3,091						3,468						(377)						(10.9)		%
Net gain (loss) on sale of loans and leases			(14,548)						(348)						(14,200)						NM						(14,776)						(1,109)						(13,667)						NM
Loss on sale of capital call lines of credit			—						—						—						—		%				—						(5,037)						5,037						(100.0)		%
Net gain (loss) on sale of investment securities			—						(429)						429						(100.0)		%				(749)						(429)						(320)						74.6		%
Unrealized gain on equity method investments			—						—						—						—		%				11,041						—						11,041						NM
Other			1,865						631						1,234						195.6		%				6,319						3,949						2,370						60.0		%
Total non-interest income			$	8,557					$	17,775					$	(9,218)					(51.9)		%				$	60,825					$	51,893					$	8,932					17.2		%

Commercial lease income

Commercial lease income represents income earned on commercial operating leases originated by Customers’ commercial equipment financing group in which Customers is the lessor. The $1.2 million increase in commercial lease income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from the growth of Customers’ equipment finance business.

The $2.9 million increase in commercial lease income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from the growth of Customers’ equipment finance business.

Loan fees

The $2.0 million increase in loan fees for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from increases in fees earned on unused lines of credit and other fees from consumer borrowers, partially offset by decreases in servicing related revenue and other fees from borrowers.

The $4.2 million increase in loan fees for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from increases in fees earned on unused lines of credit and other fees from borrowers, partially offset by a decrease in servicing related revenue.

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 $0.1 million increase in bank-owned life insurance income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from an increase in cash surrender value of the policies.

The $2.3 million decrease in bank-owned life insurance income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from a decrease in death benefits paid by insurance carriers under the policies.

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Net gain (loss) on sale of loans and leases

The $14.2 million increase in net loss on sale of loans and leases for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from $14.3 million of loss on leases of commercial clean vehicles that were accounted for as sales-type leases during the three months ended September 30, 2024, and a loss of $0.3 million, inclusive of transaction costs, on sales of $202.5 million in consumer installment loans, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs for the three months ended September 30, 2024, compared to $0.2 million in losses on sales of $12.4 million of SBA loans and $0.2 million in losses on sales of consumer installment loans for the three months ended September 30, 2023. The commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the three months ended September 30, 2024. Refer to “NOTE 8 — LEASES” to Customers’ unaudited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs. There can be no assurance that Customers will realize gains from sales of loans in 2024 given the significant uncertainty in the capital markets.

The $13.7 million increase in net loss on sale of loans and leases for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from $14.3 million of loss on leases of commercial clean vehicles that were accounted for as sales-type leases during the nine months ended September 30, 2024, a loss of $0.3 million, inclusive of transaction costs, on sales of $202.5 million in consumer installment loans, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs and a loss of $0.2 million, inclusive of transaction costs, on sale of $23.7 million in commercial and industrial loans for the nine months ended September 30, 2024, compared to $0.2 million in net gains on sales of $78.6 million of SBA loans, $0.2 million in losses on sales of consumer installment loans and a loss of $1.2 million, inclusive of transaction costs, on sales of $556.7 million in consumer installment loans that were classified as held for sale, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs for the nine months ended September 30, 2023. The commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the nine months ended September 30, 2024. Refer to “NOTE 8 — LEASES” to Customers’ unaudited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs. There can be no assurance that Customers will realize gains from sales of loans in 2024 given the significant uncertainty in the capital markets.

Loss on sale of capital call lines of credit

The $5.0 million decrease in realized loss from the sale of capital call lines of credit for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 reflected the sale of $670.0 million of short-term syndicated capital call lines of credit within specialized lending, inclusive of accrued interest and unamortized deferred loan origination costs for the nine months ended September 30, 2023, compared to no such sales for the nine months ended September 30, 2024. Customers decided to exit completely the non-strategic, short-term syndicated capital call lines of credit with borrowers that Customers had no deposit relationships during the nine months ended September 30, 2023.

Net gain (loss) on sale of investment securities

The $0.4 million decrease in net loss on sale of investment securities for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 reflects a gain realized from the sale of $0.1 million in AFS debt securities for the three months ended September 30, 2024, compared to the sale of $5.0 million in AFS debt securities for the three months ended September 30, 2023. There can be no assurance that Customers will realize gains from sales of investment securities in 2024, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

The $0.3 million increase in net loss on sale of investment securities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 reflects net losses realized from the sales of $241.6 million in AFS debt securities for the nine months ended September 30, 2024, compared to the sale of $5.0 million in AFS debt securities for the nine months ended September 30, 2023. There can be no assurance that Customers will realize gains from sales of investment securities in 2024, 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 on equity method investments

The $11.0 million increase in unrealized gain on the equity method investments for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 reflects unrealized gain from the equity method investment with a fair value of $16.0 million purchased at a discount during the nine months ended September 30, 2024.

Customers accounts for unconsolidated partnerships and certain other investments using the equity method of accounting if it has the ability to significantly influence the operating and financial policies of the investee. This is generally presumed to exist when Customers owns between 20% and 50% of a corporation, or when it has greater than 3% to 5% interest in a limited partnership or similarly structured entity. Under the equity method, Customers records its equity ownership share of net income or loss of the investee within other non-interest income. Investments accounted for under the equity method of accounting are included within other assets on the consolidated balance sheets.

Other non-interest income

The $1.2 million increase in other non-interest income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from increases in income from equity securities and SERP.

The $2.4 million increase in other non-interest income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from an increase in income from equity securities, SERP and derivatives.

NON-INTEREST EXPENSE

The table below presents the components of non-interest expense for the three and nine months ended September 30, 2024 and 2023.

			Three Months Ended September 30,												QTD												Nine Months Ended September 30,												YTD
(dollars in thousands)			2024						2023						Change						% Change						2024						2023						Change						% Change
Salaries and employee benefits			$	47,717					$	33,845					$	13,872					41.0		%				$	128,689					$	99,310					$	29,379					29.6		%
Technology, communication and bank operations			13,588						15,667						(2,079)						(13.3)		%				51,719						48,663						3,056						6.3		%
Commercial lease depreciation			7,811						7,338						473						6.4		%				23,610						22,541						1,069						4.7		%
Professional services			9,048						8,569						479						5.6		%				21,505						25,357						(3,852)						(15.2)		%
Loan servicing			3,778						3,858						(80)						(2.1)		%				11,325						13,296						(1,971)						(14.8)		%
Occupancy			2,987						2,471						516						20.9		%				8,454						7,750						704						9.1		%
FDIC assessments, non-income taxes and regulatory fees			7,902						8,551						(649)						(7.6)		%				31,607						21,059						10,548						50.1		%
Advertising and promotion			908						650						258						39.7		%				2,844						2,245						599						26.7		%
Legal settlement expense			—						4,096						(4,096)						(100.0)		%				—						4,096						(4,096)						(100.0)		%
Other			10,279						4,421						5,858						132.5		%				26,886						14,579						12,307						84.4		%
Total non-interest expense			$	104,018					$	89,466					$	14,552					16.3		%				$	306,639					$	258,896					$	47,743					18.4		%

Salaries and employee benefits

The $13.9 million increase in salaries and employee benefits for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from an increase in average full-time equivalent team members including the addition of new banking teams, annual merit increases, incentives and severance.

The $29.4 million increase in salaries and employee benefits for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from an increase in average full-time equivalent team members including the addition of new banking teams, annual merit increases, incentives and severance.

Technology, communication and bank operations

The $2.1 million decrease in technology, communication and bank operations expense for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from a decrease in deposit servicing-related expenses resulting from lower servicing fees, partially offset by an increase of $2.9 million in fees for software and processing fees.

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The $3.1 million increase in technology, communication and bank operations expense for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from an increase of $9.7 million in fees for software and processing fees, partially offset by a decrease in deposit servicing-related expenses resulting from lower servicing fees and other technology related expenses.

Customers incurred expenses of $3.0 million and $7.9 million to BM Technologies under the deposit servicing agreement included within the technology, communication and bank operations expense during the three months ended September 30, 2024 and 2023, respectively. Customers incurred expenses of $17.1 million and $22.8 million to BM Technologies under the deposit servicing agreement included within the technology, communication and bank operations expense during the nine months ended September 30, 2024 and 2023, respectively. The deposit servicing fees of $17.1 million incurred to BM Technologies for the nine months ended September 30, 2024 included $7.1 million for periods prior to 2024.

Professional services

The $0.5 million increase in professional services for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from increases in consulting fees including to enhance the Bank’s risk management infrastructure, partially offset by decreases in legal and other professional services.

The $3.9 million decrease in professional services for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from decreases in legal and other professional services, partially offset by increases in consulting fees including to enhance the Bank’s risk management infrastructure.

FDIC assessments, non-income taxes and regulatory fees

The $0.6 million decrease in FDIC assessments, non-income taxes and regulatory fees for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from a decrease in Pennsylvania bank shares taxes. Customers recorded a credit of $3.0 million for Pennsylvania bank shares taxes relating to periods prior to 2024 during the three months ended September 30, 2024.

The $10.5 million increase in FDIC assessments, non-income taxes and regulatory fees for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from an increase in FDIC assessment rates, FDIC premiums of $4.2 million relating to periods prior to 2024 and an increase in the estimated FDIC special assessments of $0.7 million. In November 2023, FDIC issued a final rule to implement a special assessment of 3.36 basis points on the uninsured deposits in excess of $5 billion as of December 31, 2022 to recover the losses arising from the closures of Silicon Valley Bank and Signature Bank in early March 2023. Customers recorded an additional special assessment of $0.7 million based on the updated estimate of the losses from the FDIC for the nine months ended September 30, 2024. The special assessment will be paid over eight quarterly periods beginning in the first quarter 2024. Customers had approximately $6.4 billion in uninsured deposits as of December 31, 2022. The total special assessment amount to be paid by Customers may vary based on collections ultimately received by the FDIC to recover its losses. Customers also recorded a credit of $3.0 million for Pennsylvania bank shares taxes relating to periods prior to 2024 during the nine months ended September 30, 2024.

Legal settlement expense

The $4.1 million decrease in legal settlement expense for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 reflects expenses from a settlement with a third party PPP service provider for the three months ended September 30, 2023.

The $4.1 million decrease in legal settlement expense for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 reflects expenses from a settlement with a third party PPP service provider for the nine months ended September 30, 2023.

Other non-interest expense

The $5.9 million increase in other non-interest expense for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from increases in fees paid to a fintech company related to consumer installment loans originated and held for sale as a part of the Bank’s held for sale strategy, provision for operating losses and the provision for credit losses on unfunded lending-related commitments.

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The $12.3 million increase in other non-interest expense for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from increases in fees paid to a fintech company related to consumer installment loans originated and held for sale as a part of the Bank’s held for sale strategy and the provision for credit losses on unfunded lending-related commitments.

INCOME TAXES

The table below presents income tax expense (benefit) and the effective tax rate for the three and nine months ended September 30, 2024 and 2023.

			Three Months Ended September 30,												QTD												Nine Months Ended September 30,												YTD
(dollars in thousands)			2024						2023						Change						% Change						2024						2023						Change						% Change
Income before income tax expense (benefit)			$	46,018					$	110,226					$	(64,208)					(58.3)		%				$	188,512					$	246,852					$	(58,340)					(23.6)		%
Income tax expense (benefit)			(725)						23,470						(24,195)						(103.1)		%				33,958						58,801						(24,843)						(42.2)		%
Effective tax rate			(1.58)		%				21.29		%																18.01		%				23.82		%

The $24.2 million decrease in income tax expense for the three months ended September 30, 2024, when compared to the same period in the prior year, primarily resulted from lower pre-tax income and an increase in estimated income tax credits for the year ending December 31, 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the three months ended September 30, 2024. These investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases. The decrease in the effective tax rate for the three months ended September 30, 2024, when compared to the same period in the prior year, primarily resulted from an increase in estimated income tax credits for the year ending December 31, 2024.

The $24.8 million decrease in income tax expense for the nine months ended September 30, 2024, when compared to the same period in the prior year, primarily resulted from lower pre-tax income and an increase in estimated income tax credits for the year ending December 31, 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the nine months ended September 30, 2024, partially offset by tax expense on surrendered bank-owned life insurance policies of $4.1 million for the nine months ended September 30, 2023. These investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases. The decrease in the effective tax rate for the nine months ended September 30, 2024, when compared to the same period in the prior year, primarily resulted from an increase in estimated income tax credits for the year ending December 31, 2024, partially offset by tax expense on surrendered bank-owned life insurance policies of $4.1 million for the nine months ended September 30, 2023.

PREFERRED STOCK DIVIDENDS

Preferred stock dividends were $3.8 million and $3.8 million for the three months ended September 30, 2024 and 2023, respectively. Preferred stock dividends were $11.4 million and $10.8 million for the nine months ended September 30, 2024 and 2023, respectively. There were no changes to the amount of preferred stock outstanding during the three and nine months ended September 30, 2024 and 2023.

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%. Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate on Series E and F Preferred Stock, plus 5.14% and 4.762%, respectively, beginning with dividends declared on October 25, 2023.

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Financial Condition

General

Customers’ total assets were $21.5 billion at September 30, 2024. This represented an increase of $139.8 million from total assets of $21.3 billion at December 31, 2023. The increase in total assets was primarily driven by increases of $563.4 million in loans and leases receivable, $352.5 million in loans receivable, mortgage finance, at fair value and $6.4 million in investment securities, at fair value, partially offset by decreases of $758.3 million in cash and cash equivalents, $64.9 million in loans held for sale and $38.7 million in investment securities held to maturity.

Total liabilities were $19.7 billion at September 30, 2024. This represented a decrease of $23.0 million from $19.7 billion at December 31, 2023. The decrease in total liabilities primarily resulted from decreases of $86.0 million in FHLB advances, $61.5 million in accrued interest payable and other liabilities and $24.8 million in other borrowings, partially offset by an increase of $149.2 million in total deposits.

The following table sets forth certain key condensed balance sheet data as of September 30, 2024 and December 31, 2023:

(dollars in thousands)			September 30, 2024						December 31, 2023						Change						% Change
Cash and cash equivalents			$	3,088,022					$	3,846,346					$	(758,324)					(19.7)		%
Investment securities, at fair value			2,412,069						2,405,640						6,429						0.3		%
Investment securities held to maturity			1,064,437						1,103,170						(38,733)						(3.5)		%
Loans held for sale			275,420						340,317						(64,897)						(19.1)		%
Loans and leases receivable			12,527,283						11,963,855						563,428						4.7		%
Loans receivable, mortgage finance, at fair value			1,250,413						897,912						352,501						39.3		%
Allowance for credit losses on loans and leases			(133,158)						(135,311)						2,153						(1.6)		%
Bank-owned life insurance			295,531						292,193						3,338						1.1		%
Other assets			455,083						366,829						88,254						24.1		%
Total assets			21,456,082						21,316,265						139,817						0.7		%
Total deposits			18,069,389						17,920,236						149,153						0.8		%
FHLB advances			1,117,229						1,203,207						(85,978)						(7.1)		%
Other borrowings			99,033						123,840						(24,807)						(20.0)		%
Subordinated debt			182,439						182,230						209						0.1		%
Accrued interest payable and other liabilities			186,812						248,358						(61,546)						(24.8)		%
Total liabilities			19,654,902						19,677,871						(22,969)						(0.1)		%
Total shareholders’ equity			1,801,180						1,638,394						162,786						9.9		%
Total liabilities and shareholders’ equity			$	21,456,082					$	21,316,265					$	139,817					0.7		%

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 $39.4 million and $45.2 million at September 30, 2024 and December 31, 2023, 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 $3.0 billion and $3.8 billion at September 30, 2024 and December 31, 2023, 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 and risk management decisions made to optimize Customers’ net interest income, while effectively managing interest-rate risk and liquidity. The decrease in interest-earning deposits from December 31, 2023 primarily resulted from deploying excess cash into loans and investment securities.

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Investment 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, 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 September 30, 2024, investment securities at fair value totaled $2.4 billion compared to $2.4 billion at December 31, 2023. The slight increase primarily resulted from purchases of $665.8 million in asset-backed securities, agency-guaranteed mortgage-backed securities and collateralized mortgage obligations, collateralized loan obligations and corporate notes and an increase in the fair value of AFS debt securities, or a decrease in unrealized losses of $36.4 million primarily due to changes in market interest rates and credit spreads, partially offset by the maturities, calls and principal repayments totaling $458.0 million and the sales of $240.8 million of asset-backed securities, collateralized loan obligations, corporate notes and private label collateralized mortgage obligations for the nine months ended September 30, 2024.

For financial reporting purposes, AFS debt securities are reported 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 benefit to provision for credit losses of $0.7 million and provision of $0.7 million on certain asset-backed securities and corporate notes included in our investment securities at fair value for the three and nine months ended September 30, 2024, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 13 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS” to Customers’ unaudited consolidated financial statements for additional information.

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

			September 30, 2024
			Within one year						After one but within five years						After five but within ten years												No specific maturity						Total
Asset-backed securities			—		%				—		%				—		%										1.43		%				1.43		%
Agency-guaranteed residential mortgage-backed securities			—						—						—												5.60						5.60
Agency-guaranteed residential collateralized mortgage obligations			—						—						—												3.67						3.67
Agency-guaranteed commercial collateralized mortgage obligations			—						—						—												5.04						5.04
Collateralized loan obligations			—						—						—												6.75						6.75
Commercial mortgage-backed securities			—						—						—												6.38						6.38
Corporate notes			9.92						6.64						5.92												—						6.75
Private label collateralized mortgage obligations			—						—						—												3.93						3.93
Weighted-average yield			9.92		%				6.64		%				5.92		%										3.45		%				5.24		%

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

Investment securities held to maturity

At September 30, 2024, investment securities held to maturity totaled $1.1 billion compared to $1.1 billion at December 31, 2023. The slight decrease in investment securities held to maturity primarily resulted from the maturities, calls and principal repayments totaling $217.3 million for the nine months ended September 30, 2024, partially offset by purchases of $160.0 million of asset-backed securities in VIEs in connection with the sale of consumer installment loans and $14.8 million of CRA-qualified, agency-guaranteed collateralized mortgage obligations.

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During the three and nine months ended September 30, 2024, Customers sold $202.5 million of personal and other installment loans that were classified as held for sale, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs. Customers provided financing to the purchasers for a portion of the sales price in the form of $160.0 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 5 – 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.

			September 30, 2024
			Within one year						After one but within five years						After five but within ten years												No specific maturity						Total
Asset-backed securities			—		%				—		%				—		%										5.84		%				5.84		%
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			—						—						—												1.88						1.88
Agency-guaranteed commercial collateralized mortgage obligations			—						—						—												2.36						2.36
Private label collateralized mortgage obligations			—						—						—												4.61						4.61
Weighted-average yield			—		%				—		%				—		%										4.43		%				4.43		%

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

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

LOANS AND LEASES

Existing lending relationships are primarily with small and middle market businesses and individual consumers primarily in Berks County and Southeastern Pennsylvania (Bucks, Chester and Philadelphia Counties); New York (Westchester and Suffolk Counties and Manhattan); Hamilton, New Jersey; Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire; Chicago, Illinois; Dallas, Texas; Wilmington, North Carolina; and nationally for certain loan and deposit products. The portfolio of specialized lending loans and leases and mortgage finance loans is nationwide. The loan portfolio consists primarily of loans to support mortgage companies’ funding needs, multifamily, 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 specialized lending business. Customers also focuses its lending efforts on local-market mortgage and home equity lending and the origination and purchase of unsecured consumer loans (installment loans), including personal, student loan refinancing, home improvement and medical loans through arrangements with fintech companies and other market place lenders nationwide. Customers is transitioning its consumer installment lending strategy from a held for investment to a held for sale business to reduce its exposure to credit risk.

Commercial Lending

Customers’ commercial lending is broadly divided into the following groups: small and middle market business banking, specialized banking, multifamily and commercial real estate lending, mortgage finance, 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.

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As of September 30, 2024, Customers had $12.5 billion in commercial loans outstanding, totaling approximately 89.1% of its total loan and lease portfolio, which includes loans held for sale and loans receivable, mortgage finance, at fair value, compared to commercial loans outstanding of $11.5 billion, comprising approximately 86.8% of its total loan and lease portfolio at December 31, 2023.

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’ specialized banking includes equipment finance, healthcare lending, real estate specialty finance, fund finance, technology and venture capital banking and financial institutions group. Customers’ lender finance vertical within fund finance provides variable rate loans secured by diverse collateral pools to private debt funds. Customers’ capital call lines vertical within fund finance provides variable rate loans secured by collateral pools and limited partnership commitments from institutional investors in private equity funds and cash management services to the alternative investment industry. Customers’ technology and venture capital banking group services the venture-backed growth industry from seed-stage through late-stage.

Customers’ mortgage finance 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 September 30, 2024 and December 31, 2023, mortgage finance loans totaled $1.3 billion and $897.9 million, respectively, and are reported as loans receivable, mortgage finance, at fair value on the consolidated balance sheet.

Customers’ commercial equipment financing group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The commercial equipment financing group is primarily focused on serving the following industries: 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, 2024 and December 31, 2023, Customers had $645.3 million and $547.0 million, respectively, of equipment finance loans outstanding. As of September 30, 2024 and December 31, 2023, Customers had $254.3 million and $205.7 million, respectively, of equipment finance leases outstanding. As of September 30, 2024 and December 31, 2023, Customers had $199.9 million and $205.7 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $88.6 million and $77.7 million, respectively.

Customers’ multifamily lending group is focused on retaining a portfolio of high-quality multifamily loans within Customers’ covered markets. These lending activities use conservative underwriting standards and primarily target the refinancing of loans with other banks or provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the multifamily property, plus an assignment of all leases related to such property. As of September 30, 2024, Customers had multifamily loans of $2.1 billion outstanding, comprising approximately 15.1% of the total loan and lease portfolio, compared to $2.1 billion, or approximately 16.2% of the total loan and lease portfolio, at December 31, 2023.

Consumer Lending

Customers provides unsecured consumer installment loans, residential mortgage and home equity loans to customers nationwide primarily through relationships with fintech companies. Customers has continued to build out its held for sale strategy in 2024 in which we accumulate loans with the intent to sell in the future while reducing consumer installment loans held for investment. The installment loan portfolio consists largely of originated and purchased personal, student loan refinancing, home improvement and medical loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660. Customers has been selective in the consumer loans it has been purchasing. Home equity lending is offered to solidify customer relationships and grow relationship revenues in the long term. This lending is important in Customers’ efforts to grow total relationship revenues for its consumer households. As of September 30, 2024, Customers had $1.5 billion in consumer loans outstanding (including consumer loans held for investment and held for sale), or 10.9% of the total loan and lease portfolio, compared to $1.7 billion, or 13.2% of the total loan and lease portfolio, as of December 31, 2023.

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Purchases and sales of loans held for investment were as follows for the three and nine months ended September 30, 2024 and 2023:

			Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands)			2024						2023						2024						2023
Purchases (1)
Specialized lending			$	—					$	—					$	—					$	631,252
Other commercial and industrial			602						4,977						8,005						15,285
Commercial real estate owner occupied			—						—						—						2,867
Residential real estate			—						—						—						4,238
Personal installment (2)			69,976						—						113,217						—
Other installment (2)			—						96,758						—						96,758
Total			$	70,578					$	101,735					$	121,222					$	750,400
Sales (3)
Specialized lending (4)			$	—					$	—					$	—					$	287,185
Other commercial and industrial (5)			—						6,725						23,708						54,083
Commercial real estate owner occupied (5)			—						5,671						—						24,522
Commercial real estate non-owner occupied			—						—						—						16,000
Personal installment			53,021						—						53,021						—
Other installment			—						—						—						154,042
Total			$	53,021					$	12,396					$	76,729					$	535,832

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 95.9% and 100.0% of the loans’ unpaid principal balance for the three months ended September 30, 2024 and 2023, respectively. The purchase price was 97.5% and 87.7% of the loans' unpaid principal balance for the nine months ended September 30, 2024 and 2023, respectively.

(2)Installment loan purchases for the three and nine months ended September 30, 2024 consist of third-party originated unsecured consumer loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

(3)For the three months ended September 30, 2024 and 2023, sales of loans held for investment resulted in no gain or loss and net losses of $0.2 million, respectively, included in net gain (loss) on sale of loans and leases in the consolidated statements of income. For the nine months ended September 30, 2024 and 2023, sales of loans held for investment resulted in net losses of $0.2 million and net gains of $0.2 million, respectively.

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

(5)Primarily sales of SBA loans for the three and nine months ended September 30, 2023.

Loans Held for Sale

The composition of loans held for sale as of September 30, 2024 and December 31, 2023 was as follows:

(amounts in thousands)			September 30, 2024						December 31, 2023
Residential mortgage loans, at fair value			$	2,523					$	1,215
Personal installment loans, at lower of cost or fair value			55,799						151,040
Other installment loans, at fair value			217,098						188,062
Total loans held for sale			$	275,420					$	340,317

Loans held for sale are reported 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.

During the three and nine months ended September 30, 2024, Customers sold $202.5 million of personal and other installment loans that were classified as held for sale, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs. Customers provided financing to the purchasers for a portion of the sales price in the form of $160.0 million of asset-backed securities while $40.2 million of the remaining sales proceeds were paid in cash.

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

Total Loans and Leases Receivable

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

(amounts in thousands)			September 30, 2024						December 31, 2023
Loans and leases receivable:
Commercial:
Commercial and industrial:
Specialized lending (1)			$	5,468,507					$	5,006,693
Other commercial and industrial (2)			1,204,426						1,279,147
Multifamily			2,115,978						2,138,622
Commercial real estate owner occupied			981,904						797,319
Commercial real estate non-owner occupied			1,326,591						1,177,650
Construction			174,509						166,393
Total commercial loans and leases receivable			11,271,915						10,565,824
Consumer:
Residential real estate			500,786						484,435
Manufactured housing			34,481						38,670
Installment:
Personal			453,739						555,533
Other			266,362						319,393
Total consumer loans receivable			1,255,368						1,398,031
Loans and leases receivable			12,527,283						11,963,855
Loans receivable, mortgage finance, at fair value			1,250,413						897,912
Allowance for credit losses on loans and leases			(133,158)						(135,311)
Total loans and leases receivable, net of allowance for credit losses on loans and leases (3)			$	13,644,538					$	12,726,456

(1)Includes direct finance and sales-type equipment leases of $254.3 million and $205.7 million at September 30, 2024 and December 31, 2023, respectively.

(2)Includes PPP loans of $30.5 million and $74.7 million at September 30, 2024 and December 31, 2023, respectively.

(3)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(18.1) million and $(22.7) million at September 30, 2024 and December 31, 2023, respectively.

Loans receivable, mortgage finance, at fair value

The mortgage finance 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 finance 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 finance, at fair value on the consolidated balance sheets. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At September 30, 2024, all of Customers’ mortgage finance 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 finance 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 finance, at fair value totaled $1.3 billion and $897.9 million at September 30, 2024 and December 31, 2023, respectively.

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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 for credit losses on loans and leases was $17.8 million and $51.6 million for the three and nine months ended September 30, 2024, respectively. The provision for credit losses on loans and leases was $17.1 million and $57.4 million for the three and nine months ended September 30, 2023, respectively. The ACL maintained for loans and leases receivable (excluding loans held for sale and loans receivable, mortgage finance, at fair value) was $133.2 million, or 1.06% of loans and leases receivable at September 30, 2024, and $135.3 million or 1.13% of loans and leases receivable at December 31, 2023.

The decrease in the ACL resulted primarily from slight improvements in macroeconomic forecasts and a decrease in consumer installment loan balances held for investment. Net charge-offs were $17.0 million for the three months ended September 30, 2024, a decrease of $0.5 million compared to the same period in 2023. Net charge-offs were $53.7 million for the nine months ended September 30, 2024, an increase of $2.0 million compared to the same period in 2023. The net charge-offs for nine months ended September 30, 2023 excluded $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the venture banking loan portfolio on June 15, 2023. The increase in net charge-offs, excluding the charge-offs for certain PCD loans acquired from the FDIC, was primarily due to higher charge-offs for commercial and industrial loans, partially offset by decreases in charge-offs for non-owner occupied commercial real estate and consumer installment loans. Refer to the tables of changes in Customers’ ACL for annualized net-charge offs to average loans by loan type for the periods indicated.

The tables below present changes in Customers’ ACL for the periods indicated.

(amounts in thousands)			Commercial and industrial (1)(2)						Multifamily						Commercial real estate owner occupied						Commercial real estate non-owner occupied						Construction						Residential real estate						Manufactured housing						Installment												Total
Three Months Ended September 30, 2024
Ending Balance, June 30, 2024			$	23,721					$	20,652					$	8,431					$	17,966					$	1,856					$	5,884					$	4,094					$	49,832											$	132,436
Charge-offs (3)			(6,538)						(2,167)						(4)						—						—						(19)						—						(12,496)												(21,224)
Recoveries (3)			1,482						—						—						—						3						40						—						2,655												4,180
Provision (benefit) for credit losses on loans and leases			6,526						(395)						2,486						(663)						(253)						(68)						(13)						10,146												17,766
Ending Balance, September 30, 2024			$	25,191					$	18,090					$	10,913					$	17,303					$	1,606					$	5,837					$	4,081					$	50,137											$	133,158
Nine Months Ended September 30, 2024
Ending Balance, December 31, 2023			$	23,503					$	16,343					$	9,882					$	16,859					$	1,482					$	6,586					$	4,239					$	56,417											$	135,311
Charge-offs (3)			(19,282)						(4,073)						(26)						—						—						(38)						—						(43,356)												(66,775)
Recoveries (3)			4,889						—						—						—						10						61						—						8,092												13,052
Provision (benefit) for credit losses on loans and leases			16,081						5,820						1,057						444						114						(772)						(158)						28,984												51,570
Ending Balance, September 30, 2024			$	25,191					$	18,090					$	10,913					$	17,303					$	1,606					$	5,837					$	4,081					$	50,137											$	133,158
Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended September 30, 2024			(0.31)		%				(0.42)		%				0.00		%				—		%				0.01		%				0.02		%				—		%				(5.37)		%										(0.56)		%
Nine Months Ended September 30, 2024			(0.30)		%				(0.26)		%				0.00		%				—		%				0.01		%				0.01		%				—		%				(6.02)		%										(0.60)		%

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(amounts in thousands)			Commercial and industrial (1)(2)						Multifamily						Commercial real estate owner occupied						Commercial real estate non-owner occupied						Construction						Residential real estate						Manufactured housing						Installment												Total
Three Months Ended September 30, 2023
Ending Balance, June 30, 2023			$	29,092					$	15,400					$	10,215					$	13,495					$	2,639					$	6,846					$	4,338					$	57,631											$	139,656
Charge-offs (3)			(9,008)						(1,999)						(39)						—						—						(42)						—						(18,932)												(30,020)
Recoveries (3)			6,034						—						—						—						—						29						—						6,459												12,522
Provision (benefit) for credit losses on loans and leases			(1,132)						2,469						187						2,324						491						(31)						(258)						13,005												17,055
Ending Balance, September 30, 2023			$	24,986					$	15,870					$	10,363					$	15,819					$	3,130					$	6,802					$	4,080					$	58,163											$	139,213
Nine Months Ended September 30, 2023
Ending Balance, December 31, 2022			$	17,582					$	14,541					$	6,454					$	11,219					$	1,913					$	6,094					$	4,430					$	68,691											$	130,924
Allowance for credit losses on FDIC PCD loans, net of charge-offs (4)			2,576						—						—						—						—						—						—						—												2,576
Charge-offs (3)			(9,600)						(3,447)						(39)						(4,527)						—						(69)						—						(52,031)												(69,713)
Recoveries (3)			6,439						—						34						27						116						34						—						11,350												18,000
Provision (benefit) for credit losses on loans and leases			7,989						4,776						3,914						9,100						1,101						743						(350)						30,153												57,426
Ending Balance, September 30, 2023			$	24,986					$	15,870					$	10,363					$	15,819					$	3,130					$	6,802					$	4,080					$	58,163											$	139,213
Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended September 30, 2023			(0.18)		%				(0.37)		%				(0.02)		%				—		%				—		%				(0.01)		%				—		%				(4.83)		%										(0.56)		%
Nine Months Ended September 30, 2023			(0.09)		%				(0.32)		%				0.00		%				(0.73)		%				0.12		%				(0.01)		%				—		%				(6.80)		%										(0.79)		%

(1)Includes specialized lending.

(2)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.

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

(4)Represents $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of a venture banking loan portfolio (included within specialized lending) from the FDIC on June 15, 2023, net of $6.2 million of charge-offs for certain of these PCD loans upon acquisition.

The ACL is based on a quarterly evaluation of the loan and lease portfolio held for investment and is maintained at a level that management considers adequate to absorb expected losses as of the balance sheet date. All commercial loans, with the exception of PPP loans and mortgage finance 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’ audited consolidated financial statements in its 2023 Form 10-K for further discussion on management’s methodology for estimating the ACL.

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Customers’ commercial real estate, commercial and residential construction, consumer residential and commercial and industrial loan types have real estate as collateral (collectively, “the real estate portfolio”) primarily in the form of a first lien position. Current appraisals providing current value estimates of the property are received when Customers’ credit group determines that the facts and circumstances have significantly changed since the date of the last appraisal, including that real estate values have deteriorated. The credit committee and loan officers review loans that are 15 or more days delinquent and all non-accrual loans on a periodic basis. In addition, loans where the loan officers have identified a “borrower of interest” are discussed to determine if additional analysis is necessary to apply the risk-rating criteria properly. The risk ratings for the real estate loan portfolio are determined based upon the current information available, including but not limited to discussions with the borrower, updated financial information, economic conditions within the geographic area and other factors that may affect the cash flow of the loan. If a loan is individually evaluated for impairment, the collateral value or discounted cash flow analysis is generally used to determine the estimated fair value of the underlying collateral, net of estimated selling costs, and compared to the outstanding loan balance to determine the amount of reserve necessary, if any. Appraisals used in this evaluation process are typically less than two years aged. For loans where real estate is not the primary source of collateral, updated financial information is obtained, including accounts receivable and inventory aging reports and relevant supplemental financial data to estimate the fair value of the loan, net of estimated selling costs, and compared to the outstanding loan balance to estimate the required reserve. Customers’ exposure to higher risk commercial real estate such as the office sector is minimal, representing approximately 1% of the total loan and lease portfolio as of September 30, 2024.

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 if principal repayment is expected to substantially come from the operation of the collateral or fair value of the collateral less estimated costs to sell if repayment of the loan is expected to be provided from the sale of such collateral. Shortfalls in the underlying collateral value for loans or leases determined to be collateral dependent are charged off immediately. Subsequent to an appraisal or other fair value estimate, management will assess whether there was a further decline in the value of the collateral based on changes in market conditions or property use that would require additional impairment to be recorded to reflect the particular situation, thereby increasing the ACL on loans and leases held for investment.

Asset Quality

Customers classifies 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 held for investment are absorbed by the ACL. The schedule that follows includes both loans held for sale and loans held for investment.

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Asset Quality at September 30, 2024

(dollars in thousands)			Total Loans and Leases						Current						30-89 Days Past Due						90 Days or More Past Due and Accruing						Non-accrual/NPL (a)						OREO and Repossessed Assets (b)						NPA (a)+(b)						NPL to Loan and Lease Type (%)						NPA to Loans and Leases + OREO and Repossessed Assets (%)
Loan and Lease Type
Commercial and industrial, including specialized lending (1)			$	6,672,933					$	6,667,097					$	1,200					$	21					$	4,615					$	—					$	4,615					0.07		%				0.07		%
Multifamily			2,115,978						2,104,144						391						—						11,834						—						11,834						0.56		%				0.56		%
Commercial real estate owner occupied			981,904						972,900						293						—						8,613						—						8,613						0.88		%				0.88		%
Commercial real estate non-owner occupied			1,326,591						1,325,535						—						—						763						—						763						0.06		%				0.06		%
Construction			174,509						174,509						—						—						—						—						—						—		%				—		%
Total commercial loans and leases receivable			11,271,915						11,244,185						1,884						21						25,825						—						25,825						0.23		%				0.23		%
Residential			500,786						483,871						8,918						—						7,997						—						7,997						1.60		%				1.60		%
Manufactured housing			34,481						31,395						823						394						1,869						—						1,869						5.42		%				5.42		%
Installment			720,101						701,210						12,563						—						6,328						—						6,328						0.88		%				0.88		%
Total consumer loans receivable			1,255,368						1,216,476						22,304						394						16,194						—						16,194						1.29		%				1.29		%
Loans and leases receivable			12,527,283						12,460,661						24,188						415						42,019						—						42,019						0.34		%				0.34		%
Loans receivable, mortgage finance, at fair value			1,250,413						1,250,413						—						—						—						—						—						—		%				—		%
Total loans held for sale			275,420						264,073						6,040						—						5,307						—						5,307						1.93		%				1.93		%
Total portfolio			$	14,053,116					$	13,975,147					$	30,228					$	415					$	47,326					$	—					$	47,326					0.34		%				0.34		%

Asset Quality at September 30, 2024 (continued)

(dollars in thousands)			Total Loans and Leases						Non-accrual / NPL						ACL																		Reserves to Loans and Leases (%)						Reserves to NPLs (%)
Loan and Lease Type
Commercial and industrial, including specialized lending (1)			$	6,672,933					$	4,615					$	25,191																	0.38		%				545.85		%
Multifamily			2,115,978						11,834						18,090																		0.85		%				152.86		%
Commercial real estate owner occupied			981,904						8,613						10,913																		1.11		%				126.70		%
Commercial real estate non-owner occupied			1,326,591						763						17,303																		1.30		%				2267.76		%
Construction			174,509						—						1,606																		0.92		%				—		%
Total commercial loans and leases receivable			11,271,915						25,825						73,103																		0.65		%				283.07		%
Residential			500,786						7,997						5,838																		1.17		%				73.00		%
Manufactured housing			34,481						1,869						4,080																		11.83		%				218.30		%
Installment			720,101						6,328						50,137																		6.96		%				792.30		%
Total consumer loans receivable			1,255,368						16,194						60,055																		4.78		%				370.85		%
Loans and leases receivable			12,527,283						42,019						133,158																		1.06		%				316.90		%
Loans receivable, mortgage finance, at fair value			1,250,413						—						—																		—		%				—		%
Total loans held for sale			275,420						5,307						—																		—		%				—		%
Total portfolio			$	14,053,116					$	47,326					$	133,158																	0.95		%				281.36		%

(1)    Includes PPP loans of $30.5 million within commercial and industrial, including specialized lending, and classified as current. PPP loans of $0.5 million were 30-59 days past due and $17.1 million were 60 days or more past due as of September 30, 2024. PPP loans were $74.7 million, of which $0.7 million were 30-59 days past due and $48.5 million were 60 days or more past due as of December 31, 2023. 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 billion at September 30, 2024 compared to $13.2 billion at December 31, 2023, and $47.3 million, or 0.34% of loans and leases, were non-performing at September 30, 2024 compared to $27.1 million, or 0.21% of loans and leases, at December 31, 2023. The total loan and lease portfolio was supported by an ACL of $133.2 million (281.36% of NPLs and 0.95% of total loans and leases) and $135.3 million (499.12% of NPLs and 1.02% of total loans and leases), at September 30, 2024 and December 31, 2023, respectively.

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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 our single point of contact relationship managers, our branchless digital banking products, our white label relationship, deposit brokers, listing services and other relationships.

In April 2024, Customers onboarded 10 experienced commercial and business banking teams in New York, California and Nevada to accelerate the Bank’s deposit growth potential. The new teams are expected to enhance its presence in New York City, where it has successfully operated for over seven years; reinforce its dedication to Los Angeles; add representation in Orange County, California; and bring client coverage to the communities of Reno and Las Vegas, Nevada. All newly onboarded bankers are highly respected in the commercial deposits space and augment existing expertise in private banking, treasury management, and commercial and industrial lending. They are expected to enhance the growth of the Bank’s low-cost, relationship-focused deposit portfolio, and their addition strengthens the Bank’s commitment to its single point of contact relationship-oriented service approach.

Customers Bank also provides TassatPayTM instant blockchain-based digital payments platform via CBITTM, which allows clients to make instant payments in U.S. dollars. CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. As of September 30, 2024 and December 31, 2023, Customers Bank held $2.8 billion of deposits from customers participating in CBIT, which are reported as deposit liabilities in the consolidated balance sheets. As of September 30, 2024, substantially all the CBIT-related deposit accounts are non-interest bearing. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The deposits from customers participating in CBIT include the omnibus deposit account established for the CBIT instant payments platform, which had an outstanding balance of $1.2 billion and $826.9 million at September 30, 2024 and December 31, 2023, respectively.

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

(dollars in thousands)			September 30, 2024						December 31, 2023						Change						% Change
Demand, non-interest bearing			$	4,670,809					$	4,422,494					$	248,315					5.6		%
Demand, interest bearing			5,606,500						5,580,527						25,973						0.5		%
Savings, including MMDA			5,360,996						4,629,336						731,660						15.8		%
Non-time deposits			15,638,305						14,632,357						1,005,948						6.9		%
Time deposits			2,431,084						3,287,879						(856,795)						(26.1)		%
Total deposits			$	18,069,389					$	17,920,236					$	149,153					0.8		%

Total deposits were $18.1 billion at September 30, 2024, an increase of $149.2 million, or 0.8%, from $17.9 billion at December 31, 2023. The increase in total deposits was primarily due to increases in savings, including MMDA of $731.7 million, or 15.8%, to $5.4 billion at September 30, 2024, from $4.6 billion at December 31, 2023, non-interest bearing demand deposits of $248.3 million, or 5.6%, to $4.7 billion at September 30, 2024 from $4.4 billion at December 31, 2023 and interest bearing demand deposits of $26.0 million, or 0.5%, to $5.6 billion at September 30, 2024, from $5.6 billion at December 31, 2023. The increases were partially offset by a decrease in time deposits of $856.8 million, or 26.1%, to $2.4 billion at September 30, 2024, from $3.3 billion at December 31, 2023.

The total amount of estimated uninsured deposits totaled $6.1 billion and $5.4 billion at September 30, 2024 and December 31, 2023, respectively. Time deposits greater than the FDIC limit of $250,000 totaled $643.0 million and $186.3 million at September 30, 2024 and December 31, 2023, respectively.

At September 30, 2024 and December 31, 2023, the Bank had $1.5 billion and $1.1 billion in deposits, respectively, to which it had pledged $1.4 billion and $1.1 billion of available borrowing capacity through the FHLB to the depositors through a standby letter of credit arrangement, respectively.

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, federal funds purchased, senior unsecured notes and subordinated debt. Subordinated debt is also considered as Tier 2 capital for certain regulatory calculations.

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Short-term debt

There weas no short-term debt outstanding at September 30, 2024 and December 31, 2023.

Long-term debt

FHLB and FRB Advances

Long-term FHLB and FRB advances at September 30, 2024 and December 31, 2023 were as follows:

			September 30, 2024																		December 31, 2023
(dollars in thousands)			Amount									Rate									Amount						Rate
FHLB advances (1)			$	1,117,229		(2)						4.24		%	(3)						$	1,203,207					3.91		%
Total long-term FHLB and FRB advances			$	1,117,229																	$	1,203,207

(1)    Amounts reported in the above table include fixed rate long-term advances from FHLB of $950.0 million with maturities ranging from March 2025 to March 2028, and variable rate long-term advances from FHLB of $155.0 million with maturities ranging from March 2028 to June 2029 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank’s option, at September 30, 2024.

(2)    Includes $12.2 million and $3.2 million of unamortized basis adjustments from interest rate swaps designated as fair value hedges of long-term advances from FHLB at September 30, 2024 and December 31, 2023, respectively. Refer to “NOTE 14 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES” to Customers’ unaudited consolidated financial statements for additional information.

(3)    Excludes the effect of interest rate swaps designated as fair value hedges of long-term advances from FHLB.

The maximum borrowing capacity with the FHLB and FRB at September 30, 2024 and December 31, 2023 was as follows:

(dollars in thousands)			September 30, 2024						December 31, 2023
Total maximum borrowing capacity with the FHLB			$	3,565,068					$	3,474,347
Total maximum borrowing capacity with the FRB			4,180,824						3,436,000
Qualifying loans and securities serving as collateral against FHLB and FRB advances			9,508,135						8,575,137

Senior Notes and Subordinated Debt

Long-term senior notes and subordinated debt at September 30, 2024 and December 31, 2023 were as follows:

(dollars in thousands)												Carrying Amount
Issued by						Ranking						September 30, 2024						December 31, 2023						Rate						Issued Amount						Date Issued						Maturity						Price
Customers Bancorp						Senior (1)						$	99,033					$	98,928					2.875		%				$	100,000					August 2021						August 2031						100.000		%
Customers Bancorp						Senior						—						24,912						4.500		%				25,000						September 2019						September 2024						100.000		%
Total other borrowings												$	99,033					$	123,840
Customers Bancorp						Subordinated (2)(3)						$	72,902					$	72,766					5.375		%				$	74,750					December 2019						December 2034						100.000		%
Customers Bank						Subordinated (2)(4)						109,537						109,464						6.125		%				110,000						June 2014						June 2029						100.000		%
Total subordinated debt												$	182,439					$	182,230

(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 had an annual fixed rate of 6.125% until June 26, 2024. From June 26, 2024 until maturity, the notes bear an annual interest rate equal to the three-month LIBOR plus 344.3 basis points. Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate in order to calculate the annual interest rate after June 26, 2024. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.

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SHAREHOLDERS’ EQUITY

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

(dollars in thousands)			September 30, 2024						December 31, 2023						Change						% Change
Preferred stock			$	137,794					$	137,794					$	—					—		%
Common stock			35,734						35,459						275						0.8		%
Additional paid in capital			571,609						564,538						7,071						1.3		%
Retained earnings			1,302,745						1,159,582						143,163						12.3		%
Accumulated other comprehensive income (loss), net			(106,082)						(136,569)						30,487						(22.3)		%
Treasury stock			(140,620)						(122,410)						(18,210)						14.9		%
Total shareholders' equity			$	1,801,180					$	1,638,394					$	162,786					9.9		%

Shareholders’ equity increased $162.8 million, or 9.9%, to $1.8 billion at September 30, 2024 when compared to shareholders’ equity of $1.6 billion at December 31, 2023. The increase primarily resulted from increases of $143.2 million in retained earnings and $30.5 million in accumulated other comprehensive income (loss), net.

The increases in common stock and additional paid in capital resulted primarily from the issuance of common stock under share-based compensation arrangements for the nine months ended September 30, 2024.

The increase in retained earnings resulted from net income of $154.6 million, partially offset by preferred stock dividends of $11.4 million for the nine months ended September 30, 2024.

The increase in accumulated other comprehensive income (loss), net primarily resulted from a decrease of $36.4 million in unrealized losses on AFS debt securities due to changes in interest rates and credit spreads and income tax effect of $9.4 million during the nine months ended September 30, 2024.

The increase in treasury stock resulted from repurchases of 373,974 shares of its common stock for $18.2 million under the 2024 Share Repurchase Program during the nine months ended September 30, 2024. On June 26, 2024, the Board of Directors of Customers Bancorp authorized a new common stock repurchase program, the 2024 Share Repurchase Program, to repurchase up to 497,509 shares of the Company’s common stock. The Company’s previously authorized common stock repurchase program, the Share Repurchase Program, authorized on August 25, 2021, subsequently expired on September 27, 2023. At expiration, the Share Repurchase Program had 497,509 shares that had not been repurchased.

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 provision for credit losses on unfunded lending-related commitments of $0.6 million and $2.7 million during the three and nine months ended September 30, 2024, respectively, resulting in an ACL of $5.6 million as of September 30, 2024. Customers had an ACL on unfunded lending-related commitments of $2.9 million as of December 31, 2023.

Customers’ contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of September 30, 2024. Refer to “NOTE 8 – LEASES”, “NOTE 9 – DEPOSITS” and “NOTE 10 – BORROWINGS” to Customers’ unaudited consolidated financial statements for additional information.

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At September 30, 2024, Customers had $3.1 billion of cash on hand and $3.5 billion of investment securities. 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. We maintain a strong liquidity position, with approximately $8.3 billion of liquidity immediately available consisting of cash on hand and available borrowing capacity from the FHLB and the FRB, which covered approximately 136% of uninsured deposits and approximately 183% of uninsured deposits less collateralized and affiliate deposits at September 30, 2024. Our loan to deposit ratio was 78% at September 30, 2024. 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 the FRB. As of September 30, 2024, Customers’ borrowing capacity with the FHLB was $3.6 billion, of which $1.1 billion was utilized in borrowings and $1.4 billion of available capacity was utilized to collateralize deposits. As of December 31, 2023, Customers’ borrowing capacity with the FHLB was $3.5 billion, of which $1.2 billion was utilized in borrowings and $1.1 billion of available capacity was utilized to collateralize deposits. As of September 30, 2024 and December 31, 2023, Customers’ borrowing capacity with the FRB was $4.2 billion and $3.4 billion, respectively. None of this capacity was utilized as of September 30, 2024 and December 31, 2023.

Customers Bank provides blockchain-based digital payments via CBIT, which allows clients to make instant payments in U.S. dollars. CBIT may only be created or minted by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. CBIT is not listed or traded on any digital currency exchange. As of September 30, 2024 and December 31, 2023, Customers Bank held $2.8 billion of deposits from customers participating in CBIT, which are reported as deposit liabilities in the consolidated balance sheets. As of September 30, 2024, substantially all the CBIT-related deposit accounts are non-interest bearing.

The CBIT instant payments platform provides a closed-system for intrabank commercial transactions and is not intended to be a trading platform for tokens or digital assets. CBIT tokens are used only in connection with the CBIT instant payments platform and are not securities for purposes of applicable securities laws. There are no scenarios in which the transaction or redemption value of one CBIT would not be equal to one U.S. dollar. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The deposits from customers participating in CBIT include the omnibus deposit account, which had an outstanding balance of $1.2 billion and $826.9 million at September 30, 2024 and December 31, 2023, respectively.

The table below summarizes Customers’ cash flows for the nine months ended September 30, 2024 and 2023:

			Nine Months Ended September 30,
(dollars in thousands)			2024						2023						Change						% Change
Net cash provided by (used in) operating activities			$	11,655					$	243,106					$	(231,451)					(95.2)		%
Net cash provided by (used in) investing activities			(745,024)						1,997,172						(2,742,196)						(137.3)		%
Net cash provided by (used in) financing activities			(24,955)						723,890						(748,845)						(103.4)		%
Net increase (decrease) in cash and cash equivalents			$	(758,324)					$	2,964,168					$	(3,722,492)					(125.6)		%

Cash flows provided by (used in) operating activities

Cash provided by operating activities of $11.7 million for the nine months ended September 30, 2024 resulted from proceeds from the sales and repayments of loans held for sale of $952.3 million, which included cash proceeds from the sales of consumer installment loans that were classified as held for sale to third-party sponsored VIEs during the nine months ended September 30, 2024, net income of $154.6 million and net non-cash operating adjustments of $56.5 million, partially offset by origination and purchases of loans held for sale of $1.0 billion, a decrease in accrued interest payable and other liabilities of $61.3 million and an increase in accrued interest receivable and other assets of $56.4 million. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans held for sale to third-party sponsored VIEs.

Cash provided by operating activities of $243.1 million for the nine months ended September 30, 2023 resulted from proceeds from the sales and repayments of loans held for sale of $454.9 million, which included cash proceeds from the sales of consumer installment loans that were classified as held for sale to third-party sponsored VIEs during the nine months ended September 30, 2023, net income of $188.1 million, net non-cash operating adjustments of $36.3 million, an increase in accrued interest payable and other liabilities of $33.3 million and a decrease in accrued interest receivable and other assets of $0.9 million, partially offset by origination and purchases of loans held for sale of $470.3 million. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans held for sale to third-party sponsored VIEs.

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Cash flows provided by (used in) investing activities

Cash used in investing activities of $745.0 million for the nine months ended September 30, 2024 primarily resulted from purchases of investment securities available for sale of $665.8 million and CRA-qualified investment securities held to maturity of $14.8 million, net increase in loans and leases, excluding mortgage finance loans of $538.6 million, net origination of mortgage finance loans of $353.1 million, purchases of loans of $121.2 million and purchases of leased assets under lessor operating leases of $31.3 million, partially offset by proceeds from maturities, calls, and principal repayments of investment securities available for sale of $458.0 million and held to maturity of $217.3 million, proceeds from sales of investment securities available for sale of $240.8 million, proceeds from sales of loans and leases of $34.4 million, net proceeds from sale of FHLB, Federal Reserve Bank, and other restricted stock of $15.5 million and proceeds from sales of leased assets under lessor operating leases of $14.6 million.

Cash provided by investing activities of $2.0 billion for the nine months ended September 30, 2023 primarily resulted from a net decrease in loans and leases, excluding mortgage finance loans of $1.6 billion primarily from PPP loan forgiveness and guarantee payments by the SBA, proceeds from the sales of loans and leases of $409.5 million including the sales of capital call lines of credit held for investment, proceeds from net repayments of mortgage finance loans of $380.9 million, proceeds from maturities, calls, and principal repayments of investment securities available for sale of $228.5 million and held to maturity of $175.9 million, proceeds from surrenders of BOLI of $56.6 million and proceeds from sales of investment securities available for sale of $4.1 million, partially offset by purchases of loans of $702.4 million including loans purchased from the FDIC, purchases of investment securities held to maturity of $73.1 million, net purchases of FHLB, Federal Reserve Bank, and other restricted stock of $51.7 million and purchases of leased asset under lessor operating leases of $20.3 million.

Cash flows provided by (used in) financing activities

Cash used in financing activities of $25.0 million for the nine months ended September 30, 2024 primarily resulted from repayments of long-term borrowed funds from the FHLB and the FRB of $250.0 million, repayments of other long-term borrowings of $25.0 million, purchases of treasury stock of $18.2 million and dividends paid on preferred stock of $11.5 million, partially offset by proceeds from long-term borrowed funds from the FHLB and the FRB of $155.0 million and a net increase in deposits of $128.4 million.

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

CAPITAL ADEQUACY

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

In first quarter 2020, the U.S federal banking regulatory agencies permitted banking organizations to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 31, 2020, the U.S. federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows banking organizations to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. Customers has elected to adopt the interim final rule, which is reflected in the regulatory capital data presented below. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of September 30, 2024, our regulatory capital ratios reflected 25%, or $15.4 million, benefit associated with the CECL transition provisions.

Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Bancorp to maintain minimum amounts and ratios (set forth in the following table) of common equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). At September 30, 2024 and December 31, 2023, the Bank and the Bancorp met all capital adequacy requirements to which they were subject.

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

															Minimum Capital Levels to be Classified as:
			Actual												Adequately Capitalized												Well Capitalized												Basel III Compliant
(dollars in thousands)			Amount						Ratio						Amount						Ratio						Amount						Ratio						Amount						Ratio
As of September 30, 2024:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	1,777,683					12.463		%				$	641,885					4.500		%				N/A						N/A						$	998,488					7.000		%
Customers Bank			$	1,943,059					13.636		%				$	641,212					4.500		%				$	926,125					6.500		%				$	997,441					7.000		%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	1,915,476					13.429		%				$	855,847					6.000		%				N/A						N/A						$	1,212,450					8.500		%
Customers Bank			$	1,943,059					13.636		%				$	854,949					6.000		%				$	1,139,932					8.000		%				$	1,211,178					8.500		%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	2,191,266					15.362		%				$	1,141,129					8.000		%				N/A						N/A						$	1,497,732					10.500		%
Customers Bank			$	2,145,947					15.060		%				$	1,139,932					8.000		%				$	1,424,916					10.000		%				$	1,496,161					10.500		%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.			$	1,915,476					8.947		%				$	856,386					4.000		%				N/A						N/A						$	856,386					4.000		%
Customers Bank			$	1,943,059					9.082		%				$	855,807					4.000		%				$	1,069,759					5.000		%				$	855,807					4.000		%
As of December 31, 2023:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	1,661,149					12.230		%				$	611,200					4.500		%				N/A						N/A						$	950,755					7.000		%
Customers Bank			$	1,868,360					13.773		%				$	610,453					4.500		%				$	881,765					6.500		%				$	949,594					7.000		%
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	1,798,942					13.245		%				$	814,933					6.000		%				N/A						N/A						$	1,154,489					8.500		%
Customers Bank			$	1,868,360					13.773		%				$	813,937					6.000		%				$	1,085,250					8.000		%				$	1,153,078					8.500		%
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.			$	2,076,550					15.289		%				$	1,086,578					8.000		%				N/A						N/A						$	1,426,133					10.500		%
Customers Bank			$	2,073,202					15.283		%				$	1,085,250					8.000		%				$	1,356,562					10.000		%				$	1,424,390					10.500		%
Tier 1 capital (to average assets)
Customers Bancorp, Inc.			$	1,798,942					8.375		%				$	859,189					4.000		%				N/A						N/A						$	859,189					4.000		%
Customers Bank			$	1,868,360					8.708		%				$	858,225					4.000		%				$	1,072,782					5.000		%				$	858,225					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. As of September 30, 2024, the Bank and the Bancorp were in compliance with the Basel III 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 growth and distribution of bank loans and leases, investments, and deposits, and their use may also affect rates charged on loans and leases or paid for deposits.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

The largest part 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 goals 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 looks to monitor and control the economic impact of changes in interest rates on the mix of interest rate sensitive assets and interest rate sensitive liabilities.

Customers uses two complementary methods to effectively measure and manage interest rate risk. The two types of simulation analysis used to determine the impact of changes in interest rates under various hypothetical interest rate scenarios are income scenario modeling and estimates of economic value (EVE). The combination of these two methods supplies 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 over a near term horizon. 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 September 30, 2025 and December 31, 2024, based upon the assets, liabilities and off-balance sheet financial instruments including derivatives in existence at September 30, 2024 and December 31, 2023.

Customers has also estimated changes to that projected twelve-month net interest income based upon interest rates rising or falling immediately (“rate shocks”). For upward rate shocks modeling a rising rate environment at September 30, 2024 and December 31, 2023, Customers used a parallel and sustained shift in interest rates, in which the base market interest rate forecast was immediately increased by 100, 200, and 300 basis points. For downward rate shocks modeling a falling rate environment at September 30, 2024 and December 31, 2023, Customers used a parallel and sustained shift in interest rates, in which the base market interest rate forecast was immediately decreased by 100, 200 and 300 basis points. The following table reflects the estimated percentage change in projected twelve-month net interest income under the rate shocks versus the base projected net interest income for the twelve months ending September 30, 2025 and December 31, 2024, resulting from changes in interest rates.

Net change in net interest income

			% Change
Rate Shocks			September 30, 2024						December 31, 2023
Up 3%			4.4%						9.9%
Up 2%			3.3%						6.6%
Up 1%			2.2%						3.6%
Down 1%			(2.5)%						(3.5)%
Down 2%			(5.4)%						(7.2)%
Down 3%			(8.5)%						(11.2)%

EVE considers a longer-term horizon and estimates the hypothetical discounted net 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 sensitivity of EVE in relation to a constant rate environment. For upward rate shocks modeling a rising rate environment at September 30, 2024 and December 31, 2023, current market interest rates were shocked by a parallel and sustained shift in interest rates, in which the base market interest rate forecast was immediately increased by 100, 200, and 300 basis points. For downward rate shocks modeling a falling rate environment at September 30, 2024 and December 31, 2023, current market interest rates were shocked by a parallel and sustained shift in interest rates, in which the base market interest rate forecast was immediately decreased by 100, 200 and 300 basis points. This method of measurement primarily evaluates the longer term repricing risks and embedded options in Customers Bank’s balance sheet. The following table reflects the estimated change in EVE at September 30, 2024 and December 31, 2023, resulting from shocks to interest rates.

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			From Base
Rate Shocks			September 30, 2024						December 31, 2023
Up 3%			(11.4)%						(6.2)%
Up 2%			(4.9)%						(3.0)%
Up 1%			(1.2)%						0.3%
Down 1%			(1.7)%						(5.4)%
Down 2%			(5.6)%						(13.2)%
Down 3%			(12.0)%						(23.1)%

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

Item 4. Controls and Procedures

(a) Management’s Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, Customers Bancorp carried out an evaluation, under the supervision and with the participation of Customers Bancorp’s management, including Customers Bancorp’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Customers Bancorp’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Customers Bancorp’s disclosure controls and procedures were effective as of September 30, 2024.

(b) Changes in Internal Control Over Financial Reporting. During the quarter ended September 30, 2024, there have been no changes in Customers Bancorp’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Customers Bancorp’s internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

For information on Customers’ legal proceedings, refer to “NOTE 15 – 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 2023 Form 10-K and subsequently filed quarterly reports on Form 10-Q. There are no material changes from the risk factors included within the 2023 Form 10-K and subsequently filed quarterly reports on Form 10-Q. The risks described within the 2023 Form 10-K and subsequently filed quarterly reports on Form 10-Q are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Refer to “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Note Regarding Forward-Looking Statements.”

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

Issuer Purchases of Equity Securities

On June 26, 2024, the Board of Directors of Customers Bancorp authorized a new common stock repurchase program, the 2024 Share Repurchase Program, to repurchase up to 497,509 shares of the Company’s common stock. The term of the 2024 Share Repurchase Program will extend for one year from June 26, 2024, unless earlier terminated. Purchases of shares under the 2024 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 months ended September 30, 2024 pursuant to the 2024 Share Repurchase Program were as follows:

Period						Total Number of Shares Purchased						Average Price Paid per Share						Total Number of Shares purchased as part of publicly announced plans or programs						Maximum Number of Shares that may yet be purchased under the plans or programs
July 1 - July 31, 2024						—						$	—					—						497,509
August 1 - August 31, 2024						193,662						47.76						193,662						303,847
September 1 - September 30, 2024						180,312						48.52						180,312						123,535
Total						373,974						$	48.13					373,974						123,535

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.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the third quarter of 2024, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated or modified any “Rule 10b5-1 trading arrangements” or “non-Rule 10b5-1 trading arrangements,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits

Exhibit No.						Description
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
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 September 30, 2024, formatted in Inline XBRL include: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.
104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension Schema Document.
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						XBRL Taxonomy Extension Definitions Linkbase Document.
101.LAB						XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Customers Bancorp, Inc.
November 12, 2024			By:						/s/ Jay S. Sidhu
			Name:						Jay S. Sidhu
			Title:						Chairman and Chief Executive Officer (Principal Executive Officer)
November 12, 2024			By:						/s/ Philip S. Watkins
			Name:						Philip S. Watkins
			Title:						Chief Financial Officer (Principal Financial Officer)

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