Table of ContentsContents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
x☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2017

For the quarterly period ended March 31, 2023
¨☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to .
For the transition period from to .
001-35542
(Commission File number)

Capture.jpg

(Exact name of registrant as specified in its charter)

cubiedgarlogoa02.jpgcubiedgarlogoa02.jpg

PennsylvaniaCustomers Bancorp, Inc.

27-2290659
Pennsylvania27-2290659
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
1015 Penn701 Reading Avenue
Suite 103
WyomissingWest Reading, PA 1961019611
(Address of principal executive offices)
(610) 933-2000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolsName of Each Exchange on which Registered
Voting Common Stock, par value $1.00 per shareCUBINew York Stock Exchange
Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series E, par value $1.00 per share		CUBI/PENew York Stock Exchange
Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series F, par value $1.00 per share		CUBI/PFNew York Stock Exchange
5.375% Subordinated Notes due 2034CUBBNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerxAccelerated Filer☐
Non-accelerated filer
o
Smaller Reporting Company☐
Large accelerated filer¨Accelerated filerx
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller Reporting Company¨
Emerging Growth Company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨☐    No  x




________________________________________ 
On October 31, 2017, 30,806,122May 5, 2023, 31,249,965 shares of Voting Common Stock were outstanding.





Table of Contents
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
Table of Contents
Part I
Item 1.
35
Item 2.
5146
Item 3.
7774
Item 4.
7875
Item 1.
7976
Item 1A.
7976
Item 2.
8177
Item 3.
8177
Item 4.
8177
Item 5.
8177
Item 6.
8278
8479
Ex-31.1
Ex-31.2
Ex-32.1
Ex-32.2
Ex-101



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GLOSSARY OF ABBREVIATIONS AND ACRONYMS
The following list of abbreviations and acronyms may be used throughout this Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Unaudited Consolidated Financial Statements and the Notes to the Unaudited Consolidated Financial Statements.
ACLAllowance for credit losses
AFSAvailable for sale
AOCIAccumulated other comprehensive income (loss)
ASCAccounting Standards Codification
ASUAccounting Standards Update
B2BBusiness-to-business
BancorpCustomers Bancorp, Inc.
BankCustomers Bank
BBB spreadBBB rated corporate bond spreads to U.S. Treasury securities
BMTBankMobile Technologies, Inc.
BM TechnologiesBM Technologies, Inc.
BOLIBank-owned life insurance
BTFPBank Term Funding Program
CAAConsolidated Appropriations Act, 2021
CARES ActCoronavirus Aid, Relief and Economic Security Act
CBITTM
Customers Bank Instant Token
CCFCustomers Commercial Finance, LLC
CECLCurrent expected credit losses
CommissionU.S. Securities and Exchange Commission
CompanyCustomers Bancorp, Inc. and subsidiaries
COVID-19Coronavirus Disease 2019
CPIConsumer Price Index
CRACommunity Reinvestment Act
CUBISymbol for Customers Bancorp, Inc. common stock traded on the NYSE
CustomersCustomers Bancorp, Inc. and Customers Bank, collectively
Customers BancorpCustomers Bancorp, Inc.
DCFDiscounted cash flow
EPSEarnings per share
EVEEconomic value of equity
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
Fed FundsFederal Reserve Board's Effective Federal Funds Rate
Federal Reserve,
Federal Reserve Board		Board of Governors of the Federal Reserve System
FHLBFederal Home Loan Bank
FICOFair, Isaac and Company
FintechThird-Party Financial Technology
FMVFair Market Value
FRBFederal Reserve Bank of Philadelphia
GDPGross domestic product
HTMHeld to maturity
LIBORLondon Interbank Offered Rate
LPOLimited Purpose Office
MFACMegalith Financial Acquisition Corp.
MMDAMoney market deposit accounts
NIMNet interest margin, tax equivalent
NMNot meaningful
NPANon-performing asset
NPLNon-performing loan
NYSENew York Stock Exchange
OCIOther comprehensive income (loss)
OREOOther real estate owned
PCDPurchased Credit-Deteriorated
3
Table of Contents
PPPPaycheck Protection Program
PPPLFFRB Paycheck Protection Program Liquidity Facility
PUTPurchase Upon Termination
Rate ShocksInterest rates rising or falling immediately
ROURight-of-use
SABSEC Staff Accounting Bulletin
SBAU.S. Small Business Administration
SBA loansLoans originated pursuant to the rules and regulations of the SBA
SECU.S. Securities and Exchange Commission
Securities ActSecurities Act of 1933, as amended
Series E Preferred StockFixed-to-floating rate non-cumulative perpetual preferred stock, series E
Series F Preferred StockFixed-to-floating rate non-cumulative perpetual preferred stock, series F
SERPSupplemental Executive Retirement Plan
Share Repurchase ProgramShare repurchase program authorized by the Board of Directors of Customers Bancorp in 2021
SOFRSecured Overnight Financing Rate
TDRTroubled debt restructuring
TRACTerminal Rental Adjustment Clause
U.S. GAAPAccounting principles generally accepted in the United States of America
VIEVariable interest entity
VOEVoting interest entity


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Table of Contents
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET — UNAUDITED
(amounts in thousands, except share and per share data)
March 31,
2023		December 31,
2022
ASSETS
Cash and due from banks$77,251 $58,025 
Interest earning deposits1,969,434 397,781 
Cash and cash equivalents2,046,685 455,806 
Investment securities, at fair value (includes allowance for credit losses of $2,173 and $578, respectively)2,926,969 2,987,500 
Investment securities held to maturity870,294 840,259 
Loans held for sale (includes $314 and $322, respectively, at fair value)424,057 328,312 
Loans receivable, mortgage warehouse, at fair value1,247,367 1,323,312 
Loans receivable, PPP246,258 998,153 
Loans and leases receivable13,145,352 13,144,894 
Allowance for credit losses on loans and leases(130,281)(130,924)
Total loans and leases receivable, net of allowance for credit losses on loans and leases14,508,696 15,335,435 
FHLB, Federal Reserve Bank, and other restricted stock124,733 74,196 
Accrued interest receivable123,754 123,374 
Bank premises and equipment, net8,581 9,025 
Bank-owned life insurance339,607 338,441 
Goodwill and other intangibles3,629 3,629 
Other assets374,609 400,135 
Total assets$21,751,614 $20,896,112 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand, non-interest bearing$3,487,517 $1,885,045 
Interest bearing14,236,100 16,271,908 
Total deposits17,723,617 18,156,953 
FHLB advances2,052,143 800,000 
Other borrowings123,645 123,580 
Subordinated debt182,021 181,952 
Accrued interest payable and other liabilities249,168 230,666 
Total liabilities20,330,594 19,493,151 
Commitments and contingencies (NOTE 15)
Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 5,700,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022137,794 137,794 
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 35,258,186 and 35,012,250 shares issued as of March 31, 2023 and December 31, 2022; 31,239,750 and 32,373,697 shares outstanding as of March 31, 2023 and December 31, 202235,258 35,012 
Additional paid in capital552,255 551,721 
Retained earnings974,399 924,134 
Accumulated other comprehensive income (loss), net(156,276)(163,096)
Treasury stock, at cost (4,018,436 and 2,638,553 shares as of March 31, 2023 and December 31, 2022)(122,410)(82,604)
Total shareholders’ equity1,421,020 1,402,961 
Total liabilities and shareholders’ equity$21,751,614 $20,896,112 
 September 30,
2017		 December 31,
2016
ASSETS   
Cash and due from banks$13,318
 $37,485
Interest-earning deposits206,162
 227,224
Cash and cash equivalents219,480
 264,709
Investment securities available for sale, at fair value584,823
 493,474
Loans held for sale (includes $1,963,076 and $2,117,510, respectively, at fair value)2,113,293
 2,117,510
Loans receivable7,061,338
 6,154,637
Allowance for loan losses(38,314) (37,315)
Total loans receivable, net of allowance for loan losses7,023,024
 6,117,322
FHLB, Federal Reserve Bank, and other restricted stock98,611
 68,408
Accrued interest receivable27,135
 23,690
Bank premises and equipment, net12,369
 12,769
Bank-owned life insurance255,683
 161,494
Other real estate owned1,059
 3,108
Goodwill and other intangibles16,604
 17,621
Other assets119,748
 102,631
Total assets$10,471,829
 $9,382,736
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Liabilities:   
Deposits:   
Demand, non-interest bearing$1,427,304
 $966,058
Interest-bearing6,169,772
 6,337,717
Total deposits7,597,076
 7,303,775
Federal funds purchased147,000
 83,000
FHLB advances1,462,343
 868,800
Other borrowings186,258
 87,123
Subordinated debt108,856
 108,783
Accrued interest payable and other liabilities59,654
 75,383
Total liabilities9,561,187
 8,526,864
Shareholders’ equity:   
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 9,000,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016217,471
 217,471
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 31,317,892 and 30,820,177 shares issued as of September 30, 2017 and December 31, 2016; 30,787,632 and 30,289,917 shares outstanding as of September 30, 2017 and December 31, 201631,318
 30,820
Additional paid in capital429,633
 427,008
Retained earnings240,076
 193,698
Accumulated other comprehensive income (loss), net377
 (4,892)
Treasury stock, at cost (530,260 shares as of September 30, 2017 and December 31, 2016)(8,233) (8,233)
Total shareholders’ equity910,642
 855,872
Total liabilities and shareholders’ equity$10,471,829
 $9,382,736
See accompanying notes to the unaudited consolidated financial statements.

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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) — UNAUDITED
(amounts in thousands, except per share data)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Interest income:       
Loans receivable$67,107
 $60,362
 $195,605
 $173,847
Loans held for sale21,633
 18,737
 53,103
 50,272
Investment securities7,307
 3,528
 21,017
 10,875
Other2,238
 1,585
 5,507
 3,937
Total interest income98,285
 84,212
 275,232
 238,931
Interest expense:       
Deposits18,381
 13,009
 48,934
 34,365
Other borrowings3,168
 1,642
 6,767
 4,867
FHLB advances7,032
 3,291
 15,433
 9,274
Subordinated debt1,685
 1,685
 5,055
 5,055
Total interest expense30,266
 19,627
 76,189
 53,561
Net interest income68,019
 64,585
 199,043
 185,370
Provision for loan losses2,352
 88
 5,937
 2,854
Net interest income after provision for loan losses65,667
 64,497
 193,106
 182,516
Non-interest income:       
Interchange and card revenue9,570
 11,547
 31,729
 13,806
Gain (loss) on sale of investment securities5,349
 (1) 8,532
 25
Deposit fees2,659
 4,218
 7,918
 5,260
Mortgage warehouse transactional fees2,396
 3,080
 7,139
 8,702
Bank-owned life insurance1,672
 1,386
 5,297
 3,629
Gain on sale of SBA and other loans1,144
 1,206
 3,045
 2,135
Mortgage banking income257
 287
 703
 737
Impairment loss on investment securities(8,349) —
 (12,934) —
Other3,328
 5,763
 7,741
 6,943
Total non-interest income18,026
 27,486
 59,170
 41,237
Non-interest expense:       
Salaries and employee benefits24,807
 22,681
 69,569
 58,051
Technology, communication and bank operations14,401
 12,525
 33,227
 19,021
Professional services7,403
 7,006
 21,142
 13,213
Occupancy2,857
 2,450
 8,228
 7,248
FDIC assessments, taxes, and regulatory fees2,475
 2,726
 6,615
 11,191
Provision for operating losses1,509
 1,406
 4,901
 1,943
Loan workout915
 592
 1,844
 1,497
Other real estate owned445
 1,192
 550
 1,663
Advertising and promotion404
 591
 1,108
 1,178
Acquisition related expenses—
 144
 —
 1,195
Other5,824
 4,905
 13,634
 12,106
Total non-interest expense61,040
 56,218
 160,818
 128,306
Income before income tax expense22,653
 35,765
 91,458
 95,447
Income tax expense14,899
 14,558
 34,236
 36,572
Net income7,754
 21,207
 57,222
 58,875
             Preferred stock dividends3,615
 2,552
 10,844
 5,900
             Net income available to common shareholders$4,139
 $18,655
 $46,378
 $52,975
Basic earnings per common share$0.13
 $0.68
 $1.52
 $1.95
Diluted earnings per common share$0.13
 $0.63
 $1.42
 $1.80
Three Months Ended
March 31,
 20232022
Interest income:
Loans and leases$244,212 $157,120 
Investment securities47,316 20,295 
Loans held for sale11,701 55 
Interest earning deposits10,395 330 
Other1,321 5,676 
Total interest income314,945 183,476 
Interest expense:
Deposits143,930 13,712 
FHLB advances10,370 — 
FRB advances6,286 — 
Subordinated debt2,689 2,689 
Other borrowings1,771 2,376 
Total interest expense165,046 18,777 
Net interest income149,899 164,699 
Provision for credit losses19,603 15,997 
Net interest income after provision for credit losses130,296 148,702 
Non-interest income:
Commercial lease income9,326 5,895 
Loan fees3,990 2,545 
Bank-owned life insurance2,647 8,326 
Mortgage warehouse transactional fees1,074 2,015 
Gain (loss) on sale of SBA and other loans— 1,507 
Net gain (loss) on sale of investment securities— (1,063)
Other1,084 1,973 
Total non-interest income18,121 21,198 
Non-interest expense:
Salaries and employee benefits32,345 26,607 
Technology, communication and bank operations16,589 24,068 
Commercial lease depreciation7,875 4,942 
Professional services7,596 6,956 
Loan servicing4,661 2,371 
Occupancy2,760 3,050 
FDIC assessments, non-income taxes and regulatory fees2,728 2,383 
Advertising and promotion1,049 315 
Other4,530 3,115 
Total non-interest expense80,133 73,807 
Income before income tax expense68,284 96,093 
Income tax expense14,563 19,332 
Net income53,721 76,761 
Preferred stock dividends3,456 1,865 
Net income available to common shareholders$50,265 $74,896 
Basic earnings per common share$1.58 $2.27 
Diluted earnings per common share1.55 2.18 
See accompanying notes to the unaudited consolidated financial statements.

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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED
(amounts in thousands)
 Three Months Ended
March 31,
 20232022
Net income$53,721 $76,761 
Unrealized gains (losses) on available for sale debt securities:
Unrealized gains (losses) arising during the period8,270 (78,858)
Income tax effect(2,101)20,503 
Reclassification adjustments for (gains) losses included in net income— 1,063 
Income tax effect— (276)
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity872 — 
Income tax effect(221)— 
Net unrealized gains (losses) on available for sale debt securities6,820 (57,568)
Other comprehensive income (loss), net of income tax effect6,820 (57,568)
Comprehensive income (loss)$60,541 $19,193 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net income$7,754
 $21,207
 $57,222
 $58,875
Unrealized (losses) gains on available-for-sale securities:       
Unrealized holding (losses) gains on securities arising during the period(3,570) 329
 15,192
 15,256
Income tax effect1,393
 (124) (5,924) (5,721)
Reclassification adjustments for (gains) losses on securities included in net income(5,349) 1
 (8,532) (25)
Income tax effect2,086
 —
 3,327
 9
Net unrealized (losses) gains on available-for-sale securities(5,440) 206
 4,063
 9,519
Unrealized gains (losses) on cash flow hedges:       
Unrealized gains (losses) arising during the period171
 890
 (189) (2,523)
Income tax effect(67) (334) 74
 946
Reclassification adjustment for losses included in net income572
 703
 2,166
 1,306
Income tax effect(223) (264) (845) (490)
Net unrealized gains (losses) on cash flow hedges453
 995
 1,206
 (761)
Other comprehensive (loss) income, net of income tax effect(4,987) 1,201
 5,269
 8,758
Comprehensive income$2,767
 $22,408
 $62,491
 $67,633
See accompanying notes to the unaudited consolidated financial statements.

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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED
(amounts in thousands, except shares outstanding data)
Three Months Ended March 31, 2023
Preferred StockCommon Stock
Shares of
Preferred
Stock
Outstanding		Preferred
Stock		Shares of
Common
Stock
Outstanding		Common
Stock		Additional
Paid in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
Stock		Total
Balance, December 31, 20225,700,000 $137,794 32,373,697 $35,012 $551,721 $924,134 $(163,096)$(82,604)$1,402,961 
Net income— — — — — 53,721 — — 53,721 
Other comprehensive income (loss)— — — — — — 6,820 — 6,820 
Preferred stock dividends (1)
— — — — — (3,456)— — (3,456)
Share-based compensation expense— — — — 2,980 — — — 2,980 
Issuance of common stock under share-based compensation arrangements— — 245,936 246 (2,446)— — — (2,200)
Repurchase of common shares— — (1,379,883)— — — — (39,806)(39,806)
Balance, March 31, 20235,700,000 $137,794 31,239,750 $35,258 $552,255 $974,399 $(156,276)$(122,410)$1,421,020 
Three Months Ended March 31, 2022
Preferred StockCommon Stock
Shares of
Preferred
Stock
Outstanding		Preferred StockShares of
Common
Stock
Outstanding		Common
Stock		Additional
Paid in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
Stock		Total
Balance, December 31, 20215,700,000 $137,794 32,913,267 $34,722 $542,391 $705,732 $(4,980)$(49,442)$1,366,217 
Net income— — — — — 76,761 — — 76,761 
Other comprehensive income (loss)— — — — — — (57,568)— (57,568)
Preferred stock dividends (1)
— — — — — (1,865)— — (1,865)
Share-based compensation expense— — — — 3,703 — — — 3,703 
Issuance of common stock under share-based compensation arrangements— — 159,904 160 (3,692)— — — (3,532)
Repurchase of common shares— — (115,324)— — — — (6,310)(6,310)
Balance, March 31, 20225,700,000 $137,794 32,957,847 $34,882 $542,402 $780,628 $(62,548)$(55,752)$1,377,406 
(1)Dividends per share of $0.619313 and $0.595688 were declared on Series E and F preferred stock, respectively, for the three months ended March 31, 2023. Dividends per share of $0.333922 and $0.310297 were declared on Series E and F preferred stock, respectively, for the three months ended March 31, 2022.
 Nine Months Ended September 30, 2017
 Preferred Stock Common Stock          
 Shares of
Preferred
Stock
Outstanding		 Preferred
Stock		 Shares of
Common
Stock
Outstanding		 Common
Stock		 Additional
Paid in
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Income/(Loss)		 Treasury
Stock		 Total
Balance, December 31, 20169,000,000
 $217,471
 30,289,917
 $30,820
 $427,008
 $193,698
 $(4,892) $(8,233) $855,872
Net income—
 —
 —
 —
 —
 57,222
 —
 —
 57,222
Other comprehensive income—
 —
 —
 —
 —
 —
 5,269
 —
 5,269
Preferred stock dividends—
 —
 —
 —
 —
 (10,844) —
 —
 (10,844)
Share-based compensation expense—
 —
 —
 —
 4,536
 —
 —
 —
 4,536
Exercise of warrants—
 —
 50,387
 50
 507
 —
 —
 —
 557
Issuance of common stock under share-based compensation arrangements—
 —
 447,328
 448
 (2,418) —
 —
 —
 (1,970)
Balance, September 30, 20179,000,000
 $217,471
 30,787,632
 $31,318
 $429,633
 $240,076
 $377
 $(8,233) $910,642
                  
 Nine Months Ended September 30, 2016
 Preferred Stock Common Stock          
 
Shares of
Preferred
Stock
Outstanding
 Preferred Stock 
Shares of
Common
Stock
Outstanding
 
Common
Stock
 
Additional
Paid in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Treasury
Stock
 Total
Balance, December 31, 20152,300,000
 $55,569
 26,901,801
 $27,432
 $362,607
 $124,511
 $(7,984) $(8,233) $553,902
Net income—
 —
 —
 —
 —
 58,875
 —
 —
 58,875
Other comprehensive income—
 —
 —
 —
 —
 —
 8,758
 —
 8,758
Issuance of common stock, net of offering costs of $217—
 —
 226,677
 227
 5,450
 —
 —
 —
 5,677
Issuance of preferred stock, net of offering costs of $5,5206,700,000
 161,980
 —
 —
 —
 —
 —
 —
 161,980
Preferred stock dividends—
 —
 —
 —
 —
 (5,900) —
   (5,900)
Share-based compensation expense—
 —
 —
 —
 4,569
 —
 —
 —
 4,569
Exercise of warrants—
 —
 259,851
 259
 862
 —
 —
 —
 1,121
Issuance of common stock under share-based compensation arrangements—
 —
 155,888
 156
 673
 —
 —
 —
 829
Balance, September 30, 20169,000,000
 $217,549
 27,544,217
 $28,074
 $374,161
 $177,486
 $774
 $(8,233) $789,811
See accompanying notes to the unaudited consolidated financial statements.

8
Table of Contents
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(amounts in thousands)

 Three Months Ended
March 31,
 20232022
Cash Flows from Operating Activities
Net income from continuing operations$53,721 $76,761 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision (benefit) for credit losses19,603 15,997 
Depreciation and amortization8,833 6,055 
Share-based compensation expense3,005 3,718 
Deferred taxes18,656 (22,810)
Net amortization (accretion) of investment securities premiums and discounts(2,682)918 
Unrealized (gain) loss on investment securities(62)276 
Net (gain) loss on sale of investment securities— 1,063 
Impairment loss on fixed assets and leases109 — 
Unrealized (gain) loss on derivatives52 (964)
Settlement of terminated fair value hedge derivatives4,630 — 
(Gain) loss on sale of loans— (2,070)
Origination and purchases of loans held for sale(185,919)(10,999)
Proceeds from the sales and repayments of loans held for sale106,146 24,813 
Amortization (accretion) of loan net deferred fees, discounts and premiums(23,039)(27,907)
Earnings on investment in bank-owned life insurance(2,647)(8,326)
(Increase) decrease in accrued interest receivable and other assets(932)66,855 
Increase (decrease) in accrued interest payable and other liabilities18,064 (6,440)
Net Cash Provided By (Used In) Operating Activities17,538 116,940 
Cash Flows from Investing Activities
Proceeds from maturities, calls and principal repayments of investment securities available for sale69,648 224,809 
Proceeds from maturities, calls and principal repayments of investment securities held to maturity44,213 — 
Proceeds from sales of investment securities available for sale— 155,954 
Purchases of investment securities available for sale— (814,246)
Purchases of investment securities held to maturity(73,074)— 
Origination of mortgage warehouse loans(4,702,988)(7,938,526)
Proceeds from repayments of mortgage warehouse loans4,794,683 8,475,173 
Net (increase) decrease in loans and leases, excluding mortgage warehouse loans736,616 159,706 
Proceeds from sales of loans and leases— 14,281 
Purchases of loans(12,550)(206,330)
Proceeds from bank-owned life insurance727 5,850 
Net (purchases of) proceeds from sale of FHLB, Federal Reserve Bank, and other restricted stock(50,537)15,205 
Purchases of bank premises and equipment(130)(274)
Proceeds from sales of leased assets under lessor operating leases113 — 
Purchases of leased assets under lessor operating leases(2,076)(2,930)
Net Cash Provided By (Used In) Investing Activities804,645 88,672 
Cash Flows from Financing Activities
Net increase (decrease) in deposits(435,823)(362,364)
Net increase (decrease) in short-term borrowed funds from FHLB(300,000)(700,000)
Net increase (decrease) in federal funds purchased— 625,000 
Proceeds from long-term borrowed funds from FHLB and FRB2,565,000 — 
Repayments of long-term borrowed funds from FHLB and FRB(1,015,000)— 
Preferred stock dividends paid(3,450)(1,823)
Purchase of treasury stock(39,806)(6,310)
Payments of employee taxes withheld from share-based awards(2,280)(3,755)
Proceeds from issuance of common stock55 208 
Net Cash Provided By (Used In) Financing Activities768,696 (449,044)
Net Increase (Decrease) in Cash and Cash Equivalents1,590,879 (243,432)
Cash and Cash Equivalents – Beginning455,806 518,032 
Cash and Cash Equivalents – Ending$2,046,685 $274,600 
(continued)
Three Months Ended
March 31,
20232022
Non-cash Investing and Financing Activities:
Transfer of loans held for investment to held for sale$16,000 $— 


 Nine Months Ended
September 30,
 2017 2016
Cash Flows from Operating Activities   
Net income$57,222
 $58,875
Adjustments to reconcile net income to net cash provided by (used in) operating activities:   
Provision for loan losses, net of change to FDIC receivable and clawback liability5,937
 2,854
Depreciation and amortization7,476
 4,138
Share-based compensation expense5,377
 5,213
Deferred taxes286
 (4,846)
Net amortization of investment securities premiums and discounts520
 664
Gain on sale of investment securities(8,532) (25)
Impairment loss on investment securities12,934
 —
Gain on sale of SBA and other loans(3,553) (2,674)
Origination of loans held for sale(22,770,726) (27,092,862)
Proceeds from the sale of loans held for sale22,925,668
 26,473,789
Decrease in FDIC loss sharing receivable net of clawback liability—
 255
Amortization of fair value discounts and premiums93
 312
Net loss on sales of other real estate owned154
 85
Valuation and other adjustments to other real estate owned, net of FDIC receivable298
 1,261
Earnings on investment in bank-owned life insurance(5,297) (3,629)
Increase in accrued interest receivable and other assets(27,862) (38,672)
(Decrease) increase in accrued interest payable and other liabilities(14,106) 66,577
Net Cash Provided By (Used In) Operating Activities185,889
 (528,685)
Cash Flows from Investing Activities   
Proceeds from maturities, calls and principal repayments of securities available for sale36,461
 46,097
Proceeds from sales of investment securities available for sale698,451
 2,853
Purchases of investment securities available for sale(796,594) (5,000)
Net increase in loans(921,049) (641,093)
Proceeds from sales of loans124,703
 91,868
Purchase of loans(262,641) —
Purchases of bank-owned life insurance(90,000) —
Proceeds from bank-owned life insurance1,418
 619
Net (purchases of) proceeds from FHLB, Federal Reserve Bank, and other restricted stock(30,203) 19,220
Payments to the FDIC on loss sharing agreements—
 (2,049)
Purchases of bank premises and equipment(1,725) (3,343)
Proceeds from sales of other real estate owned1,680
 419
Acquisition of Disbursements business, net—
 (17,000)
Net Cash Used In Investing Activities(1,267,428) (507,409)
Cash Flows from Financing Activities   
Net increase in deposits293,301
 1,479,471
Net increase (decrease) in short-term borrowed funds from the FHLB593,543
 (663,600)
Net increase (decrease) in federal funds purchased64,000
 (18,000)
Proceeds from long-term FHLB borrowings—
 75,000
Net proceeds from issuance of long-term debt98,564
 —
Net proceeds from issuance of preferred stock—
 161,980
        Preferred stock dividends paid(10,844) (5,450)
        Exercise of warrants557
 1,121
        Payments of employee taxes withheld from share-based awards(4,923) (702)
        Proceeds from issuance of common stock2,112
 7,269
Net Cash Provided By Financing Activities1,036,310
 1,037,089
Net (Decrease) Increase in Cash and Cash Equivalents(45,229) 995
Cash and Cash Equivalents – Beginning264,709
 264,593
Cash and Cash Equivalents – Ending$219,480
 $265,588
    
    
    
 (continued)
  
    
Supplementary Cash Flows Information   
Interest paid$70,706
 $50,410
Income taxes paid31,545
 40,966
Non-cash items:   
Transfer of loans to other real estate owned$83
 $605
Transfer of loans held for investment to loans held for sale150,638
 —

See accompanying notes to the unaudited consolidated financial statements.

9
Table of Contents
CUSTOMERS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF THE BUSINESS
Customers Bancorp, Inc. (the “Bancorp” or “Customers(“Customers Bancorp”) is a bank holding company engaged in banking activities through its wholly owned subsidiary, Customers Bank (the “Bank”("the Bank”), collectively referred to as “Customers” herein.  The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Customers Bancorp Inc. and its wholly owned subsidiaries, Customersthe Bank, and non-bank subsidiaries, serve residents and businesses in Southeastern Pennsylvania (Bucks, Berks, Chester, Philadelphia and Delaware Counties); Harrisburg, Pennsylvania (Dauphin County); Rye Brook, New York (Westchester County); Hamilton, New Jersey (Mercer County); Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire (Rockingham County); Manhattan and Melville, New York; Washington, D.C.; Chicago, Illinois; Dallas, Texas; Orlando and Jacksonville, Florida; Wilmington, North Carolina; and nationally for certain loan and deposit products. The Bank has 14seven full-service branches and provides commercial banking products, primarily loans and deposits. In addition, Customersthe Bank also administratively supports loan and other financial products, including equipment finance leases, to customers through its limited-purpose offices in Boston, Massachusetts,Massachusetts; Providence, Rhode Island,Island; Portsmouth, New Hampshire,Hampshire; Manhattan and Melville, New York,York; Philadelphia and Philadelphia, Pennsylvania.Lancaster, Pennsylvania; Chicago, Illinois; Dallas, Texas; Wilmington, North Carolina; and other locations. The Bank also provides liquidity to residential mortgage originatorsserves specialty niche businesses nationwide, throughincluding its commercial loans to mortgage companies, commercial equipment financing, SBA lending, specialty lending and consumer loans through relationships with fintech companies.
Through BankMobile, a division of CustomersThe Bank Customers offers state of the art high tech digital banking services to consumers, students, and the "under banked" nationwide. The combination of the BankMobile technology software platform with the Vibe Student Checking and Refund Management Disbursement Services business (the "Disbursement business") acquired from Higher One Holdings, Inc. and Higher One, Inc. (together, "Higher One") in June 2016 propelled BankMobile to one of the largest mobile banking services in the United States by number of customers. Customers has announced its intent to spin-off BankMobile to Customers’ shareholders through a tax-free spin-off/merger transaction. Accordingly, the assets and liabilities of BankMobile will not be reported separately as held for sale, and its operating results and associated cash flows will not be reported as discontinued operations, until execution of the spin-off/merger transaction and will be considered held and used for all periods presented. Previously reported held-for-sale balances in the consolidated balance sheet as of December 31, 2016, and corresponding operating results and cash flows for the periods presented, have been reclassified to conform with the current period consolidated financial statement presentation. See NOTE 3 TAX-FREE SPIN-OFF AND MERGER.
Customers is subject to regulation of the Pennsylvania Department of Banking and Securities and the Federal Reserve Bank and is periodically examined by those regulatory authorities. Customers Bancorp has made certain equity investments through its wholly owned subsidiaries CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd.

NOTE 2 - ACQUISITION ACTIVITY
On June 15, 2016, Customers completed the acquisition of substantially all of the assets and the assumption of certain liabilities of the Disbursement business from Higher One. The acquisition was completed pursuant to the terms of an Asset Purchase Agreement (the "Purchase Agreement") dated as of December 15, 2015 between Customers and Higher One. Under the terms of the Purchase Agreement, Customers also acquired all existing relationships with vendors and educational institutions, and all intellectual property and assumed normal business related liabilities. In conjunction with the acquisition, Customers hired approximately 225 Higher One employees primarily located in New Haven, Connecticut that manage the Disbursement business and serve the Disbursement business customers.

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


As specified in the Purchase Agreement, the payments of $10 million payable to Higher One upon each of the first and second anniversary of the transaction closing were placed into an escrow account with a third party. The escrow account with $10 million and $20 million, respectively, as of September 30, 2017 and December 31, 2016 in aggregate restricted cash and the corresponding obligation to pay Higher One pursuant to the terms of the Purchase Agreement have been assigned to BankMobile and are included with "Cash and cash equivalents" and "Accrued interest payable and other liabilities" on the September 30, 2017 and December 31, 2016 consolidated balance sheets. For more information regarding Customers' plans for BankMobile and the presentation of BankMobile within the consolidated financial statements, see NOTE 3 - TAX-FREE SPIN-OFF AND MERGER.
The assets acquired and liabilities assumed were initially presented at their estimated fair values based on a preliminary
allocation of the purchase price. In many cases, the determination of these fair values required management to make estimates
about discount rates, future expected cash flows, market conditions and other future events that were highly subjective and
subject to change. The fair value estimates were considered preliminary and subject to change for up to one year after the
closing date of the acquisition as additional information became available. Based on a preliminary purchase price allocation, Customers recorded $4.3 million in goodwill as a result of the acquisition. At December 31, 2016, Customers recorded adjustments to the estimated fair values of prepaid expenses and other liabilities, which resulted in a $1.0 million increase in goodwill. The adjusted amount of goodwill of $5.3 million reflects the excess purchase price over the estimated fair value of
the net assets acquired. The goodwill recorded is deductible for tax purposes. The purchase price allocation was considered final as of June 30, 2017. The following table summarizes the final adjusted amounts recognized for assets acquired and liabilities assumed:
(amounts in thousands) 
Fair value of assets acquired: 
Developed software$27,400
Other intangible assets9,300
Accounts receivable2,784
Prepaid expenses418
Fixed assets, net229
Total assets acquired40,131
  
Fair value of liabilities assumed: 
Other liabilities5,735
Deferred revenue2,655
Total liabilities assumed8,390
  
Net assets acquired$31,741
  
Transaction cash consideration (1)$37,000
  
Goodwill recognized$5,259
(1) Includes $10 million payable to Higher One upon each of the first and second anniversary of the transaction closing, which has been placed into an escrow account with a third party (aggregate amount of $20 million at December 31, 2016). Customers paid the first $10 million due to Higher One in June 2017.

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

NOTE 3 – TAX-FREE SPIN-OFF AND MERGER

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

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

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

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


 December 31, 2016 As Previously Reported Effect of Reclassification From Held For Sale to Held and Used December 31, 2016 After Reclassification
(amounts in thousands)  
ASSETS     
Cash and cash equivalents$244,709
 $20,000
 $264,709
Loans receivable6,142,390
 12,247
 6,154,637
Bank premises and equipment, net12,259
 510
 12,769
Goodwill and other intangibles3,639
 13,982
 17,621
Assets held for sale79,271
 (79,271) —
Other assets70,099
 32,532
 102,631
LIABILITIES     
Demand, non-interest bearing deposits$512,664
 $453,394
 $966,058
Interest bearing deposits6,334,316
 3,401
 6,337,717
Non-interest bearing deposits held for sale453,394
 (453,394) —
Other liabilities held for sale31,403
 (31,403) —
Accrued interest payable and other liabilities47,381
 28,002
 75,383

 Three Months Ended September 30, 2016 Effect of Reclassification From Held For Sale to Held and Used Three Months Ended September 30, 2016
 As Previously Reported  After Reclassification
 Interest income$84,212
 $—
 $84,212
 Interest expense19,622
 5
 19,627
 Net interest income64,590
 (5) 64,585
 Provision for loan losses(161) 249
 88
 Non-interest income11,121
 16,365
 27,486
 Non-interest expenses36,750
 19,468
 56,218
 Income from continuing operations before income taxes39,122
 (3,357) 35,765
 Provision for income taxes15,834
 (1,276) 14,558
 Net income from continuing operations23,288
 (2,081) 21,207
 Loss from discontinued operations before income taxes(3,357) 3,357
 —
 Income tax benefit from discontinued operations(1,276) 1,276
 —
 Net loss from discontinued operations(2,081)
2,081

—
 Net income21,207

—

21,207
 Preferred stock dividend2,552
 —
 2,552
 Net income available to common shareholders$18,655
 $—
 $18,655
      

 Nine Months Ended September 30, 2016 Effect of Reclassification From Held For Sale to Held and Used Nine Months Ended September 30, 2016
 As Previously Reported  After Reclassification
 Interest income$238,931
 $—
 $238,931
 Interest expense53,548
 13
 53,561
 Net interest income185,383
 (13) 185,370
 Provision for loan losses2,605
 249
 2,854
 Non-interest income22,241
 18,996
 41,237
 Non-interest expenses100,706
 27,600
 128,306
 Income from continuing operations before income taxes104,313
 (8,866) 95,447
 Provision for income taxes39,942
 (3,370) 36,572
 Net income from continuing operations64,371
 (5,496) 58,875
 Loss from discontinued operations before income taxes(8,865) 8,865
 —
 Income tax benefit from discontinued operations(3,369) 3,369
 —
 Net loss from discontinued operations(5,496) 5,496
 —
 Net income58,875
 —
 58,875
 Preferred stock dividend5,900
 —
 5,900
 Net income available to common shareholders$52,975
 $—
 $52,975
      

NOTE 4 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation
The interim unaudited consolidated financial statements of Customers Bancorp and subsidiaries have been prepared in conformity with U.S. GAAP and pursuant to the rules and regulations of the SEC. These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the financial position and the results of operations and cash flows of Customers Bancorp and subsidiaries for the interim periods presented. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted from these interim unaudited consolidated financial statements as permitted by SEC rules and regulations. The December 31, 20162022 consolidated balance sheet presented in this report has been derived from Customers Bancorp’s audited 20162022 consolidated financial statements. Management believes that the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for the periods presented. These interim unaudited consolidated financial statements should be read in conjunction with the 20162022 consolidated financial statements of Customers Bancorp and subsidiaries included in Customers' Annual Report on Form 10-K for the year ended December 31, 20162022 filed with the SEC on March 8, 2017. ThatFebruary 28, 2023 (the "2022 Form 10-K"). The 2022 Form 10-K describes Customers Bancorp’s significant accounting policies, which include its policies on Principles of Consolidation; Cash and Cash Equivalents and Statements of Cash Flows; Restrictions on Cash and Amounts due from Banks; Business Combinations; Investment Securities; Loan Accounting Framework; Allowance for Loan Losses; Goodwill and other Intangible Assets; Investments in FHLB, Federal Reserve Bank, and other restricted stock; Other Real Estate Owned; FDIC Loss Sharing Receivable and Clawback Liability; Bank-Owned Life Insurance; Bank Premises and Equipment; Treasury Stock; Income Taxes; Share-Based Compensation; Segments; Derivative Instruments and Hedging; Comprehensive Income; and Earnings per Share. Certain prior period amounts have been reclassified to conform to the current period presentation. Results for interim periods are not necessarily indicative of those that may be expected for the fiscal year.
Reclassifications
As described in NOTE 3 - TAX-FREE SPIN-OFF AND MERGER, as of September 30, 2017, Customers reclassified BankMobile, a segment previously classified as held for sale to held and used, as it no longer met the held-for-sale criteria. Certain prior period amounts and note disclosures (including NOTE 9 and NOTE 12) have been reclassified to conform with the current period presentation. Except for these reclassifications, therepolicies. There have been no material changes to Customers'Customers Bancorp's significant accounting policies as disclosed in Customers' Annual Report on Form 10-Knoted above for the yearthree months ended DecemberMarch 31, 2016.2023.

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

Recently Issued Accounting Standards
Presented below are recently issued accounting standards that Customers has adopted as well as those that the FASB has issued but are not yet effective.
10
Table of Contents
Accounting Standards Adopted in 20172022
Since January 1, 2017, Customers has adopted the following FASB
StandardSummary of GuidanceEffects on Financial Statements
ASU 2022-06,
Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848 and Amendments to the Definition of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate

Issued December 2022
• Defers the sunset date of ASC 848 that provides optional guidance for a limited period of time to ease the potential burden in accounting for (or derecognizing the effects of) reference rate reform on financial reporting. Specifically, ASC 848 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. These relate only to those contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition, including derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.
• Amends the definition of the SOFR Overnight Index Swap Rate to any rate based on SOFR qualifies as a benchmark interest rate for purposes of applying fair value hedge accounting.
• Effective as of December 21, 2022 and ASC 848 can be adopted anytime during the period of January 1, 2020 through December 31, 2024.
• Customers adopted the guidance in ASC 848 during the adoption period for certain optional expedients.
• The adoption of ASC 848 did not have a material impact on Customers' financial condition, results of operations and consolidated financial statements.
• As of March 31, 2023, Customers has not yet elected to apply optional expedients for
certain contract modifications. We plan to elect additional optional expedients in the future, which are not expected to have a material impact on Customers' financial condition, results of operations and consolidated financial statements.
Accounting Standard Updates (“ASUs”), none of which had a material impact to Customers’ consolidated financial statements:Standards Adopted in 2023
StandardSummary of GuidanceEffects on Financial Statements
ASU 2022-02,
Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

Issued March 2022
• Eliminates the accounting guidance for TDRs by creditors, and applies the loan refinancing and restructuring guidance when a borrower is experiencing financial difficulty to determine whether a modification results in a new loan or a continuation of an existing loan.
• Provides enhanced disclosure requirements for certain loan refinancing and restructurings and disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326.
• Effective for fiscal years beginning after December 15, 2022, including interim periods within those
fiscal years. Early adoption is permitted, including adoption in any interim period, provided the amendments are adopted as of the beginning of the fiscal year that includes the interim period of adoption. Early adoption is permitted separately for the amendments to TDRs and vintage disclosures.
• TDR and vintage disclosures are to be adopted prospectively. An entity may adopt TDR recognition and measurement guidance prospectively or elect to use a modified retrospective transition method, with a cumulative effect adjustment to retained earnings at the beginning of the period of adoption.
• Customers adopted this guidance on January 1, 2023 using a modified retrospective transition method for TDR recognition and measurement.
• This guidance did not have a material impact on Customers' financial condition, results of operations and consolidated financial statements.
• Additional disclosures related to gross write-offs by year of origination and certain loan modifications to borrowers experiencing financial difficulty are presented in NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES.
Customers adopted ASU 2016-05, Derivatives and Hedging: Effect
11
Table of Derivative Contract Novations on Existing Hedge Accounting Relationships, on a prospective basis. This ASU clarifies that a change in the counterparties to a derivative contract (i.e., a novation), in and of itself, does not require the de-designation of a hedging relationship provided that all the other hedge accounting criteria continue to be met.

Customers also adopted ASU 2016-06, Contingent Put and Call Options in Debt Instruments. This ASU clarifies that a contingency of put or call exercise does not need to be evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis of hybrid financial instruments. In other words, a contingent put or call option embedded in a debt instrument would be evaluated for possible separate accounting as a derivative instrument without regard to the nature of the exercise contingency. However, as required under the existing guidance, companies will still need to evaluate the other relevant embedded derivative guidance, such as whether the payoff from the contingent put or call option is adjusted based on changes in an index other than interest rates or credit risk, and whether the debt involves a substantial premium or discount. As the adoption did not result in any significant impact to Customers’ consolidated financial statements, it did not result in a modified retrospective application.

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

the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for the equity method of accounting.
Customers also adopted ASU 2016-17, Consolidation - Interests Held Through Related Parties that are Under Common Control. This ASU amends the guidance included in ASU 2015-02, Consolidation: Amendments to Consolidation Analysis which Customers adopted in first quarter 2016. This ASU makes a narrow amendment that requires that a single decision maker considers indirect economic interests in an entity held through related parties that are under common control on a proportionate basis when determining whether it is the primary beneficiary of that VIE. Prior to this amendment, indirect interests held through related parties that are under common control were to be considered equivalent of the single decision maker’s direct interests in their entirety which could result in a single decision maker consolidating the VIE. As the adoption did not result in any significant impact to Customers’ consolidated financial statements, it did not result in a full or modified retrospective application.Contents
Accounting Standards Issued But Not Yet Adopted

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which amends the existing hedge accounting model and expands an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also changes certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption permitted. Customers plans to adopt this ASU by January 1, 2018. Adoption of this new guidance must be applied on a modified retrospective approach. While Customers continues to assess all potential impacts of the standard, Customers does not currently expect the adoption of this ASU to have a significant impact on its financial condition, results of operations and consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Accounting for Certain Financial Instruments with Down Round Features, which will change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) would no longer be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified financial instruments, the amendments require entities to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic earnings per share ("EPS"). For public business entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Customers currently does not have any equity-linked financial instruments (or embedded features) with down round features, accordingly Customers does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations and consolidated financial statements, however, Customers will continue to evaluate the potential impact through the adoption date.

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

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

impact on its financial condition, results of operations and consolidated financial statements, however, Customers will continue to evaluate the potential impact through the adoption date.

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

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

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

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

In October 2016, the FASB issued ASU 2016-16-Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This eliminates the current exception for all intra-entity transfers of an asset other than inventory that requires deferral of the tax effects until the asset is sold to a third party or otherwise recovered through use.
This ASU is effective for Customers for its first reporting period beginning after December 15, 2017, with early adoption permitted. Customers does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations and consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which aims to reduce the existing diversity in practice with regards to the following specific items in the Statement of Cash Flows:
1.StandardCash payments for debt prepayment or extinguishment costs will be classified in financing activities.Summary of GuidanceEffects on Financial Statements
2.Upon settlement of zero-coupon bonds and bonds with insignificant cash coupons, the portion of the payment attributable to imputed interest will be classified as an operating activity, while the portion of the payment attributable to principal will be classified as a financing activity.
3.Cash paid by an acquirer soon after a business combination (i.e. approximately three months or less) for the settlement of a contingent consideration liability will be classified in investing activities. Payments made thereafter should be separated between financing activities and operating activities. Cash payments up to the amount of the contingent consideration liability recognized at the acquisition date will be classified in financing activities; any excess will be classified in operating activities.
4.Cash proceeds received from the settlement of insurance claims will be classified on the basis of the related insurance coverage (i.e., the nature of the loss). Cash proceeds from lump-sum settlements will be classified based on the nature of each loss component included in the settlement.
5.
ASU 2022-03,
Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

Issued June 2022
Cash proceeds received from
• Clarifies that a contractual restriction on the settlementsale of bank-owned life insurance (BOLI) policies
an equity security is not considered part of the unit of account of the equity security and not considered in measuring fair value.
• Prohibits recognition and measurement of a contractual sale restriction on the sale of an equity security as a separate unit of account.
• Provides disclosure requirements for the equity securities subject to contractual sale restrictions.
• Effective for fiscal years beginning after December 15, 2023, including interim periods within those
fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.
• Customers will be classified as cash inflows from investing activities. Cash payments for premiumsadopt this guidance on BOLI may be classified as cash outflows for investing, operating, orJanuary 1, 2024. This guidance is not expected to have a combinationmaterial impact on Customers' financial condition, results of both.operations and consolidated financial statements.
6.A transferor’s beneficial interest obtained in a securitization of financial assets will be disclosed as a non-cash activity, and cash received from beneficial interests will be classified in investing activities.
7.
ASU 2023-02,
Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

Issued March 2023
Distributions received from
• Provides an election to account for tax equity investments, regardless of the tax credit program, using the proportional amortization method investeesprovided that certain conditions are met.
• Effective for fiscal years beginning after December 15, 2023, including interim periods within those
fiscal years. Early adoption is permitted for any interim period, as of the beginning of the fiscal year that includes that interim period.
• Customers will be classified using eitheradopt this guidance on January 1, 2024. This guidance is not expected to have a cumulative earnings approach or a look-through approach as an accounting policy election.material impact on Customers' financial condition, results of operations and consolidated financial statements.
The ASU contains additional guidance clarifying when an entity should separate cash receipts and cash payments and classify them into more than one class of cash flows (including when reasonable judgment is required to estimate and allocate cash flows) versus when an entity should classify the aggregate amount into one class of cash flows on the basis of predominance.This ASU is effective for Customers for its first reporting period beginning after December 15, 2017, with early adoption permitted. Customers is currently evaluating the impact of this ASU and does not expect the ASU to have a material impact on the presentation of its statement of cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. This ASU requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate lifetime expected credit loss and record an allowance that, when deducted from the amortized cost basis of the financial asset (including HTM securities), presents the net amount expected to be collected on the financial asset. This ASU will replace today’s “incurred loss” approach. The CECL model is expected to result in earlier recognition of credit losses. For available-for-sale debt securities, entities will be required to record allowances for credit losses rather than reduce the carrying amount, as they do today under the OTTI model, and will be allowed to reverse previously established allowances in the event the credit of the issuer improves. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for Customers for its first reporting period beginning after December 15, 2019. Earlier adoption is also permitted. Adoption of the new guidance can be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Customers is currently evaluating the impact of this ASU, initiating implementation efforts across the company, and planning for loss modeling requirements consistent with lifetime expected loss estimates. It is expected that the new model will include different assumptions used in calculating credit losses, such as estimating losses over the estimated life of a financial asset and will consider expected future changes in macroeconomic conditions. The adoption of this ASU may result in an increase to Customers' allowance for loan losses which will depend upon the nature and characteristics of Customers' loan portfolio at the adoption date, as well as the macroeconomic conditions and forecasts at that date. Customers currently does not intend to early adopt this new guidance.

In March 2016, the FASB issued ASU 2016-04, Liabilities - Extinguishments of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products, that would require issuers of prepaid stored-value product (such as gift cards, telecommunication cards, and traveler’s checks), to derecognize the financial liability related to those products for breakage. Breakage is the value of prepaid stored-value products that is not redeemed by consumers for goods, services or cash. There is currently a diversity in the methodology used to recognize breakage. Subtopic 405-20, Extinguishment of Liabilities, includes derecognition guidance for both financial liabilities and nonfinancial liabilities, and Topic 606, Revenue from Contracts with Customers, includes authoritative breakage guidance but excludes financial liabilities. The amendments in this ASU provide a narrow scope exception to the guidance in Subtopic 405-20 to require that breakage be accounted for consistent with the breakage guidance in Topic 606. This ASU is effective for Customers for its first reporting period beginning after December 15, 2017. Customers does not expect the adoption of this ASU to have a significant impact on its financial condition, results of operations and consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes the current lease accounting guidance for both lessees and lessors under ASC 840, Leases. From the lessee's perspective, the new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for lessees. The new guidance will require lessors to account for leases using an approach that is substantially similar to the existing guidance for sales-type, direct financing leases and operating leases. The new standard is effective for Customers for its first reporting period beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. A modified retrospective transition approach is required for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Customers is currently evaluating the impact of this ASU on its financial condition and results of operations and expects to recognize right-of-use assets and lease liabilities for substantially all of its operating lease commitments based on the present value of unpaid lease payments as of the date of adoption. Customers does not intend to early adopt this ASU.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance in this ASU among other things, (1) requires equity investments with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (3) eliminates the requirement for public entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (4) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (5) requires an entity to present separately in other comprehensive income the portion of the change in fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements and (7) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The guidance in this ASU is effective for Customers for its first reporting period beginning after December 15, 2017, including interim periods within those fiscal years. Customers is in the process of evaluating the impacts of the adoption of this ASU, however, it does not expect the impact to be significant to its financial condition, results of operations and consolidated financial statements given the immaterial amount of its investment in equity securities.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), superseding the revenue recognition requirements in ASC 605. This ASU requires an entity to recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment includes a five-step process to assist an entity in achieving the main principle(s) of revenue recognition under ASC 605. In August 2015, the FASB issued ASU 2015-14, which formalized the deferral of the effective date of the amendment for a period of one-year from the original effective date. Following the issuance of ASU 2015-14, the amendment will be effective for Customers for its first reporting period beginning after December 15, 2017. In March 2016, the FASB also issued ASU 2016-08, an amendment to the guidance in ASU 2014-09, which reframed the structure of the indicators of when an entity is acting as an agent and focused on evidence that an entity is acting as the principal or agent in a revenue transaction. ASU 2016-08 also eliminated two of the indicators (the entity’s consideration is in the form of a commission and the entity is not exposed to credit risk) in making that determination. This amendment also clarifies that each indicator may be more or less relevant to the assessment depending on the terms and conditions of the contract. In April 2016, the FASB also issued ASU 2016-10, which clarifies the implementation guidance on identifying promised goods or services and on determining whether an entity's promise to grant a license with either a right to use the entity's intellectual property

(which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU 2016-12, an amendment to ASU 2014-09, which provided practical expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on transition, collectability, non-cash consideration and the presentation of sales and other similar taxes. The amendments, collectively, should be applied retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption.
Because the ASU does not apply to revenue associated with leases and financial instruments (including loans and securities), Customers current assessment is that the new guidance will not have a material impact on the elements of its consolidated statements of operations most closely associated with leases and financial instruments (such as interest income, interest expense and securities gain). Customers will adopt this ASU on January 1, 2018 using a modified retrospective approach. Customers has completed its identification of all revenue streams that are included in its financial statements and has identified its deposit related fees, service charges, debit card and prepaid card interchange income, and university fees to be within the scope of the standard. Customers is also substantially complete with its review of the related contracts and has also completed its evaluation of certain costs related to these revenue streams to determine whether such costs should be presented as expenses or contra-revenue (i.e., gross vs. net). Customers' overall assessment suggests that adoption of this ASU will not materially change its current method and timing of recognizing revenue for these revenue streams. Customers, however, is still evaluating the ASU’s expanded disclosure requirements. As provided above, Customers current assessment is that the adoption of this ASU will not have a significant impact to its financial condition, results of operations and consolidated financial statements.

NOTE 53 — EARNINGS (LOSS) PER SHARE
The following are the components and results of Customers' earnings per common share calculations for the periods presented.
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
(amounts in thousands, except share and per share data)       
Net income available to common shareholders$4,139
 $18,655
 $46,378
 $52,975
        
Weighted-average number of common shares outstanding - basic30,739,671
 27,367,551
 30,597,314
 27,131,960
Share-based compensation plans1,754,480
 2,205,291
 2,004,917
 2,119,717
Warrants18,541
 124,365
 24,392
 243,531
Weighted-average number of common shares - diluted32,512,692
 29,697,207
 32,626,623
 29,495,208
        
Basic earnings per common share$0.13
 $0.68
 $1.52
 $1.95
Diluted earnings per common share$0.13
 $0.63
 $1.42
 $1.80

 Three Months Ended
March 31,
(amounts in thousands, except share and per share data)20232022
Net income available to common shareholders$50,265 $74,896 
Weighted-average number of common shares outstanding – basic31,819,203 32,957,033 
Share-based compensation plans525,814 1,370,032 
Weighted-average number of common shares – diluted32,345,017 34,327,065 
Basic earnings per common share$1.58 $2.27 
Diluted earnings per common share1.55 2.18 
The following is a summary ofare securities that could potentially dilute basic earnings per common share in future periods that were not included in the computation of diluted earnings per common share because either the performance conditions for certain of the share-based compensation awards have not been met or to do so would have been anti-dilutive for the periods presented.
 Three Months Ended
March 31,
 20232022
Anti-dilutive securities:
Share-based compensation awards850,725 — 
12
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Anti-dilutive securities:       
Share-based compensation awards409,225
 616,995
 409,225
 616,995
Warrants52,242
 52,242
 52,242
 52,242
Total anti-dilutive securities461,467
 669,237
 461,467
 669,237

Table of Contents
NOTE 64 — CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT (1)
The following tables present the changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2017March 31, 2023 and 2016.
 Three Months Ended September 30, 2017
(amounts in thousands)Unrealized Gains (Losses) on Available-For-Sale Securities Unrealized  
Loss on
Cash Flow  Hedges		 Total
Balance - June 30, 2017$6,822
 $(1,458) $5,364
Other comprehensive income (loss) before reclassifications(2,177) 104
 (2,073)
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2)(3,263) 349
 (2,914)
Net current-period other comprehensive (loss) income(5,440) 453
 (4,987)
Balance - September 30, 2017$1,382
 $(1,005) $377

 Nine Months Ended September 30, 2017
(amounts in thousands)Unrealized Gains (Losses) on Available-For-Sale Securities Unrealized  
Loss on
Cash Flow  Hedges		 Total
Balance - December 31, 2016$(2,681) $(2,211) $(4,892)
Other comprehensive income (loss) before reclassifications9,268
 (115) 9,153
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2)(5,205) 1,321
 (3,884)
Net current-period other comprehensive income4,063
 1,206
 5,269
Balance - September 30, 2017$1,382
 $(1,005) $377
      
2022. Amounts in parentheses indicate reductions to AOCI.
(1)All Three Months Ended March 31, 2023
(amounts are presentedin thousands)
Unrealized Gains (Losses) on Available for Sale Securities (1)
Balance - December 31, 2022$(163,096)
Unrealized gains (losses) arising during period, before tax8,270 
Income tax effect(2,101)
Other comprehensive income (loss) before reclassifications6,169 
Reclassification adjustments for (gains) losses included in net of tax. income, before tax— 
Income tax effect— 
Amounts in parentheses indicate reductions toreclassified from accumulated other comprehensive income.income (loss) to net income
— 
(2)Amortization of unrealized loss on securities transferred from available for sale to held to maturityReclassification amounts for available-for-sale securities are reported as gain on sale of investment securities on the consolidated statements of income. Reclassification amounts for cash flow hedges are reported as interest expense on FHLB advances on the consolidated statements of income.

 Three Months Ended September 30, 2016
 Available-for-sale-securities    
(amounts in thousands)Unrealized GainsForeign Currency ItemsTotal Unrealized Gains Unrealized Loss on Cash Flow Hedge Total
Balance - June 30, 2016$4,895
$(768)$4,127
 $(4,554) $(427)
Other comprehensive income (loss) before reclassifications15
190
205
 556
 761
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2)1
—
1
 439
 440
Net current-period other comprehensive income16
190
206
 995
 1,201
Balance - September 30, 2016$4,911
$(578)$4,333
 $(3,559) $774


 Nine Months Ended September 30, 2016
 Available-for-sale-securities    
(amounts in thousands)Unrealized Gains (Losses)Foreign Currency ItemsTotal Unrealized Gains (Losses) Unrealized Loss on Cash Flow Hedge Total
Balance - December 31, 2015$(4,602)$(584)$(5,186) $(2,798) $(7,984)
Other comprehensive income (loss) before reclassifications9,529
6
9,535
 (1,577) 7,958
Amounts reclassified from accumulated other comprehensive income (loss) to net income (2)(16)—
(16) 816
 800
Net current-period other comprehensive income (loss)9,513
6
9,519
 (761) 8,758
Balance - September 30, 2016$4,911
$(578)$4,333
 $(3,559) $774
        
872 
(1)Income tax effectAll (221)
Amortization of unrealized loss on securities transferred from available for sale to held to maturity651 
Net current-period other comprehensive income (loss)6,820 
Balance - March 31, 2023$(156,276)

Three Months Ended March 31, 2022
(amounts are presentedin thousands)
Unrealized Gains (Losses) on Available for Sale Securities (1)
Balance - December 31, 2021$(4,980)
Unrealized gains (losses) arising during period, before tax(78,858)
Income tax effect20,503 
Other comprehensive income (loss) before reclassifications(58,355)
Reclassification adjustments for (gains) losses included in net of tax. income, before tax1,063 
Income tax effect(276)
Amounts in parentheses indicate reductions toreclassified from accumulated other comprehensive income.income (loss) to net income
787 
(2)Amortization of unrealized loss on securities transferred from available for sale to held to maturityReclassification amounts— 
Income tax effect— 
Amortization of unrealized loss on securities transferred from available for available-for-sale securities are reported as gainsale to held to maturity— 
Net current-period other comprehensive income (loss) on sale of investment securities on the consolidated statements of income. Reclassification amounts for cash flow hedges are reported as interest expense on FHLB advances on the consolidated statements of income.(57,568)
Balance - March 31, 2022$(62,548)



(1)Reclassification amounts for AFS debt securities are reported as gain (loss) on sale of investment securities and amortization of unrealized losses on debt securities transferred from available-for-sale to held-to-maturity is reported within interest income on the consolidated statements of income.
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NOTE 75 — INVESTMENT SECURITIES
Investment securities at fair value
The amortized cost, and approximate fair value and allowance for credit losses of investment securities at fair value as of September 30, 2017March 31, 2023 and December 31, 20162022 are summarized as follows:
 
March 31, 2023 (1)
(amounts in thousands)Amortized CostAllowance for Credit LossesGross Unrealized GainsGross Unrealized LossesFair Value
Available for sale debt securities:
Asset-backed securities$154,151 $(790)$— $(5,426)$147,935 
Agency-guaranteed residential collateralized mortgage obligations143,717 — — (9,964)133,753 
Collateralized loan obligations875,303 — 285 (21,488)854,100 
Commercial mortgage-backed securities142,050 — 4 (5,236)136,818 
Corporate notes642,859 (1,383)379 (55,060)586,795 
Private label collateralized mortgage obligations1,111,256 — 951 (71,349)1,040,858 
Available for sale debt securities$3,069,336 $(2,173)$1,619 $(168,523)2,900,259 
Equity securities (2)
26,710 
Total investment securities, at fair value$2,926,969 

 
December 31, 2022 (1)
(amounts in thousands)Amortized CostAllowance for Credit LossesGross Unrealized GainsGross Unrealized LossesFair Value
Available for sale debt securities:
Asset-backed securities$169,170 $(578)$— $(8,050)$160,542 
Agency-guaranteed residential collateralized mortgage obligations147,481 — — (13,617)133,864 
Collateralized loan obligations896,992 — 88 (24,342)872,738 
Commercial mortgage-backed securities142,222 — 1 (5,866)136,357 
Corporate notes657,086 — 45 (61,878)595,253 
Private label collateralized mortgage obligations1,125,583 — 308 (63,630)1,062,261 
Available for sale debt securities$3,138,534 $(578)$442 $(177,383)2,961,015 
Equity securities (2)
26,485 
Total investment securities, at fair value$2,987,500 
(1)Accrued interest on AFS debt securities totaled $19.6 million and $16.7 million at March 31, 2023 and December 31, 2022, respectively, and is included in accrued interest receivable on the consolidated balance sheet.
(2)Includes perpetual preferred stock issued by domestic banks and domestic bank holding companies and equity securities issued by fintech companies, without a readily determinable fair value, and CRA-qualified mutual fund shares at March 31, 2023 and December 31, 2022. No impairments or measurement adjustments have been recorded on the equity securities without a readily determinable fair value since acquisition.
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Customers' transactions with unconsolidated VIEs include sales of consumer installment loans and investments in the tables below:securities issued by the VIEs. Customers is not the primary beneficiary of the VIEs because Customers has no right to make decisions that will most significantly affect the economic performance of the VIEs. Customers' continuing involvement with the unconsolidated VIEs is not significant. Customers' continuing involvement is not considered to be significant 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.
 September 30, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 Fair Value
(amounts in thousands)       
Available for Sale:       
Agency-guaranteed residential mortgage-backed securities$197,606
 $521
 $(1,800) $196,327
Agency-guaranteed commercial real estate mortgage-backed securities337,683
 2,843
 (418) 340,108
Corporate notes (1)44,958
 1,119
 —
 46,077
Equity securities (2)2,311
 —
 —
 2,311
 $582,558
 $4,483
 $(2,218) $584,823
(1)Includes subordinated debt issued by other bank holding companies.
(2)Includes equity securities issued by a foreign entity.


 December 31, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 Fair Value
(amounts in thousands)       
Available for Sale:       
Agency-guaranteed residential mortgage-backed securities$233,002
 $918
 $(2,657) $231,263
Agency-guaranteed commercial real estate mortgage-backed securities204,689
 —
 (2,872) 201,817
Corporate notes (1)44,932
 401
 (185) 45,148
Equity securities (2)15,246
 —
 —
 15,246
 $497,869
 $1,319
 $(5,714) $493,474
(1)Includes subordinated debt issued by other bank holding companies.
(2)Includes equity securities issued by a foreign entity.
There were no sales of AFS debt securities for the three months ended March 31, 2023. Proceeds from the sale of AFS debt securities were $156.0 million for the three months ended March 31, 2022. The following table presents proceedsgross realized gains and realized losses from the sale of available-for-sale investmentAFS debt securities and gross gains and gross losses realized on those sales for the three and nine months ended September 30, 2017March 31, 2023 and 2016:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
(amounts in thousands)       
Proceeds from sale of available-for-sale securities$554,540
 $5
 $698,451
 $2,853
Gross gains$5,349
 $—
 $8,532
 $26
Gross losses—
 (1) —
 (1)
Net gains (losses)$5,349
 $(1) $8,532
 $25
2022:
Three Months Ended March 31,
(amounts in thousands)20232022
Gross realized gains$— $974 
Gross realized losses— (2,037)
Net realized gains (losses) on sale of available for sale debt securities$— $(1,063)
These gains (losses) were determined using the specific identification method and were reported as net gain (loss) on sale of investment securities included inwithin non-interest income on the consolidated statements of income.
The following table presents available-for-saleAFS debt securities by stated maturity. Debt securities backed by mortgages and other assets have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay and, therefore, these debt securities are classified separately with no specific maturity date:
 March 31, 2023
(amounts in thousands)Amortized
Cost		Fair
Value
Due in one year or less$7,500 $7,500 
Due after one year through five years506,934 469,143 
Due after five years through ten years128,425 110,152 
Asset-backed securities154,151 147,935 
Agency-guaranteed residential collateralized mortgage obligations143,717 133,753 
Collateralized loan obligations875,303 854,100 
Commercial mortgage-backed securities142,050 136,818 
Private label collateralized mortgage obligations1,111,256 1,040,858 
Total available for sale debt securities$3,069,336 $2,900,259 
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 September 30, 2017
 
Amortized
Cost
 
Fair
Value
(amounts in thousands)   
Due in one year or less$—
 $—
Due after one year through five years—
 —
Due after five years through ten years42,958
 43,854
Due after ten years2,000
 2,223
Agency-guaranteed residential mortgage-backed securities197,606
 196,327
Agency-guaranteed commercial real estate mortgage-backed securities337,683
 340,108
Total debt securities$580,247
 $582,512


Gross unrealized losses and fair value of Customers' investmentsAFS 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, 2017March 31, 2023 and December 31, 20162022 were as follows:
 March 31, 2023
 Less Than 12 Months12 Months or MoreTotal
(amounts in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Available for sale debt securities:
Asset-backed securities$21,902 $(46)$99,525 $(3,968)$121,427 $(4,014)
Agency-guaranteed residential collateralized mortgage obligations— — 133,753 (9,964)133,753 (9,964)
Collateralized loan obligations209,389 (3,648)582,070 (17,840)791,459 (21,488)
Commercial mortgage-backed securities17,742 (520)115,676 (4,716)133,418 (5,236)
Corporate notes152,391 (8,607)341,401 (42,169)493,792 (50,776)
Private label collateralized mortgage obligations288,509 (15,128)563,437 (56,221)851,946 (71,349)
Total$689,933 $(27,949)$1,835,862 $(134,878)$2,525,795 $(162,827)
 September 30, 2017
 Less Than 12 Months 12 Months or More Total
 Fair Value 
Unrealized
Losses
 Fair Value 
Unrealized
Losses
 Fair Value 
Unrealized
Losses
(amounts in thousands)           
Available for Sale:           
Agency-guaranteed residential mortgage-backed securities$54,525
 $(279) $45,682
 $(1,521) $100,207
 $(1,800)
Agency-guaranteed commercial real estate mortgage-backed securities105,044
 (418) —
 —
 105,044
 (418)
Total$159,569
 $(697) $45,682
 $(1,521) $205,251
 $(2,218)


 December 31, 2016
 Less Than 12 Months 12 Months or More Total
 Fair Value 
Unrealized
Losses
 Fair Value 
Unrealized
Losses
 Fair Value 
Unrealized
Losses
(amounts in thousands)           
Available for Sale:           
Agency-guaranteed residential mortgage-backed securities$87,433
 $(1,330) $30,592
 $(1,327) $118,025
 $(2,657)
Agency-guaranteed commercial real estate mortgage-backed securities201,817
 (2,872) —
 —
 201,817
 (2,872)
Corporate notes (1)9,747
 (185) —
 —
 9,747
 (185)
Total$298,997
 $(4,387) $30,592
 $(1,327) $329,589
 $(5,714)
(1)Includes subordinated debt issued by other bank holding companies.    

 December 31, 2022
 Less Than 12 Months12 Months or MoreTotal
(amounts in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Available for sale debt securities:
Asset-backed securities$160,542 $(8,050)$— $— $160,542 $(8,050)
Agency-guaranteed residential collateralized mortgage obligations133,864 (13,617)— — 133,864 (13,617)
Collateralized loan obligations386,701 (13,516)315,270 (10,826)701,971 (24,342)
Commercial mortgage-backed securities39,828 (1,410)93,005 (4,456)132,833 (5,866)
Corporate notes386,464 (36,119)178,955 (25,759)565,419 (61,878)
Private label collateralized mortgage obligations478,096 (29,364)314,332 (34,266)792,428 (63,630)
Total$1,585,495 $(102,076)$901,562 $(75,307)$2,487,057 $(177,383)
At September 30, 2017,March 31, 2023, there were sixteen available-for-sale investment50 AFS debt securities with unrealized losses in the less-than-twelve-monthless-than-twelve-months category and eleven available-for-sale investment112 AFS debt securities with unrealized losses in the twelve-month-or-moretwelve-months-or-more category. TheExcept for the four asset-backed securities and six corporate notes where there was a deterioration in future estimated cash flows as further discussed below, the unrealized losses on the mortgage-backed securities are guaranteed by government-sponsored entities and primarily relatewere principally due to changes in market interest rates. All amountsrates that resulted in a negative impact on the respective securities' fair value and are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell theseany of the 162 securities, and it is not more likely than not that Customers will be required to sell any of the 162 securities before recovery of the amortized cost basis. At December 31, 2022, there were 156 AFS debt securities in an unrealized loss position.
At September 30, 2017, management evaluated its equity holdings issued by Religare Enterprises, Ltd. ("Religare") for other-than-temporary impairment. Because management no longer has the intent to hold these securities until a recovery in fair value, Customers recorded an other-than-temporary impairment loss of $8.3 millionallowance for credit losses on four asset-backed securities and $12.9 million, respectively, forsix corporate notes where there was a deterioration in future estimated cash flows during the three and nine months ended September 30, 2017 forMarch 31, 2023 and on four asset-backed securities during the fullthree months ended March 31, 2022. A discounted cash flow approach is used to determine the amount of the decline in fair value belowallowance. The cash flows expected to be collected, after considering expected prepayments, are discounted at the cost basis established at June 30, 2017 and December 31, 2016.original effective interest rate. The fair valueamount of the equity securities at September 30, 2017 of $2.3 million becameallowance is limited to the newdifference between the amortized cost basis of the securities. Becausesecurity and its estimated fair value.
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The following tables present the changeactivity in disposition strategythe allowance for BankMobile at September 30, 2017, Customers did not record a deferred tax assetcredit losses on AFS debt securities, by major security type, for the other-than-temporary impairment loss recorded in third quarter 2017. In addition, Customers reversed $4.6 million of previously recorded deferred tax assets in third quarter 2017 as the tax-free spin-off/merger strategy for BankMobile does not result in capital gains that could be used to offset any capital losses resulting from the disposition of the Religare equity securities.periods presented:
Three Months Ended March 31, 2023Three Months Ended March 31, 2022
(amounts in thousands)Asset-backed securitiesCorporate notesTotalAsset-backed securitiesCorporate notesTotal
Balance at January 1,$578 $— $578 $— $— $— 
Credit losses on securities for which credit losses were not previously recorded— 1,383 1,383 728 — 728 
Credit losses on previously impaired securities273 — 273 — — — 
Decrease in allowance for credit losses on previously impaired securities(61)— (61)— — — 
Balance at March 31,$790 $1,383 $2,173 $728 $— $728 
At September 30, 2017March 31, 2023 and December 31, 2016,2022, no securities holding of any one issuer, other than the U.S. government and its agencies, amounted to greater than 10% of shareholders' equity.
At March 31, 2023, Customers Bank had pledged AFS investment securities aggregating $127.6$1.6 billion in fair value as collateral for immediate available liquidity from FRB, including the BTFP. The counterparty does not have the ability to sell or repledge these securities.
Investment securities held to maturity
The amortized cost, approximate fair value and allowance for credit losses of investment securities held to maturity as of March 31, 2023 and December 31, 2022 are summarized as follows:
March 31, 2023 (1)
(amounts in thousands)Amortized CostAllowance for Credit LossesNet Carrying ValueGross Unrealized GainsGross Unrealized LossesFair Value
Held to maturity debt securities:
Asset-backed securities$322,877 $— $322,877 $— $(3,142)$319,735 
Agency-guaranteed residential mortgage-backed securities7,152 — 7,152 (513)6,639 
Agency-guaranteed commercial mortgage-backed securities1,909 — 1,909 — (61)1,848 
Agency-guaranteed residential collateralized mortgage obligations201,097 — 201,097 — (13,136)187,961 
Agency-guaranteed commercial collateralized mortgage obligations150,852 — 150,852 — (7,239)143,613 
Private label collateralized mortgage obligations186,407 — 186,407 — (9,490)176,917 
Total held to maturity debt securities$870,294 $— $870,294 $— $(33,581)$836,713 
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December 31, 2022 (1)
(amounts in thousands)Amortized CostAllowance for Credit LossesNet Carrying ValueGross Unrealized GainsGross Unrealized LossesFair Value
Held to maturity debt securities:
Asset-backed securities$361,107 $— $361,107 $— $(4,974)$356,133 
Agency-guaranteed residential mortgage-backed securities7,189 — 7,189 (563)6,626 
Agency-guaranteed commercial mortgage-backed securities1,928 — 1,928 — (104)1,824 
Agency-guaranteed residential collateralized mortgage obligations204,495 — 204,495 — (18,376)186,119 
Agency-guaranteed commercial collateralized mortgage obligations151,711 — 151,711 — (9,435)142,276 
Private label collateralized mortgage obligations113,829 — 113,829 — (12,994)100,835 
Total held to maturity debt securities$840,259 $— $840,259 $— $(46,446)$793,813 
(1)Accrued interest on HTM debt securities totaled $1.5 million and $231.3$1.0 million at March 31, 2023 and December 31, 2022, respectively, and is included in accrued interest receivable on the consolidated balance sheet.
The following table presents HTM debt securities by stated maturity. Debt securities backed by mortgages and other assets have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay and, therefore, these debt securities are classified separately with no specific maturity date:
 March 31, 2023
(amounts in thousands)Amortized
Cost		Fair
Value
Asset-backed securities$322,877 $319,735 
Agency-guaranteed residential mortgage-backed securities7,152 6,639 
Agency-guaranteed commercial mortgage-backed securities1,909 1,848 
Agency-guaranteed residential collateralized mortgage obligations201,097 187,961 
Agency-guaranteed commercial collateralized mortgage obligations150,852 143,613 
Private label collateralized mortgage obligations186,407 176,917 
Total held to maturity debt securities$870,294 $836,713 
Customers recorded no allowance for credit losses on investment securities classified as held to maturity at March 31, 2023 and December 31, 2022. The U.S. government agency securities represent obligations issued by a U.S. government-sponsored enterprise or other federal government agency that are explicitly or implicitly guaranteed by the U.S. federal government and therefore, assumed to have zero credit losses. Most of the private label collateralized mortgage obligations are highly rated and with sufficient overcollateralization, therefore have zero expected credit losses. Customers recorded no allowance for its investment in the asset-backed securities. Customers considered the seniority of its beneficial interest, which includes its overcollateralization of these asset-backed securities in the estimate of the ACL at March 31, 2023 and December 31, 2022. The unrealized losses on HTM debt securities with no ACL were due to changes in market interest rates that resulted in a negative impact on the respective securities' fair value and are expected to be recovered when market prices recover or at maturity.
Credit Quality Indicators
Customers monitors the credit quality of HTM debt securities primarily through credit ratings provided by rating agencies. Investment grade debt securities are rated BBB- or higher by S&P Global Ratings, Baa3 or higher by Moody's Investors Service or equivalent ratings by other rating agencies, and are generally considered to be of low credit risk. Except for the asset-backed securities 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 March 31, 2023 and December 31, 2022. The asset-backed securities and a private label collateralized mortgage obligation are not rated by rating agencies. Customers monitors the credit quality of these asset-backed securities and a private label collateralized mortgage obligation by evaluating the performance of the sold consumer installment loans and other underlying loans against the overcollateralization available for these securities.
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The following table presents the amortized cost of HTM debt securities based on their lowest credit rating available:
March 31, 2023
(amounts in thousands)AAAAAABBBNot RatedTotal
Held to maturity debt securities:
Asset-backed securities$— $— $— $— $322,877 $322,877 
Agency-guaranteed residential mortgage-backed securities— — — — 7,152 7,152 
Agency-guaranteed commercial mortgage-backed securities— — — — 1,909 1,909 
Agency-guaranteed residential collateralized mortgage obligations— — — — 201,097 201,097 
Agency-guaranteed commercial collateralized mortgage obligations— — — — 150,852 150,852 
Private label collateralized mortgage obligations62,327 7,132 34,563 9,256 73,129 186,407 
Total held to maturity debt securities$62,327 $7,132 $34,563 $9,256 $757,016 $870,294 
Customers has elected to not estimate an ACL on accrued interest receivable on HTM debt securities, as it already has a policy in place to reverse or write-off accrued interest, through interest income, for debt securities in nonaccrual status in a timely manner. At March 31, 2023 and December 31, 2022, there were no HTM debt securities past due under the terms of their agreements or in nonaccrual status.
At March 31, 2023 and December 31, 2022, Customers Bank had pledged HTM investment securities aggregating $443.8 million and $16.7 million in fair value, respectively, as collateral against its borrowings primarily withfor immediate available liquidity from FRB, including the FHLBBTFP and an unused linelines of credit with another financial institution. TheseThe counterparties do not have the ability to sell or repledge these securities.

NOTE 86 – LOANS HELD FOR SALE
The composition of loans held for sale as of September 30, 2017March 31, 2023 and December 31, 20162022 was as follows:
(amounts in thousands)March 31, 2023December 31, 2022
Commercial loans:
Multifamily loans, at lower of cost or fair value$4,051 $4,079 
Commercial real estate non-owner occupied loans, at lower of cost or fair value16,000 — 
Total commercial loans held for sale20,051 4,079 
Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value507 507 
Residential mortgage loans, at fair value314 322 
Personal installment loans, at lower of cost or fair value307,336 133,801 
Other installment loans, at lower of cost or fair value95,849 189,603 
Total consumer loans held for sale404,006 324,233 
Loans held for sale$424,057 $328,312 
 September 30, 2017 December 31, 2016
(amounts in thousands)   
Commercial loans:   
Mortgage warehouse loans, at fair value$1,961,248
 $2,116,815
Multi-family loans at lower of cost or fair value150,217
 —
Total commercial loans held for sale2,111,465
 2,116,815
Consumer loans:   
Residential mortgage loans, at fair value1,828
 695
Loans held for sale$2,113,293
 $2,117,510

CommercialTotal loans held for sale consistsas of March 31, 2023 and December 31, 2022 included NPLs of $6.0 million and $6.2 million, respectively.
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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 March 31, 2023 and December 31, 2022.
(amounts in thousands)March 31, 2023December 31, 2022
Loans and leases receivable, mortgage warehouse, at fair value$1,247,367 $1,323,312 
Loans receivable, PPP246,258 998,153 
Loans and leases receivable:
Commercial:
Commercial and industrial:
Specialty lending (1)
5,519,176 5,412,887 
Other commercial and industrial1,295,688 1,259,943 
Multifamily2,195,211 2,213,019 
Commercial real estate owner occupied895,314 885,339 
Commercial real estate non-owner occupied1,245,248 1,290,730 
Construction188,123 162,009 
Total commercial loans and leases receivable11,338,760 11,223,927 
Consumer:
Residential real estate494,815 497,952 
Manufactured housing43,272 45,076 
Installment:
Personal849,420 964,641 
Other419,085 413,298 
Total consumer loans receivable1,806,592 1,920,967 
Loans and leases receivable13,145,352 13,144,894 
Allowance for credit losses on loans and leases(130,281)(130,924)
Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)
$14,508,696 $15,335,435 
(1)Includes direct finance equipment leases of $168.8 million and $157.4 million at March 31, 2023 and December 31, 2022, respectively.
(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(0.7) million and $(21.5) million at March 31, 2023 and December 31, 2022, respectively.
Customers' total loans and leases receivable includes loans receivable which are reported at fair value based on an election made to account for these loans at fair value and loans and leases receivable which are predominately reported at their outstanding unpaid principal balance, net of charge-offs, deferred costs and fees and unamortized premiums and discounts, and are evaluated for impairment. The total amount of accrued interest recorded for total loans was $100.9 million and $105.5 million at March 31, 2023 and December 31, 2022, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At March 31, 2023 and December 31, 2022, there were $13.8 million and $11.5 million of individually evaluated loans that were collateral-dependent, respectively. Substantially all individually evaluated loans are collateral-dependent and consisted primarily of commercial and industrial, commercial real estate, and residential real estate loans. Collateral-dependent commercial and industrial loans were secured by accounts receivable, inventory and equipment; collateral-dependent commercial real estate loans were secured by commercial real estate assets; and residential real estate loans were secured by residential real estate assets.
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Loans receivable, mortgage warehouse, at fair value
Mortgage warehouse loans consist of commercial loans to mortgage companies (i.e., mortgage warehouse loans).companies. These mortgage warehouse lending transactions are subject to master repurchase agreementsagreements. As a result of the contractual provisions, for accounting purposes, control of the underlying mortgage loan has not transferred and the rewards and risks of the mortgage loans are not assumed by Customers. The mortgage warehouse loans are designated as loans held for saleinvestment and reported at fair value based on an election made to account for the loans at fair value. Pursuant to the agreements, Customers funds the pipelines for these mortgage lenders by sending payments directly to the closing agents for funded mortgage loans (i.e., the purchase event) and receives proceeds directly from third party investors when the underlying mortgage loans are sold into the secondary market (i.e., the sale event).market. The fair value of the mortgage warehouse loans is estimated as the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The interest rates on these loans are variable, and the lending transactions are short-term, with an average life of 21under 30 days from purchase to sale. The primary goal of these lending transactions is to provide liquidity to mortgage companies.

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

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


NOTE 9 — LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
The following table presents loans receivable as of September 30, 20172023 and December 31, 2016. BankMobile2022, all of Customers' commercial mortgage warehouse loans were current in terms of payment. As these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures.
Loans receivable, previously reportedPPP
Customers had $246.3 million and $998.2 million of PPP loans outstanding as heldof March 31, 2023 and December 31, 2022, respectively, which are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and earn a fixed interest rate of 1.00%. Customers recognized interest income, including net origination fees, of $23.6 million and $36.9 million for salethe three months ended March 31, 2023 and 2022, respectively.
PPP loans include an embedded credit enhancement from the SBA, which guarantees 100% of the principal and interest owed by the borrower provided that the SBA's eligibility criteria are met. As a result, the eligible PPP loans do not have been reclassified as heldan ACL and used to conform with the current period presentation.are therefore excluded from ACL-related disclosures.
 September 30, 2017 December 31, 2016
(amounts in thousands) 
 Commercial:   
 Multi-family$3,618,989
 $3,214,999
 Commercial and industrial (including owner occupied commercial real estate)1,601,789
 1,382,343
 Commercial real estate non-owner occupied1,237,849
 1,193,715
 Construction73,203
 64,789
 Total commercial loans6,531,830
 5,855,846
 Consumer:   
 Residential real estate435,188
 193,502
 Manufactured housing92,938
 101,730
 Other3,819
 3,483
 Total consumer loans531,945
 298,715
Total loans receivable7,063,775
 6,154,561
Deferred (fees)/costs and unamortized (discounts)/premiums, net(2,437) 76
Allowance for loan losses(38,314) (37,315)
Loans receivable, net of allowance for loan losses$7,023,024
 $6,117,322




Loans and leases receivable
The following tables summarize loans and leases receivable by loan and lease type and performance status as of September 30, 2017March 31, 2023 and December 31, 2016:2022:
 March 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)
Total loans and leases (4)
Commercial and industrial, including specialty lending$1,158 $172 $3,422 $4,752 $6,810,112 $6,814,864 
Multifamily— 5,189 881 6,070 2,189,141 2,195,211 
Commercial real estate owner occupied2,412 — 3,563 5,975 889,339 895,314 
Commercial real estate non-owner occupied— — 11 11 1,245,237 1,245,248 
Construction— — — — 188,123 188,123 
Residential real estate6,808 420 2,563 9,791 485,024 494,815 
Manufactured housing819 771 3,333 4,923 38,349 43,272 
Installment11,393 8,257 8,720 28,370 1,240,135 1,268,505 
Total$22,590 $14,809 $22,493 $59,892 $13,085,460 $13,145,352 
21
Table of Contents
 September 30, 2017
 
30-89 Days
Past Due (1)
 
90 Days
Or More
Past Due(1)
 
Total Past
Due (1)
 
Non-
Accrual
 Current (2) 
Purchased-
Credit-
Impaired
Loans (3)
 
Total
Loans (4)
(amounts in thousands)             
Multi-family$—
 $—
 $—
 $—
 $3,617,062
 $1,927
 $3,618,989
Commercial and industrial—
 —
 —
 20,423
 1,093,997
 802
 1,115,222
Commercial real estate - owner occupied—
 —
 —
 2,949
 472,832
 10,786
 486,567
Commercial real estate - non-owner occupied—
 —
 —
 184
 1,232,212
 5,453
 1,237,849
Construction—
 —
 —
 —
 73,203
 —
 73,203
Residential real estate1,607
 —
 1,607
 4,269
 423,551
 5,761
 435,188
Manufactured housing (5)2,937
 2,505
 5,442
 1,959
 82,896
 2,641
 92,938
Other consumer67
 —
 67
 58
 3,474
 220
 3,819
Total$4,611
 $2,505
 $7,116
 $29,842
 $6,999,227
 $27,590
 $7,063,775



December 31, 2016
 
30-89 Days
Past Due (1)
 
90 Days
Or More
Past Due(1)
 
Total Past
Due (1)
 
Non-
Accrual
 Current (2) 
Purchased-
Credit-
Impaired
Loans (3)
 
Total
Loans (4)
(amounts in thousands)             
Multi-family$12,573
 $—
 $12,573
 $—
 $3,200,322
 $2,104
 $3,214,999
Commercial and industrial350
 —
 350
 8,443
 978,881
 1,037
 988,711
Commercial real estate - owner occupied137
 —
 137
 2,039
 379,227
 12,229
 393,632
Commercial real estate - non-owner occupied—
 —
 —
 2,057
 1,185,331
 6,327
 1,193,715
Construction—
 —
 —
 —
 64,789
 —
 64,789
Residential real estate4,417
 —
 4,417
 2,959
 178,559
 7,567
 193,502
Manufactured housing (5)3,761
 2,813
 6,574
 2,236
 89,850
 3,070
 101,730
Other consumer12
 —
 12
 58
 3,177
 236
 3,483
Total$21,250
 $2,813
 $24,063
 $17,792
 $6,080,136
 $32,570
 $6,154,561
 December 31, 2022
(amounts in thousands)
30-59 Days past due (1)
60-89 Days past due (1)
90 Days or more past due (2)
Total past due
Loans and leases not past due (3)
Total loans and leases (4)
Commercial and industrial, including specialty lending$3,123 $717 $1,415 $5,255 $6,667,575 $6,672,830 
Multifamily10,684 5,217 1,143 17,044 2,195,975 2,213,019 
Commercial real estate owner occupied5,173 — 2,704 7,877 877,462 885,339 
Commercial real estate non-owner occupied2,136 — 11 2,147 1,288,583 1,290,730 
Construction— — — — 162,009 162,009 
Residential real estate5,208 1,157 3,158 9,523 488,429 497,952 
Manufactured housing901 537 3,346 4,784 40,292 45,076 
Installment11,246 7,942 9,527 28,715 1,349,224 1,377,939 
Total$38,471 $15,570 $21,304 $75,345 $13,069,549 $13,144,894 
(1)(1)Includes past due loans and leases that are accruing interest because collection is considered probable.
(2)Includes loans amounting to $1.7 million and $1.9 million as of March 31, 2023 and December 31, 2022, respectively, that are still accruing interest because collection is considered probable.
(3)Loans and leases where next payment due is less than 30 days from the report date. The tables exclude PPP loans of $246.3 million, of which $0.8 million were 30-59 days past due and $117.9 million were 60 days or more past due as of March 31, 2023, and PPP loans of $998.2 million, of which $0.6 million were 30-59 days past due and $36.0 million were 60 days or more past due as of December 31, 2022. Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.
(4)Includes PCD loans of $7.9 million and $8.3 million at March 31, 2023 and December 31, 2022, respectively.
Nonaccrual Loans and Leases
The following table presents the amortized cost of loans and leases held for investment on nonaccrual status.
 
March 31, 2023 (1)
December 31, 2022 (1)
(amounts in thousands)Nonaccrual loans with no related allowanceNonaccrual loans with related allowanceTotal nonaccrual loansNonaccrual loans with no related allowanceNonaccrual loans with related allowanceTotal nonaccrual loans
Commercial and industrial, including specialty lending$3,742 $144 $3,886 $1,731 $30 $1,761 
Multifamily881 — 881 1,143 — 1,143 
Commercial real estate owner occupied3,621 — 3,621 2,768 — 2,768 
Residential real estate6,473 — 6,473 6,922 — 6,922 
Manufactured housing— 2,568 2,568 — 2,410 2,410 
Installment— 8,720 8,720 — 9,527 9,527 
Total$14,717 $11,432 $26,149 $12,564 $11,967 $24,531 
(1) Presented at amortized cost basis.
Interest income recognized on nonaccrual loans was insignificant for the three months ended March 31, 2023 and 2022. Accrued interest reversed when the loans went to nonaccrual status was insignificant for the three months ended March 31, 2023 and 2022.
22
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 months ended March 31, 2023 and 2022 are presented in the tables below.
(amounts in thousands)
Commercial and industrial (1)
MultifamilyCommercial real estate owner occupiedCommercial real estate non-owner occupiedConstructionResidential real estateManufactured housingInstallmentTotal
Three Months Ended
March 31, 2023
Ending Balance,
December 31, 2022		$17,582 $14,541 $6,454 $11,219 $1,913 $6,094 $4,430 $68,691 $130,924 
Charge-offs(160)— — (4,239)— — — (16,715)(21,114)
Recoveries231 — — 5 116 2 — 2,109 2,463 
Provision (benefit) for credit losses on loans and leases2,397 543 2,018 4,047 307 757 (91)8,030 18,008 
Ending Balance,
March 31, 2023		$20,050 $15,084 $8,472 $11,032 $2,336 $6,853 $4,339 $62,115 $130,281 
(amounts in thousands)
Commercial and industrial (1)
MultifamilyCommercial real estate owner occupiedCommercial real estate non-owner occupiedConstructionResidential real estateManufactured housingInstallmentTotal
Three Months Ended
March 31, 2022
Ending Balance,
December 31, 2021		$12,702 $4,477 $3,213 $6,210 $692 $2,383 $4,278 $103,849 $137,804 
Charge-offs(301)— — — — (4)— (8,865)(9,170)
Recoveries360 337 7 8 113 6 — 1,113 1,944 
Provision (benefit) for credit losses on loans and leases(1,996)2,623 621 (263)134 2,300 64 11,786 15,269 
Ending Balance,
March 31, 2022		$10,765 $7,437 $3,841 $5,955 $939 $4,685 $4,342 $107,883 $145,847 
(1) Includes specialty lending.
(2)Loans where next payment due is less than 30 days from the report date.
(3)Purchased-credit-impaired loans aggregated into a pool are accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, and the past due status of the pools, or that of the individual loans within the pools, is not meaningful. Because of the credit impaired nature of the loans, the loans are recorded at a discount reflecting estimated future cash flows and the Bank recognizes interest income on each pool of loans reflecting the estimated yield and passage of time. Such loans are considered to be performing. Purchased-credit-impaired loans that are not in pools accrete interest when the timing and amount of their expected cash flows are reasonably estimable, and are reported as performing loans.
(4)Amounts exclude deferred costs and fees, unamortized premiums and discounts, and the allowance for loan losses.
(5)Manufactured housing loans purchased in 2010 are subject to cash reserves held at the Bank that are used to fund past-due payments when the loan becomes 90 days or more delinquent. Subsequent purchases are subject to varying provisions in the event of borrowers’ delinquencies.
At March 31, 2023, the ACL on loans and leases was $130.3 million, a decrease of $0.6 million from the December 31, 2022 balance of $130.9 million. The decrease in ACL for the three months ended March 31, 2023 was primarily attributable to a decrease in consumer installment loans, partially offset by additional provision for credit losses from the recognition of weaker macroeconomic forecasts.

Loan Modifications for Borrowers Experiencing Financial Difficulty
Customers adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02") effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of TDRs and enhanced the disclosures for loan modifications to borrowers experiencing financial difficulty. Refer to NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION for additional information on the adoption.
A borrower is considered to be experiencing financial difficulty when there is a significant doubt about the borrower's ability to make the required principal and interest payments on the loan or to get an equivalent financing from another creditor at a market rate for a similar loan.
When borrowers are experiencing financial difficulty, Customers may make certain loan modifications as part of loss mitigation strategies to maximize expected payment. To be classified as a modification made to a borrower experiencing financial difficulty the modification must be in the form of an interest rate reduction, principal forgiveness, or an other-than-insignificant payment delay (payment deferral), term extension, or combinations thereof.
Customers will generally try other forms of relief before principal forgiveness but would define any contractual reduction in the amount of principal due without receiving payment or assets as 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 would consider 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.
23
The following table presents the amortized cost of loans that were modified to borrowers experiencing financial difficulty for the three months ended March 31, 2023, disaggregated by class of financing receivable and type of modification granted.
Three Months Ended March 31, 2023
(dollars in thousands)Term ExtensionPayment DeferralDebt ForgivenessInterest Rate Reduction and Term ExtensionTotalPercentage of Total by Financing Class
Commercial and industrial, including specialty lending$172 $— $— $— $172 0.00 %
Commercial real estate owner occupied169 — — — 169 0.02 %
Manufactured housing7 — — 63 70 0.16 %
Personal installment4,833 131 114 — 5,078 0.60 %
Total$5,181 $131 $114 $63 $5,489 
As of September 30, 2017 and DecemberMarch 31, 2016,2023, there were no commitments to lend additional funds to debtors experiencing financial difficulty whose loans have been modified during the Bank had $0.3 million and $0.5 million, respectively,three months ended March 31, 2023.
The following table summarizes the impacts of residential real estate held in other real estate owned. As of September 30, 2017 and December 31, 2016, the Bank had initiated foreclosure proceedings of $1.5 million and $0.4 million, respectively, on loans secured by residential real estate.

Allowance for loan losses
The changes in the allowance for loan lossesmodifications made to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2017 and 2016 andMarch 31, 2023.
Three Months Ended March 31, 2023
Weighted Average
(dollars in thousands)Interest Rate Reduction (%)Term Extension
(in months)		Payment Deferral
(in months)		Debt Forgiven
Commercial and industrial, including specialty lending—%40$— 
Commercial real estate owner occupied—40— 
Manufactured housing0.8550— 
Personal installment—5666 
The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored to understand the loans and allowance for loan losses by loan class based on impairment evaluation method aseffectiveness of September 30, 2017 and December 31, 2016 were as follows. The amounts presented for the provision for loan losses below do not include the effect of changes to estimated benefits resulting from the FDIC loss share arrangements for the covered loans for periods prior to the termination of the FDIC loss sharing arrangements.
Three Months Ended
September 30, 2017
Multi-family Commercial and Industrial Commercial Real Estate Owner Occupied Commercial
Real Estate Non-Owner Occupied		 Construction Residential
Real Estate		 Manufactured
Housing		 Other Consumer Total
(amounts in thousands)                 
Ending Balance,
June 30, 2017
$12,028
 $11,585
 $2,976
 $7,786
 $716
 $2,995
 $268
 $104
 $38,458
Charge-offs—
 (2,032) —
 (77) —
 (120) —
 (356) (2,585)
Recoveries—
 54
 —
 —
 27
 7
 —
 1
 89
Provision for loan losses668
 966
 262
 (53) 104
 72
 (77) 410
 2,352
Ending Balance,
September 30, 2017
$12,696
 $10,573
 $3,238
 $7,656
 $847
 $2,954
 $191
 $159
 $38,314
Nine Months Ended
September 30, 2017
                 
Ending Balance,
December 31, 2016
$11,602
 $11,050
 $2,183
 $7,894
 $840
 $3,342
 $286
 $118
 $37,315
Charge-offs—
 (4,079) —
 (485) —
 (410) —
 (602) (5,576)
Recoveries—
 337
 9
 —
 157
 34
 —
 101
 638
Provision for loan losses1,094
 3,265
 1,046
 247
 (150) (12) (95) 542
 5,937
Ending Balance,
September 30, 2017
$12,696
 $10,573
 $3,238
 $7,656
 $847
 $2,954
 $191
 $159
 $38,314
                  
As of September 30, 2017                 
Loans:                 
Individually evaluated for impairment$—
 $20,493
 $2,950
 $184
 $—
 $8,178
 $10,340
 $56
 $42,201
Collectively evaluated for impairment3,617,062
 1,093,927
 472,831
 1,232,212
 73,203
 421,249
 79,957
 3,543
 6,993,984
Loans acquired with credit deterioration1,927
 802
 10,786
 5,453
 —
 5,761
 2,641
 220
 27,590
 $3,618,989
 $1,115,222
 $486,567
 $1,237,849
 $73,203
 $435,188
 $92,938
 $3,819
 $7,063,775
Allowance for loan losses:                 
Individually evaluated for impairment$—
 $625
 $740
 $—
 $—
 $142
 $5
 $15
 $1,527
Collectively evaluated for impairment12,696
 9,462
 2,481
 4,732
 847
 2,222
 83
 93
 32,616
Loans acquired with credit deterioration—
 486
 17
 2,924
 —
 590
 103
 51
 4,171
 $12,696
 $10,573
 $3,238
 $7,656
 $847
 $2,954
 $191
 $159
 $38,314


Three Months Ended
September 30, 2016
Multi-family Commercial and Industrial Commercial Real Estate Owner Occupied Commercial
Real Estate Non-Owner Occupied		 Construction Residential
Real Estate		 Manufactured
Housing		 Other Consumer Total
(amounts in thousands)                 
Ending Balance,
June 30, 2016
$12,368
 $10,370
 $1,582
 $8,483
 $1,209
 $3,535
 $440
 $110
 $38,097
Charge-offs—
 (237) —
 (140) —
 (43) —
 (246) (666)
Recoveries—
 62
 —
 —
 8
 298
 —
 10
 378
Provision for loan losses(695) 832
 305
 3
 (168) (411) (18) 240
 88
Ending Balance,
September 30, 2016
$11,673
 $11,027
 $1,887
 $8,346
 $1,049
 $3,379
 $422
 $114
 $37,897
Nine Months Ended
September 30, 2016
                 
Ending Balance,
December 31, 2015
$12,016
 $8,864
 $1,348
 $8,420
 $1,074
 $3,298
 $494
 $133
 $35,647
Charge-offs—
 (774) —
 (140) —
 (456) —
 (478) (1,848)
Recoveries—
 173
 —
 8
 465
 299
 —
 10
 955
Provision for loan losses(343) 2,764
 539
 58
 (490) 238
 (72) 449
 3,143
Ending Balance,
September 30, 2016
$11,673
 $11,027
 $1,887
 $8,346
 $1,049
 $3,379
 $422
 $114
 $37,897
As of December 31, 2016                 
Loans:                 
Individually evaluated for impairment$—
 $8,516
 $2,050
 $2,151
 $—
 $6,972
 $9,665
 $57
 $29,411
Collectively evaluated for impairment3,212,895
 979,158
 379,353
 1,185,237
 64,789
 178,963
 88,995
 3,190
 6,092,580
Loans acquired with credit deterioration2,104
 1,037
 12,229
 6,327
 —
 7,567
 3,070
 236
 32,570
 $3,214,999
 $988,711
 $393,632
 $1,193,715
 $64,789
 $193,502
 $101,730
 $3,483
 $6,154,561
Allowance for loan losses:                 
Individually evaluated for impairment$—
 $1,024
 $287
 $14
 $—
 $35
 $—
 $—
 $1,360
Collectively evaluated for impairment11,602
 9,686
 1,896
 4,626
 772
 2,414
 88
 60
 31,144
Loans acquired with credit deterioration—
 340
 —
 3,254
 68
 893
 198
 58
 4,811
 $11,602
 $11,050
 $2,183
 $7,894
 $840
 $3,342
 $286
 $118
 $37,315

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



Impairedmodification efforts. Loans - Individually Evaluated for Impairment
The following tables present the recorded investment (net of charge-offs), unpaid principal balance, and related allowance by loan type for impaired loans that were individually evaluated for impairment as of September 30, 2017 and December 31, 2016 and the average recorded investment and interest income recognized for the three and nine months ended September 30, 2017 and 2016. Purchased-credit-impaired loans are considered to be performing and arein payment default at 90 days or more past due. The following table presents an aging analysis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023.
March 31, 2023
(dollars in thousands)30-59 Days past due60-89 Days past due90 Days or more past dueCurrentTotal
Commercial and industrial, including specialty lending$— $172 $— $— $172 
Commercial real estate owner occupied— — 169 — 169 
Manufactured housing— — — 70 70 
Personal installment202 44 21 4,811 5,078 
Total$202 $216 $190 $4,881 $5,489 
As of March 31, 2023, Customers did not includedhave any loans that were made to borrowers experiencing financial difficulty during the three months ended March 31, 2023 that subsequently defaulted. Customers' ACL is influenced by loan level characteristics that inform the assessed propensity to default. As such, the provision for credit losses is impacted by changes in the tables below.such loan level characteristics, such as payment performance. Loans made to borrowers experiencing financial difficulty can be classified as either accrual or nonaccrual.
24
 September 30, 2017 
Three Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2017
 
Recorded
Investment
Net of
Charge offs
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
(amounts in thousands)             
With no related allowance recorded:             
Commercial and industrial$19,433
 $22,354
 $—
 $13,345
 $354
 $8,796
 $450
Commercial real estate owner occupied1,669
 1,936
 —
 1,744
 15
 1,589
 18
Commercial real estate non-owner occupied184
 428
 —
 184
 91
 989
 93
Other consumer32
 32
 —
 44
 —
 50
 —
Residential real estate7,457
 7,664
 —
 5,228
 125
 4,865
 126
Manufactured housing10,340
 10,340
 —
 10,243
 164
 10,038
 457
With an allowance recorded:             
Commercial and industrial1,060
 1,331
 625
 1,963
 —
 5,400
 22
Commercial real estate owner occupied1,281
 1,281
 740
 1,056
 1
 950
 3
Commercial real estate non-owner occupied—
 —
 —
 51
 —
 94
 —
Other consumer24
 24
 15
 12
 —
 6
 —
Residential real estate721
 741
 142
 2,862
 —
 2,729
 84
Manufactured housing—
 —
 5
 114
 —
 108
 8
Total$42,201
 $46,131
 $1,527
 $36,846
 $750
 $35,614
 $1,261

 December 31, 2016 
Three Months Ended
September 30, 2016
 
Nine Months Ended
September 30, 2016
 
Recorded
Investment
Net of
Charge offs
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
(amounts in thousands)             
With no related allowance recorded:             
Multi-family$—
 $—
 $—
 $2,080
 $38
 $1,205
 $38
Commercial and industrial2,396
 3,430
 —
 21,859
 406
 18,681
 879
Commercial real estate owner occupied1,210
 1,210
 —
 10,182
 201
 9,651
 403
Commercial real estate non-owner occupied2,002
 2,114
 —
 7,983
 118
 6,081
 133
Other consumer57
 57
 —
 43
 —
 45
 —
Residential real estate6,682
 6,749
 —
 3,835
 39
 4,039
 83
Manufactured housing9,665
 9,665
 —
 8,971
 9
 8,785
 290
With an allowance recorded:             
Multi-family—
 —
 —
 383
 5
 290
 15
Commercial and industrial6,120
 6,120
 1,024
 7,561
 43
 7,256
 155
Commercial real estate - owner occupied840
 840
 287
 —
 —
 6
 —
Commercial real estate non-owner occupied149
 204
 14
 328
 2
 438
 6
Other consumer—
 —
 —
 —
 —
 36
 —
Residential real estate290
 303
 35
 300
 —
 421
 —
Total$29,411
 $30,692
 $1,360
 $63,525
 $861
 $56,934
 $2,002
Troubled Debt RestructuringsRestructuring
At September 30, 2017 and December 31, 2016,2022, there were $20.8$16.8 million and $16.4 million, respectively, in loans reported as troubled debt restructurings (“TDRs”). TDRs are reported as impaired loans in the calendar year of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent years, a TDR may be returned to accrual status if it satisfies a minimum six-month performance requirement, however, it will remain classified as impaired. Generally, the Bank requires sustained performance for nine months before returning a TDR to accrual status.
Modification of purchased-credit-impaired loans that are accounted for within loan pools in accordance with the accounting standards for purchased-credit-impaired loans do not result in the removal of these loans from the pool even if the modifications would otherwise be considered a TDR. Accordingly, as each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, modifications of loans within such pools are not considered TDRs.
The following table presents loans modified in a troubled debt restructuring by type of concession for the three and nine months ended September 30, 2017 and 2016.March 31, 2022. There were no modifications that involved forgiveness of debt.
 
Three Months Ended
September 30, 2017
 
Three Months Ended
 September 30, 2016
 Number
of Loans		 Recorded
Investment		 Number
of Loans		 Recorded
Investment
(dollars in thousands)       
Extensions of maturity1
 $60
 —
 $—
Interest-rate reductions3
 122
 10
 533
Total4
 $182
 10
 $533

 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
 September 30, 2016
 Number
of Loans		 Recorded
Investment		 Number
of Loans		 Recorded
Investment
(dollars in thousands)       
Extensions of maturity4
 $6,263
 3
 $1,995
Interest-rate reductions32
 1,297
 49
 1,932
Total36
 $7,560
 52
 $3,927
The following table provides, by loan type, the number of loans modified in troubled debt restructurings, and the related recorded investment, duringfor the three and nine months ended September 30, 2017 and 2016.
March 31, 2022.
Three Months Ended March 31, 2022
(dollars in thousands)Number of loansRecorded investment
Interest-rate reductions10 $346 
Other (1)
32 451 
Total42 $797 
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2016
 Number
of Loans		 Recorded
Investment		 Number
of Loans		 Recorded
Investment
(dollars in thousands)       
Commercial and industrial—
 $—
 —
 $—
Manufactured housing4
 182
 10
 533
Residential real estate—
 —
 —
 —
Total loans4
 $182
 10
 $533
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2016
 Number
of Loans		 Recorded
Investment		 Number
of Loans		 Recorded
Investment
(dollars in thousands)       
Commercial and industrial3
 $6,203
 1
 $76
Commercial real estate non-owner occupied—
 —
 1
 1,844
Manufactured housing33
 1,357
 47
 1,716
Residential real estate—
 —
 3
 291
Total loans36
 $7,560
 52
 $3,927

(1) Other includes covenant modifications, forbearance, loans discharged under Chapter 7 bankruptcy, or other concessions.
As of September 30, 2017, except for one commercial and industrial loan with an outstanding commitment of $2.3 million,December 31, 2022, there were no other commitments to lend additional funds to debtors whose loans have been modified in TDRs. There were no commitments to lend additional funds to debtors whose loans have been modified in TDRs at December 31, 2016.TDRs.
AsThe following table presents, by loan type, the number of September 30, 2017, ten manufactured housing loans totaling $0.5 million that were modified in TDRs withinand the pastrelated recorded investment, for which there was a payment default within twelve months defaulted on payments. As of September 30, 2016, five manufactured housing loans totaling $0.1 million, that were modified in TDRs withinfollowing the past twelve months, defaulted on payments.

modification.
March 31, 2022
(dollars in thousands)Number of loansRecorded investment
Manufactured housing1 $49 
Installment23 276 
Total loans24 $325 
Loans modified in troubled debt restructuringsTDRs are evaluated for impairment. The nature and extent of impairment of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of allowance for loan losses. There was no allowance recorded as a result of TDR modifications during the three months ended September 30, 2017. For the nine months ended September 30, 2017, there was one allowance recorded resulting from TDR modifications, totaling $1 thousand for one manufactured housing loan. There was one specific allowance totaling $29 thousand for one commercial real estate non-owner occupied loan resulting from TDR modifications during the three and nine months ended September 30, 2016.


Purchased Credit Impaired Loans
The changes in accretable yield related to purchased-credit-impaired loans for the three and nine months ended September 30, 2017 and 2016 were as follows:
 Three Months Ended September 30,
 2017 2016
(amounts in thousands)   
Accretable yield balance as of June 30,$9,006
 $11,165
Accretion to interest income(368) (460)
Reclassification from nonaccretable difference and disposals, net(276) 107
Accretable yield balance as of September 30,$8,362
 $10,812

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

Allowance for Loan Losses and the FDIC Loss Sharing Receivable and Clawback Liability
Losses incurred on covered loans were eligible for partial reimbursement by the FDIC. Subsequent to the purchase date, the expected cash flows on the covered loans were subject to evaluation. Decreases in the present value of expected cash flows on the covered loans were recognized by increasing the allowance for loan losses with a related charge to the provision for loan losses. At the same time, the FDIC indemnification asset was increased reflecting an estimated future collection from the FDIC, which was recorded as a reduction to the provision for loan losses. If the expected cash flows on the covered loans increased such that a previously recorded impairment could be reversed, the Bank recorded a reduction in the allowance for loan losses (with a related credit to the provision for loan losses) accompanied by a reduction in the FDIC receivable balance (with a related charge to the provision for loan losses). Increases in expected cash flows on covered loans and decreases in expected cash flows from the FDIC loss sharing receivable, when there were no previously recorded impairments, were considered together and recognized over the remaining life of the loans as interest income. Decreases in the valuations of other real estate owned covered by the loss sharing agreements were recorded net of the estimated FDIC receivable as an increase to other real estate owned expense (a component of non-interest expense).
On July 11, 2016, Customers entered into an agreement to terminate all existing rights and obligations pursuant to the loss sharing agreements with the FDIC. In connection with the termination agreement, Customers paid the FDIC $1.4 million as final payment under these agreements. The negotiated settlement amount was based on net losses incurred on the covered assets through September 30, 2015, adjusted for cash payments to and receipts from the FDIC as part of the December 31, 2015 and March 31, 2016 certifications. Consequently, loans and other real estate owned previously reported as covered assets pursuant to the loss sharing agreements were no longer presented as covered assets as of June 30, 2016.
The following table presents changes in the allowance for loan losses and the FDIC loss sharing receivable, including the effects of the estimated clawback liability and the termination agreement, for the three and nine months ended September 30, 2017 and 2016.
 Allowance for Loan Losses
 Three Months Ended September 30,
(amounts in thousands)2017 2016
Ending balance as of June 30,$38,458
 $38,097
Provision for loan losses (1)2,352
 88
Charge-offs(2,585) (666)
Recoveries89
 378
Ending balance as of September 30,$38,314
 $37,897

 
FDIC Loss Sharing Receivable/
Clawback Liability
 Three Months Ended September 30,
(amounts in thousands)2017 2016
Ending balance as of June 30,$—
 $(1,381)
Cash payments to the FDIC—
 1,381
Ending balance as of September 30,$—
 $—
    
(1) Provision for loan losses$2,352
 $88
Net amount reported as provision for loan losses$2,352
 $88


 Allowance for Loan Losses
 Nine Months Ended September 30,
(amounts in thousands)2017 2016
Ending balance as of December 31,$37,315
 $35,647
Provision for loan losses (1)5,937
 3,143
Charge-offs(5,576) (1,848)
Recoveries638
 955
Ending balance as of September 30,$38,314
 $37,897


 
FDIC Loss Sharing Receivable/
Clawback Liability
 Nine Months Ended September 30,
(amounts in thousands)2017 2016
Ending balance as of December 31,$—
 $(2,083)
Increased estimated cash flows (2)—
 289
Other activity, net (a)—
 (255)
Cash payments to the FDIC—
 2,049
Ending balance as of September 30,$—
 $—
    
(1) Provision for loan losses$5,937
 $3,143
(2) Effect attributable to FDIC loss share arrangements—
 (289)
Net amount reported as provision for loan losses$5,937
 $2,854
(a) Includes external costs, such as legal fees, real estate taxes, and appraisal expenses, which qualified for reimbursement under the FDIC loss sharing agreements.ACL.
Credit Quality Indicators
Multi-family,The ACL represents management's estimate of expected losses in Customers' loans and leases receivable portfolio, excluding commercial mortgage warehouse loans reported at fair value pursuant to a fair value option election and PPP loans receivable. Commercial and industrial including specialty lending, multifamily, owner occupied commercial real estate, non-owner occupied commercial real estate, construction, and residential real estateconstruction 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. ManufacturedResidential real estate, manufactured housing and other consumerinstallment loans are evaluated based on the payment activity of the loan.
To facilitate the monitoring of credit quality within the multi-family, commercial and industrial including specialty lending, multifamily, owner occupied commercial real estate, non-owner occupied commercial real estate, and construction loan portfolios, and residential real estate classes, and for purposes of analyzing historical loss rates usedas an input in the determination of the allowance for loan lossesACL lifetime loss rate model for the respectivecommercial and industrial loan portfolio, class, the Bank utilizes the following categories of risk ratings: pass/satisfactory (includes risk rating 1 through 6), special mention, substandard, doubtful, and loss. The risk rating categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass/satisfactoryPass ratings, which are

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

loans and leases. The 2022 Form 10-K describes Customers Bancorp’s risk rating grades are defined as follows:
“1” – Pass/Excellent
Loans rated 1 represent a credit extension of the highest quality. The borrower’s historic (at least five years) cash flows manifest extremely large and stable margins of coverage. Balance sheets are conservative, well capitalized, and liquid. After considering debt service for proposed and existing debt, projected cash flows continue to be strong and provide ample coverage. The borrower typically reflects broad geographic and product diversification and has access to alternative financial markets.
“2” – Pass/Superior
Loans rated 2 are those for which the borrower has a strong financial condition, balance sheet, operations, cash flow, debt capacity and coverage with ratios better than industry norms. The borrowers of these loans exhibit a limited leverage position, are virtually immune to local economies, and are in stable growing industries. The management team is well respected and the company has ready access to public markets.
“3” – Pass/Strong
Loans rated 3 are those loans for which the borrowers have above average financial condition and flexibility; more than satisfactory debt service coverage; balance sheet and operating ratios are consistent with or better than industry peers; operate in industries with little risk; move in diversified markets; and are experienced and competent in their industry. These borrowers’ access to capital markets is limited mostly to private sources, often secured, but the borrower typically has access to a wide range of refinancing alternatives.
“4” – Pass/Good
Loans rated 4 have a sound primary and secondary source of repayment. The borrower may have access to alternative sources of financing, but sources are not as widely available as they are to a higher grade borrower. These loans carry a normal level of risk, with very low loss exposure. The borrower has the ability to perform according to the terms of the credit facility. The margins of cash flow coverage are satisfactory but vulnerable to more rapid deterioration than the higher quality loans.
“5” – Satisfactory
Loans rated 5 are extended to borrowers who are determined to be a reasonable credit risk and demonstrate the ability to repay the debt from normal business operations. Risk factors may include reliability of margins and cash flows, liquidity, dependence on a single product or industry, cyclical trends, depth of management, or limited access to alternative financing sources. The borrower’s historical financial information may indicate erratic performance, but current trends are positive and the quality of financial information is adequate, but is not as detailed and sophisticated as information found on higher grade loans. If adverse circumstances arise, the impact on the borrower may be significant.
“6” – Satisfactory/Bankable with Care
Loans rated 6 are those for which the borrower has higher than normal credit risk; however, cash flow and asset values are generally intact. These borrowers may exhibit declining financial characteristics, with increasing leverage and decreasing liquidity and may have limited resources and access to financial alternatives. Signs of weakness in these borrowers may include delinquent taxes, trade slowness and eroding profit margins.
“7” – Special Mention
Loans rated Special Mention are credit facilities that may have potential developing weaknesses and deserve extra attention from the account manager and other management personnel. In the event potential weaknesses are not corrected or mitigated, deterioration in the ability of the borrower to repay the debt in the future may occur. This grade is not assigned to loans that

bear certain peculiar risks normally associated with the type of financing involved, unless circumstances have caused the risk to increase to a level higher than would have been acceptable when the credit was originally approved. Loans where significant actual, not potential, weaknesses or problems are clearly evident are graded in the category below.
“8” – Substandard
Loans are classified Substandard when the loans are inadequately protected by the current sound worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the company will sustain some loss if the weaknesses are not corrected.
“9” – Doubtful
The Bank assigns a doubtful rating to loans that have all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to the advantage of and strengthen the credit quality of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceeding, capital injection, perfecting liens on additional collateral or refinancing plans.
“10” – Loss
The Bank assigns a loss rating to loans considered uncollectible and of such little value that their continuance as an active asset is not warranted. Amounts classified as loss are immediately charged off.grades.
Risk ratings are not established for certain consumer loans, including residential real estate, home equity, manufactured housing, and installment loans, mainly because these portfolios consist of a larger number of homogeneous loans with smaller balances. Instead, these portfolios are evaluated for risk mainly based upon aggregate payment history through the monitoring of delinquency levels and trends and are classified as performing and non-performing.
The following tables present the credit ratings of loans and leases receivable and current period gross write-offs as of September 30, 2017March 31, 2023 and December 31, 2016.2022.
25
 September 30, 2017
 Multi-family 
Commercial
and
Industrial
 
Commercial
Real Estate Owner Occupied
 Commercial Real Estate Non-Owner Occupied Construction 
Residential
Real Estate
 Manufactured Housing Other Consumer Total
(amounts in thousands)              
Pass/Satisfactory$3,577,304
 $1,080,797
 $468,389
 $1,212,945
 $73,203
 $431,364
 $—
 $—
 $6,844,002
Special Mention36,604
 8,663
 9,716
 22,008
 —
 —
 —
 —
 76,991
Substandard5,081
 25,762
 8,462
 2,896
 —
 3,824
 —
 —
 46,025
Performing (1)—
 —
 —
 —
 —
 —
 85,537
 3,694
 89,231
Non-performing (2)—
 —
 —
 —
 —
 —
 7,401
 125
 7,526
Total$3,618,989
 $1,115,222
 $486,567
 $1,237,849
 $73,203
 $435,188
 $92,938
 $3,819
 $7,063,775

Term Loans Amortized Cost Basis by Origination Year as of
March 31, 2023
(amounts in thousands)20232022202120202019PriorRevolving loans amortized cost basisRevolving loans converted to termTotal
Commercial and industrial loans and leases, including specialty lending:
Pass$706,320 $2,821,406 $610,166 $205,708 $169,511 $116,433 $1,969,270 $78,949 $6,677,763 
Special mention6,000 10,967 355 23,813 — 1,637 1,795 215 44,782 
Substandard— 3,000 23,696 4,672 8,327 44,779 7,845 — 92,319 
Doubtful— — — — — — — — — 
Total commercial and industrial loans and leases$712,320 $2,835,373 $634,217 $234,193 $177,838 $162,849 $1,978,910 $79,164 $6,814,864 
Commercial and industrial loans and leases charge-offs:
Three Months Ended March 31, 2023$— $— $7 $— $— $153 $— $— $160 
Multifamily loans:
Pass$— $1,255,264 $361,915 $129,659 $21,944 $324,392 $— $— $2,093,174 
Special mention— — — — — 60,200 — — 60,200 
Substandard— — 1,492 — — 40,345 — — 41,837 
Doubtful— — — — — — — — — 
Total multifamily loans$— $1,255,264 $363,407 $129,659 $21,944 $424,937 $— $— $2,195,211 
Multifamily loans charge-offs:
Three Months Ended March 31, 2023$— $— $— $— $— $— $— $— $— 
Commercial real estate owner occupied loans:
Pass$24,001 $304,107 $206,692 $107,215 $91,158 $142,199 $— $— $875,372 
Special mention— — — — 350 1,962 — — 2,312 
Substandard— — — — 134 17,496 — — 17,630 
Doubtful— — — — — — — — 
Total commercial real estate owner occupied loans$24,001 $304,107 $206,692 $107,215 $91,642 $161,657 $— $— $895,314 
Commercial real estate owner occupied loans charge-offs:
Three Months Ended March 31, 2023$— $— $— $— $— $— $— $— $— 
Commercial real estate non-owner occupied:
Pass$668 $332,095 $116,170 $152,613 $71,417 $421,225 $— $— $1,094,188 
Special mention— — — 21,083 — 8,609 — — 29,692 
Substandard— 10,910 — — 28,473 81,985 — — 121,368 
Doubtful— — — — — — — — — 
Total commercial real estate non-owner occupied loans$668 $343,005 $116,170 $173,696 $99,890 $511,819 $— $— $1,245,248 
Commercial real estate non-owner occupied loans charge-offs:
Three Months Ended March 31, 2023$— $— $— $— $— $4,239 $— $— $4,239 
Construction:
Pass$— $93,193 $41,077 $9,918 $28,512 $13,755 $568 $1,100 $188,123 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Total construction loans$— $93,193 $41,077 $9,918 $28,512 $13,755 $568 $1,100 $188,123 
Construction loans charge-offs:
Three Months Ended March 31, 2023$— $— $— $— $— $— $— $— $— 
Total commercial loans and leases receivable$736,989 $4,830,942 $1,361,563 $654,681 $419,826 $1,275,017 $1,979,478 $80,264 $11,338,760 
26
 December 31, 2016
 Multi-family Commercial
and
Industrial		 Commercial
Real Estate Owner Occupied		 Commercial Real Estate Non-Owner Occupied Construction Residential
Real Estate		 Manufactured
Housing		 Other Consumer Total
(amounts in thousands)              
Pass/Satisfactory$3,198,290
 $954,846
 $375,919
 $1,175,850
 $50,291
 $189,919
 $—
 $—
 $5,945,115
Special Mention—
 19,552
 12,065
 10,824
 14,498
 —
 —
 —
 56,939
Substandard16,709
 14,313
 5,648
 7,041
 —
 3,583
 —
 —
 47,294
Performing (1)—
 —
 —
 —
 —
 —
 92,920
 3,413
 96,333
Non-performing (2)—
 —
 —
 —
 —
 —
 8,810
 70
 8,880
Total$3,214,999
 $988,711
 $393,632
 $1,193,715
 $64,789
 $193,502
 $101,730
 $3,483
 $6,154,561
Term Loans Amortized Cost Basis by Origination Year as of
March 31, 2023
(amounts in thousands)20232022202120202019PriorRevolving loans amortized cost basisRevolving loans converted to termTotal
Commercial loans and leases receivable charge-offs:
Three Months Ended March 31, 2023$— $— $7 $— $— $4,392 $— $— $4,399 
Residential real estate loans:
Performing$2,825 $172,464 $151,252 $6,690 $15,856 $74,745 $64,870 $— $488,702 
Non-performing— 271 457 234 434 4,282 435 — 6,113 
Total residential real estate loans$2,825 $172,735 $151,709 $6,924 $16,290 $79,027 $65,305 $— $494,815 
Residential real estate loans charge-offs:
Three Months Ended March 31, 2023$— $— $— $— $— $— $— $— $— 
Manufactured housing loans:
Performing$— $— $— $— $— $40,173 $— $— $40,173 
Non-performing— — — — 211 2,888 — — 3,099 
Total manufactured housing loans$— $— $— $— $211 $43,061 $— $— $43,272 
Manufactured housing loans charge-offs:
Three Months Ended March 31, 2023$— $— $— $— $— $— $— $— $— 
Installment loans:
Performing$38,376 $602,558 $338,980 $105,550 $103,290 $8,934 $60,349 $— $1,258,037 
Non-performing— 5,426 3,007 737 1,035 156 107 — 10,468 
Total installment loans$38,376 $607,984 $341,987 $106,287 $104,325 $9,090 $60,456 $— $1,268,505 
Installment loans charge-offs:
Three Months Ended March 31, 2023$1,724 $4,192 $6,856 $1,655 $1,933 $355 $— $— $16,715 
Total consumer loans$41,201 $780,719 $493,696 $113,211 $120,826 $131,178 $125,761 $— $1,806,592 
Consumer loans charge-offs:
Three Months Ended March 31, 2023$1,724 $4,192 $6,856 $1,655 $1,933 $355 $— $— $16,715 
Loans and leases receivable$778,190 $5,611,661 $1,855,259 $767,892 $540,652 $1,406,195 $2,105,239 $80,264 $13,145,352 
Loans and leases receivable charge-offs:
Three Months Ended March 31, 2023$1,724 $4,192 $6,863 $1,655 $1,933 $4,747 $— $— $21,114 


(1)Includes consumer and other installment loans not subject to risk ratings.
(2)Includes loans that are past due and still accruing interest and loans on nonaccrual status.

27
Term Loans Amortized Cost Basis by Origination Year as of December 31, 2022
(amounts in thousands)20222021202020192018PriorRevolving loans amortized cost basisRevolving loans converted to termTotal
Commercial and industrial loans and leases, including specialty lending:
Pass$3,206,250 $682,132 $242,516 $198,866 $56,572 $83,417 $2,066,349 $— $6,536,102 
Special mention11,134 6,023 27,780 — 1,501 172 2,599 — 49,209 
Substandard— 22,917 967 8,431 6,713 39,554 8,937 — 87,519 
Doubtful— — — — — — — — — 
Total commercial and industrial loans and leases$3,217,384 $711,072 $271,263 $207,297 $64,786 $123,143 $2,077,885 $— $6,672,830 
Multifamily loans:
Pass$1,260,544 $364,047 $130,656 $22,167 $112,212 $203,215 $— $— $2,092,841 
Special mention— — — — 4,959 50,858 — — 55,817 
Substandard— 1,500 — — — 62,861 — — 64,361 
Doubtful— — — — — — — — — 
Total multifamily loans$1,260,544 $365,547 $130,656 $22,167 $117,171 $316,934 $— $— $2,213,019 
Commercial real estate owner occupied loans:
Pass$293,096 $220,515 $105,925 $90,752 $34,196 $121,616 $— $— $866,100 
Special mention— — — — 134 1,841 — — 1,975 
Substandard— — — 134 10,569 6,561 — — 17,264 
Doubtful— — — — — — — — — 
Total commercial real estate owner occupied loans$293,096 $220,515 $105,925 $90,886 $44,899 $130,018 $— $— $885,339 
Commercial real estate non-owner occupied:
Pass$339,044 $119,304 $156,281 $73,827 $62,237 $386,235 $— $— $1,136,928 
Special mention— — 21,211 — — 10,617 — — 31,828 
Substandard10,910 — — 28,656 8,198 74,210 — — 121,974 
Doubtful— — — — — — — — — 
Total commercial real estate non-owner occupied loans$349,954 $119,304 $177,492 $102,483 $70,435 $471,062 $— $— $1,290,730 
Construction:
Pass$72,177 $36,114 $9,537 $28,644 $4,696 $9,112 $1,729 $— $162,009 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Total construction loans$72,177 $36,114 $9,537 $28,644 $4,696 $9,112 $1,729 $— $162,009 
Total commercial loans and leases receivable$5,193,155 $1,452,552 $694,873 $451,477 $301,987 $1,050,269 $2,079,614 $— $11,223,927 
Residential real estate loans:
Performing$162,217 $148,217 $7,224 $17,128 $10,739 $77,762 $67,782 $— $491,069 
Non-performing271 366 238 441 1,425 3,357 785 — 6,883 
Total residential real estate loans$162,488 $148,583 $7,462 $17,569 $12,164 $81,119 $68,567 $— $497,952 
Manufactured housing loans:
Performing$— $— $— $213 $103 $41,918 $— $— 42,234 
Non-performing— — — — — 2,842 — — 2,842 
Total manufactured housing loans$— $— $— $213 $103 $44,760 $— $— $45,076 
Installment loans:
Performing$785,699 $305,729 $100,173 $100,570 $8,430 $782 $64,690 $— $1,366,073 
Non-performing5,164 4,356 1,023 1,111 61 59 92 — 11,866 
Total installment loans$790,863 $310,085 $101,196 $101,681 $8,491 $841 $64,782 $— $1,377,939 
Total consumer loans$953,351 $458,668 $108,658 $119,463 $20,758 $126,720 $133,349 $— $1,920,967 
Loans and leases receivable$6,146,506 $1,911,220 $803,531 $570,940 $322,745 $1,176,989 $2,212,963 $— $13,144,894 

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Loan Purchases and Sales
In first quarter 2017, Customers purchased $174.2 millionPurchases and sales of thirty-year fixed-rate residential mortgage loans from Florida-based Everbank.were as follows for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
(amounts in thousands)20232022
Purchases (1)
Other commercial and industrial$5,445 $— 
Commercial real estate owner occupied2,867 — 
Residential real estate4,238 146,874 
Personal installment (2)
— 59,456 
Total$12,550 $206,330 
Sales (3)
Other commercial and industrial (4)
$— $8,840 
Commercial real estate owner occupied (4)
— 5,441 
Total$— $14,281 
(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 98.5%101.9% and 98.1% of loans outstanding. In second quarter 2017, Customers purchased an additional $90.0 million of thirty-year fixed-rate residential mortgage loans from Everbank. The purchase price was 101.0% of loans outstanding. There were no loan purchases duringthe loans' unpaid principal balance for the three months ended September 30, 2017March 31, 2023 and during2022, respectively.
(2)Installment loan purchases for the three or nine months ended September 30, 2016.March 31, 2023 and 2022 consist of third-party originated unsecured consumer loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

In first quarter 2017, Customers sold $94.9(3)There were no sales of loans held for investment for the three months ended March 31, 2023. Gains of $1.5 million from the sales of multi-family loans held for $95.4 million resultinginvestment for the three months ended March 31, 2022 are included in a gain (loss) on sale of $0.5 millionSBA and $8.7 millionother loans in the consolidated statement of Small Business Administration (SBA) loans resulting in a gain on sale of $0.8 million. In second quarter 2017, Customers sold $7.0 millionincome.
(4)Primarily sales of SBA loans resulting in a gain on sale of $0.6 million. In third quarter 2017, Customers sold $11.0 million of SBA loans resulting in a gain on sale of $1.1 million. In first quarter 2016, Customers sold $6.9 million of SBA loans resulting in a gain on sale of $0.6 million. In second quarter 2016, Customers sold one commercial loan amounting to $5.7 million resulting in a loss on sale of $0.1 million and $3.6 million of SBA loans resulting in a gain on sale of $0.4 million. There were no loan sales during the third quarter 2016.loans.

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

Loans Pledged as Collateral
Customers has pledged eligible real estate, commercial and industrial, mortgage warehouse, PPP and consumer installment loans as collateral for potential borrowings outstanding or available immediately from the Federal Home Loan Bank of Pittsburgh ("FHLB")FHLB and FRB in the amount of $5.5$9.9 billion and $7.1 billion at September 30, 2017, compared to $4.8 billion atMarch 31, 2023 and December 31, 2016.2022, respectively.
NOTE 8 — LEASES
Lessee
Customers has operating leases for its branches, certain LPOs, and administrative offices, with remaining lease terms ranging between one month and ten years. These operating leases comprise substantially all of Customers' obligations in which Customers is the lessee. These lease agreements typically consist of initial lease terms ranging between one and ten years, with options to renew the leases or extend the term up to ten years at Customers' sole discretion. Some operating leases include variable lease payments that are based on an index or rate, such as the CPI. Variable lease payments are not included in the liability or ROU asset and are recognized in the period in which the obligation for those payments are incurred. Customers' operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, Customers does not have any commitments that would meet the definition of a finance lease.
As most of Customers' operating leases do not provide an implicit rate, Customers utilized its incremental borrowing rate when determining the present value of lease payments.
The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding balance sheet location:
(amounts in thousands)ClassificationMarch 31, 2023December 31, 2022
ASSETS
Operating lease ROU assetsOther assets$18,509 $16,133 
LIABILITIES
Operating lease liabilitiesOther liabilities$21,067 $19,046 
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The following table summarizes operating lease cost and its corresponding income statement location for the periods presented:
Three Months Ended March 31,
(amounts in thousands)Classification20232022
Operating lease cost (1)
Occupancy expenses$1,218 $998 
(1) There were no variable lease costs for the three months ended March 31, 2023 and 2022, and sublease income for operating leases was immaterial.
Maturities of non-cancelable operating lease liabilities were as follows at March 31, 2023:
(amounts in thousands)March 31, 2023
2023$4,096 
20244,701 
20253,650 
20262,880 
20272,369 
Thereafter5,524 
Total minimum payments23,220 
Less: interest2,153 
Present value of lease liabilities$21,067 
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 $1.7 million and $1.2 million for the three months ended March 31, 2023 and 2022, respectively. These payments were reported as cash flows used in operating activities in the statement of cash flows.
The following table summarizes the weighted average remaining lease term and discount rate for Customers' operating leases at March 31, 2023 and December 31, 2022:
March 31, 2023December 31, 2022
Weighted average remaining lease term (years)
Operating leases5.9 years5.1 years
Weighted average discount rate
Operating leases3.15 %2.85 %
Equipment Lessor
CCF is a wholly-owned subsidiary of Customers Bank and is referred to as the Equipment Finance Group. The Equipment Finance Group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The Equipment Finance Group is primarily focused on serving the following segments: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. Lease terms typically range from 24 months to 120 months. The Equipment Finance Group offers the following products: Loans, Capital Lease, PUT, TRAC, Split-TRAC, and FMV. Direct finance equipment leases are included in commercial and industrial loans and leases receivable.
The estimated residual values for direct finance and operating leases are established by utilizing internally developed analyses, external studies, and/or third-party appraisals to establish a residual position. For the direct finance leases, only Customers' Split-TRAC leases have residual risk and the unguaranteed portions are typically nominal. Expected credit losses on direct financing leases and the related estimated residual values are included in the ACL on loans and leases.
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Leased assets under operating leases are carried at amortized cost net of accumulated depreciation, and any impairment charges and are presented in other assets. The depreciation expense of the leased assets is recognized on a straight-line basis over the contractual term of the leases up to the expected residual value. The expected residual value and, accordingly, the monthly depreciation expense, may change throughout the term of the lease. Operating lease rental income for leased assets is recognized in commercial lease income on a straight-line basis over the lease term. Customers periodically reviews its operating leased assets for impairment. An impairment loss is recognized if the carrying amount of the operating leased asset exceeds its fair value and is not recoverable. The carrying amount of operating leased assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value upon the eventual disposition of the equipment.
The following table summarizes lease receivables and investment in operating leases and their corresponding balance sheet location at March 31, 2023 and December 31, 2022:
(amounts in thousands)ClassificationMarch 31, 2023December 31, 2022
ASSETS
Direct financing leases
Lease receivablesLoans and leases receivable$152,650 $140,182 
Guaranteed residual assetsLoans and leases receivable12,043 12,370 
Unguaranteed residual assetsLoans and leases receivable8,419 7,555 
Deferred initial direct costsLoans and leases receivable1,056 667 
Unearned incomeLoans and leases receivable(5,398)(3,404)
Net investment in direct financing leases$168,770 $157,370 
Operating leases
Investment in operating leasesOther assets$251,027 $248,454 
Accumulated depreciationOther assets(60,350)(52,585)
Deferred initial direct costsOther assets1,385 1,461 
Net investment in operating leases192,062 197,330 
Total lease assets$360,832 $354,700 
Maturities of operating and direct financing lease receivables were as follows at March 31, 2023:
(amounts in thousands)Operating leasesDirect financing leases
2023$37,253 $30,229 
202435,972 37,402 
202532,256 28,074 
202637,305 22,519 
202726,746 18,792 
Thereafter59,528 17,585 
Total minimum payments$229,060 154,601 
Less: interest1,951 
Present value of lease receivables$152,650 
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NOTE 9 – DEPOSITS
The components of deposits at March 31, 2023 and December 31, 2022 were as follows:
March 31, 2023December 31, 2022
(amounts in thousands)
Demand, non-interest bearing$3,487,517 $1,885,045 
Demand, interest bearing5,791,302 8,476,027 
Savings, including money market deposit accounts2,943,992 3,546,015 
Time5,500,806 4,249,866 
Total deposits$17,723,617 $18,156,953 
The scheduled maturities for time deposits at March 31, 2023 were as follows:
(amounts in thousands)March 31, 2023
2023$2,846,450 
20242,255,828 
2025121,435 
2026275,909 
20271,144 
Thereafter40 
Total time deposits$5,500,806 
Time deposits greater than the FDIC limit of $250,000 totaled $61.1 million and $85.5 million at March 31, 2023 and December 31, 2022, respectively.
Included in the demand, interest bearing balances above were $755.4 million and $553.2 million of brokered demand deposits at March 31, 2023 and December 31, 2022, respectively. Included in the savings and money market deposit account balances above were $10.4 million and $415.7 million of brokered money market deposits at March 31, 2023 and December 31, 2022, respectively. Included in time deposits above were $5.3 billion and $4.0 billion of brokered time deposits at March 31, 2023 and December 31, 2022, respectively.
Demand deposit overdrafts reclassified as loans were $2.4 million and $3.7 million at March 31, 2023 and December 31, 2022, respectively.
In 2021, Customers Bancorp completed the divestiture of BMT, the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC. In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” In connection with the divestiture, Customers entered into various agreements with BM Technologies, including a deposit servicing agreement. Customers incurred expenses of $7.6 million and $17.8 million to BM Technologies under the deposit servicing agreement, included within the technology, communication and bank operations expense in non-interest expense during the three months ended March 31, 2023 and 2022, respectively. Customers held $1.1 billion of deposits serviced by BM Technologies as of March 31, 2023 and December 31, 2022. On March 22, 2023, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits in connection with BM Technologies' Higher Education business to a new sponsor bank or June 30, 2024. Also on March 22, 2023, Customers agreed to amend and extend an existing white label relationship with a third party and BM Technologies, whereby Customers will continue to pay deposit servicing fees to BM Technologies.
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NOTE 10 - BORROWINGS

Short-term debt
InShort-term debt at March 31, 2023 and December 31, 2022 was as follows:
 March 31, 2023December 31, 2022
(dollars in thousands)AmountRateAmountRate
FHLB advances— — %300,000 4.54 %
Total short-term debt$— $300,000 
The following is a summary of additional information relating to Customers' short-term debt:
(dollars in thousands)
March 31, 2023 (1)
December 31, 2022 (2)
FRB advances (3)
Maximum outstanding at any month end$— $— 
Average balance during the period487,067 — 
Weighted-average interest rate during the period5.23 %— %
FHLB advances
Maximum outstanding at any month end— 775,000 
Average balance during the period354,482 144,918 
Weighted-average interest rate during the period5.16 %1.07 %
Federal funds purchased
Maximum outstanding at any month end— 895,000 
Average balance during the period15,333 349,581 
Weighted-average interest rate during the period4.97 %1.66 %
(1)    For the three months ended March 31, 2023.
(2)    For the year ended December 31, 2022.
(3)    Includes advances under the BTFP. The BTFP offers loans of up to one year to eligible depository institutions pledging any collateral valued at par, that are eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.
At March 31, 2023 and December 31, 2022, Customers Bank had aggregate availability under federal funds lines totaling $1.7 billion.
Long-term debt
FHLB and FRB advances
Long-term FHLB and FRB advances at March 31, 2023 and December 31, 2022 were as follows:
March 31, 2023December 31, 2022
(dollars in thousands)AmountRateAmountRate
FHLB advances (1)(2)
$2,052,143 4.64 %$500,000 3.37 %
Total long-term FHLB and FRB advances$2,052,143 $500,000 
(1)    Amounts reported in the above table include variable and fixed rate long-term advances from FHLB of $1.1 billion with maturities ranging from June 2017,2024 to September 2026 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bancorp issued $100Bank's option, and fixed rate long-term advances of $950.0 million with maturities ranging from March 2025 to March 2028, at March 31, 2023.
(2)    Includes $2.1 million of unamortized basis adjustments from a terminated interest rate swap designated as a fair value hedge of a long-term advance from FHLB of $250 million with a fixed rate of 3.30% and maturity of June 2027, at March 31, 2023.
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Maturities of long-term FHLB advances were as follows at March 31, 2023:
March 31, 2023
(dollars in thousands)
Amount (1)
Rate
2024$420,000 4.26 %
2025540,000 5.21 %
2026540,000 5.23 %
2027450,000 3.70 %
Thereafter100,000 4.19 %
Total long-term FHLB advances$2,050,000 
(1)    Amounts reported in the above table include variable and fixed rate long-term advances from FHLB of $1.1 billion with maturities ranging from June 2024 to September 2026 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank's option.

The maximum borrowing capacity with the FHLB and FRB at March 31, 2023 and December 31, 2022 was as follows:
(amounts in thousands)March 31, 2023December 31, 2022
Total maximum borrowing capacity with the FHLB$3,307,772 $3,241,120 
Total maximum borrowing capacity with the FRB (1)
6,516,922 2,510,189 
Qualifying loans and securities (1) serving as collateral against FHLB and FRB advances
12,079,694 7,142,865 
(1)    Includes $508.2 million of borrowing capacity available under the BTFP, which offers loans of up to one year to eligible depository institutions pledging any collateral valued at par, that are eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.
Senior and Subordinated Debt
Long-term senior notes and subordinated debt at 99.775% of face value. The price to purchasers represents a yield-to-maturity of 4.0% on the fixed coupon rate of 3.95%. March 31, 2023 and December 31, 2022 were as follows:
March 31, 2023December 31, 2022
(dollars in thousands)
Issued byRankingCarrying AmountCarrying AmountRateIssued AmountDate IssuedMaturityPrice
Customers Bancorp
Senior (1)
$98,823 $98,788 2.875 %$100,000 August 2021August 2031100.000 %
Customers BancorpSenior24,822 24,792 4.500 %25,000 September 2019September 2024100.000 %
Total other borrowings$123,645 $123,580 
Customers Bancorp
Subordinated (2)(3)
$72,630 $72,585 5.375 %$74,750 December 2019December 2034100.000 %
Customers Bank
Subordinated (2)(4)
109,391 109,367 6.125 %110,000 June 2014June 2029100.000 %
Total subordinated debt$182,021 $181,952 
(1)The senior notes maturewill bear an annual fixed rate of 2.875% until August 15, 2026. From August 15, 2026 until maturity, the notes will bear an annual interest rate equal to a benchmark rate, which is expected to be the three-month term SOFR after June 30, 2023, plus 235 basis points. Customers Bancorp has the ability to call the senior notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after August 15, 2026.
(2)The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.
(3)Customers Bancorp has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after December 30, 2029.
(4)The subordinated notes will bear an annual fixed rate of 6.125% until June 2022.

The net proceeds26, 2024. From June 26, 2024 until maturity, the notes will bear an annual interest rate equal to Customers after deducting the underwriting discount and estimated offering expenses were approximately $98.6 million. The net proceeds were contributed tothree-month LIBOR plus 344.3 basis points. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.
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NOTE 11 — SHAREHOLDERS’ EQUITY
Common Stock
On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). The term of the Share Repurchase Program was extended to September 27, 2023, unless earlier terminated. Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise. The exact number of shares, timing for purposessuch purchases, and the price and terms at and on which such purchases are to be made will be at the discretion of the Company and will comply with all applicable regulatory limitations. Customers Bancorp purchased 1,379,883 shares of its working capital needscommon stock for $39.8 million and 115,324 shares for $6.3 million under the Share Repurchase Program during the three months ended March 31, 2023 and 2022, respectively.
Preferred Stock
As of March 31, 2023 and December 31, 2022, Customers Bancorp has two series of preferred stock outstanding. The table below summarizes Customers' issuances of preferred stock that remain outstanding at March 31, 2023 and December 31, 2022 and the funding of its organic growth.dividends paid per share.
(amounts in thousands except share and per share data)Shares atCarrying value atInitial Fixed RateDate at which dividend rate becomes floating and earliest redemption dateFloating rate of Three-Month LIBOR Plus:
Dividend Paid Per Share in 2023 (1)
Fixed-to-floating rate:Issue DateMarch 31, 2023December 31, 2022March 31, 2023December 31, 2022
Series EApril 28, 20162,300,0002,300,000$55,593 $55,593 6.45 %June 15, 20215.140 %$0.62 
Series FSeptember 16, 20163,400,0003,400,00082,201 82,201 6.00 %December 15, 20214.762 %$0.60 
Totals5,700,0005,700,000$137,794 $137,794 

(1) For the three months ended March 31, 2023.
NOTE 1112 — REGULATORY CAPITAL
The Bank and the Bancorp are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can result in certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on Customers' financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and the Bancorp must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under the regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.
In first quarter 2020, the U.S federal banking regulatory agencies permitted banking organizations to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 31, 2020, the U.S. federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows banking organizations to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. Customers has elected to adopt the interim final rule, which is reflected in the regulatory capital data presented below. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of March 31, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions.
In April 2020, the U.S. federal banking regulatory agencies issued an interim final rule that permits banks to exclude the impact of participating in the SBA PPP program in their regulatory capital ratios. Specifically, PPP loans are zero percent risk weighted and a bank can exclude all PPP loans pledged as collateral to the PPPLF from its average total consolidated assets for purposes of calculating the Tier 1 capital to average assets ratio (i.e. a leverage ratio). Customers applied this regulatory guidance in the calculation of its regulatory capital ratios presented below.
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, 2017March 31, 2023 and December 31, 2016,2022, the Bank and the Bancorp satisfied all capital requirements to which they were subject.
The Dodd-Frank Act required the Federal Reserve Bank to establish minimum consolidated capital requirements for bank holding companies that are as stringent as those required for insured depositary subsidiaries. In 2013, the federal banking agencies approved rules that implemented the Dodd-Frank requirements and certain other regulatory capital reforms effective January 1, 2015, that (i) introduced a new capital ratio pursuant to the prompt corrective action provisions, the common equity tier 1 capital to risk weighted assets ratio, (ii) increased the adequately capitalized and well capitalized thresholds for the Tier 1
35

risk based capital ratios to 6% and 8%, respectively, (iii) changed the treatment of certain capital components for determining Tier 1 and Tier 2 capital, and (iv) changed the risk weighting of certain assets and off-balance sheet items in determining risk weighted assets.
Generally, to be consideredcomply 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 basedrisk-based capital ratios and the Tier 1 leverage ratio in excess of the related minimum ratios as set forth in the following table:
 Actual For Capital Adequacy Purposes (Minimum Plus Capital Buffer) 
To Be Well Capitalized Under
Prompt Corrective Action
Provisions
(amounts in thousands)Amount Ratio Amount Ratio Amount Ratio
As of September 30, 2017:           
Common equity Tier 1 capital (to risk weighted assets)           
Customers Bancorp, Inc.$677,976
 8.284% $470,603
 5.750% N/A
 N/A
Customers Bank$1,009,380
 12.342% $470,242
 5.750% $531,578
 6.500%
Tier 1 capital (to risk weighted assets)           
Customers Bancorp, Inc.$895,447
 10.941% $593,369
 7.250% N/A
 N/A
Customers Bank$1,009,380
 12.342% $592,914
 7.250% $654,250
 8.000%
Total capital (to risk weighted assets)           
Customers Bancorp, Inc.$1,014,784
 12.399% $757,057
 9.250% N/A
 N/A
Customers Bank$1,156,766
 14.145% $756,477
 9.250% $817,813
 10.000%
Tier 1 capital (to average assets)           
Customers Bancorp, Inc.$895,447
 8.355% $428,709
 4.000% N/A
 N/A
Customers Bank$1,009,380
 9.434% $427,963
 4.000% $534,954
 5.000%
As of December 31, 2016:           
Common equity Tier 1 capital (to risk weighted assets)           
Customers Bancorp, Inc.$628,139
 8.487% $379,306
 5.125% N/A
 N/A
Customers Bank$857,421
 11.626% $377,973
 5.125% $479,380
 6.500%
Tier 1 capital (to risk weighted assets)           
Customers Bancorp, Inc.$844,755
 11.414% $490,322
 6.625% N/A
 N/A
Customers Bank$857,421
 11.626% $488,599
 6.625% $590,006
 8.000%
Total capital (to risk weighted assets)           
Customers Bancorp, Inc.$966,097
 13.053% $638,343
 8.625% N/A
 N/A
Customers Bank$1,003,609
 13.608% $636,101
 8.625% $737,508
 10.000%
Tier 1 capital (to average assets)           
Customers Bancorp, Inc.$844,755
 9.067% $372,652
 4.000% N/A
 N/A
Customers Bank$857,421
 9.233% $371,466
 4.000% $464,333
 5.000%

Minimum Capital Levels to be Classified as:
 ActualAdequately CapitalizedWell CapitalizedBasel III Compliant
(dollars in thousands)AmountRatioAmountRatioAmountRatioAmountRatio
As of March 31, 2023:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,466,676 9.624 %$685,809 4.500 %N/AN/A$1,066,814 7.000 %
Customers Bank$1,721,118 11.313 %$684,636 4.500 %$988,919 6.500 %$1,064,990 7.000 %
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,604,469 10.528 %$914,412 6.000 %N/AN/A$1,295,417 8.500 %
Customers Bank$1,721,118 11.313 %$912,848 6.000 %$1,217,131 8.000 %$1,293,202 8.500 %
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,878,449 12.326 %$1,219,216 8.000 %N/AN/A$1,600,221 10.500 %
Customers Bank$1,922,468 12.636 %$1,217,131 8.000 %$1,521,414 10.000 %$1,597,485 10.500 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc.$1,604,469 7.534 %$851,851 4.000 %N/AN/A$851,851 4.000 %
Customers Bank$1,721,118 8.092 %$850,809 4.000 %$1,063,511 5.000 %$850,809 4.000 %
As of December 31, 2022:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,470,837 9.637 %$686,838 4.500 %N/AN/A$1,068,415 7.000 %
Customers Bank$1,708,598 11.213 %$685,694 4.500 %$990,447 6.500 %$1,066,636 7.000 %
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,608,630 10.539 %$915,784 6.000 %N/AN/A$1,297,361 8.500 %
Customers Bank$1,708,598 11.213 %$914,259 6.000 %$1,219,012 8.000 %$1,295,201 8.500 %
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,862,089 12.200 %$1,221,045 8.000 %N/AN/A$1,602,622 10.500 %
Customers Bank$1,889,472 12.400 %$1,219,012 8.000 %$1,523,765 10.000 %$1,599,954 10.500 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc.$1,608,630 7.664 %$839,547 4.000 %N/AN/A$839,547 4.000 %
Customers Bank$1,708,598 8.150 %$838,611 4.000 %$1,048,264 5.000 %$838,611 4.000 %
The risk-based capital rules adopted effective January 1, 2015Basel III Capital Rules require that banks and holding companieswe maintain a "capital conservation buffer" of 250 basis points in excess of the "minimum capital ratio." The minimum capital ratio is equal to the prompt corrective action adequately capitalized threshold ratio. The2.500% capital conservation buffer is being phased in over four years beginning on January 1, 2016, with a maximum bufferrespect to each of 0.625% of risk weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter.

Effective January 1, 2017, the capital level required to avoid limitation on elective distributions applicable to the Bancorp and the Bank were as follows:
(i) a common equity Tier 1, capital ratio of 5.750%;
(ii) a Tier 1 Risk basedand total capital ratioto risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a conservation buffer of 7.250%; and
(iii) a Total Risk based capital ratio of 9.250%.
Failure to maintainless than the required capital conservation buffer will result inamount is subject to limitations on capital distributions, including dividend payments and onstock repurchases, and certain discretionary bonusesbonus payments to executive officers.

NOTE 1213 — DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Customers uses fair value measurements to record fair value adjustments to certain assets and liabilities and to disclose the fair value of its financial instruments. ASC Topic 825, Financial Instruments, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For Customers, as for most financial institutions, the majority of its assets and liabilities are considered to be financial instruments. Many of these financial instruments lack an available trading market as characterized by a willing buyer and a willing seller engaging in an exchange transaction. For fair value disclosure purposes, Customers utilized certain fair value measurement criteria under ASC Topic 820, Fair Value Measurements and Disclosures("ASC 820"), as explained below.
36
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, 2017March 31, 2023 and December 31, 2016:2022:
Cash and cash equivalents:
The carrying amounts reportedFinancial Instruments Recorded at Fair Value on the balance sheet for cash and cash equivalents approximate those assets’ fair values. These assets are classified as Level 1 fair values, based upon the lowest level of input that is significant to the fair value measurements.a Recurring Basis
Investment securities:
The fair values of investmentequity securities available for salewith a readily determinable fair value, AFS debt securities and debt securities reported at fair value based on a fair value option election are determined by obtaining quoted market prices on nationally recognized and foreign securities exchanges (Level 1), quoted prices in markets that are not active (Level 2), matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or internally and externally developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).
When quoted market prices are not available, Customers employs an independent pricing service that utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service's results and has an established process to challenge their valuations, or methodologies, that appear unusual or unexpected.
Customers also utilizes internally and externally developed models that use unobservable inputs due to limited or no market activity of the instrument. These models use unobservable inputs that are inherently judgmental and reflect our best estimates of the assumptions a market participant would use to calculate fair value. Certain unobservable inputs in isolation may have either a directionally consistent or opposite impact on the fair value of the instrument for a given change in that input. When multiple inputs are used within the valuation techniques, a change in one input in a certain direction may be offset by an opposite change from another input. These assets are classified as Level 1, 2 or 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
The carrying amount
37

Loans held for sale - Consumer residentialResidential mortgage loans:loans (fair value option):
The BankCustomers 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 salereceivable - Commercial mortgage warehouse loans:loans (fair value option):
The fair value of commercial mortgage warehouse loans is the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The loan is used by mortgage companies as short-term bridge financing between the funding of the mortgage loans and the finalization of the sale of the loans to an investor. Changes in fair value are not generally expected to be recognized because at inception of the transaction the underlying mortgage loans have already been sold to an approved investor. Additionally, the interest rate is variable, and the transaction is short-term, with an average life of 21under 30 days from purchase to sale. These assets are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Loans held for sale - Multifamily loans:
The fair values of multi-family loans held for sale are estimated using pricing indications from letters of intent with third party investors, recent sale transactions within the secondary markets for loans with similar characteristics, non-binding indicative bids from brokers, or estimates made by management considering current market ratesDerivatives (assets and terms. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Loans receivable, net of allowance for loan losses:
The fair values of loans held for investment are estimated using discounted cash flows and market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. These assets are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Impaired loans:
Impaired loans are those loans that are accounted for under ASC 310, Receivables, in which the Bank has measured impairment generally based on the fair value of the loan’s collateral or discounted cash flow analysis.  Fair value is generally determined based upon independent third-party appraisals of the properties that collateralize the loans or discounted cash flows based upon the expected proceeds.  These assets are generally classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Other real estate owned:
The fair value of other real estate owned ("OREO") is determined by using appraisals, which may be discounted based on management’s review and changes in market conditions or sales agreements with third parties.  All appraisals must be performed in accordance with the Uniform Standards of Professional Appraisal Practice.  Appraisals are certified to the Bank and performed by appraisers on the Bank’s approved list of appraisers.  Evaluations are completed by a person independent of management.  The content of the appraisal depends on the complexity of the property.  Appraisals are completed on a “retail value” and an “as is value”. These assets are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Deposit liabilities:
The fair values disclosed for interest and non-interest bearing checking, passbook savings and money market deposit accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  These liabilities are classified as Level 1 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. These liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Federal funds purchased:
For these short-term instruments, the carrying amount is considered a reasonable estimate of fair value. These liabilities are classified as Level 1 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Borrowings:
Borrowings consist of long-term and short-term FHLB advances, 5-year senior unsecured notes, and subordinated debt. For overnight borrowings, the carrying amounts are considered reasonable estimates of fair value and are classified as Level 1 fair value measurements. Fair values of all other FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. The prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. Fair values of privately placed subordinated and senior unsecured debt are estimated by a third-party financial adviser using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit-risk characteristics, terms and remaining maturity. These liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements. The $63 million senior unsecured notes issued during third quarter 2013 are traded on The New York Stock Exchange, and their price can be obtained daily. This fair value measurement is classified as Level 1.
Derivatives (Assets and Liabilities)liabilities):
The fair values of interest rate swaps, interest rate caps and credit derivatives are determined using models that incorporate readily observable market data into a market standard methodology. This methodology nets the discounted future cash receipts and the discounted expected cash payments. The discounted variable cash receipts and payments are based on expectations of future interest rates derived from observable market interest rate curves. In addition, fair value is adjusted for the effect of nonperformance risk by incorporating credit valuation adjustments for the BankCustomers and its counterparties. These assets and liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.
The fair values of the residential mortgage loan commitments are derived from the estimated fair values that can be generated when the underlying mortgage loan is sold in the secondary market. The BankCustomers generally uses commitments on hand from third-third party investors to estimate an exit price and adjusts for the probability of the commitment being exercised based on the Bank’sCustomers' internal experience (i.e., pull-through rate). These assets and liabilities are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Derivative assets and liabilities are presented in "Other assets"other assets and "Accruedaccrued interest payable and other liabilities"liabilities on the consolidated balance sheet.

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis
Off-balance-sheet financial instruments:Collateral-dependent loans:

TheCollateral-dependent loans are those loans that are accounted for under ASC 326, Financial Instruments - Credit Losses ("ASC 326"), in which the Bank has measured impairment generally based on the fair value of the loan’s collateral or DCF analysis. Fair value is generally determined based upon independent third-party appraisals of the properties that collateralize the loans, DCF based upon the expected proceeds, sales agreements or letters of intent with third parties. These assets are generally classified as Level 3 fair values, based upon the lowest level of unused commitmentsinput that is significant to lend and standby letters of credit are considered to be the same as their contractual amounts.fair value measurements.
The following information should not be interpreted as an estimate of Customers' fair value in its entirety because fair value calculations are only provided for a limited portion of Customers' assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making these estimates, comparisons between Customer’sCustomers' disclosures and those of other companies may not be meaningful.

38
The estimated fair values of Customers' financial instruments at September 30, 2017March 31, 2023 and December 31, 20162022 were as follows. BankMobile assets and liabilities previously reported as held for sale have been reclassified as held and used to conform with the current period presentation.follows:
   Fair Value Measurements at March 31, 2023
(amounts in thousands)Carrying AmountEstimated Fair ValueQuoted 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$2,046,685 $2,046,685 $2,046,685 $— $— 
Debt securities, available for sale2,900,259 2,900,259 — 2,836,883 63,376 
Debt securities, held to maturity870,294 836,713 — 516,978 319,735 
Loans held for sale424,057 424,057 — 16,314 407,743 
Total loans and leases receivable, net of allowance for credit losses on loans and leases14,508,696 13,973,288 — 1,247,367 12,725,921 
FHLB, Federal Reserve Bank, and other restricted stock124,733 124,733 — 124,733 — 
Derivatives34,751 34,751 — 34,686 65 
Liabilities:
Deposits$17,723,617 $17,707,705 $12,222,811 $5,484,894 $— 
FHLB advances2,052,143 2,047,365 — 2,047,365 — 
Other borrowings123,645 108,381 — 108,381 — 
Subordinated debt182,021 152,769 — 152,769 — 
Derivatives32,999 32,999 — 32,999 — 

   Fair Value Measurements at December 31, 2022
(amounts in thousands)Carrying AmountEstimated Fair ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Assets:
Cash and cash equivalents$455,806 $455,806 $455,806 $— $— 
Debt securities, available for sale2,961,015 2,961,015 — 2,887,749 73,266 
Debt securities, held to maturity840,259 793,813 — 437,680 356,133 
Loans held for sale328,312 328,312 — 322 327,990 
Total loans and leases receivable, net of allowance for credit losses on loans and leases15,335,435 14,890,823 — 1,323,312 13,567,511 
FHLB, Federal Reserve Bank, and other restricted stock74,196 74,196 — 74,196 — 
Derivatives44,435 44,435 — 44,380 55 
Liabilities:
Deposits$18,156,953 $18,127,338 $13,907,087 $4,220,251 $— 
FHLB advances800,000 781,113 — 781,113 — 
Other borrowings123,580 108,081 — 108,081 — 
Subordinated debt181,952 168,441 — 168,441 — 
Derivatives42,106 42,106 — 42,106 — 

39
     Fair Value Measurements at September 30, 2017
 
Carrying
Amount
 
Estimated
Fair Value
 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) 
Significant
Unobservable
Inputs
(Level 3)
(amounts in thousands)         
Assets:         
Cash and cash equivalents$219,480
 $219,480
 $219,480
 $—
 $—
Investment securities, available for sale584,823
 584,823
 2,311
 582,512
 —
Loans held for sale2,113,293
 2,113,473
 —
 1,963,076
 150,397
Loans receivable, net of allowance for loan losses7,023,024
 7,020,487
 —
 —
 7,020,487
FHLB, Federal Reserve Bank and other restricted stock98,611
 98,611
 —
 98,611
 —
Derivatives10,447
 10,447
 —
 10,344
 103
Liabilities:         
Deposits$7,597,076
 $7,596,324
 $5,296,636
 $2,299,688
 $—
Federal funds purchased147,000
 147,000
 147,000
 —
 —
FHLB advances1,462,343
 1,462,245
 727,343
 734,902
 —
Other borrowings186,258
 194,157
 65,704
 128,453
 —
Subordinated debt108,856
 115,500
 —
 115,500
 —
Derivatives12,092
 12,092
 —
 12,092
 —

     Fair Value Measurements at December 31, 2016
 
Carrying
Amount
 
Estimated
Fair Value
 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) 
Significant
Unobservable
Inputs
(Level 3)
(amounts in thousands)         
Assets:         
Cash and cash equivalents$264,709
 $264,709
 $264,709
 $—
 $—
Investment securities, available for sale493,474
 493,474
 15,246
 478,228
 —
Loans held for sale2,117,510
 2,117,510
 —
 2,117,510
 —
Loans receivable, net of allowance for loan losses6,117,322
 6,162,020
 —
 —
 6,162,020
FHLB, Federal Reserve Bank and other restricted stock68,408
 68,408
 —
 68,408
 —
Derivatives10,864
 10,864
 —
 10,819
 45
Liabilities:         
Deposits$7,303,775
 $7,303,663
 $4,472,013
 $2,831,650
 $—
Federal funds purchased83,000
 83,000
 83,000
 —
 —
FHLB advances868,800
 869,049
 688,800
 180,249
 —
Other borrowings87,123
 91,761
 66,261
 25,500
 —
Subordinated debt108,783
 111,375
 —
 111,375
 —
Derivatives14,172
 14,172
 —
 14,172
 —

For financial assets and liabilities measured at fair value on a recurring and nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2017March 31, 2023 and December 31, 20162022 were as follows:
 March 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$— $84,559 $63,376 $147,935 
Agency-guaranteed residential collateralized mortgage obligations— 133,753 — 133,753 
Collateralized loan obligations— 854,100 — 854,100 
Commercial mortgage-backed securities— 136,818 — 136,818 
Corporate notes— 586,795 — 586,795 
Private label collateralized mortgage obligations— 1,040,858 — 1,040,858 
Derivatives— 34,686 65 34,751 
Loans held for sale – fair value option— 314 — 314 
Loans receivable, mortgage warehouse – fair value option— 1,247,367 — 1,247,367 
Total assets – recurring fair value measurements$— $4,119,250 $63,441 $4,182,691 
Liabilities
Derivatives $— $32,999 $— $32,999 
Measured at Fair Value on a Nonrecurring Basis:
Assets
Collateral-dependent loans$— $16,000 $6,569 $22,569 
Total assets – nonrecurring fair value measurements$— $16,000 $6,569 $22,569 
40
September 30, 2017
Fair Value Measurements at the End of the Reporting Period Using December 31, 2022
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)       (amounts in thousands)Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)		Total
Measured at Fair Value on a Recurring Basis:       Measured at Fair Value on a Recurring Basis:
Assets       Assets
Available-for-sale securities:       
Agency-guaranteed residential mortgage-backed securities$—
 $196,327
 $—
 $196,327
Agency guaranteed commercial mortgage-backed securities—
 340,108
 —
 340,108
Available for sale debt securities:Available for sale debt securities:
Asset-backed securitiesAsset-backed securities$— $87,276 $73,266 $160,542 
Agency-guaranteed residential collateralized mortgage obligationsAgency-guaranteed residential collateralized mortgage obligations— 133,864 — 133,864 
Collateralized loan obligationsCollateralized loan obligations— 872,738 — 872,738 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities— 136,357 — 136,357 
Corporate notes—
 46,077
 —
 46,077
Corporate notes— 595,253 — 595,253 
Equity securities2,311
 —
 —
 2,311
Private label collateralized mortgage obligationsPrivate label collateralized mortgage obligations— 1,062,261 — 1,062,261 
Derivatives—
 10,344
 103
 10,447
Derivatives— 44,380 55 44,435 
Loans held for sale – fair value option—
 1,963,076
 —
 1,963,076
Loans held for sale – fair value option— 322 — 322 
Total assets - recurring fair value measurements$2,311
 $2,555,932
 $103
 $2,558,346
Loans receivable, mortgage warehouse – fair value optionLoans receivable, mortgage warehouse – fair value option— 1,323,312 — 1,323,312 
Total assets – recurring fair value measurementsTotal assets – recurring fair value measurements$— $4,255,763 $73,321 $4,329,084 
Liabilities       Liabilities
Derivatives $—
 $12,092
 $—
 $12,092
Derivatives$— $42,106 $— $42,106 
Measured at Fair Value on a Nonrecurring Basis:       Measured at Fair Value on a Nonrecurring Basis:
Assets       Assets
Impaired loans, net of reserves of $1,527$—
 $—
 $2,976
 $2,976
Other real estate owned—
 —
 782
 782
Total assets - nonrecurring fair value measurements$—
 $—
 $3,758
 $3,758
Collateral-dependent loansCollateral-dependent loans$— $— $4,819 $4,819 
Total assets – nonrecurring fair value measurementsTotal assets – nonrecurring fair value measurements$— $— $4,819 $4,819 

 December 31, 2016
 Fair Value Measurements at the End of the Reporting Period Using
 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total
(amounts in thousands)       
Measured at Fair Value on a Recurring Basis:       
Assets       
Available-for-sale securities:       
Agency-guaranteed residential mortgage-backed securities$—
 $231,263
 $—
 $231,263
Agency-guaranteed commercial mortgage-backed securities—
 201,817
 —
 201,817
Corporate notes—
 45,148
 —
 45,148
Equity securities15,246
 —
 —
 15,246
Derivatives—
 10,819
 45
 10,864
Loans held for sale – fair value option—
 2,117,510
 —
 2,117,510
Total assets - recurring fair value measurements$15,246
 $2,606,557
 $45
 $2,621,848
Liabilities       
Derivatives$—
 $14,172
 $—
 $14,172
Measured at Fair Value on a Nonrecurring Basis:       
Assets       
Impaired loans, net of reserves of $1,360$—
 $—
 $6,527
 $6,527
Other real estate owned—
 —
 2,731
 2,731
Total assets - nonrecurring fair value measurements$—
 $—
 $9,258
 $9,258

The changes in Levelasset-backed securities (Level 3 assetsassets) measured at fair value on a recurring basis for the three and nine months ended September 30, 2017March 31, 2023 and 20162022 are summarized as follows. Additional information about residential mortgage loan commitments can be found in NOTE 13 - DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES.the table below.
Asset-backed securities
(amounts in thousands)Three Months Ended March 31,
20232022
Balance at January 1,$73,266 $142,885 
Principal payments and premium amortization(11,216)(16,349)
Increase in allowance for credit losses(273)(728)
Decrease in allowance for credit losses61 — 
Change in fair value recognized in OCI1,538 (3,955)
Balance at March 31,$63,376 $121,853 
 Residential Mortgage Loan Commitments
 Three Months Ended September 30,
 2017 2016
(amounts in thousands)   
Balance at June 30$102
 $157
Issuances103
 85
Settlements(102) (157)
Balance at September 30$103
 $85


 Residential Mortgage Loan Commitments
 Nine Months Ended September 30,
 2017 2016
(amounts in thousands)   
Balance at December 31$45
 $45
Issuances300
 315
Settlements(242) (275)
Balance at September 30$103
 $85
    


Customers' policy is to recognize transfers between fair value levels when events or circumstances warrant transfers. There were no transfers between levels during the three and nine months ended September 30, 2017March 31, 2023 and 2016.2022.

41
The following table summarizestables summarize financial assets and financial liabilities measured at fair value as of September 30, 2017March 31, 2023 and December 31, 20162022 on a recurring and nonrecurring basis for which Customers utilized Level 3 inputs to measure fair value. The unobservable Level 3 inputs noted below contain a level of uncertainty that may differ from what is realized in an immediate settlement of the assets. Therefore, Customers may realize a value higher or lower than the current estimated fair value of the assets.
 Quantitative Information about Level 3 Fair Value Measurements
September 30, 2017
Fair Value
Estimate
 Valuation Technique Unobservable Input 
Range (Weighted
Average) (4)
(amounts in thousands)       
Impaired loans$2,976
 Collateral appraisal (1) Liquidation expenses (2) (8)%
Other real estate owned782
 Collateral appraisal (1) Liquidation expenses (2) (8)%
Residential mortgage loan commitments103
 Adjusted market bid Pull-through rate 90%
 Quantitative Information about Level 3 Fair Value Measurements
December 31, 2016
Fair Value
Estimate
 Valuation Technique Unobservable Input 
Range (Weighted
Average) (4)
(amounts in thousands)       
Impaired loans$1,431
 Collateral appraisal (1) Liquidation expenses (2) (8)%
Impaired loans5,096
 Discounted cash flow Projected cash flows (3) 4 times EBITDA
Other real estate owned2,731
 Collateral appraisal (1) Liquidation expenses (2) (8)%
Residential mortgage loan commitments45
 Adjusted market bid Pull-through rate 90%
(1)Obtained from approved independent appraisers. Appraisals are current andQuantitative Information about Level 3 Fair Value Measurements
(dollars in compliance with credit policy. The Bank does not generally discount appraisals.thousands)Fair Value
Estimate		Valuation TechniqueUnobservable InputRange 
(Weighted Average)
March 31, 2023
(2)Asset-backed securitiesFair value is adjusted for estimated costs to sell based on a percentage of the value as determined by the appraisal.$63,376 Discounted cash flowDiscount rate


Annualized loss rate


Constant prepayment rate
9% - 9%
(9%)

4% - 5%
(4%)

17% - 27%
(24%)
(3)Projected cash flows of the business derived using EBITDA multiple based on management's best estimate.
(4)Presented as a percentage of the value determined by appraisal for impaired loans and other real estate owned.



Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)Fair Value
Estimate		Valuation TechniqueUnobservable InputRange 
(Weighted Average)
December 31, 2022
Asset-backed securities$73,266 Discounted cash flowDiscount rate


Annualized loss rate


Constant prepayment rate
9% - 9%
(9%)

4% - 5%
(5%)

19% - 25%
(23%)
NOTE 1314 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Risk Management Objectives of Using Derivatives
Customers is exposed to certain risks arising from both its business operations and economic conditions. Customers manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources, and durations of its assets and liabilities. Specifically, Customers enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the valuevalues of which are determined by interest rates. Customers'Customers’ derivative financial instruments are used to manage differences in the amount, timing, and duration of Customers'Customers’ known or expected cash receipts and its known or expected cash payments principally related to certain borrowings.borrowings and deposits. Customers also has interest-rate derivatives resulting from a servicean accommodation provided to certain qualifying customers, and therefore, they are not used to manage Customers'Customers’ interest-rate risk in assets or liabilities. Customers manages a matched book with respect to its derivative instruments used in this customer service in order to minimize its net risk exposure resulting from such transactions.
Cash FlowFair Value Hedges of Interest RateBenchmark Interest-Rate Risk
Customers' objectivesCustomers is exposed to changes in using interest-rate derivatives arethe fair value of certain of its fixed rate AFS debt securities, deposits and FHLB advances due to add stability tochanges in the benchmark interest expense and to manage exposure to interest-rate movements. To accomplish this objective,rate. Customers primarily uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate such as part of its interest-rate-risk management strategy. Interest-ratethe Fed Funds Effective Swap Rate. Interest rate swaps designated as cash flowfair value hedges of certain of its fixed rate AFS debt securities involve the receiptpayment of variablefixed-rate amounts fromto a counterparty in exchange for Customers makingreceiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate swaps designated as fair value hedges of certain deposits and FHLB advances involve the payment of variable-rate amounts to a counterparty in exchange for Customers receiving fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount.
The effective portion of changes in the fair value of For derivatives designated and qualifyingthat qualify as cash flowfair value hedges, is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period thatgain or loss on the derivative as well as the offsetting loss or gain on the hedged forecasted transaction affects earnings. To date, suchitem attributable to the hedged risk are recognized in net interest income.
42
At March 31, 2023, Customers had three outstanding interest rate derivatives with notional amounts totaling $22.5 million that were used to hedge the variable cash flows associated with the forecasted issuances of debt. The ineffective portion of the change indesignated as fair value hedges of the derivatives is to be recognized directly in earnings.certain AFS debt securities. During the three and nine months ended September 30, 2017March 31, 2023, Customers entered into, and 2016, Customers did not record any hedge ineffectiveness.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on Customers' variable-rate debt. Customers expects to reclassify $1.2 million from accumulated other comprehensive income to interest expense during the next 12 months.
Customers is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 24 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).
At September 30, 2017, Customers had nine outstandingterminated two interest rate derivatives with notional amounts totaling $550.0 million that were designated as cash flowfair value hedges of certain deposits and FHLB advances resulting in $4.6 million of basis adjustments which will be amortized over the remaining terms of the hedged items as a reduction in interest expense. During the three months ended March 31, 2022, Customers terminated two interest rate risk.derivatives with notional amounts totaling $16.5 million that were designated as fair value hedges together with the sale of hedged AFS debt securities. At December 31, 2016,2022, Customers had fourthree outstanding interest rate derivatives with notional amounts totaling $325.0$22.5 million that were designated as cash flowfair value hedges of interest rate risk. The hedges expire between January 2018certain AFS debt securities.
As of March 31, 2023 and April 2019.December 31, 2022, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges.
Amortized CostCumulative Amount of Fair Value Hedging Adjustment to Hedged Items
(amounts in thousands)March 31, 2023December 31, 2022March 31, 2023December 31, 2022
AFS debt securities$22,500 $22,500 $1,476 $1,777 
Deposits300,000 — 2,487 — 
FHLB advances250,000 — 2,143 — 
Derivatives Not Designated as Hedging Instruments
Customers executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies (typically the loan customers will swap a floating-rate loan for a fixed-rate loan). and interest rate caps with commercial banking customers to facilitate their respective risk management strategies. The customer interest rate swaps and interest rate caps are simultaneously offset by interest rate swaps and interest rate caps that Customers executes with a third party in order to minimize interest rateinterest-rate risk exposure resulting from such transactions. BecauseAs the interest rate swaps and interest rate caps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and caps and the offsetting third-party market swaps and caps are recognized directly in earnings. At September 30, 2017,March 31, 2023, Customers had 76139 interest rate swaps with an aggregate notional amount of $793.6$1.3 billion and 12 interest rate caps with an aggregated notional amount of $244.6 million related to this program. At December 31, 2016,2022, Customers had 76141 interest rate swaps with an aggregate notional amount of $716.6$1.3 billion and 12 interest rate caps with an aggregate notional amount of $245.8 million related to this program.
Customers enters into residential mortgage loan commitments in connection with its consumer mortgage banking activities to fund mortgage loans at specified rates and times in the future. These commitments are short-term in nature and generally expire in 30 to 60 days. The residential mortgage loan commitments that relate to the origination of mortgage loans that will be held for sale are considered derivative instruments under the applicable accounting guidance and are reported at fair value, with changes in fair value recorded directly in earnings. At September 30, 2017March 31, 2023 and December 31, 2016,2022, Customers had an outstandingaggregate notional balanceamount of residential mortgage loan commitments of $5.4$3.3 million and $3.6$1.5 million, respectively.

Customers has also purchased and sold credit derivatives to either hedge or participate in the performance risk associated with some of its counterparties. These derivatives are not designated as hedging instruments and are reported at fair value, with changes in fair value reportedrecorded directly in earnings. At September 30, 2017March 31, 2023 and December 31, 2016,2022, Customers had outstandingan aggregate notional balancesamount of credit derivatives of $53.3$123.5 million and $44.9$142.0 million, respectively.
43
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 sheetsheets as of September 30, 2017March 31, 2023 and December 31, 2016.2022.
 March 31, 2023
 Derivative AssetsDerivative Liabilities
(amounts in thousands)Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as fair value hedges:
Interest rate swapsOther assets$1,476 Other liabilities$— 
Total$1,476 $— 
Derivatives not designated as hedging instruments:
Interest rate swaps and capsOther assets$33,210 Other liabilities$32,956 
Credit contractsOther assets— Other liabilities43 
Residential mortgage loan commitmentsOther assets65 Other liabilities— 
Total$33,275 $32,999 
  September 30, 2017
  Derivative Assets Derivative Liabilities
  
Balance Sheet
Location
 Fair Value 
Balance Sheet
Location
 Fair Value
(amounts in thousands)        
Derivatives designated as cash flow hedges:        
Interest rate swaps Other assets $355
 Other liabilities $2,001
Total   $355
   $2,001
Derivatives not designated as hedging instruments:        
Interest rate swaps Other assets $9,861
 Other liabilities $10,083
Credit contracts Other assets 128
 Other liabilities 8
Residential mortgage loan commitments Other assets 103
 Other liabilities —
Total   $10,092
   $10,091
 December 31, 2016
 Derivative Assets Derivative Liabilities
 Balance Sheet   Balance Sheet  December 31, 2022
 Location Fair Value Location Fair ValueDerivative AssetsDerivative Liabilities
(amounts in thousands)    (amounts in thousands)Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as cash flow hedges:    
Derivatives designated as fair value hedges:Derivatives designated as fair value hedges:
Interest rate swaps Other assets $—
 Other liabilities $3,624
Interest rate swapsOther assets$1,777 Other liabilities$— 
Total $—
 $3,624
Total$1,777 $— 
Derivatives not designated as hedging instruments:    Derivatives not designated as hedging instruments:
Interest rate swaps Other assets $10,683
 Other liabilities $10,537
Interest rate swaps and capsInterest rate swaps and capsOther assets$42,589 Other liabilities$42,076 
Credit contracts Other assets 136
 Other liabilities 11
Credit contractsOther assets14 Other liabilities30 
Residential mortgage loan commitments Other assets 45
 Other liabilities —
Residential mortgage loan commitmentsOther assets55 Other liabilities— 
Total $10,864
 $10,548
Total$42,658 $42,106 
Effect of Derivative Instruments on ComprehensiveNet Income
The following tables presenttable presents amounts included in the effectconsolidated statements of Customers' derivative financial instruments on comprehensive income related to derivatives designated as fair value hedges and derivatives not designated as hedges for the three and nine months ended September 30, 2017March 31, 2023 and 2016.2022.
Amount of Income (Loss) Recognized in Earnings
Three Months Ended March 31,
(amounts in thousands)Income Statement Location20232022
Derivatives designated as fair value hedges:
Recognized on interest rate swapsNet interest income$(301)$2,521 
Recognized on hedged AFS debt securitiesNet interest income301 (2,521)
Total$— $— 
Derivatives not designated as hedging instruments:
Interest rate swaps and capsOther non-interest income$(24)$961 
Credit contractsOther non-interest income(28)3 
Residential mortgage loan commitmentsOther non-interest income11 (31)
Total$(41)$933 
44
 Three Months Ended September 30, 2017
 Income Statement Location 
Amount of Income (Loss)
Recognized in Earnings
(amounts in thousands)   
Derivatives not designated as hedging instruments:   
Interest rate swapsOther non-interest income $91
Credit contractsOther non-interest income (6)
Residential mortgage loan commitmentsMortgage banking income                 1
Total  $86


 Three Months Ended September 30, 2016
 Income Statement Location 
Amount of Income (Loss)
Recognized in Earnings
(amounts in thousands)   
Derivatives not designated as hedging instruments:   
Interest rate swapsOther non-interest income                 $1,737
Credit contractsOther non-interest income (15)
Residential mortgage loan commitmentsMortgage banking income                 (71)
Total  $1,651
 Nine Months Ended September 30, 2017
 Income Statement Location 
Amount of Income (Loss)
Recognized in Earnings
(amounts in thousands)   
Derivatives not designated as hedging instruments:   
Interest rate swapsOther non-interest income                 $429
Credit contractsOther non-interest income (5)
Residential mortgage loan commitmentsMortgage banking income                 58
Total  $482
    
 Nine Months Ended September 30, 2016
 Income Statement Location 
Amount of Income
Recognized in Earnings
(amounts in thousands)   
Derivatives not designated as hedging instruments:   
Interest rate swapsOther non-interest income                 $1,250
Credit contractsOther non-interest income 257
Residential mortgage loan commitmentsMortgage banking income                 41
Total  $1,548
    
 Three Months Ended September 30, 2017
 
Amount of Gain
Recognized in OCI on
Derivatives (Effective Portion) (1)
 
Location of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)
 
Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
(amounts in thousands)     
Derivatives in cash flow hedging relationships:     
Interest rate swaps$104
 Interest expense $(572)

 Three Months Ended September 30, 2016
 
Amount of Gain
Recognized in OCI on
Derivatives (Effective Portion) (1)
 
Location of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)
 
Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
(amounts in thousands)     
Derivatives in cash flow hedging relationships:     
Interest rate swaps$556
 Interest expense $(703)


 Nine Months Ended September 30, 2017
 Amount of Loss
Recognized in OCI on
Derivatives (Effective Portion) (1)		 Location of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)		 Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
(amounts in thousands)     
Derivative in cash flow hedging relationships:     
Interest rate swaps$(115) Interest expense $(2,166)
      
 Nine Months Ended September 30, 2016
 Amount of Loss
Recognized in OCI on
Derivatives (Effective Portion) (1)		 Location of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)		 Amount of Loss
Reclassified from
Accumulated OCI into
Income (Effective Portion)
(amounts in thousands)     
Derivative in cash flow hedging relationships:     
Interest rate swaps$(1,577) Interest expense $(1,306)
      
(1) Amounts presented are netTable of taxes. See NOTE 6 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME for total effect on other comprehensive income from derivatives designated as cash flow hedges for the periods presented.Contents

Credit-risk-related Contingent Features
By entering into derivative contracts, Customers is exposed to credit risk. The credit risk associated with derivatives executed with customers is the same as that involved in extending the related loans and is subject to the same standard credit policies. To mitigate the credit-risk exposure to major derivative dealer counterparties, Customers only enters into agreements with those counterparties that maintain credit ratings of high quality.quality or with central clearing parties.
Agreements with major derivative dealer counterparties contain provisions whereby default on any of Customers' indebtedness would be considered a default on its derivative obligations. Customers also has entered into agreements that contain provisions under which the counterparty could require Customers to settle its obligations if Customers fails to maintain its status as a well/adequately capitalized institution. As of September 30, 2017,March 31, 2023, the fair value of derivatives in a net liabilityasset position (which includes accrued interest but excludes any adjustment for nonperformance-risk) related to these agreements was $7.3$21.0 million. In addition, Customers, which has minimum collateral posting thresholds with certain of these counterparties, and at September 30, 2017 had posted $8.3received $23.0 million of cash as collateral.collateral at March 31, 2023. Customers records cash posted or received as collateral with these counterparties, except with a central clearing entity, as a reduction or an increase in the outstanding balance of cash and cash equivalents and an increase in the balance of other assets.assets or other liabilities.
Disclosures about Offsetting Assets and Liabilities
The following tables present derivative instruments that are subject to enforceable master netting arrangements. Customers' interest rate swaps and interest rate caps with institutional counterparties are subject to master netting arrangements and are included in the tabletables below. Interest rate swaps and interest rate caps with commercial banking customers and residential mortgage loan commitments are not subject to master netting arrangements and are excluded from the tabletables below. Customers has not made a policy election to offset its derivative positions.

 Gross Amounts Recognized on the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance SheetNet Amount
(amounts in thousands)Financial InstrumentsCash Collateral Received/Posted
March 31, 2023
Interest rate derivative assets with institutional counterparties$22,073 $(1,061)$(21,012)$— 
Interest rate derivative liabilities with institutional counterparties$1,061 $(1,061)$— $— 
Offsetting of Financial Assets and Derivative Assets
 Gross Amounts Recognized on the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance SheetNet Amount
(amounts in thousands)Financial InstrumentsCash Collateral Received/Posted
December 31, 2022
Interest rate derivative assets with institutional counterparties$29,706 $(619)$(29,087)$— 
Interest rate derivative liabilities with institutional counterparties$619 $(619)$— $— 
At September 30, 2017
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the
Consolidated
Balance
Sheet
 
Net
Amounts of
Assets
Presented
in the
Consolidated
Balance
Sheet
 
Gross Amounts
Not Offset in the
Consolidated
Balance Sheet
 
Net
Amount
 
Financial
Instruments
 
Cash
Collateral
Received
 
(amounts in thousands)           
Description           
Interest rate swap derivatives with institutional counterparties$4,190
 $—
 $4,190
 $—
 $1,900
 $2,290
Offsetting of Financial Liabilities and Derivative Liabilities
At September 30, 2017
 
Gross
Amount of
Recognized
Liabilities
 
Gross
Amounts
Offset in the
Consolidated
Balance
Sheet
 
Net
Amounts of
Liabilities
Presented
in the
Consolidated
Balance
Sheet
 Gross Amounts
Not Offset in the
Consolidated
Balance Sheet		  
 
Financial
Instruments
 
Cash
Collateral
Pledged
 
Net
Amount
(amounts in thousands)           
Description           
Interest rate swap derivatives with institutional counterparties$8,400
 $—
 $8,400
 $—
 $8,262
 $138
Offsetting of Financial Assets and Derivative Assets
At December 31, 2016
 
Gross
Amount of
Recognized
Assets
 
Gross
Amounts
Offset in the
Consolidated
Balance
Sheet
 
Net
Amounts of
Assets
Presented
in the
Consolidated
Balance
Sheet
 Gross Amounts
Not Offset in the
Consolidated
Balance Sheet		 
Net
Amount
 
Financial
Instruments
 
Cash
Collateral
Received
 
(amounts in thousands)           
Description           
Interest rate swap derivatives with institutional counterparties$4,723
 $—
 $4,723
 $—
 $—
 $4,723
Offsetting of Financial Liabilities and Derivative Liabilities
At December 31, 2016
 
Gross
Amount of
Recognized
Liabilities
 
Gross
Amounts
Offset in the
Consolidated
Balance
Sheet
 
Net
Amounts of
Liabilities
Presented
in the
Consolidated
Balance
Sheet
 Gross Amounts
Not Offset in the
Consolidated
Balance Sheet		 
Net
Amount
 
Financial
Instruments
 
Cash
Collateral
Pledged
 
(amounts in thousands)           
Description           
Interest rate swap derivatives with institutional counterparties$9,825
 $—
 $9,825
 $—
 $4,472
 $5,353

NOTE 1415 — BUSINESS SEGMENTSLOSS CONTINGENCIES

Customers has historically operated under oneLoss contingencies, including claims and legal actions arising in the ordinary course of business, segment, "Community Banking."are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the consolidated financial statements that are not currently accrued for. However, beginning in third quarter 2016, Customers revised its segment financial reporting to reflect the manner in which its chief operating decision makers (our Chief Executive Officer and Board of Directors) have begun allocating resources and assessing performance subsequent to Customers' acquisitionlight of the Disbursement business from Higher Oneuncertainties inherent in these matters, it is possible that the ultimate resolution may have a material adverse effect on Customers’ results of operations for a particular period, and the combinationfuture changes in circumstances or additional information could result in accruals or resolution in excess of that business with the BankMobile technology platform late in second quarter 2016.
Management has determined that Customers'established accruals, which could adversely affect Customers’ results of operations, consist of two reportable segments - Community Business Banking and BankMobile. Each segment generates revenues, manages risk, and offers distinct products and services to targeted customers through different delivery channels. The strategy, marketing, and analysis of these segments vary considerably.
The Community Business Banking segment is delivered predominately to commercial customers in Southeastern Pennsylvania, New York, New Jersey, Massachusetts, Rhode Island and New Hampshire through a single point of contact business model and provides liquidity to residential mortgage originators nationwide through commercial loans to mortgage companies. Lending and deposit gathering activities are focused primarily on privately held businesses, high net worth families, selected commercial real estate lending, and commercial mortgage companies. Revenues are generated primarily through net interest income (the difference between interest earned on loans, investments, and other interest earning assets and interest paid on deposits and other borrowed funds) and other non-interest income, such as mortgage warehouse transactional fees and bank owned life insurance.
The BankMobile segment provides state of the art high tech digital banking and disbursement services to consumers, students, and the "under banked" nationwide. BankMobile, as a division of Customers Bank, is a full service banking platform that is accessible to customers anywhere and anytime through the customer's smartphone or other web-enabled device. Revenues are currently being generated primarily through interchange and card revenue, deposit and wire transfer fees and university fees. The majority of revenue and expenses for BankMobile are a result of the Disbursement business acquisition.
The following tables present the operating results for Customers' reportable business segments for the three and nine months ended September 30, 2017 and 2016. Customers has presented the financial information and disclosures for prior periods to reflect the segment disclosures as if they had been in effect for the periods presented. The segment financial results include directly attributable revenues and expenses. Corporate overhead costs are assigned to the Community Business Banking segment as those expenses are expected to continue following the planned spin-off of BankMobile. Similarly, the preferred stock dividends have been allocated in their entirety to the Community Business Banking segment. The tax benefit assigned to BankMobile was based on an estimated effective tax rate of 37.25% for 2017 and 38% for 2016.
BankMobile, previously presented as discontinued operations in the financial statements due to Customers' stated intent to sell the business, was reclassified as held and used at September 30, 2017. As of September 30, 2017, Customers has decided to spin off BankMobile to Customers’ shareholders through a spin-off/merger transaction which is currently being negotiated. For more information on BankMobile's reclassification, see NOTE 3 - TAX-FREE SPIN-OFF AND MERGER.


potentially materially.
45
 Three Months Ended September 30, 2017
 Community Business Banking BankMobile Consolidated
Interest income$95,585
 $2,700
(1 
) 
$98,285
Interest expense30,250
 16

30,266
Net interest income65,335
 2,684
 68,019
Provision for loan losses1,874
 478
 2,352
Non-interest income4,190
 13,836
 18,026
Non-interest expense33,990
 27,050

61,040
Income (loss) before income tax expense (benefit)33,661
 (11,008) 22,653
Income tax expense (benefit)18,999
 (4,100) 14,899
Net income (loss)14,662
 (6,908) 7,754
Preferred stock dividends3,615
 —
 3,615
Net income (loss) available to common shareholders$11,047
 $(6,908) $4,139
      


 Three Months Ended September 30, 2016
 Community Business Banking BankMobile Consolidated
Interest income$82,828
 $1,384
(1 
) 
$84,212
Interest expense19,620
 7
 19,627
Net interest income63,208
 1,377
 64,585
Provision for loan losses(162) 250
 88
Non-interest income11,121
 16,365
 27,486
Non-interest expense 
36,864
 19,354
 56,218
Income (loss) before income tax expense (benefit)37,627
 (1,862) 35,765
Income tax expense (benefit)15,266
 (708) 14,558
Net income (loss)22,361
 (1,154) 21,207
Preferred stock dividends2,552
 —
 2,552
Net income (loss) available to common shareholders$19,809
 $(1,154) $18,655
      
(1) - Amounts reported include funds transfer pricingTable of $2.7 million and 1.4 million for the three months ended September 30, 2017 and 2016, respectively, credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.Contents



 Nine Months Ended September 30, 2017
 Community Business Banking BankMobile Consolidated
Interest income$265,524
 $9,708
(1 
) 
$275,232
Interest expense76,134
 55
 76,189
Net interest income189,390
 9,653
 199,043
Provision for loan losses5,459
 478
 5,937
Non-interest income16,587
 42,583
 59,170
Non-interest expense94,704
 66,114
 160,818
Income before income tax expense (benefit)105,814
 (14,356) 91,458
Income tax expense (benefit)39,584
 (5,348) 34,236
Net income (loss)66,230
 (9,008) 57,222
Preferred stock dividends10,844
 —
 10,844
Net income (loss) available to common shareholders$55,386
 $(9,008) $46,378
      
As of September 30, 2017     
Goodwill and other intangibles$3,632
 $12,972
 $16,604
Total assets$10,405,452
 $66,377
(2 
) 
$10,471,829
Total deposits$6,815,994
 $781,082
 $7,597,076
      

 Nine Months Ended September 30, 2016
 Community Business Banking BankMobile Consolidated
Interest income$234,513
 $4,418
(1 
) 
$238,931
Interest expense53,539
 22
 53,561
Net interest income180,974
 4,396
 185,370
Provision for loan losses2,605
 249
 2,854
Non-interest income22,241
 18,996
 41,237
Non-interest expense101,053
 27,253
 128,306
Income (loss) before income tax expense (benefit)99,557
 (4,110) 95,447
Income tax expense (benefit)38,134
 (1,562) 36,572
Net income (loss)61,423
 (2,548) 58,875
Preferred stock dividends5,900
 —
 5,900
Net income (loss) available to common shareholders$55,523
 $(2,548) $52,975
      
As of September 30, 2016     
Goodwill and other intangibles$3,642
 $13,282
 $16,924
Total assets$9,532,281
 $70,329
(2 
) 
$9,602,610
Total deposits$6,855,788
 $533,182
 $7,388,970
      
(1) - Amounts reported include funds transfer pricing of $9.7 million and $4.4 million for the nine months ended September 30, 2017 and 2016, respectively, credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.
(2) - Amounts reported exclude intra company receivables.



ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations
Cautionary Note Regarding Forward-Looking Statements

This report and all attachments hereto, as well as other written or oral communications made from time to time by us, may contain forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements relateinclude statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future events or future predictions, including events or predictions relating to future financial performance and are generally identifiablebusiness. Statements preceded by, followed by, or that include the use of forward-looking terminology such aswords “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “may,“anticipate,” “will,“estimate,” “should,“intend,” “plan,” “intend,“project,” or “anticipate”similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the negative thereof or comparable terminology. Forward-looking statements reflect numerous assumptions, estimatesgoals, plans, objectives, intentions and forecasts as to future events. No assurance can be given that the assumptions, estimates and forecasts underlyingexpectations expressed in such forward-looking statements, will accurately reflect future conditions,including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, the impact of COVID-19 and its variants on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; higher inflation and its impacts; and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that any guidance, goals, targets or projected results will be realized. The assumptions, estimatesthe foregoing factors are not exclusive, and forecasts underlyingneither such factors nor any such forward-looking statements involve judgments with respect to, among other things,statement takes into account the impact of any future economic, competitive, regulatory and financial market conditions and future business decisions, which may not be realized and which are inherently subject to significant business, economic, competitive and regulatory uncertainties and known and unknown risks, including the risks described under “Risk Factors” in Customers Bancorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “2016 Form 10-K”), as such factors may be updated from time to time in our filings with the SEC, including our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.  Our actual results may differ materially from those reflected in the forward-looking statements. You are cautioned not to place undue reliance on anyevents. All forward-looking statements we make, whichand information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. We doFor a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2022, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake any obligation to release publicly or otherwise provide any revisions toupdate any forward-looking statements westatement whether written or oral, that may make, including any forward-looking financial information,be made from time to reflect eventstime by Customers Bancorp, Inc. or circumstances occurring after the date hereofby or to reflect the occurrenceon behalf of unanticipated events,Customers Bank, except as may be required under applicable law.
Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the "Bancorp" or "Customers Bancorp"), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the "Bank"), collectively referred to as "Customers" herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers' financial condition and results of operations as of and for the three and nine months ended September 30, 2017.March 31, 2023. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers' 20162022 Form 10-K.
Overview
Like most financial institutions, Customers derives the majority of its income from interest it receives on its interest-earning assets, such as loans, leases and investments. Customers' primary source of funds for making these loans, leases and investments are its deposits and borrowings, on which it pays interest. Consequently, one of the key measures of Customers' success is the amount of its net interest income, or the difference between the interest income on its interest-earning assets and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. Another key measure is the difference between the interest income generated by interest earning assets and the interest expense on interest-bearing liabilities, relative to the amount of average interest earning assets, which is referred to as net interest margin.
There is credit risk inherent in loans and leases requiring Customers to maintain an ACL to absorb credit losses on existing loans and leases that may become uncollectible. Customers maintains this allowance by charging a provision for credit losses on loan and leases against its operating earnings. Customers has included a detailed discussion of this process, as well as several tables describing its ACL, in "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" and "NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' unaudited consolidated financial statements.
46
Impact of Macroeconomic and Banking Industry Uncertainties, COVID-19 and Geopolitical Conflict
The U.S. economy has strengthened since the spread of COVID-19 variants, with higher inflation and housing values beginning in 2021. Also, the ongoing global supply chain issues and the military conflict between Russia and Ukraine contributed to higher inflation in 2022. In response, the Federal Reserve began normalizing monetary policy with its decision in late 2021 to taper its quantitative easing and raising the federal funds rate beginning in March 2022. Inflation remains elevated in 2023, reflecting supply and demand imbalances related to COVID-19 and its variants, higher food and energy prices from the military conflict between Russia and Ukraine, and broader price pressures. The Federal Reserve has raised interest rates significantly throughout 2022 and in the early part of 2023 in attempts to bring the inflation to its long run target rate of two percent. Future rate hikes may occur during the remainder of 2023, as the Federal Reserve has indicated attaining a stance of monetary policy that is sufficiently restrictive to return inflation to two percent over time.
In early March 2023, regional banks, Silicon Valley Bank and Signature Bank were placed in receivership by the state regulators and the FDIC. Citing systemic risk to the U.S. banking system, the FDIC, Federal Reserve and the U.S. Department of Treasury announced that all depositors of Silicon Valley Bank and Signature Bank would be made whole and have access to their funds. The Federal Reserve has also established a new Bank Term Funding Program, which offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities and other qualifying assets as collateral. These assets will be valued at par. The BTFP is an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress. As of March 31, 2023, Customers had no advances outstanding under the Federal Reserve's discount window or the BTFP. Refer to "NOTE 10 – BORROWINGS" to Customers' unaudited consolidated financial statements.
Significant uncertainties as to future economic conditions continue to exist, including higher inflation and interest rate environment, elevated liquidity risk to the U.S. banking system, particularly to the regional banks, disruptions to global supply chain and labor markets and higher oil and commodity prices exacerbated by the military conflict between Russia and Ukraine. Customers has taken deliberate actions in response, including maintaining higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios. Customers has shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates to position the Bank for higher interest rate hikes. Customers has also shifted the mix of its available for sale debt securities portfolio towards variable rate, shorter duration debt securities. The Bank's debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity, including through the BTFP. The Bank had $7.4 billion in immediate available liquidity from FRB and FHLB and cash on hand of $2.0 billion as of March 31, 2023. The Bank also maintains a diversified deposit base with approximately 78% of our deposits (inclusive of accrued interest) insured by the FDIC, along with $393.9 million of state and municipal deposits collateralized by our lines of credit at FHLB and $54.9 million of deposits from our affiliates as of March 31, 2023. The Bank's FDIC insured, collateralized and affiliates' deposits represented approximately 81% of our deposits (inclusive of accrued interest) as of March 31, 2023. Customers is focused on growing its non-interest bearing and lower-cost interest-bearing deposits. Customers continues to monitor closely the impact of uncertainties affecting the macroeconomic conditions, the U.S. banking system, particularly regional banks, COVID-19 and its variants, the military conflict between Russia and Ukraine, as well as any effects that may result from the federal government's responses including future rate hikes and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, COVID-19 and its variants, the geopolitical conflict and developments in the U.S. banking system will impact Customers' operations and financial results during the remainder of 2023 is highly uncertain.
New Accounting Pronouncements
For information about the impact that recently adopted or issued accounting guidance will have on us, refer to "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' unaudited consolidated financial statements.
Critical Accounting Policies and Estimates
Customers has adopted various accounting policies that govern the application of accounting principles generally accepted in the United States of AmericaU.S. GAAP and that are consistent with general practices within the banking industry in the preparation of its consolidated financial statements. Customers' significant accounting policies are described in “NOTE 4 -"NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION”PRESENTATION" in Customers' audited consolidated financial statements included in its 20162022 Form 10-K and updated in this report on Form 10-Q for the quarterly period ended September 30, 2017.March 31, 2023 in "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" in Customers' unaudited consolidated financial statements.
47
Certain accounting policies may involve significant judgments and assumptions by Customers that have a material impact on the carrying value of certain assets and liabilities.assets. Customers considers these accounting policies to be critical accounting policies. The judgmentjudgments 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' assetsassets.
The critical accounting policy that is both important to the portrayal of Customers' financial condition and liabilitiesresults of operations and requires complex, subjective judgments is the ACL. This critical accounting policy and material estimate, along with the related disclosures, are reviewed by Customers' Audit Committee of the Board of Directors.
Allowance for Credit Losses
Customers' ACL at March 31, 2023 represents Customers' current estimate of the lifetime credit losses expected from its loan and lease portfolio and its unfunded lending-related commitments that are not unconditionally cancellable. Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans and leases' expected remaining term.
Customers uses external sources in the creation of its forecasts, including current economic conditions and forecasts for macroeconomic variables over its reasonable and supportable forecast period (e.g., GDP growth rate, unemployment rate, BBB spread, commercial real estate and home price index). After the reasonable and supportable forecast period, which ranges from two to five years, the models revert the forecasted macroeconomic variables to their historical long-term trends, without specific predictions for the economy, over the expected life of the pool, while also incorporating prepayment assumptions into its lifetime loss rates. Internal factors that impact the quarterly allowance estimate include the level of outstanding 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 loan and lease portfolio, credit underwriting policy exceptions, peer comparison, industry data, and model and data limitations. The qualitative allowance for economic forecast risk is further informed by multiple alternative scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to changes, sometimes materially and rapidly. Customers recognizes that this approach may not be suitable in certain economic environments such that additional analysis may be performed at management's discretion. Due in part to its subjectivity, the qualitative evaluation may be materially impacted during periods of economic uncertainty and late breaking events that could lead to a revision of reserves to reflect management's best estimate of expected credit losses.
The ACL is established in accordance with our ACL policy. The ACL Committee, which includes the President, Chief Financial Officer, Chief Accounting Officer, Chief Lending Officer, and Chief Credit Officer, among others, reviews the adequacy of the ACL each quarter, together with Customers' risk management team. The ACL policy, significant judgments and the related disclosures are reviewed by Customers' Audit Committee of the Board of Directors.
The net decrease in our estimated ACL as of March 31, 2023 as compared to our December 31, 2022 estimate was primarily attributable to a decrease in consumer installment loans, partially offset by additional provision for credit losses from the recognition of weaker macroeconomic forecasts. There was a provision for credit losses on loans and leases of $18.0 million for the three months ended March 31, 2023, resulting in an ACL ending balance of $133.6 million ($130.3 million for loans and leases and $3.3 million for unfunded lending-related commitments) as of March 31, 2023.
To determine the ACL as of March 31, 2023, Customers utilized Moody's March 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 March 2023 assumed lower growth rate in macroeconomic forecasts compared to the fourth quarter 2022 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board delaying the increase in the effective fed funds rate due to the recent financial system turmoil, but ultimately raising it to the terminal range of 5.0% to 5.25%; policymakers' aggressive response ensures that the recent bank failures do not weaken the financial system or the U.S. economy; the CPI rising 4.1% in 2023 and 2.4% in 2024; and the unemployment rate rising at the end of 2023 and into 2024. Customers continues to monitor the impact of the U.S. banking system turmoil, military conflict between Russia and Ukraine, global supply chain and labor market disruptions, inflation, and related policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.
48
As of December 31, 2022, the ACL ending balance was $133.9 million ($130.9 million for loans and leases and $3.0 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2022, Customers utilized the Moody's December 2022 Baseline forecast to generate its modelled expected losses and considered Moody's other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management's reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2022 assumed lower growth rates in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2021; oil prices remaining volatile, but gradually declining by mid-2023, from recession fears, weakening global economies and the embargo on Russian crude oil from the Russian invasion of Ukraine; COVID-19 becoming less disruptive to global supply chains, tourism and business travel, immigration and labor markets; the Federal Reserve raising the effective fed funds rate to just under 5.0% and cutting the fed funds rate beginning in late 2023 and throughout 2024; the CPI rising 4.1% in 2023 and 2.4% in 2024; and the unemployment rate rising to 4.0% in 2023 and 4.1% in 2024.
One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody's. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers' modelling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around the recent bank failures raising fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards, the Federal Reserve keeping the fed funds rate elevated, but less than in the Baseline projections because of the weakening economy, military conflict between Russia and Ukraine persisting longer than expected, worsening supply chain conditions, rising unemployment and the U.S. economy falling into recession in the second quarter of 2023. Under this scenario, as an example, the unemployment rate is estimated at 5.6% and 7.6% in 2023 and 2024, respectively. These numbers represent a 2.1% and 3.7% higher unemployment estimate than the Baseline scenario projection of 3.5% and 3.9% 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 $38 million at March 31, 2023. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.
There is no certainty that Customers' ACL will be appropriate over time to cover losses in our portfolio as economic and market conditions may ultimately differ from our reasonable and supportable forecast. Additionally, events adversely affecting specific customers, industries, or Customers' markets, such as geopolitical instability, risks of rising inflation including a near-term recession, worsening of the U.S. banking system turmoil, or the emergence of a more contagious and severe COVID-19 variant, could severely impact our current expectations. If the credit quality of Customers' customer base materially deteriorates or the risk profile of a market, industry, or group of customers changes materially, Customers' net income and capital could be materially adversely affected which, in turn could have a material adverse effect on Customers' financial condition and results of operations. The extent to which the geopolitical instability, risks of rising inflation, worsening of the U.S. banking system turmoil, and COVID-19 and its variants have and will continue to negatively impact Customers' businesses, financial condition, liquidity and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time.

For more information, refer to "NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' unaudited consolidated financial statements.
Third Quarter Events
49
Results of Operations
The following table sets forth the condensed statements of income for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
(dollars in thousands)20232022Change% Change
Net interest income$149,899 $164,699 $(14,800)(9.0)%
Provision for credit losses19,603 15,997 3,606 22.5 %
Total non-interest income18,121 21,198 (3,077)(14.5)%
Total non-interest expense80,133 73,807 6,326 8.6 %
Income before income tax expense68,284 96,093 (27,809)(28.9)%
Income tax expense14,563 19,332 (4,769)(24.7)%
Net income53,721 76,761 (23,040)(30.0)%
Preferred stock dividends3,456 1,865 1,591 85.3 %
Net income available to common shareholders$50,265 $74,896 $(24,631)(32.9)%
Customers reported net income available to common shareholders of $4.1 million, or $0.13 per fully diluted common share for third quarter 2017. The reported results were impacted by several notable charges in third quarter 2017. First, Customers' previously-announced strategic decision to spin-off its BankMobile business directly to Customers’ shareholders, to be followed by a merger of BankMobile into Flagship Community Bank rather than sell the business directly to a third party resulted in including BankMobile segment results as part of the continuing Customers’ business rather than as discontinued operations. The reclassification as part of the continuing business resulted in the capture of depreciation and amortization expense not recognized during the period the related assets were classified as held for sale ($4.2 million pre-tax, or $0.08 per diluted share). In addition, Customers' decision to spin-off and then merge the BankMobile business eliminated Customers’ tax strategy to offset capital losses on disposition of the Religare common stock with capital gains from the sale of BankMobile. Customers’ decision to pursue the spin-off and merger reduced earnings by $7.7 million after tax ($0.24 per diluted share) in the third quarter due to the reversal of $4.6 million of previously recognized deferred tax assets, and inability to recognize deferred tax benefits of $3.1 million for the third quarter 2017 impairment charge of $8.3 million ($0.16 per diluted share), equal to the third quarter 2017 decrease in market value of Customers’ investment in Religare.
Asset quality remained exceptional with non-performing loans of $29.8 million, or 0.33% of total loans, and total non-performing assets (non-performing loans and other real estate owned) only 0.30% of total assets at September 30, 2017, reflecting Customers' conservative lending practices and continued focus on credit risk management. Customers' level of non-performing loans at September 30, 2017 remained well below industry average non-performing loans of 1.42% and Customers' peer group non-performing loans of 0.88%. Customers' capital ratios at the holding company and its bank subsidiary continue to exceed the “well-capitalized” threshold established by regulation at the Bank and exceed the applicable Basel III regulatory threshold ratios for the Bancorp and the Bank at September 30, 2017. Customers Bancorp's Tier 1 leverage ratio was 8.36%, and its total risk-based capital ratio was 12.40% at September 30, 2017.
Customers ended the quarter with $10.5 billion in total assets, stable asset quality trends, and stronger capital. Customers expects to strategically reduce assets below $10 billion as of December 31, 2017 to eliminate the risk of not receiving full interchange fees by qualifying for the small issuer exemption under the Durbin Amendment to the Dodd Frank legislation.

Results of Operations
Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016
Net income available to common shareholders decreased $14.5 million, or 77.8%, to $4.1$50.3 million for the three months ended September 30, 2017 whenMarch 31, 2023, compared to net income available to common shareholders of $18.7$74.9 million for the three months ended September 30, 2016. The decreased net income available to common shareholders primarily resulted from certain notable third quarter 2017 charges totaling $15.6 million including:

Change in BankMobile disposition strategy ($10.4 million after tax). As further described under the "Third Quarter Events of Note" above, Customers' reclassification of BankMobile as part of the continuing business resulted in the capture of depreciation and amortization expense not recognized during the period the related assets were classified as held for sale ($4.2 million pre-tax and $2.6 million after tax). In addition, Customers' decision to spin-off and then merge the BankMobile business eliminated Customers’ tax strategy to offset capital losses on disposition of the Religare common stock with capital gains from the sale of BankMobile, reducing earnings by $7.7 million after tax in third quarter 2017.
Religare investment impairment charge of $8.3 million ($5.2 million after tax). Customers recorded an other-than-temporary impairment loss of $8.3 million for three months ended September 30, 2017 for the full amount of the decline in fair value of the Religare investment below the cost basis established at June 30, 2017.

Other contributorsMarch 31, 2022. Factors contributing to the decreasechange in net income available to common shareholders includedfor the three months ended March 31, 2023 compared to the three months ended March 31, 2022 were as follows.
Net interest income
Net interest income decreased $14.8 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 due to higher funding costs from a shift in the mix of interest-bearing liabilities in a rising interest rate environment and reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness, which accelerated the recognition of net deferred loan origination fees, offset in part by an increase in commercial and industrial loans and leases, mostly due to higher interest rates on variable rate loans in specialty lending. Average interest-earning assets increased by $1.9 billion for the three months ended March 31, 2023, compared to the three months ended March 31, 2022. The increase in interest-earning assets was driven by increases in commercial and industrial loans and leases, primarily in specialty lending and multifamily loans, offset in part by decreases in PPP loans due to PPP loan forgiveness and guarantee payments from the SBA and commercial loans to mortgage companies. NIM decreased by 64 basis points to 2.96% for the three months ended March 31, 2023 from 3.60% for the three months ended March 31, 2022. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 331 basis point increase in the cost of interest-bearing liabilities and contributed to the NIM decrease for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The NIM decrease was partially offset by a shift in the mix of interest-earning assets in a rising interest rate environment mostly in commercial and industrial loans and leases, primarily in specialty lending, which drove a 221 basis point increase in the yield on interest-earning assets. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was $5.5 billion in ending balance ($5.7 billion average balance) of commercial and industrial loans and leases in specialty lending yielding 7.38% and $5.5 billion in ending balance ($4.5 billion average balance) of certificates of deposit costing 4.18% at and for the three months ended March 31, 2023. Customers' total cost of funds, including non-interest bearing deposits was 3.45% and 0.43% for the three months ended March 31, 2023 and 2022, respectively.
Provision for credit losses
The $3.6 million increase in the provision for loancredit losses for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily reflects the recognition of weaker macroeconomic forecasts. 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 0.99% of total loans and leases receivable, excluding PPP loans (non-GAAP measure, please refer to the non-GAAP reconciliation within Loans and Leases - Credit Risk), at March 31, 2023, compared to 1.44% at March 31, 2022. Net charge-offs for the three months ended March 31, 2023 were $18.7 million, or 49 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $7.2 million, or 21 basis points on an annualized basis, for the three months ended March 31, 2022. The increase in net charge-offs for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was primarily due to higher charge-offs for consumer installment loans.
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The provision for credit losses for the three months ended March 31, 2023 and 2022 also included a provision for credit losses of $2.3$1.6 million primarily as a result of growthand $0.7 million, respectively, on certain asset-backed securities and corporate notes included in the loan portfolio and provisions on impaired loans, and increasesour investment securities available for sale. Refer to "NOTE 5 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.
Non-interest income
The $3.1 million decrease in non-interest expensesincome for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from decreases of $4.8$5.7 million primarily drivenin bank-owned life insurance income, $1.5 million in gain on sale of SBA and other loans, $0.9 million in mortgage warehouse transactional fees and $0.9 million in other non-interest income. These decreases were offset in part by increases of $3.4 million in commercial lease income and $1.4 million in loan fees and a decrease of $1.1 million in net loss on sale of investment securities for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.
Non-interest expense
The $6.3 million increase in non-interest expense for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from increases of $5.7 million in salaries and employee benefits, $2.9 million in commercial lease depreciation, $2.3 million in loan servicing, $1.4 million in other non-interest expense, $0.7 million in advertising and technology-related expenses, including core process systempromotion and conversion costs and noncapitalizable software development costs.$0.6 million in professional services. These increases were offset in part by increased gains on salea decrease of investment securities of $5.4$7.5 million in technology, communication and an increase in net interest income of $3.4 million.

Net interest income of $68.0 million increased $3.4 million, or 5.3%,bank operations for the three months ended September 30, 2017 whenMarch 31, 2023 compared to net interestthe three months ended March 31, 2022.
Income tax expense
Customers' effective tax rate was 21.3% for the three months ended March 31, 2023 compared to 20.1% for the three months ended March 31, 2022. The increase in the effective tax rate primarily resulted from lower death benefits from bank-owned life insurance policies and stock-based compensation benefits, partially offset by an increase in income of $64.6tax credits.
Preferred stock dividends
Preferred stock dividends were $3.5 million and $1.9 million for the three months ended September 30, 2016. This increase resulted primarily from an increase inMarch 31, 2023 and 2022, respectively. There were no changes to the average balanceamount of interest-earning assets of $1.2 billion for third quarter 2017, offset in part by a 21 basis point decline in net interest margin (tax-equivalent) to 2.62% for third quarter 2017 from 2.83% for third quarter 2016.
The provision for loan losses of $2.4 million increased $2.3 million forpreferred stock outstanding during the three months ended September 30, 2017 whenMarch 31, 2023 and 2022.
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 provision for loan losses of $0.1 million for the three months ended September 30, 2016. The third quarter 2017 provision expense included provisions of $1.4 million for loan portfolio growth and reserves of $0.8 million for impaired loans.
Non-interest income of $18.0 million decreased $9.5 million, or 34.4%Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, for the three months ended September 30, 2017 when compared to non-interest incomea fixed rate of $27.5 million for the three months ended September 30, 2016. This decrease was primarily the result of an $8.3 million other-than-temporary impairment loss related6.00%. Pursuant to the Religare investment, decreases in other non-interest incomeAdjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers expects that the Series E and F Preferred Stock will substitute three-month term SOFR plus a tenor spread adjustment of $2.4 million, due to a $2.2 million recovery of a previously recorded loss in third quarter 2016, decreases in interchange and card revenue and deposit fees of $2.0 million and $1.6 million, respectively, driven by lower business volumes in BankMobile Disbursements. These decreases were offset in part by increased gains on sales of investment securities of $5.4 million.
Non-interest expense of $61.0 million increased $4.8 million, or 8.6%,26.161 basis points for the three months ended September 30, 2017 when compared to non-interest expense of $56.2 million for the three months ended September 30, 2016. This increase resulted primarily from increases in salaries and employee benefits of $2.1 million, driven primarily by salary increasesthree-month LIBOR as the average number of full-time equivalent employees remained relatively consistent over the past year, and increasesbenchmark reference rate in technology, communications and bank operations and other expenses of $1.9 million and $0.9 million, respectively, driven by technology enhancements and the capture of depreciation and amortization expenses relatedorder to BankMobile due to the reclassification of BankMobile as held and used as of Septembercalculate dividends after June 30, 2017.2023.
Income tax expense of $14.9 million increased $0.3 million, or 2.3%, for the three months ended September 30, 2017 when compared to income tax expense of $14.6 million for the three months ended September 30, 2016. The increase in income tax expense was driven primarily by the elimination of deferred tax benefits from other-than-temporary impairment losses on investment securities totaling $7.7 million, offset in part by a decrease in pre-tax income of $13.1 million in third quarter 2017 compared to third quarter 2016.
Preferred stock dividends of $3.6 million increased $1.1 million, or 41.7%, for the three months ended September 30, 2017 when compared to preferred stock dividends of $2.6 million for the three months ended September 30, 2016. This increase was the result of preferred stock issuances aggregating $85.0 million in September 2016 with dividends at 6.00%.

Net Interest IncomeNET INTEREST INCOME
Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers' earnings. 
The following table summarizes Customers' net interest income, and related interest spread, andnet interest margin for the periods indicated.
 Three Months Ended September 30,
 2017 2016
 
Average
Balance
 
Interest
Income or
Expense
 
Average
Yield or
Cost (%)
 
Average
Balance
 
Interest
Income or
Expense
 
Average
Yield or
Cost (%)
(dollars in thousands)           
Assets           
Interest-earning deposits$280,845
 $923
 1.30% $237,753
 $326
 0.55%
Investment securities (A)1,017,065
 7,307
 2.87% 534,333
 3,528
 2.64%
Loans:           
Commercial loans to mortgage companies1,956,587
 21,099
 4.28% 2,142,986
 18,990
 3.53%
Multifamily loans3,639,566
 33,301
 3.63% 3,283,007
 31,373
 3.80%
Commercial and industrial1,476,083
 15,792
 4.24% 1,193,906
 11,887
 3.96%
Non-owner occupied commercial real estate1,294,996
 12,706
 3.89% 1,236,054
 12,295
 3.96%
All other loans561,911
 5,842
 4.12% 385,511
 4,554
 4.70%
Total loans (B)8,929,143

88,740
 3.94% 8,241,464

79,099
 3.82%
Other interest-earning assets125,341
 1,315
 4.16% 90,010
 1,259
 5.56%
Total interest-earning assets10,352,394

98,285
 3.77% 9,103,560

84,212
 3.68%
Non-interest-earning assets389,797
     336,013
    
Total assets$10,742,191
     $9,439,573
    
Liabilities           
Interest checking accounts$351,422
 708
 0.80% $202,645
 278
 0.55%
Money market deposit accounts3,427,682
 9,866
 1.14% 3,115,076
 5,200
 0.66%
Other savings accounts40,310
 29
 0.28% 36,516
 22
 0.24%
Certificates of deposit2,361,069
 7,778
 1.31% 2,796,028
 7,509
 1.07%
Total interest-bearing deposits6,180,483
 18,381
 1.18% 6,150,265
 13,009
 0.84%
Borrowings2,414,086
 11,885
 1.96% 1,586,262
 6,618
 1.66%
Total interest-bearing liabilities8,594,569
 30,266
 1.40% 7,736,527
 19,627
 1.01%
Non-interest-bearing deposits1,158,911
     863,435
    
Total deposits and borrowings9,753,480
   1.23% 8,599,962
   0.91%
Other non-interest-bearing liabilities66,220
     129,208
    
Total liabilities9,819,700
     8,729,170
    
Shareholders’ Equity922,491
     710,403
    
Total liabilities and shareholders’ equity$10,742,191
     $9,439,573
    
Net interest earnings  68,019
     64,585
  
Tax-equivalent adjustment (C)  203
     96
  
Net interest earnings  $68,222
     $64,681
  
Interest spread    2.54%     2.77%
Net interest margin    2.61%     2.82%
Net interest margin tax equivalent (C)    2.62%     2.83%
(A)For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(B)Includes non-accrual loans, the effect of which is to reduce the yield earned on loans, and deferred loan fees.
(C)Non-GAAP tax-equivalent basis, using a 35% statutory tax rate to approximate interest income as a taxable asset.

The following table presents the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities.liabilities for the three months ended March 31, 2023 and 2022. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

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 Three Months Ended September 30,
 2017 vs. 2016
 
Increase (Decrease) due
to Change in
  
 Rate Volume Total
(amounts in thousands)     
Interest income     
Interest-earning deposits$528
 $69
 $597
Investment securities335
 3,444
 3,779
Loans:     
Commercial loans to mortgage companies3,853
 (1,744) 2,109
Multifamily loans(1,440) 3,368
 1,928
Commercial and industrial908
 2,997
 3,905
Non-owner occupied commercial real estate(195) 606
 411
All other loans(610) 1,898
 1,288
Total loans2,516

7,125

9,641
Other interest-earning assets(365) 421
 56
Total interest income3,014

11,059

14,073
Interest expense     
Interest checking accounts167
 263
 430
Money market deposit accounts4,095
 571
 4,666
Other savings accounts4
 3
 7
Certificates of deposit1,539
 (1,270) 269
Total interest-bearing deposits5,805
 (433) 5,372
Borrowings1,337
 3,930
 5,267
Total interest expense7,142
 3,497
 10,639
Net interest income$(4,128) $7,562
 $3,434
Three Months Ended March 31,Three Months Ended March 31,
202320222023 vs. 2022
(dollars in thousands)Average
Balance		Interest
Income or
Expense		Average
Yield or
Cost (%)		Average
Balance		Interest
Income or
Expense		Average
Yield or
Cost (%)		Due to rateDue to volumeTotal
Assets
Interest-earning deposits$914,149 $10,395 4.61 %$826,240 $329 0.16 %$10,027 $39 $10,066 
Investment securities (1)
4,031,247 47,316 4.69 %4,036,966 20,295 2.01 %27,049 (28)27,021 
Loans and leases:
Commercial and industrial:
Specialty lending loans and leases (2)
5,694,168 103,688 7.38 %2,730,990 23,391 3.47 %40,907 39,390 80,297 
Other commercial and industrial loans (2)
1,705,205 25,570 6.08 %1,393,418 13,268 3.86 %8,856 3,446 12,302 
Commercial loans to mortgage companies1,262,139 17,412 5.59 %1,836,647 14,006 3.09 %8,770 (5,364)3,406 
Multifamily loans2,206,600 20,470 3.76 %1,531,846 13,766 3.64 %467 6,237 6,704 
PPP loans889,235 23,551 10.74 %2,641,318 36,894 5.66 %20,448 (33,791)(13,343)
Non-owner occupied commercial real estate loans1,449,722 20,199 5.65 %1,312,210 12,207 3.77 %6,604 1,388 7,992 
Residential mortgages542,909 5,598 4.18 %416,417 3,680 3.58 %682 1,236 1,918 
Installment loans1,727,995 39,425 9.25 %1,794,145 39,963 9.03 %958 (1,496)(538)
Total loans and leases (3)
15,477,973 255,913 6.70 %13,656,991 157,175 4.67 %75,560 23,178 98,738 
Other interest-earning assets91,308 1,321 5.87 %52,111 5,677 
NM(6)
(6,906)2,550 (4,356)
Total interest-earning assets20,514,677 314,945 6.21 %18,572,308 183,476 4.00 %110,543 20,926 131,469 
Non-interest-earning assets538,243 557,022 
Total assets$21,052,920 $19,129,330 
Liabilities
Interest checking accounts$7,494,379 70,485 3.81 %$5,769,372 7,730 0.54 %59,802 2,953 62,755 
Money market deposit accounts2,470,004 20,783 3.41 %4,880,051 4,674 0.39 %19,501 (3,392)16,109 
Other savings accounts822,312 6,286 3.10 %880,113 784 0.36 %5,556 (54)5,502 
Certificates of deposit4,504,333 46,376 4.18 %450,644 524 0.47 %21,429 24,423 45,852 
Total interest-bearing deposits (4)
15,291,028 143,930 3.82 %11,980,180 13,712 0.46 %125,471 4,747 130,218 
Federal funds purchased15,333 188 4.97 %88,611 73 0.33 %222 (107)115 
Borrowings1,788,116 20,928 4.75 %532,610 4,992 3.80 %1,528 14,408 15,936 
Total interest-bearing liabilities17,094,477 165,046 3.91 %12,601,401 18,777 0.60 %137,390 8,879 146,269 
Non-interest-bearing deposits (4)
2,299,295 4,900,983 
Total deposits and borrowings19,393,772 3.45 %17,502,384 0.43 %
Other non-interest-bearing liabilities247,575 237,131 
Total liabilities19,641,347 17,739,515 
Shareholders' equity1,411,573 1,389,815 
Total liabilities and shareholders' equity$21,052,920 $19,129,330 
Net interest income149,899 164,699 $(26,847)$12,047 $(14,800)
Tax-equivalent adjustment375 239 
Net interest earnings$150,274 $164,938 
Interest spread2.76 %3.57 %
Net interest margin2.95 %3.59 %
Net interest margin tax equivalent2.96 %3.60 %
Net interest margin tax equivalent, excluding PPP loans (5)
2.80 %3.32 %

(1)For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
Net(2)Includes owner occupied commercial real estate loans.
(3)Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.
(4)Total costs of deposits (including interest incomebearing and non-interest-bearing) were 3.32% and 0.33% for the three months ended September 30, 2017 was $68.0 million,March 31, 2023 and 2022, respectively.
(5)Non-GAAP tax-equivalent basis, using an increaseestimated marginal tax rate of $3.4 million, or 5.3%, from26% for the three months ended March 31, 2023 and 2022, presented to approximate interest income as a taxable asset and excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of $64.6these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedule that follows this table.
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(6)Not Meaningful. Average yield on other interest-earning assets for the three months ended March 31, 2022 was 44.18% primarily due to $5.2 million of equity investment distributions.
Net interest income decreased $14.8 million for the three months ended September 30, 2016, as averageMarch 31, 2023 compared to the three months ended March 31, 2022 due to higher funding costs from a shift in the mix of interest-bearing liabilities in a rising interest rate environment and reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness, which accelerated the recognition of net deferred loan origination fees, offset in part by an increase in commercial and security balancesindustrial loans and leases, mostly due to higher interest rates on variable rate loans in specialty lending. Average interest-earning assets increased $1.2 billion. Netby $1.9 billion, primarily related to increases in commercial and industrial loans and leases, primarily in specialty lending and multifamily loans, offset in part by decreases in PPP loans due to PPP loan forgiveness and guarantee payments from the SBA and commercial loans to mortgage companies. The commercial loans to mortgage companies trend had been a function of refinance activity, which had slowed since reaching its high level in early 2021, and into 2022 and 2023 with rising interest margin (tax equivalent) narrowedrates.
The NIM decreased by 2164 basis points to 2.62% for third quarter 2017 compared to 2.83% for third quarter 2016. The net interest margin (tax equivalent) compression largely resulted from a $1.4 million reduction in prepayment penalties in the multi-family portfolio. Net interest margin (tax equivalent) was also impacted by Customers Bancorp's issuance of $100 million principal amount of 3.95% senior notes on June 30, 2017 and a one-time interest expense adjustment of approximately $0.3 million.
Interest expense on total interest-bearing deposits increased $5.4 million in third quarter 2017 compared to third quarter 2016. The increase was mainly driven by the average rate on interest-bearing deposits, which increased 34 basis points for third quarter 2017 compared to third quarter 2016, reflecting higher interest rates offered by Customers on its money market deposit accounts and certificates of deposits in order to remain competitive and attract new and retain existing deposit customers. Deposit volumes remained relatively stable, as average interest-bearing deposits increased $30.2 million2.96% for the three months ended September 30, 2017 compared to average interest-bearing depositsMarch 31, 2023 from 3.60% for the three months ended September 30, 2016.

Interest expense on borrowings increased $5.3 millionMarch 31, 2022 resulting primarily from a shift in third quarter 2017 compared to third quarter 2016. This increase was primarily driventhe mix of interest-bearing liabilities in a rising interest rate environment, offset in part by a higher averageshift in the mix of interest-earning assets in a rising interest rate on borrowings, which increased 30environment. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 331 basis points for third quarter 2017 compared to third quarter 2016, primarily as a result of anpoint increase in the borrowing rate for short term advances, including FHLB advancescost of interest-bearing liabilities and federal funds purchased, and an increase incontributed to the outstanding balance of senior note borrowings.
Provision for Loan Losses
The provision for loan losses of $2.4 million increased by $2.3 millionNIM decrease for the three months ended September 30, 2017,March 31, 2023 compared to $0.1 millionthe three months ended March 31, 2022. The decrease in NIM was also due to reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness during the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The decrease in NIM was offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment, mostly in commercial and industrial loans and leases, primarily in specialty lending, which drove a 221 basis point increase in the yield on interest-earning assets. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was $5.5 billion in ending balance ($5.7 billion average balance) of commercial and industrial loans and leases within specialty lending yielding 7.38% and $5.5 billion in ending balance ($4.5 billion average balance) of certificates of deposit costing 4.18% at and for the samethree months ended March 31, 2023. Customers' total cost of funds, including non-interest bearing deposits was 3.45% and 0.43% for the three months ended March 31, 2023 and 2022, respectively.
Customers' net interest margin tables contain non-GAAP financial measures calculated using non-GAAP amounts. These measures include net interest margin tax equivalent, excluding PPP loans. Management uses these non-GAAP measures to compare the current period presentation to historical periods in 2016. prior filings. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
A reconciliation of net interest margin tax equivalent, excluding PPP loans for the three months ended March 31, 2023 and 2022 is set forth below.
Three Months Ended March 31,
(dollars in thousands)20232022
Net interest income (GAAP)$149,899 $164,699 
Tax-equivalent adjustment375 239 
Net interest income tax equivalent (GAAP)150,274 164,938 
Loans receivable, PPP net interest income(14,106)(34,615)
Net interest income tax equivalent, excluding PPP loans (Non-GAAP)$136,168 $130,323 
Average total interest-earning assets (GAAP)$20,514,677 $18,572,308 
Average PPP loans(889,235)(2,641,318)
Adjusted average total interest-earning assets (Non-GAAP)$19,625,442 $15,930,990 
Net interest margin (GAAP)2.95 %3.59 %
Net interest margin tax equivalent (GAAP)2.96 %3.60 %
Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)2.80 %3.32 %

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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 March 31, 2023, which resulted primarily from the recognition of weaker macroeconomic forecasts. Customers recorded a provision for credit losses of $2.4 million in third quarter 2017 included provisions of $1.4$18.0 million for loan portfolio growthloans and reserves of $0.8leases and $0.3 million for impaired loans. In third quarter 2016,lending-related commitments, respectively, for the three months ended March 31, 2023. Customers recorded a provision for loancredit losses for loans and leases of $15.3 million and a credit to provision for credit losses (a benefit) on lending-related commitments of $0.1 million, respectively, for the three months ended March 31, 2022. Net charge-offs for the three months ended March 31, 2023 were $18.7 million, or 49 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $7.2 million, or 21 basis points of average loans and leases on an annualized basis, for the three months ended March 31, 2022. The increase in net charge-offs for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was the result of minimal loan growth during the quarter, as planned, as well as exceptional asset quality.primarily due to higher charge-offs for consumer installment loans.
For more information about the provision and allowance for loan lossesACL and our loss experience seeon loans and leases, refer to “Credit Risk” and “Asset Quality” herein.
Non-Interest IncomeThe provision for credit losses for the three months ended March 31, 2023 and 2022 also included a provision for credit losses of $1.6 million and $0.7 million, respectively, on certain asset-backed securities and corporate notes included in our investment securities available for sale. Refer to "NOTE 5 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.
NON-INTEREST INCOME
The table below presents the components of non-interest income for the three months ended September 30, 2017March 31, 2023 and 2016.2022.
 Three Months Ended March 31,
(dollars in thousands)20232022Change% Change
Commercial lease income$9,326 $5,895 $3,431 58.2 %
Loan fees3,990 2,545 1,445 56.8 %
Bank-owned life insurance2,647 8,326 (5,679)(68.2)%
Mortgage warehouse transactional fees1,074 2,015 (941)(46.7)%
Gain (loss) on sale of SBA and other loans— 1,507 (1,507)(100.0)%
Net gain (loss) on sale of investment securities— (1,063)1,063 (100.0)%
Other1,084 1,973 (889)(45.1)%
Total non-interest income$18,121 $21,198 $(3,077)(14.5)%
Commercial lease income
 Three Months Ended September 30,
 2017 2016
(amounts in thousands)   
Interchange and card revenue$9,570
 $11,547
Gain (loss) on sale of investment securities5,349
 (1)
Deposit fees2,659
 4,218
Mortgage warehouse transactional fees2,396
 3,080
Bank-owned life insurance1,672
 1,386
Gain on sale of SBA and other loans1,144
 1,206
Mortgage banking income257
 287
Impairment loss on investment securities(8,349) —
Other3,328
 5,763
Total non-interest income$18,026
 $27,486
Non-interestCommercial lease income decreased $9.5represents income earned on commercial operating leases originated by Customers' Equipment Finance Group in which Customers is the lessor. The $3.4 million during the three months ended September 30, 2017 to $18.0 million, compared to $27.5 millionincrease in commercial lease income for the three months ended September 30, 2016. ThisMarch 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from the continued growth of Customers' equipment finance business.
Loan fees
The $1.4 million increase in loan fees for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from an increase in fees earned on unused lines of credit and other fees from commercial borrowers.
Bank-owned life insurance
Bank-owned life insurance income represents income earned on life insurance policies owned by Customers including an increase in cash surrender value of the policies and any benefits paid by insurance carriers under the policies. The $5.7 million decrease was primarily duein bank-owned life insurance income for the three months ended March 31, 2023 compared to an $8.3 million other-than-temporary-impairment loss on equity securities,the three months ended March 31, 2022 resulted from a decrease in other non-interest incomedeath benefits paid by insurance carriers under the policies.
54
Mortgage warehouse transactional fees
The $0.9 million due to a $2.2 million recovery of a previously recorded loss in third quarter 2016, decreases in interchange and card revenue and deposit fees of $2.0 million and $1.6 million, respectively, driven by lower business volumes in BankMobile Disbursements, and a decrease in mortgage warehouse transactional fees for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from lower refinancing activity due to higher interest rates. There can be no assurance that Customers will earn mortgage warehouse transactional fees in 2023 comparable to prior periods, given the lower mortgage banking activity in a higher interest rate environment.
Gain (loss) on sale of $0.7SBA and other loans
The $1.5 million driven by a reductiondecrease in gain on sale of SBA and other loans for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 reflects $1.5 million in gains on sales of $14.3 million of SBA loans in the volumethree months ended March 31, 2022, compared to no such sales in the three months ended March 31, 2023. There can be no assurance that Customers will realize gains from sales of warehouse transactions. These decreases were offsetloans in part by increases2023 comparable to prior periods given the significant uncertainty in gainsthe capital markets.
Net gain (loss) on sale of investment securities
The $1.1 million decrease in net loss on sale of investment securities for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 reflects net losses realized from the sale of $156.0 million in AFS debt securities during the three months ended March 31, 2022, compared to no such sales in the three months ended March 31, 2023. There can be no assurance that Customers will realize gains from sales of investment securities in 2023, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.
Other non-interest income
The $0.9 million decrease in other non-interest income for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from decreases in unrealized gains on derivatives due to changes in market interest rates, mortgage banking and deposit fees, partially offset by increases in SERP income due to changes in capital markets and gains from the sales of $5.4 million and income from bank-owned life insurance policies of $0.3 million.commercial lease assets.

Non-Interest ExpenseNON-INTEREST EXPENSE
The table below presents the components of non-interest expense for the three months ended SeptemberMarch 31, 2023 and 2022.
 Three Months Ended March 31,
(dollars in thousands)20232022Change% Change
Salaries and employee benefits$32,345 $26,607 $5,738 21.6 %
Technology, communication and bank operations16,589 24,068 (7,479)(31.1)%
Commercial lease depreciation7,875 4,942 2,933 59.3 %
Professional services7,596 6,956 640 9.2 %
Loan servicing4,661 2,371 2,290 96.6 %
Occupancy2,760 3,050 (290)(9.5)%
FDIC assessments, non-income taxes and regulatory fees2,728 2,383 345 14.5 %
Advertising and promotion1,049 315 734 233.0 %
Other4,530 3,115 1,415 45.4 %
Total non-interest expense$80,133 $73,807 $6,326 8.6 %
Salaries and employee benefits
The $5.7 million increase in salaries and employee benefits for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from an increase in average full-time equivalent team members, annual merit increases, incentives, severance accruals and SERP expenses.
55
Technology, communication and bank operations
The $7.5 million decrease in technology, communication and bank operations expense for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from decreases in deposit servicing-related expenses resulting from lower servicing fees and the discontinuation of the interchange maintenance fees paid to BM Technologies pursuant to the amended deposit servicing agreement, partially offset by $2.7 million increase in higher software licenses, fees paid for software as a service and other processing and technology-related expenses.
Customers incurred expenses of $7.6 million and $17.8 million to BM Technologies under the deposit servicing agreement, included within the technology, communication and bank operations expense during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, Customers held $1.1 billion of deposits serviced by BM Technologies. On March 22, 2023, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 20172024. Customers expects that approximately $514 million of these serviced deposits held on March 31, 2023 in connection with BM Technologies' Higher Education business will leave Customers Bank by the earlier of BM Technologies' successful completion of the transfer of such deposits to a new sponsor bank or June 30, 2024. The remaining serviced deposits of approximately $569 million in connection with an existing white label relationship will remain at Customers Bank and 2016.continue to be serviced by BM Technologies, which was also renewed on March 22, 2023. Refer to "NOTE 9 – DEPOSITS" to Customers' unaudited consolidated financial statements for additional information.
Commercial lease depreciation
 Three Months Ended September 30,
 2017 2016
(amounts in thousands)   
Salaries and employee benefits$24,807
 $22,681
Technology, communication and bank operations14,401
 12,525
Professional services7,403
 7,006
Occupancy2,857
 2,450
FDIC assessments, taxes, and regulatory fees2,475
 2,726
Provision for operating losses1,509
 1,406
Loan workout915
 592
Other real estate owned445
 1,192
Advertising and promotion404
 591
Acquisition related expenses—
 144
Other5,824
 4,905
Total non-interest expense$61,040
 $56,218
The $2.9 million increase in commercial lease depreciation for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor.
Non-interestProfessional services
The $0.6 million increase in professional services for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to an increase in legal fees related to PPP related matters, partially offset by a decrease in outside professional services related to PPP forgiveness.
Loan servicing
The $2.3 million increase in loan servicing for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from the growth in loan portfolios serviced by third parties.
Advertising and promotion
The $0.7 million increase in advertising and promotion for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from higher spending on media and advertising agencies for our deposit products.
Other non-interest expense
The $1.4 million increase in other non-interest expense for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily resulted from increases in operating losses and a provision or addition to the reserve for unfunded commitments. A provision or addition to the reserve for unfunded commitments for the three months ended March 31, 2023 was $61.0$0.3 million, compared to a credit or release to the reserve for unfunded commitments of $0.1 million for the three months ended September 30, 2017,March 31, 2022.
INCOME TAXES
The table below presents income tax expense and the effective tax rate for the three months ended March 31, 2023 and 2022.
Three Months Ended March 31,
(dollars in thousands)20232022Change% Change
Income before income tax expense$68,284 $96,093 $(27,809)(28.9)%
Income tax expense14,563 19,332 (4,769)(24.7)%
Effective tax rate21.33 %20.12 %
56
The $4.8 million decrease in income tax expense for the three months ended March 31, 2023, when compared to the same period in the prior year, primarily resulted from a decrease in pre-tax income and increased income tax credits. The increase in the effective tax rate for the three months ended March 31, 2023, when compared to the same period in the prior year, primarily resulted from lower death benefits from bank-owned life insurance policies and stock-based compensation benefits, partially offset by an increase of $4.8in income tax credits.
PREFERRED STOCK DIVIDENDS
Preferred stock dividends were $3.5 million from non-interest expense of $56.2and $1.9 million for the three months ended September 30, 2016.
SalariesMarch 31, 2023 and employee benefits, which represent2022, respectively. There were no changes to the largest componentamount of non-interest expense, increased $2.1 million, or 9.4%, to $24.8 million forpreferred stock outstanding during the three months ended September 30, 2017 from $22.7 million forMarch 31, 2023 and 2022.
On June 15, 2021, the three months ended September 30, 2016. The increase was primarily attributable to increases in salaries as the average number of full-time equivalent employees remained relatively consistent over the past year.
Technology, communication and bank operations expenses increased by $1.9 million, or 15.0%, to $14.4 million for the three months ended September 30, 2017 from $12.5 million for the three months ended September 30, 2016. The increase was primarily attributable to increased core processing system expenses and non-capitalizable software development costs of $2.0 million and $1.5 million, respectively, as well as the recapture of $3.2 million of depreciation expense in third quarter 2017 related to BankMobile for the period it was classified as held for sale. These increases were offset in part by a $3.9 million one-time expense in third quarter 2016 for technology-related services.
Income Taxes
Income tax expense increased $0.3 million for the three months ended September 30, 2017 to $14.9 million, compared to $14.6 million in the same period of 2016. This increase was driven primarily by the elimination of deferred tax benefits from other-than-temporary impairment losses on investment securities totaling $7.7 million, offset in part by a decrease in pre-tax income of $13.1 million in third quarter 2017 compared to third quarter 2016.

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


Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net income available to common shareholders decreased $6.6 million, or 12.5%three-month LIBOR plus 5.14%, to $46.4 million for the nine months ended September 30, 2017 when compared to net income available to common shareholders of $53.0 million for the nine months ended September 30, 2016. The decreased net income available to common shareholders primarily resulted from an increase in non-interest expense of $32.5 million, an increase in preferred stock dividends of $4.9 million, and an increase in provision for loan losses of $3.1 million. These increases were offset in part by an increase in net interest income of $13.7 million, largely reflecting the growth in interest earning assets over the past twelve months, an increase in non-interest income of $17.9 million largely as a result of a full nine months of BankMobile Disbursements operations, and a decrease in income tax expense of $2.3 million.
Net interest income increased $13.7 million, or 7.4%, for the nine months ended September 30, 2017 to $199.0 million when compared to net interest income of $185.4 million for the nine months ended September 30, 2016. This increase resulted principally from an increase in the average balance of interest-earning assets of $1.1 billion offset in part by a 13 basis point decrease in the net interest margin (tax equivalent) to 2.71% for the first nine months of 2017 when compared to the first nine months of 2016.
The provision for loan losses increased $3.1 million to $5.9 million for the nine months ended September 30, 2017 when compared to the provision for loan losses of $2.9 million for the same period in 2016. The provision for loan losses of $5.9 million included $2.3 million for loan portfolio growth and $3.9 million for impaired loans, offset in part by a $0.8 million release resulting from improved asset quality and lower incurred losses than previously estimated.
Non-interest income increased $17.9 million, or 43.5%, for the nine months ended September 30, 2017 to $59.2 million when compared to $41.2 million for the nine months ended September 30, 2016. The increase was primarily a result of an increase in interchange and card revenue of $17.9 million reflecting a full nine months of BankMobile Disbursements operations, an increase in gains on sales of investment securities of $8.5 million, an increase in deposit fees of $2.7 million, and increased bank-owned life insurance income of $1.7 million, offset in part by other-than-temporary impairment losses of $12.9 million related to the decline in market value of the Religare investment and a decrease in mortgage warehouse transactional fees of $1.6 million.
Non-interest expense increased $32.5 million, or 25.3%, for the nine months ended September 30, 2017 to $160.8 million when compared to non-interest expense of $128.3 million for the nine months ended September 30, 2016. The increase primarily resulted from increased BankMobile expenses of $38.9 million due to the acquisition of the Disbursements business in June 2016 compared to a full nine monthsfixed rate of BankMobile Disbursements operations in 2017, offset in part by decreased FDIC assessments, taxes, and regulatory fees of $4.6 million and a one-time expense of $3.9 million in third quarter 2016 for technology-related services. The increased BankMobile expenses, largely6.45%. On December 15, 2021, the result of a full nine months of BankMobile Disbursements operations in 2017 and only three months in 2016, included $10.5 million of increased salaries and employee benefits, $17.0 million of increased technology, communications, and bank operations, $6.4 million of increased professional services, and $5.5 million of increased other operating expenses. Excluding the effect of BankMobile, non-interest expense decreased $6.3 million period over period as management continued its efforts to control expenses.
Income tax expense decreased $2.3 million for the nine months ended September 30, 2017 to $34.2 million whenSeries F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to income tax expensea fixed rate of $36.6 million for the same period of 2016. The decrease in income tax expense was driven primarily by a decrease in pre-tax income of $4.0 million in the first nine months of 2017 as well as the $4.6 million of tax benefits recognized for the increase in fair value of restricted stock units vesting and the exercise of stock options since the award date compared to $0.6 million for the the same period in 2016. Customers' effective tax rate decreased to 37.4% for the nine months ended September 30, 2017, compared to 38.3% for the same period of 2016.
Preferred stock dividends increased $4.9 million for the nine months ended September 30, 2017 to $10.8 million when compared to preferred stock dividends of $5.9 million in the same period of 2016. This increase was the result of preferred stock issuances totaling $142.5 million issued in April 2016 with dividends at 6.45% and in September 2016 with dividends at 6.00%.

Net Interest Income
Net interest income (the difference between the interest earned on loans, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers' earnings. 
The following table summarizes Customers' net interest income and related spread and margin for the periods indicated.
 Nine Months Ended September 30,
 2017 2016
 Average
Balance		 Interest
Income or
Expense		 Average
Yield or
Cost (%)		 Average
Balance		 Interest
Income or
Expense		 Average
Yield or
Cost
(amounts in thousands)           
Assets           
Interest-earning deposits$327,154
 $2,446
 1.00% $211,971
 $845
 0.53%
Investment securities (A)971,710
 21,017
 2.88% 548,921
 10,875
 2.64%
Loans:           
Commercial loans to mortgage companies1,734,874
 53,860
 4.15% 1,931,892
 50,767
 3.51%
Multifamily loans3,496,276
 96,570
 3.69% 3,235,689
 91,611
 3.78%
Commercial and industrial1,402,650
 44,034
 4.20% 1,127,622
 33,626
 3.98%
Non-owner occupied commercial real estate1,290,762
 37,654
 3.90% 1,170,996
 33,759
 3.85%
All other loans515,567
 16,590
 4.30% 399,202
 14,356
 4.80%
Total loans (B)8,440,129
 248,708
 3.94% 7,865,401

224,119
 3.81%
Other interest-earning assets102,590
 3,061
 3.99% 90,911
 3,092
 4.54%
Total interest earning assets9,841,583

275,232
 3.74% 8,717,204

238,931
 3.66%
Non-interest-earning assets367,595
     305,326
    
Total assets$10,209,178
     $9,022,530
    
Liabilities           
Interest checking accounts$338,991
 1,839
 0.73% $160,525
 681
 0.57%
Money market deposit accounts3,347,661
 24,462
 0.98% 3,044,696
 13,674
 0.60%
Other savings accounts41,685
 87
 0.28% 39,075
 66
 0.23%
Certificates of deposit2,489,970
 22,546
 1.21% 2,556,935
 19,944
 1.04%
Total interest-bearing deposits6,218,307
 48,934
 1.05% 5,801,231
 34,365
 0.79%
Borrowings1,836,654
 27,255
 1.98% 1,693,455
 19,196
 1.51%
Total interest-bearing liabilities8,054,961
 76,189
 1.26% 7,494,686
 53,561
 0.95%
Non-interest-bearing deposits1,185,062
     800,358
    
Total deposits and borrowings9,240,023
   1.10% 8,295,044
   0.86%
Other non-interest-bearing liabilities72,622
     76,774
    
Total liabilities9,312,645
     8,371,818
    
Shareholders’ Equity896,533
     650,712
    
Total liabilities and shareholders’ equity$10,209,178
     $9,022,530
    
Net interest earnings  199,043
     185,370
  
Tax-equivalent adjustment (C)  399
     298
  
Net interest earnings  $199,442
     $185,668
  
Interest spread    2.64%     2.80%
Net interest margin    2.70%     2.84%
Net interest margin tax equivalent (C)    2.71%     2.84%
(A)For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(B)Includes non-accrual loans, the effect of which is to reduce the yield earned on loans, and deferred loan fees.
(C)Non-GAAP tax-equivalent basis, using a 35% statutory tax rate to approximate interest income as a taxable asset.

The following table presents the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately Pursuant to the change due to volumeAdjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers expects that the Series E and the change due to rate.
 Nine Months Ended September 30,
 2017 vs. 2016
 Increase (Decrease) due
to Change in		  
 Rate Volume Total
(amounts in thousands)     
Interest income     
Interest-earning deposits$989
 $612
 $1,601
Investment securities1,079
 9,063
 10,142
Loans:     
Commercial loans to mortgage companies8,621
 (5,528) 3,093
Multifamily loans(2,213) 7,172
 4,959
Commercial and industrial1,879
 8,529
 10,408
Non-owner occupied commercial real estate434
 3,461
 3,895
All other loans(1,616) 3,850
 2,234
Total loans7,105
 17,484
 24,589
Other interest-earning assets(402) 371
 (31)
Total interest income8,771
 27,530
 36,301
Interest expense     
Interest checking accounts233
 925
 1,158
Money market deposit accounts9,313
 1,475
 10,788
Other savings accounts16
 5
 21
Certificates of deposit3,138
 (536) 2,602
Total interest-bearing deposits12,700
 1,869
 14,569
Borrowings6,333
 1,726
 8,059
Total interest expense19,033
 3,595
 22,628
Net interest income$(10,262) $23,935
 $13,673
Net interest income for the nine months ended September 30, 2017 was $199.0 million, an increaseF Preferred Stock will substitute three-month term SOFR plus a tenor spread adjustment of $13.7 million, or 7.4%, when compared to net interest income of $185.4 million for the nine months ended September 30, 2016. This increase was primarily driven by increased average loan and security balances of $1.0 billion.

Net interest margin (tax equivalent) narrowed by 13 basis points to 2.71% from the nine months ended September 30, 2016. The net interest margin compression largely resulted from a $1.6 million reduction in prepayment penalties in the multi-family portfolio during the nine months ended September 30, 2017 as compared to nine months ended September 30, 2016. Net interest margin (tax equivalent) was also impacted by Customers Bancorp's issuance of $100 million principal amount of 3.95% senior notes on June 30, 2017.
Interest expense on total interest-bearing deposits increased $14.6 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. This increase primarily resulted from increased deposit volume as average interest-bearing deposits for the nine months ended September 30, 2017 increased by $417.1 million when compared to average interest-bearing deposits for the nine months ended September 30, 2016. The average rate on interest-bearing deposits increased 2626.161 basis points for three-month LIBOR as the nine months ended September 30, 2017 compared to the nine months ended September 30,

2016, reflecting higher interest rates offered by Customers on its money market deposit accounts and certificates of depositsbenchmark reference rate in order to remain competitive and attract new and retain existing deposit customers.calculate dividends after June 30, 2023.
Interest expense on borrowings increased $8.1 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. This increase was driven by a 47 basis point increase in average rates for the period due primarily to higher rates on short term borrowings used to fund commercial loans to mortgage companies. This increase was also driven by increased volume as average borrowings increased by $143.2 million when compared to average borrowings for the nine months ended September 30, 2016.
Provision for Loan Losses
The provision for loan losses increased by $3.1 million to $5.9 million for the nine months ended September 30, 2017, compared to $2.9 million for the same period in 2016. The provision for loan losses of $5.9 million included $2.3 million for loan portfolio growth and $3.9 million for impaired loans, offset in part by a $0.8 million release resulting from improved asset quality and lower incurred losses than previously estimated. The provision for loan losses of $2.9 million for the nine months ended September 30, 2016 included provisions for loan portfolio growth and reserves on impaired loans of approximately $5.0 million, offset in part by increased estimated cash flows expected to be collected on purchased credit-impaired loans, a reduction in the estimated amounts owed to the FDIC for previous FDIC assisted transactions, and other recoveries of approximately $2.1 million.
For more information about the provision and allowance for loan losses and our loss experience, see “Credit Risk” and “Asset Quality” herein.
Non-Interest Income
The table below presents the components of non-interest income for the nine months ended September 30, 2017 and 2016.
 Nine Months Ended September 30,
 2017 2016
(amounts in thousands)   
Interchange and card revenue$31,729
 $13,806
Gain on sale of investment securities8,532
 25
Deposit fees7,918
 5,260
Mortgage warehouse transactional fees7,139
 8,702
Bank-owned life insurance5,297
 3,629
Gain on sale of SBA and other loans3,045
 2,135
Mortgage banking income703
 737
Impairment loss on investment securities(12,934) —
Other7,741
 6,943
Total non-interest income$59,170
 $41,237
Non-interest income increased $17.9 million during the nine months ended September 30, 2017 to $59.2 million, compared to $41.2 million for the nine months ended September 30, 2016. This increase was primarily due to a $17.9 million increase in interchange and card revenues reflecting a full nine months of BankMobile Disbursements business activity in 2017 compared to three full months in 2016, an $8.5 million increase in gains on sale of investment securities, an increase in deposit fees of $2.7 million, and increased income from bank-owned life insurance policies of $1.7 million, offset in part by a $12.9 million other-than-temporary-impairment loss on equity securities and a decrease in mortgage warehouse transactional fees of $1.6 million driven by a reduction in the volume of warehouse transactions.

Non-Interest Expense
The table below presents the components of non-interest expense for the nine months ended September 30, 2017 and 2016.
 Nine Months Ended September 30,
 2017 2016
(amounts in thousands)   
Salaries and employee benefits$69,569
 $58,051
Technology, communication and bank operations33,227
 19,021
Professional services21,142
 13,213
Occupancy8,228
 7,248
FDIC assessments, taxes, and regulatory fees6,615
 11,191
Provision for operating losses4,901
 1,943
Loan workout1,844
 1,497
Advertising and promotion1,108
 1,178
Other real estate owned550
 1,663
Acquisition related expenses—
 1,195
Other13,634
 12,106
Total non-interest expense$160,818
 $128,306
Non-interest expense was $160.8 million for the nine months ended September 30, 2017, an increase of $32.5 million from non-interest expense of $128.3 million for the nine months ended September 30, 2016.
Salaries and employee benefits, which represent the largest component of non-interest expense, increased $11.5 million, or 19.8%, to $69.6 million for the nine months ended September 30, 2017, reflecting salary increases as well as a higher average number of full-time equivalent employees, primarily resulting from a full year of BankMobile Disbursements operations.
Technology, communication and bank operations increased by $14.2 million, or 74.7%, to $33.2 million for the nine months ended September 30, 2017 from $19.0 million for the nine months ended September 30, 2016. This increase was primarily attributable to increases in core processing system and conversion expenses of $9.0 million, interchange expenses of $4.7 million, non-capitalizable software development costs of $3.4 million, and depreciation expense primarily driven by the $3.2 catch-up adjustment recorded in third quarter 2017 for the period BankMobile was classified as held for sale. These increases were partially offset by a $3.9 million one-time expense in third quarter 2016 for technology-related services. The increased technology, communication, and bank operations expenses reflected a full nine months of BankMobile Disbursements activity in 2017 compared to three full months of activity for 2016.
Professional services expense increased by $7.9 million, or 60.0%, to $21.1 million for the nine months ended September 30, 2017 from $13.2 million for the nine months ended September 30, 2016. This increase was primarily driven by the transitional services agreement which was in effect for the twelve months following the acquisition of the Disbursement business from Higher One and ended in second quarter 2017 and increases in consulting and other professional services to support a $10.5 billion bank.
FDIC assessments, taxes, and regulatory fees decreased by $4.6 million, or 40.9%, to $6.6 million for the nine months ended September 30, 2017 from $11.2 million for the nine months ended September 30, 2016. This decrease was primarily related to a lower insurance assessment charged by the FDIC as the FDIC's Deposit Insurance Fund reached a targeted ratio.
Provision for operating losses increased by $3.0 million, or 152.2%, to $4.9 million for the nine months ended September 30, 2017 from $1.9 million for the nine months ended September 30, 2016. The provision for operating losses represents Customers' estimated liability for losses resulting from fraud or theft-based transactions that have generally been disputed by deposit account holders mainly from its BankMobile Disbursements business but where such disputes have not been resolved as of the end of the reporting period. The reserve is based on historical rates of loss on such transactions. The increase is mainly attributable to the accrual for the estimated liability for a full nine months of operations of the BankMobile Disbursements business in 2017.

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

Preferred Stock Dividends

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

Financial Condition
General
Customers crossed the $10 billion asset threshold during the second quarter of 2017 and continued to exceed $10 billion ofCustomers' total assets were $21.8 billion at September 30, 2017 with total assets of $10.5 billion.March 31, 2023. This represented a $1.1 billion, or 11.6%,an increase of $855.5 million from total assets of $9.4$20.9 billion at December 31, 2016.2022. The change in Customers' financial position occurred primarily as the result of an increase in total loans outstanding of $0.9 billion since December 31, 2016, or 10.9%,assets was primarily driven by growthincreases of $1.6 billion in multifamily, commercialcash and industrial loans, and consumer residential loans. Commercialcash equivalents, $95.7 million in loans held for sale and $30.0 million in investment increased $0.7 billion, or 11.5%,securities held to $6.5maturity, partially offset by decreases of $751.9 million in loans receivable, PPP, $75.9 million in loans receivable, mortgage warehouse, at fair value and $60.5 million in investment securities, at fair value.
Total liabilities were $20.3 billion at September 30, 2017 compared to $5.9March 31, 2023. This represented an increase of $837.4 million from $19.5 billion at December 31, 2016, and consumer loans held for investment increased $233.2 million to $531.9 million at September 30, 2017 from $298.7 million at December 31, 2016.
Given the change in disposition strategy related to BankMobile as of September 30, 2017, Customers has decided to strategically reduce its total assets to below $10 billion as of December 31, 2017 in order to continue to qualify for the small issuer exemption rules of the Durbin Amendment to optimize interchange revenue through June 30, 2019. Customers plans to reduce total assets by approximately $500 million by year-end 2017 through normal seasonality of the mortgage warehouse business, which tends to decline in the winter months, selling multi-family and residential mortgage loans, and selling investment securities as needed. In addition, Customers expects to moderately grow its commercial and industrial loan portfolio while limiting growth in its multi-family loan portfolio by disciplined pricing.
Total liabilities were $9.6 billion at September 30, 2017. This represented a $1.0 billion, or 12.1%, increase from $8.5 billion at December 31, 2016.2022. The increase in total liabilities primarily resulted primarily from an increase of $1.3 billion in FHLB borrowings, which increasedadvances, partially offset by $0.6 billion, or 68.3%, to $1.5 billion at September 30, 2017 from $0.9 billion at December 31, 2016, other borrowings, which increased $99.1a decrease of $433.3 million or 113.8%, to $186.3 million at September 30, 2017 from $87.1 million at December 31, 2016 resulting from the issuance of the $100 million senior notes on June 30, 2017, and federal funds purchased, which increased $64.0 million, or 77.1%, to $147.0 million at September 30, 2017 from $83.0 million at December 31, 2016. Overall deposits increased $293.3 million, or 4.0%, to $7.6 billion at September 30, 2017 from $7.3 billion at December 31, 2016.

in total deposits.
The following table sets forth certain key condensed balance sheet data as of September 30, 2017March 31, 2023 and December 31, 2016:2022:
(dollars in thousands)March 31,
2023		December 31,
2022		Change% Change
Cash and cash equivalents$2,046,685 $455,806 $1,590,879 349.0 %
Investment securities, at fair value2,926,969 2,987,500 (60,531)(2.0)%
Investment securities held to maturity870,294 840,259 30,035 3.6 %
Loans held for sale424,057 328,312 95,745 29.2 %
Loans receivable, mortgage warehouse, at fair value1,247,367 1,323,312 (75,945)(5.7)%
Loans receivable, PPP246,258 998,153 (751,895)(75.3)%
Loans and leases receivable13,145,352 13,144,894 458 0.0 %
Allowance for credit losses on loans and leases(130,281)(130,924)643 (0.5)%
Bank-owned life insurance339,607 338,441 1,166 0.3 %
Other assets374,609 400,135 (25,526)(6.4)%
Total assets21,751,614 20,896,112 855,502 4.1 %
Total deposits17,723,617 18,156,953 (433,336)(2.4)%
FHLB advances2,052,143 800,000 1,252,143 156.5 %
Other borrowings123,645 123,580 65 0.1 %
Subordinated debt182,021 181,952 69 0.0 %
Accrued interest payable and other liabilities249,168 230,666 18,502 8.0 %
Total liabilities20,330,594 19,493,151 837,443 4.3 %
Total shareholders’ equity1,421,020 1,402,961 18,059 1.3 %
Total liabilities and shareholders’ equity$21,751,614 $20,896,112 $855,502 4.1 %
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 September 30,
2017		 December 31,
2016
(amounts in thousands)   
Cash and cash equivalents$219,480
 $264,709
Investment securities available for sale, at fair value584,823
 493,474
Loans held for sale (includes $1,963,076 and $2,117,510, respectively, at fair value)2,113,293
 2,117,510
Loans receivable7,061,338
 6,154,637
Allowance for loan losses(38,314) (37,315)
Total assets10,471,829
 9,382,736
Total deposits7,597,076
 7,303,775
Federal funds purchased147,000
 83,000
FHLB advances1,462,343
 868,800
Other borrowings186,258
 87,123
Subordinated debt108,856
 108,783
Total liabilities9,561,187
 8,526,864
Total shareholders’ equity910,642
 855,872
Total liabilities and shareholders’ equity10,471,829
 9,382,736
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks and interest-earning deposits. Cash and due from banks consists mainly of vault cash and cash items in the process of collection. These balances totaled $13.3Cash and due from banks were $77.3 million and $58.0 million at September 30, 2017. This represents a $24.2 million decrease from $37.5 million atMarch 31, 2023 and December 31, 2016.  These2022, respectively. Cash and due from banks balances vary from day to day, primarily due to variations in customers’ depositsdeposit activities with the Bank.
Interest-earning deposits consist of cash deposited at other banks, primarily the Federal Reserve Bank of Philadelphia.FRB. Interest-earning deposits were $206.2 million$2.0 billion and $227.2$397.8 million at September 30, 2017March 31, 2023 and December 31, 2016,2022, respectively.
Included The balance of interest-earning deposits varies from day to day, depending on several factors, such as fluctuations in the reported balancescustomers' deposits with Customers, payment of cashchecks drawn on customers' accounts and cash equivalents at September 30, 2017strategic investment decisions made to maximize Customers' net interest income, while effectively managing interest-rate risk and liquidity. The increase in interest-earning deposits from December 31, 2016 was $10.0 million and $20.0 million, respectively,2022 primarily resulted from maintaining a higher level of restricted cash placedliquidity in escrow for paymentresponse to Higher One in connection withheightened liquidity risk to the acquisition ofU.S. banking system, particularly to the Disbursement business.regional banks.
Investment Securitiessecurities at fair value
The investment securities portfolio is an important source of interest income and liquidity. At September 30, 2017, investments consistedIt consists primarily of residential and commercial real estate mortgage-backed securities and collateralized mortgage obligations guaranteed by an agencyagencies of the United States government, asset-backed securities, collateralized loan obligations, commercial mortgage-backed securities, private label collateralized mortgage obligations, corporate notes and marketablecertain equity securities. In addition to generating revenue, the investment portfolio is maintained to manage interest-rate risk, provide liquidity, andserve as collateral for other borrowings, and diversify the credit risk of interest-earning assets. The portfolio is structured to maximizeoptimize net interest income given the changes in the economic environment, liquidity position and balance sheet mix.
At September 30, 2017,March 31, 2023, investment securities at fair value totaled $2.9 billion compared to $3.0 billion at December 31, 2022. The decrease primarily resulted from the maturities, calls and principal repayments totaling $69.6 million, partially offset by an increase in the fair value of AFS debt securities, or a decline in unrealized losses of $8.2 million due to changes in market interest rates for the three months ended March 31, 2023.
For financial reporting purposes, AFS debt securities are carried at fair value. Unrealized gains and losses on AFS debt securities, other than credit losses, are included in other comprehensive income (loss) and reported as a separate component of shareholders’ equity, net of the related tax effect. Changes in the fair value of equity securities with a readily determinable fair value and securities reported at fair value based on a fair value option election are recorded in non-interest income in the period in which they occur. Customers recorded a provision for credit losses of $1.6 million on certain asset-backed securities and corporate notes included in our investment securities at fair value during the three months ended March 31, 2023. Refer to "NOTE 5 – INVESTMENT SECURITIES" and "NOTE 13 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS" to Customers' unaudited consolidated financial statements for additional information.
The following table sets forth information about the maturities and weighted-average yield of the AFS debt securities portfolio. The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security adjusted for prepayment estimates, and considers the contractual coupon, amortization of premiums and accretion of discounts. Yields are not reported on a tax-equivalent basis. Yields exclude the impact of related hedging derivatives.
March 31, 2023
Within one yearAfter one but within five yearsAfter five but within ten yearsNo
specific
maturity		Total
Asset-backed securities— %— %— %3.44 %3.44 %
Agency-guaranteed residential collateralized mortgage obligations— — — 2.43 2.43 
Collateralized loan obligations— — — 6.56 6.56 
Commercial mortgage-backed securities— — — 6.19 6.19 
Corporate notes6.75 6.76 4.77 — 6.36 
Private label collateralized mortgage obligations— — — 3.04 3.04 
Weighted-average yield6.75 %6.76 %4.77 %4.48 %4.86 %
The agency-guaranteed collateralized mortgage obligations in the AFS portfolio were $584.8issued by Ginnie Mae and contain guarantees for the collection of principal and interest on the underlying mortgages.
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Investment securities held to maturity
At March 31, 2023, investment securities held to maturity totaled $870.3 million compared to $493.5$840.3 million at December 31, 2016, an increase of $91.3 million.2022. The increase was primarily the resultin investment securities held to maturity resulted from a purchase of purchases$73.1 million of agency-guaranteed mortgage-backed securities of $796.6 million during the nine months ended September 30, 2017,private label collateralized mortgage obligations, partially offset in part by salesmaturities, calls and principal repayments of $698.5totaling $44.2 million for the three months ended March 31, 2023.
The following table sets forth information about the maturities and impairment charges of $12.9 million. Customers held allweighted-average yield of the investment securities soldheld 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 2017accumulated other comprehensive income. Yields are not reported on a tax-equivalent basis.
March 31, 2023
Within one yearAfter one but within five yearsAfter five but within ten yearsNo
specific
maturity		Total
Asset-backed securities— %— %— %5.50 %5.50 %
Agency-guaranteed residential mortgage-backed securities— — — 1.80 1.80 
Agency-guaranteed commercial mortgage-backed securities— — — 1.77 1.77 
Agency-guaranteed residential collateralized mortgage obligations— — — 1.90 1.90 
Agency-guaranteed commercial collateralized mortgage obligations— — — 2.15 2.15 
Private label collateralized mortgage obligations— — — 4.58 4.58 
Weighted-average yield— %— %— %3.81 %3.81 %
The agency-guaranteed mortgage-backed securities and collateralized mortgage obligations in the HTM portfolio were issued by Fannie Mae, Freddie Mac and Ginnie Mae, and contain guarantees for more than 90 days.the collection of principal and interest on the underlying mortgages.

Investment securities classified as HTM are those debt securities that Customers has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs, or changes in general economic conditions. For financial reporting purposes, these securities are carried at cost, adjusted for the amortization of premiums and accretion of discounts, computed by a method which approximates the interest method over the terms of the securities. Refer to "NOTE 5 – INVESTMENT SECURITIES" and "NOTE 13 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS" to Customers' unaudited consolidated financial statements for additional information.
Loans
LOANS AND LEASES
Existing lending relationships are primarily with small and middle market businesses and individual consumers primarily in Bucks,Southeastern Pennsylvania (Bucks, Berks, Chester, Montgomery,Philadelphia and Delaware and Philadelphia Counties, Pennsylvania; Camden and Mercer Counties, New Jersey; Westchester County andCounties); Harrisburg, Pennsylvania (Dauphin County); Rye Brook, New York City,(Westchester County); Hamilton, New Jersey (Mercer County); Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire (Rockingham County); Manhattan and Melville, New York; Washington, D.C.; Chicago, Illinois; Dallas, Texas; Orlando and the New England area.Jacksonville, Florida and Wilmington, North Carolina; and nationally for certain loan and deposit products. The portfolio of loans to mortgage banking companies is a nation-wide portfolio.nationwide. The loan portfolio consists primarily of loans to support mortgage banking companies’ funding needs, multi-family/multifamily, commercial real estate and commercial and industrial loans. The BankCustomers continues to focus on small and middle market business loans to grow its commercial lending efforts, expandparticularly its commercial and industrial loan and lease portfolio and its specialty mortgage warehouse lending business, and expand its multi-family/commercial real estate lending business. Customers also focuses its lending efforts on local-market mortgage and home equity lending and the origination and purchase of unsecured consumer loans (installment loans), including personal, student loan refinancing, home improvement and medical loans through arrangements with fintech companies and other market place lenders nationwide.
Commercial Lending
Customers' commercial lending is divided into foursix groups: Business Banking, Small and Middle Market Business Banking, Multi-familySpecialty Banking, Multifamily and Commercial Real Estate Lending, and Mortgage Banking Lending, and SBA Lending. This grouping is designed to allow for more effectivegreater resource deployment, higher standards of risk management, stronger oversight ofstrong asset quality, better management of interest ratelower interest-rate risk and higher productivity levels.
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As of March 31, 2023, Customers had $12.9 billion in commercial loans outstanding, totaling approximately 85.3% of its total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage warehouse, at fair value and PPP loans, compared to commercial loans outstanding of $13.5 billion, comprising approximately 85.8% of its total loan and lease portfolio at December 31, 2022. Included in the $12.9 billion and $13.5 billion in commercial loans outstanding as of March 31, 2023 and December 31, 2022, respectively, were $246.3 million and $998.2 million of PPP loans, respectively. The PPP loans are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and earn a fixed interest rate of 1.00%.
The commercial lending group focuses primarily on companies with annual revenues ranging from $1 million to $100 million, which typically have credit requirements between $0.5 million and $10 million.
The small and middle market business banking platform originates loans, including Small Business AdministrationSBA loans, through the branch network sales force and a team of dedicated relationship managers. The support administration of this platform is centralized, including technology, risk management, product management, marketing, performance tracking and overall strategy. Credit and sales training has been established for Customers' sales force, ensuring that it has small business experts in place providing appropriate financial solutions to the small business owners in its communities. AThe division approach focuses on industries that offer high asset quality and are deposit rich to drive profitability. Customers' SBA Lending includes digital small balance 7(a) lending.
In 2009, Customers launched itsCustomers' Specialty Banking includes lending to mortgage companies, equipment finance, warehouse lending, healthcare lending, real estate specialty finance, fund finance, technology and venture capital banking and financial institutions group. Customers added three new verticals within its Specialty Banking, which included capital call lines, technology and venture capital banking and financial institutions group in 2021 to further build its franchise and support the growth of its commercial lending. Customers' lender finance vertical within fund finance provides variable rate loans secured by diverse collateral pools to private debt funds. Customers' capital call lines vertical within fund finance provides variable rate loans secured by collateral pools and limited partnership commitments from institutional investors in private equity funds and cash management services to the alternative investment industry. Customers' technology and venture capital banking provides loans to businesses with mission critical software products, whichrecurring software revenues and funded by well-known venture capital firms.
Customers' lending to mortgage companies primarily provides financing to mortgage bankers for residential mortgage originations from loan closing until sale in the secondary market. Many providers of liquidity in this segment exited the business in 2009 during a period of market turmoil. Customers saw an opportunity to provide liquidity to this business segment at attractive spreads.  There was also the opportunity to attract escrow deposits and to generate fee income in this business.
The goal of the mortgage banking business lending group is to provide liquidity to mortgage companies. These loans are primarily used by mortgage companies to fund their pipelines from closing of individual mortgage loans until their sale into the secondary market. The underlying residential loans are taken as collateral for the Bank’sCustomers' commercial loans to the mortgage companies. As of September 30, 2017,March 31, 2023 and December 31, 2022, commercial loans in the warehouse lending portfolioto mortgage companies totaled $2.0$1.2 billion and $1.3 billion, respectively, and are designatedreported as held for sale.loans receivable, mortgage warehouse, at fair value on the consolidated balance sheet.
The goalEquipment Finance Group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The Equipment Finance Group is primarily focused on serving the following segments: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. As of the Bank’s multi-familyMarch 31, 2023 and December 31, 2022, Customers had $526.8 million and $560.3 million, respectively, of equipment finance loans outstanding. As of March 31, 2023 and December 31, 2022, Customers had $168.8 million and $157.4 million of equipment finance leases outstanding, respectively. As of March 31, 2023 and December 31, 2022, Customers had $192.1 million and $197.3 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $60.4 million and $52.6 million, respectively.
Customers' multifamily lending group is to buildfocused on retaining a portfolio of high-quality multi-familymultifamily loans within Customers' covered markets. These lending activities use conservative underwriting standards and primarily target the Bank’s covered markets, while cross selling other products and services. This product primarily targets refinancing existingof loans with other banks using conservative underwriting standards and providesor provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the multi-familymultifamily property, plus an assignment of all leases related to such property. As of September 30, 2017, the BankMarch 31, 2023, Customers had multi-familymultifamily loans of $3.8$2.2 billion outstanding, making upcomprising approximately 41.1% of the Bank’s total loan portfolio, including loans held for sale, compared to $3.2 billion, or approximately 38.9%14.6% of the total loan and lease portfolio, including loans held for sale,compared to $2.2 billion, or approximately 14.0% of the total loan and lease portfolio, at December 31, 2016.2022.
AsCustomers had $246.3 million and $998.2 million of September 30, 2017, the Bank had $8.6 billion in commercialPPP loans outstanding totaling approximately 94.2%as of its total loan portfolio, which includes loans held for sale, compared to $8.0 billion commercial loans outstanding, composing approximately 96.4% of its loan portfolio, including loans held for sale, atMarch 31, 2023 and December 31, 2016.2022, respectively, which are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and earn a fixed interest rate of 1.00%.
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Consumer Lending
Customers provides unsecured consumer installment loans, residential mortgage and home equity and residential mortgage loans to customers. Underwriting standardscustomers nationwide including through relationships with fintech companies. Customers has continued to build out its Banking-as-a-Service/Marketplace Lending (Baas/MPL) business in 2023 in which we accumulate loans with the intent to sell in the future while reducing loans held for investment. The installment loan portfolio consists largely of originated and purchased personal, student loan refinancing, home equity lendingimprovement and medical loans. None of the loans held for investment are conservative andconsidered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660. Customers has been selective in the consumer loans it has been purchasing. Home equity lending is offered to solidify customer relationships and grow relationship revenues in the long term. This lending is important in Customers' efforts to grow total relationship revenues for its consumer households. As of September 30, 2017, the BankMarch 31, 2023, Customers had $533.8 million$2.2 billion in consumer loans outstanding or 5.8% of the Bank’s total loan portfolio, which includes(including consumer loans held for sale.investment and held for sale), or 14.7% of the total loan and lease portfolio, compared to $2.2 billion, or 14.2% of the total loan and lease portfolio, as of December 31, 2022.
Purchases and sales of loans were as follows for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
(amounts in thousands)20232022
Purchases (1)
Other commercial and industrial$5,445$—
Commercial real estate owner occupied2,867—
Residential real estate4,238146,874
Personal installment (2)
—59,456
Total$12,550$206,330
Sales (3)
Other commercial and industrial (4)
$—$8,840
Commercial real estate owner occupied (4)
—5,441
Total$—$14,281
(1)Amounts reported represent the unpaid principal balance at time of purchase. The Bank planspurchase price was 101.9% and 98.1% of the loans' unpaid principal balance for the three months ended March 31, 2023 and 2022, respectively.
(2)Installment loan purchases for the three months ended March 31, 2023 and 2022 consist of third-party originated unsecured consumer loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to expand its product offeringsbe those with FICO scores below 660.
(3)There were no sales of loans held for investment for the three months ended March 31, 2023. Gains of $1.5 million from the sales of loans held for investment for the three months ended March 31, 2022 are included in real estate secured consumer lending.gain (loss) on sale of SBA and other loans in the consolidated statements of income.

Customers Bank has launched a community outreach program in Philadelphia to finance homeownership in urban communities. As part(4)Primarily sales of this program, the Bank is offering an “Affordable Mortgage Product." This community outreach program is penetrating the underserved population, especially in low and moderate income neighborhoods. As part of this commitment, a limited purpose office was opened in Progress Plaza, 1501 North Broad Street, Philadelphia, PA. The program includes homebuyer seminars that prepare potential homebuyers for homeownership by teaching money management and budgeting skills, including the financial responsibilities that come with having a mortgage and owning a home. The “Affordable Mortgage Product” is offered throughout Customers Bank’s assessment areas.SBA loans.
Loans Held for Sale
The composition of loans held for sale as of September 30, 2017March 31, 2023 and December 31, 20162022 was as follows:
(amounts in thousands)March 31, 2023December 31, 2022
Commercial loans:
Multifamily loans, at lower of cost or fair value$4,051 $4,079 
Commercial real estate non-owner occupied loans, at lower of cost or fair value16,000 — 
Total commercial loans held for sale20,051 4,079 
Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value507 507 
Residential mortgage loans, at fair value314 322 
Personal installment loans, at lower of cost or fair value307,336 133,801 
Other installment loans, at lower of cost or fair value95,849 189,603 
Total consumer loans held for sale404,006 324,233 
Loans held for sale$424,057 $328,312 
 September 30, December 31,
 2017 2016
(amounts in thousands) 
Commercial loans:   
Mortgage warehouse loans, at fair value$1,961,248
 $2,116,815
Multi-family loans at lower of cost or fair value150,217
 —
Total commercial loans held for sale2,111,465
 2,116,815
Consumer Loans:   
Residential mortgage loans, at fair value1,828
 695
Loans held for sale$2,113,293
 $2,117,510

At September 30, 2017, loansLoans held for sale totaled $2.1 billion, or 23.0% of the total loan portfolio, and $2.1 billion, or 25.6% of the total loan portfolio, at December 31, 2016.
Mortgage warehouse loans held for sale at September 30, 2017 decreased $155.6 million when compared to December 31, 2016. Mortgage warehouse loan balances are typically elevated during the summer months when home-purchasing activity is usually stronger. However, Customers expects that mortgage warehouse loan growth will moderate and return to more normal seasonal patterns as interest rates and the interest rate yield curve return to more normal levels and spreads.
Held-for-sale loans are carried on the consolidated balance sheet at either fair value (due to the election of the fair value option) or at the lower of cost or fair value. An allowance for loan lossesACL is not recorded on loans that are classified as held for sale.

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Total Loans and Leases Receivable
LoansThe composition of total loans and leases receivable (excluding loans held for sale), net was as follows:
(amounts in thousands)March 31, 2023December 31, 2022
Loans and leases receivable, mortgage warehouse, at fair value$1,247,367 $1,323,312 
Loans receivable, PPP246,258 998,153 
Loans and leases receivable:
Commercial:
Commercial and industrial:
Specialty lending (1)
5,519,176 5,412,887 
Other commercial and industrial1,295,688 1,259,943 
Multifamily2,195,211 2,213,019 
Commercial real estate owner occupied895,314 885,339 
Commercial real estate non-owner occupied1,245,248 1,290,730 
Construction188,123 162,009 
Total commercial loans and leases receivable11,338,760 11,223,927 
Consumer:
Residential real estate494,815 497,952 
Manufactured housing43,272 45,076 
Installment:
Personal849,420 964,641 
Other419,085 413,298 
Total consumer loans receivable1,806,592 1,920,967 
Loans and leases receivable13,145,352 13,144,894 
Allowance for credit losses on loans and leases(130,281)(130,924)
Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)
$14,508,696 $15,335,435 
(1)Includes direct finance equipment leases of the allowance for loan losses, increased by $905.7$168.8 million to $7.0 billionand $157.4 million at September 30, 2017 from $6.1 billion at DecemberMarch 31, 2016. Loans receivable as of September 30, 20172023 and December 31, 2016 consisted2022, respectively.
(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(0.7) million and $(21.5) million at March 31, 2023 and December 31, 2022, respectively.
Loans receivable, mortgage warehouse, at fair value
The mortgage warehouse product line primarily provides financing to mortgage companies nationwide from the time of origination of the following:underlying mortgage loans until the mortgage loans are sold into the secondary market. As a mortgage warehouse lender, Customers provides a form of financing to mortgage bankers by purchasing for resale the underlying residential mortgages on a short-term basis under a master repurchase agreement. These loans are reported as loans receivable, mortgage warehouse, at fair value on the consolidated balance sheets. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At March 31, 2023, all of Customers' commercial mortgage warehouse loans were current in terms of payment.
Customers is subject to the risks associated with such lending, including, but not limited to, the risks of fraud, bankruptcy and default of the mortgage banker or of the underlying residential borrower, any of which could result in credit losses. Customers' mortgage warehouse lending team members monitor these mortgage originators by obtaining financial and other relevant information to reduce these risks during the lending period. Loans receivable, mortgage warehouse, at fair value totaled $1.2 billion and $1.3 billion at March 31, 2023 and December 31, 2022, respectively.
On June 30, 2022, one of Customers’ commercial mortgage warehouse borrowers filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. As of March 31, 2023, Customers had an outstanding loan balance with the borrower of $6.0 million in an unsecured working capital loan that was fully guaranteed by an affiliate of the primary shareholder of the borrower.
62
 September 30, December 31,
 2017 2016
(amounts in thousands) 
 Commercial:   
 Multi-family$3,618,989
 $3,214,999
 Commercial and industrial (including owner occupied commercial real estate)1,601,789
 1,382,343
 Commercial real estate non-owner occupied1,237,849
 1,193,715
 Construction73,203
 64,789
 Total commercial loans6,531,830
 5,855,846
 Consumer:   
 Residential real estate435,188
 193,502
 Manufactured housing92,938
 101,730
 Other3,819
 3,483
 Total consumer loans531,945
 298,715
Total loans receivable7,063,775
 6,154,561
Deferred (fees)/costs and unamortized (discounts)/premiums, net(2,437) 76
 Allowance for loan losses(38,314) (37,315)
 Loans receivable, net of allowance for loan losses$7,023,024
 $6,117,322
Loans receivable, PPP

Customers had $246.3 million and $998.2 million of PPP loans outstanding as of March 31, 2023 and December 31, 2022, respectively, which are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and earn a fixed interest rate of 1.00%. Customers recognized interest income, including origination fees, of $23.6 million and $36.9 million for the three months ended March 31, 2023 and 2022, respectively.
Credit Risk
Customers manages credit risk by maintaining diversification in its loan and lease portfolio, establishing and enforcing prudent underwriting standards diligentand collection efforts, and continuous and periodic loan and lease classification reviews. Management also considers the effect of credit risk on financial performance by reviewing quarterly and maintaining an adequate allowance for loan losses.ACL. Credit losses are charged to the allowance for loan lossescharged-off when they are identified, and provisions are added for current expected credit losses, to the allowance for loan losses when and as appropriate.ACL at least quarterly. The adequacy of the allowance for loan losses, maintained at a level to absorbACL is estimated incurred losses in the held-for-investment loan portfolio as of the last day of the reporting period, is evaluated at least quarterly.
The provision for loancredit losses on loans and leases was $2.4$18.0 million and $0.1$15.3 million for the three months ended September 30, 2017March 31, 2023 and 2016, respectively, and $5.9 million and $2.9 million for the nine months ended September 30, 2017 and 2016,2022, respectively. The allowance for loan lossesACL maintained for loans and leases receivable (excludes(excluding loans held for sale)sale and loans receivable, mortgage warehouse, at fair value) was $38.3$130.3 million, or 0.54%0.97% of loans and leases receivable and 0.99% of loans and leases receivable, excluding PPP (a non-GAAP measure) at September 30, 2017March 31, 2023, and $37.3$130.9 million or 0.61%0.93% of loans and leases receivable and 1.00% of loans and leases receivable, excluding PPP loans (a non-GAAP measure) at December 31, 2016.2022. Excluding loans receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedule below.
The decrease in the ACL resulted primarily from a decrease in consumer installment loans, partially offset by additional provision for credit losses from the recognition of weaker macroeconomic forecasts. Net charge-offs were $2.5$18.7 million for the three months ended September 30, 2017,March 31, 2023, an increase of $2.2$11.4 million compared to the same period in 2016. Net charge-offs were $4.9 million for the nine months ended September 30, 2017, an increase of $4.0 million compared to the same period in 2016.2022. The increase in net charge-offs period over period was largely driven byprimarily due to higher charge-offs for consumer installment loans. Installment charge-offs were attributable to unsecured consumer installment loans originated or purchased through arrangements with fintech companies and other market place lenders. Refer to the charge-offtable of $1.6 million and $1.8 million during the third quarter 2017 and second quarter 2017, respectively, related to two relationships in the commercial and industrial post-2009 originated loan portfolio.


The chart below depicts changes in the Bank’s allowanceCustomers' ACL for annualized net-charge offs to average loans by loan lossestype for the periods indicated.
A reconciliation of the coverage of ACL for loans and leases held for investment to the ACL for loans and leases held for investment, excluding PPP loans as of March 31, 2023 and December 31, 2022 is set forth below.
(dollars in thousands)March 31, 2023December 31, 2022
Loans and leases receivable (GAAP)$13,391,610 $14,143,047 
Less: Loans receivable, PPP246,258 998,153 
Loans and leases held for investment, excluding PPP (Non-GAAP)$13,145,352 $13,144,894 
ACL for loans and leases (GAAP)$130,281 $130,924 
Coverage of ACL for loans and leases held for investment (GAAP)0.97 %0.93 %
Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP)0.99 %1.00 %
63
The amounts presentedtables below present changes in Customers' ACL for the provisionperiods indicated.
(amounts in thousands)
Commercial and industrial (2)
MultifamilyCommercial real estate owner occupiedCommercial real estate non-owner occupiedConstructionResidential real estateManufactured housingInstallmentTotal
Three Months Ended
March 31, 2023
Ending Balance,
December 31, 2022		$17,582 $14,541 $6,454 $11,219 $1,913 $6,094 $4,430 $68,691 $130,924 
Charge-offs (1)
(160)— — (4,239)— — — (16,715)(21,114)
Recoveries (1)
231 — — 5 116 2 — 2,109 2,463 
Provision (benefit) for credit losses on loans and leases2,397 543 2,018 4,047 307 757 (91)8,030 18,008 
Ending Balance,
March 31, 2023		$20,050 $15,084 $8,472 $11,032 $2,336 $6,853 $4,339 $62,115 $130,281 
Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended
March 31, 2023		0.00 %— %— %(1.34)%0.27 %0.00 %— %(4.35)%(0.58)%
(amounts in thousands)
Commercial and industrial (2)
MultifamilyCommercial real estate owner occupiedCommercial real estate non-owner occupiedConstructionResidential real estateManufactured housingInstallmentTotal
Three Months Ended
March 31, 2022
Ending Balance,
December 31, 2021		$12,702 $4,477 $3,213 $6,210 $692 $2,383 $4,278 $103,849 $137,804 
Charge-offs (1)
(301)— — — — (4)— (8,865)(9,170)
Recoveries (1)
360 337 7 8 113 6 — 1,113 1,944 
Provision (benefit) for credit losses on loans and leases(1,996)2,623 621 (263)134 2,300 64 11,786 15,269 
Ending Balance,
March 31, 2022		$10,765 $7,437 $3,841 $5,955 $939 $4,685 $4,342 $107,883 $145,847 
Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended March 31, 20220.01 %0.09 %0.00 %0.00 %0.24 %0.00 %— %(1.75)%(0.32)%
(1)Charge-offs and recoveries on PCD loans that are accounted for loan losses below do not includein pools are recognized on a net basis when the effect of changes to estimated benefits resulting from the FDIC loss share arrangements for the covered loans for periods prior to the termination of the FDIC loss sharing agreements.pool matures.
Analysis of the Allowance for Loan Losses(2)Includes specialty lending.
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
(amounts in thousands)       
Balance at the beginning of the period$38,458
 $38,097
 $37,315
 $35,647
Loan charge-offs (1)       
Commercial and industrial2,032
 237
 4,079
 774
Commercial real estate non-owner occupied77
 140
 485
 140
Residential real estate120
 43
 410
 456
Other consumer356
 246
 602
 478
Total Charge-offs2,585
 666
 5,576
 1,848
Loan recoveries (1)       
Commercial and industrial54
 62
 337
 173
Commercial real estate owner occupied—
 —
 9
 —
Commercial real estate non-owner occupied—
 —
 —
 8
Construction27
 8
 157
 465
Residential real estate7
 298
 34
 299
Other consumer1
 10
 101
 10
Total Recoveries89
 378
 638
 955
Total net charge-offs2,496
 288
 4,938
 893
Provision for loan losses2,352
 88
 5,937
 3,143
Balance at the end of the period$38,314

$37,897
 $38,314
 $37,897
(1)Charge-offs and recoveries on purchased-credit-impaired loans that are accounted for in pools are recognized on a net basis when the pool matures.
The allowance for loan lossesACL is based on a quarterly evaluation of the loan and lease portfolio and is maintained at a level that management considers adequate to absorb probableexpected losses incurred as of the balance sheet date. All commercial loans, with the exception of PPP loans and commercial mortgage warehouse loans, which are reported at fair value, are assigned credit riskinternal credit-risk ratings, based upon an assessment of the borrower, the structure of the transaction and the available collateral and/or guarantees. All loans and leases are monitored regularly by the responsible officer, and the risk ratings are adjusted when considered appropriate. The risk assessment allows management to identify problem loans and leases timely. Management considers a variety of factors and recognizes the inherent risk of loss that always exists in the lending process. Management uses a disciplined methodology to estimate an appropriate level of allowance for loan losses. See “Asset Quality”ACL. Refer to Critical Accounting Policies and Estimates herein and "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' unaudited consolidated financial statements, also, refer to "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' audited consolidated financial statements in its 2022 Form 10-K for further discussion on management's methodology for estimating the ACL.
64
Approximately 85%42% of the Bank’sCustomers' commercial real estate, commercial and residential construction, consumer residential and commercial and industrial loan types have real estate as collateral (collectively, “the real estate portfolio”). The Bank’s lien position on the real estate collateral will vary on a loan-by-loan basis and will change as a result of changes, primarily in the valueform of the collateral.a first lien position. Current appraisals providing current value estimates of the property are received when the Bank’sCustomers' 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 fifteen15 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 ratingrisk-rating criteria properly. The risk ratings for the real estate loan portfolio are determined based upon the current information available, including but not limited to discussions with the borrower, updated financial information, economic conditions within the geographic area and other factors that may affect the cash flow of the loan. If a loan is impaired and individually evaluated for impairment, the collateral value or discounted cash flow or loan market value analysis is generally used to estimatedetermine the amountestimated fair value of proceeds expected to be collected, and that estimated amount,the underlying collateral, net of estimated selling costs, as applicable, isand compared to the outstanding loan balance to estimatedetermine the amount of impairment,reserve necessary, if any. Appraisals used in this evaluation process are typically less than two years aged. For loans where real estate is not the primary source of collateral, updated financial information is obtained, including accounts

receivable and inventory aging reports and relevant supplemental financial data to estimate the fair value of the loan, and compared, net of estimated selling costs, and compared to the outstanding loan balance to estimate the required reserve, if any.reserve.
These impairment measurements are inherently subjective as they require material estimates, including, among others, estimates of property values in appraisals, the amounts and timing of expected future cash flows on individual loans, and general considerations for historical loss experience, economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios, all of which require judgment and may be susceptible to significant change over time and as a result of changing economic conditions or other factors. Pursuant to ASC 310-10-35 - Loan Impairment and ASC 310-40 - Troubled Debt Restructurings by Creditors, impaired326, individually assessed loans, consisting primarily of loans placed on non-accrual and restructured under troubled debt restructurings loans, or charged-off to their net realizable value, are considered in the methodology for determining the allowance for loan losses.  ImpairedACL. Individually assessed loans are generally evaluated based on the expected future cash flows if principal is expected to come from the operation of such collateral or the fair value of the underlying collateral (less estimated costs to sell) if principal repayment is expected to substantially come from the operation of the collateral or fair value of the collateral less estimated costs to sell if repayment of the loan is expected to be provided from the sale of such collateral. Shortfalls in the underlying collateral value for loans or leases determined to be collateral dependent are charged off immediately. Subsequent to an appraisal or other fair value estimate, management will assess whether there was a further decline in the value of the collateral based on changes in market conditions or property use that would require additional impairment to be recorded to reflect the particular situation, thereby increasing the ACL on loans and leases.
Asset Quality
Customers divides its loan portfolio into two categories to analyze and understand loan activity and performance: loans that were originated and loans that were acquired. Customers further segments the originatedloan and acquired loan categorieslease receivables by loan product or other characteristic generally defining a shared characteristic with other loans or leases in the same group. Customers' originated loans were subject to the current underwriting standards that were put in place in 2009. Management believes this segmentation better reflects the risk in the portfolio and the various types of reserves that are available to absorb loan losses that may emerge in future periods. Credit lossesCharge-offs from originated and acquired loans and leases are absorbed by the allowance for loan losses. Credit losses from acquired loans are absorbed by the allowance for loan losses, nonaccretable difference fair value marks, and cash reserves. As described below, the allowance for loan losses is intended to absorb only those losses estimated to have been incurred after acquisition, whereas the fair value mark and cash reserves absorb losses estimated to have been embedded in the acquired loans at acquisition.ACL. The schedule that follows includes both loans held for sale and loans held for investment.
65

Asset Quality at September 30, 2017March 31, 2023
(dollars in thousands)Total Loans and LeasesCurrent30-89 Days Past Due90 Days or More Past Due and AccruingNon-accrual/NPL (a)OREO and Repossessed Assets (b)NPA (a)+(b)NPL to Loan and Lease Type (%)NPA to Loans and Leases + OREO and Repossessed Assets (%)
Loan and Lease Type 
Commercial and industrial, including specialty lending$6,814,864 $6,808,780 $1,252 $946 $3,886 $— $3,886 0.06 %0.06 %
Multifamily2,195,211 2,189,141 5,189 — 881 — 881 0.04 %0.04 %
Commercial real estate owner occupied895,314 889,281 2,412 — 3,621 — 3,621 0.40 %0.40 %
Commercial real estate non-owner occupied1,245,248 1,245,248 — — — 37 37 — %0.00 %
Construction188,123 188,123 — — — — — — %— %
Total commercial loans and leases receivable11,338,760 11,320,573 8,853 946 8,388 37 8,425 0.07 %0.07 %
Residential494,815 482,250 6,092 — 6,473 35 6,508 1.31 %1.32 %
Manufactured housing43,272 38,348 1,590 766 2,568 64 2,632 5.93 %6.07 %
Installment1,268,505 1,240,135 19,650 — 8,720 — 8,720 0.69 %0.69 %
Total consumer loans receivable1,806,592 1,760,733 27,332 766 17,761 99 17,860 0.98 %0.99 %
Loans and leases receivable (1)
13,145,352 13,081,306 36,185 1,712 26,149 136 26,285 0.20 %0.20 %
Loans receivable, PPP (2)
246,258 246,258 — — — — — — %— %
Loans receivable, mortgage warehouse, at fair value1,247,367 1,247,367 — — — — — — %— %
Total loans held for sale424,057 399,170 18,912 — 5,975 — 5,975 1.41 %1.41 %
Total portfolio$15,063,034 $14,974,101 $55,097 $1,712 $32,124 $136 $32,260 0.21 %0.21 %

Loan TypeTotal Loans Current 
30-89
Days Past Due
 
90
Days or More Past Due and
Accruing
 
Non-
accrual/
NPL (a)
 
OREO
(b)
 
NPA
(a)+(b)
 
NPL
to
Loan
Type
(%)
 
NPA
to
Loans +
OREO
(%)
(amounts in thousands)   
Originated Loans                 
Multi-Family$3,616,313
 $3,616,313
 $—
 $—
 $—
 $—
 $—
 —% —%
Commercial & Industrial (1)1,507,395
 1,484,400
 —
 —
 22,995
 —
 22,995
 1.53% 1.53%
Commercial Real Estate Non-Owner Occupied1,215,099
 1,215,099
 —
 —
 —
 —
 —
 —% —%
Residential108,786
 107,569
 636
 —
 581
 —
 581
 0.53% 0.53%
Construction73,203
 73,203
 —
 —
 —
 —
 —
 —% —%
Other consumer1,450
 1,437
 13
 —
 —
 —
 —
 —% —%
Total Originated Loans6,522,246
 6,498,021
 649
 —
 23,576
 —
 23,576
 0.36% 0.36%
Loans Acquired              

 

Bank Acquisitions153,772
 147,172
 1,352
 941
 4,307
 782
 5,089
 2.80% 3.29%
Loan Purchases 
387,757
 379,026
 2,984
 3,788
 1,959
 277
 2,236
 0.51% 0.58%
Total Loans Acquired541,529
 526,198
 4,336
 4,729
 6,266
 1,059
 7,325
 1.16% 1.35%
Deferred fees and unamortized discounts, net(2,437) (2,437) —
 —
 —
 —
 —
 

 

Total Loans Receivable7,061,338
 7,021,782
 4,985
 4,729
 29,842
 1,059
 30,901
 0.42% 0.44%
Total Loans Held for Sale2,113,293
 2,113,293
 —
 —
 —
 —
 —
 

 

Total Portfolio$9,174,631
 $9,135,075
 $4,985
 $4,729
 $29,842
 $1,059
 $30,901
 0.33% 0.34%
(1) Commercial & industrial loans, including owner occupied commercial real estate loans.


Asset Quality at September 30, 2017March 31, 2023 (continued)
Loan TypeTotal Loans NPL ALL 
Cash
Reserve
 
Total
Credit
Reserves
 
Reserves
to Loans
(%)
 
Reserves
to NPLs
(%)
(amounts in thousands) 
Originated Loans             
Multi-Family$3,616,313
 $—
 $12,696
 $—
 $12,696
 0.35% —%
Commercial & Industrial (1)1,507,395
 22,995
 13,084
 —
 13,084
 0.87% 56.90%
Commercial Real Estate Non-Owner Occupied1,215,099
 —
 4,665
 —
 4,665
 0.38% —%
Residential108,786
 581
 2,130
 —
 2,130
 1.96% 366.61%
Construction73,203
 —
 847
 —
 847
 1.16% —%
Other consumer1,450
 —
 59
 —
 59
 4.07% —%
Total Originated Loans6,522,246
 23,576
 33,481
 —
 33,481
 0.51% 142.01%
Loans Acquired          

 

Bank Acquisitions153,772
 4,307
 4,642
 —
 4,642
 3.02% 107.78%
Loan Purchases 
387,757
 1,959
 191
 728
 919
 0.24% 46.91%
Total Loans Acquired541,529
 6,266
 4,833
 728
 5,561
 1.03% 88.75%
Deferred fees and unamortized discounts, net(2,437) —
 —
 —
 —
 

 

Total Loans Receivable7,061,338
 29,842
 38,314
 728
 39,042
 0.55% 130.83%
Total Loans Held for Sale2,113,293
 —
 —
 —
 —
 

 

Total Portfolio$9,174,631
 $29,842
 $38,314
 $728
 $39,042
 0.43% 130.83%
(dollars in thousands)Total Loans and LeasesNon-accrual / NPLACLReserves to Loans and Leases (%)Reserves to NPLs (%)
Loan and Lease Type
Commercial and industrial, including specialty lending$6,814,864 $3,886 $20,050 0.29 %515.95 %
Multifamily2,195,211 881 15,084 0.69 %1,712.15 %
Commercial real estate owner occupied895,314 3,621 8,472 0.95 %233.97 %
Commercial real estate non-owner occupied1,245,248 — 11,032 0.89 %— %
Construction188,123 — 2,336 1.24 %— %
Total commercial loans and leases receivable11,338,760 8,388 56,974 0.50 %679.23 %
Residential494,815 6,473 6,853 1.38 %105.87 %
Manufactured housing43,272 2,568 4,339 10.03 %168.96 %
Installment1,268,505 8,720 62,115 4.90 %712.33 %
Total consumer loans receivable1,806,592 17,761 73,307 4.06 %412.74 %
Loans and leases receivable (1)
13,145,352 26,149 130,281 0.99 %498.23 %
Loans receivable, PPP (2)
246,258 — — — %— %
Loans receivable, mortgage warehouse, at fair value1,247,367 — — — %— %
Total loans held for sale424,057 5,975 — — %— %
Total portfolio$15,063,034 $32,124 $130,281 0.86 %405.56 %
(1)    Commercial & industrialExcluding loans including owner occupied commercial real estate.receivable, PPP from total loans and leases receivable is a non-GAAP measure. Management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedules that follow this table.

(2)    The tables exclude PPP loans of $246.3 million, of which $0.8 million were 30-59 days past due and $117.9 million were 60 days or more past due as of March 31, 2023, and PPP loans of $998.2 million, of which $0.6 million were 30-59 days past due and $36.0 million were 60 days or more past due as of December 31, 2022. Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.

66
Originated LoansCustomers' asset quality table contains non-GAAP financial measures which exclude loans receivable, PPP from their calculations. Management uses these non-GAAP measures to compare the current period presentation to historical periods in prior filings. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers' financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.
Post 2009 originated loans (excluding held-for-sale loans) totaled $6.5 billion, or 92.4%A reconciliation of total loans and lease portfolio, excluding loans receivable, PPP and other related amounts, at September 30, 2017,March 31, 2023, is set forth below.
(dollars in thousands)Total Loans and LeasesCurrent30-89 Days Past Due90 Days or More Past Due and AccruingNon-accrual/NPL (a)OREO and Repossessed Assets (b)NPA (a)+(b)NPL to Loan and Lease Type (%)NPA to Loans and Leases + OREO and Repossessed Assets (%)
Total loans and leases portfolio (GAAP)$15,063,034 $14,974,101 $55,097 $1,712 $32,124 $136 $32,260 0.21 %0.21 %
Less: Loans receivable, PPP (1)
246,258 246,258 — — — — — — %— %
Total loans and leases portfolio, excluding loans receivable, PPP (Non-GAAP)14,816,776 14,727,843 55,097 1,712 32,124 136 32,260 0.22 %0.22 %
Less: Loans held for sale424,057 399,170 18,912 — 5,975 — 5,975 1.41 %1.41 %
Less: Loans receivable, mortgage warehouse, at fair value1,247,367 1,247,367 — — — — — — %— %
Loans and leases receivable, excluding loans receivable, PPP (Non-GAAP)$13,145,352 $13,081,306 $36,185 $1,712 $26,149 $136 $26,285 0.20 %0.20 %
(dollars in thousands)Total Loans and LeasesNon-accrual / NPLACLReserves to Loans and Leases (%)Reserves to NPLs (%)
Total loans and leases portfolio (GAAP)$15,063,034 $32,124 $130,281 0.86 %405.56 %
Less: Loans receivable, PPP (1)
246,258 — — — %— %
Total loans and leases portfolio, excluding loans receivable, PPP (Non-GAAP)14,816,776 32,124 130,281 0.88 %405.56 %
Less: Loans held for sale424,057 5,975 — — %— %
Less: Loans receivable, mortgage warehouse, at fair value1,247,367 — — — %— %
Loans and leases receivable, excluding loans receivable, PPP (Non-GAAP)$13,145,352 $26,149 $130,281 0.99 %498.23 %
(1)    Loans receivable, PPP includes PPP loans that are past due, as claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.
The total loan and lease portfolio was $15.1 billion at March 31, 2023 compared to $5.8$15.8 billion at December 31, 2022, and $32.1 million, or 94.8%0.21% of loans and leases, were non-performing at March 31, 2023 compared to $30.7 million, or 0.19% of loans and leases, at December 31, 2022. The total loan and lease portfolio was supported by an ACL of $130.3 million (405.56% of NPLs and 0.86% of total loans receivableand leases) and $130.9 million (425.95% of NPLs and 0.83% of total loans and leases), at DecemberMarch 31, 2016. The management team adopted new underwriting standards that management believes better limits risks of loss in 2009 and have worked to monitor these standards. Only $23.6 million, or 0.36% of post 2009 originated loans were non-performing at September 30, 2017, compared to $10.5 million, or 0.18% of post 2009 loans, at December 31, 2016. The post 2009 loans were supported by an allowance for loan losses of $33.5 million (0.51% of post 2009 originated loans) and $31.8 million (0.55% of post 2009 originated loans), respectively, at September 30, 20172023 and December 31, 2016.2022, respectively.
Loans Acquired
At September 30, 2017, total acquired loans were $0.5 billion, or 7.7% of total loans receivable, compared to $0.3 billion, or 5.2% of total loans receivable, at December 31, 2016.  Non-performing acquired loans totaled $6.3 million and $7.3 million, respectively, at September 30, 2017 and December 31, 2016. When loans are acquired, they are recorded on the balance sheet at fair value. Acquired loans include purchased portfolios, FDIC assisted failed-bank acquisitions, and unassisted acquisitions. Of the manufactured housing loans purchased from Tammac prior to 2012, $53.1 million were supported by a $0.7 million cash reserve at September 30, 2017, compared to $57.6 million supported by a cash reserve of $1.0 million at December 31, 2016. The cash reserve was created as part of the purchase transaction to absorb losses and is maintained in a demand deposit account at the Bank. All current losses and delinquent interest are absorbed by this reserve.  For the manufactured housing loans purchased in 2012, Tammac has an obligation to pay the Bank the full payoff amount of the defaulted loan, including any principal, unpaid interest, or advances on the loans, once the borrower vacates the property. At September 30, 2017, $32.8 million of these loans were outstanding, compared to $36.6 million at December 31, 2016.DEPOSITS

Many of the acquired loans were purchased at a discount. The price paid considered management’s judgment as to the credit and interest rate risk inherent in the portfolio at the time of purchase. Every quarter, management reassesses the risk and adjusts the cash flow forecast to incorporate changes in the credit outlook. Generally, a decrease in forecasted cash flows for a purchased loan will result in a provision for loan losses, and absent charge-offs, an increase in the allowance for loan losses. Acquired loans have a significantly higher percentage of non-performing loans than loans originated after September 2009. Management acquired these loans with the expectation that non-performing loan levels would be elevated, and therefore incorporated that expectation into the price paid. Customers has assigned these loans to its Special Assets Group, a team that focuses on workouts for these acquired non-performing assets. Total acquired loans were supported by reserves (allowance for loan losses and cash reserves) of $5.6 million (1.03% of total acquired loans) and $6.5 million (2.03% of total acquired loans), respectively, at September 30, 2017 and December 31, 2016.

Deposits
The Bank offers a variety of deposit accounts, including checking, savings, money market deposit accounts (“MMDA”)MMDA, and time deposits. Deposits are generallyprimarily obtained primarily from ourCustomers' geographic service area.  Customers also acquires depositsarea and nationwide through branchless digital banking, our white label relationship, deposit brokers, listing services and other relationships. Total deposits were $7.6 billionCustomers Bank provides TassatPayTM instant blockchain-based digital payments platform via CBITTM, which allows clients to make instant payments in U.S. dollars. CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at September 30, 2017, an increaseCustomers Bank. As of $0.3 billion, or 4.0%, from $7.3 billion atMarch 31, 2023 and December 31, 2016. Demand2022, Customers Bank held $1.9 billion and $2.3 billion, respectively, of deposits were $1.8 billionfrom customers participating in CBIT, which are reported as deposit liabilities in the consolidated balance sheets. At March 31, 2023, substantially all the CBIT-related deposit accounts are non-interest bearing. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at September 30, 2017, compared to $1.3 billionCustomers 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 $254.7 million and $23 thousand at March 31, 2023 and December 31, 2016, an increase2022, respectively.
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Table of $484.1 million, or 37.1%. These amounts consist primarily of non-interest bearing demand deposits. Savings, including MMDA, totaled $3.5 billion at September 30, 2017, an increase of $340.5 million, or 10.8%, from $3.2 billion at December 31, 2016. This increase was primarily attributed to an increase in money market deposit accounts, including accounts held by municipalities. Total time deposits were $2.3 billion at September 30, 2017, a decrease of $531.3 million, or 18.8%, from $2.8 billion at December 31, 2016. At September 30, 2017, the Bank had $1.4 billion in state and municipal deposits to which Customers has pledged available borrowing capacity through the FHLB to the depositor through a letter of credit arrangement. State and municipal deposits under this program decreased $44.5 million, or 3.1% from December 31, 2016.Contents
The components of deposits were as follows at the dates indicated:
(dollars in thousands)March 31, 2023December 31, 2022Change% Change
Demand, non-interest bearing$3,487,517 $1,885,045 $1,602,472 85.0 %
Demand, interest bearing5,791,302 8,476,027 (2,684,725)(31.7)%
Savings, including MMDA2,943,992 3,546,015 (602,023)(17.0)%
Non-time deposits12,222,811 13,907,087 (1,684,276)(12.1)%
Time deposits5,500,806 4,249,866 1,250,940 29.4 %
Total deposits$17,723,617 $18,156,953 $(433,336)(2.4)%
Total deposits were $17.7 billion at March 31, 2023, a decrease of $433.3 million, or 2.4%, from $18.2 billion at December 31, 2022. Interest bearing demand deposits decreased by $2.7 billion, or 31.7%, to $5.8 billion at March 31, 2023, from $8.5 billion at December 31, 2022 and savings, including MMDA decreased by $602.0 million, or 17.0%, to $2.9 billion at March 31, 2023, from $3.5 billion at December 31, 2022. These decreases were partially offset by increases in non-interest bearing demand deposits of $1.6 billion, or 85.0%, to $3.5 billion at March 31, 2023 from $1.9 billion at December 31, 2022 and time deposits of $1.3 billion, or 29.4%, to $5.5 billion at March 31, 2023, from $4.2 billion at December 31, 2022.
 September 30,
2017		 December 31,
2016
(amounts in thousands)   
Demand$1,789,573
 $1,305,455
Savings, including MMDA3,507,063
 3,166,558
Time, $100,000 and over1,406,899
 2,106,905
Time, other893,541
 724,857
Total deposits$7,597,076
 $7,303,775
Total deposits at March 31, 2023 and December 31, 2022 include $1.1 billion of deposits serviced by BM Technologies under a deposit servicing agreement. On March 22, 2023, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2024. Customers expects that approximately $514 million of these serviced deposits held on March 31, 2023 in connection with BM Technologies' Higher Education business will leave Customers Bank by the earlier of BM Technologies' successful completion of the transfer of such deposits to a new sponsor bank or June 30, 2024. The remaining serviced deposits of approximately $569 million in connection with an existing white label relationship will remain at Customers Bank and continue to be serviced by BM Technologies, which was also renewed on March 22, 2023.

The total amount of estimated uninsured deposits totaled $3.9 billion and $6.4 billion at March 31, 2023 and December 31, 2022, respectively. Time deposits greater than the FDIC limit of $250,000 totaled $61.1 million and $85.5 million at March 31, 2023 and December 31, 2022, respectively.

At March 31, 2023, the Bank had $393.9 million in state and municipal deposits to which it had pledged $397.2 million of available borrowing capacity through the FHLB to the depositors through a letter of credit arrangement.
BorrowingsFHLB ADVANCES AND OTHER BORROWINGS
Borrowed funds from various sources are generally used to supplement deposit growth and meet other operating needs. Customers' borrowings generally include short-term and long-term advances from the FHLB, FRB, federal funds purchased, senior unsecured notes and subordinated debt. Subordinated debt is also considered as Tier 2 capital for certain regulatory calculations. As of September 30, 2017
Short-term debt
Short-term debt at March 31, 2023 and December 31, 2016, total outstanding borrowings2022 was as follows:
 March 31, 2023December 31, 2022
(dollars in thousands)AmountRateAmountRate
FHLB advances— — %300,000 4.54 %
Total short-term debt$— $300,000 
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Long-term debt
FHLB and FRB Advances
Long-term FHLB and FRB advances at March 31, 2023 and December 31, 2022 were $1.9 billionas follows:
March 31, 2023December 31, 2022
(dollars in thousands)AmountRateAmountRate
FHLB advances (1)(2)
$2,052,143 4.64 %$500,000 3.37 %
Total long-term FHLB and FRB advances$2,052,143 $500,000 
(1)    Amounts reported in the above table include variable and fixed rate long-term advances from FHLB of $1.1 billion respectively,with maturities ranging from June 2024 to September 2026 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank's option, and fixed rate long-term advances of $950.0 million with maturities ranging from March 2025 to March 2028, at March 31, 2023.
(2)    Includes $2.1 million of unamortized basis adjustments from a terminated interest rate swap designated as a fair value hedge of a long-term advance from FHLB of $250 million with a fixed rate of 3.30% and maturity of June 2027, at March 31, 2023.
The maximum borrowing capacity with the FHLB and FRB at March 31, 2023 and December 31, 2022 was as follows:
(dollars in thousands)March 31, 2023December 31, 2022
Total maximum borrowing capacity with the FHLB$3,307,772 $3,241,120 
Total maximum borrowing capacity with the FRB (1)
6,516,922 2,510,189 
Qualifying loans and securities (1) serving as collateral against FHLB and FRB advances
12,079,694 7,142,865 
(1)    Includes $508.2 million of borrowing capacity available under the BTFP, which representedoffers loans of up to one year to eligible depository institutions pledging any collateral valued at par, that are eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.
Senior Notes and Subordinated Debt
Long-term senior notes and subordinated debt at March 31, 2023 and December 31, 2022 were as follows:
March 31, 2023December 31, 2022
(dollars in thousands)
Issued byRankingCarrying AmountCarrying AmountRateIssued AmountDate IssuedMaturityPrice
Customers Bancorp
Senior (1)
$98,823 $98,788 2.875 %$100,000 August 2021August 2031100.000 %
Customers BancorpSenior24,822 24,792 4.500 %25,000 September 2019September 2024100.000 %
Total other borrowings$123,645 $123,580 
Customers Bancorp
Subordinated (2)(3)
$72,630 $72,585 5.375 %$74,750 December 2019December 2034100.000 %
Customers Bank
Subordinated (2)(4)
109,391 109,367 6.125 %110,000 June 2014June 2029100.000 %
Total subordinated debt$182,021 $181,952 
(1)The senior notes will bear an increaseannual fixed rate of $0.8 billion, or 65.9%. This increase was primarily2.875% until August 15, 2026. From August 15, 2026 until maturity, the result ofnotes will bear an increase in investments and loans receivable increasingannual interest rate equal to a benchmark rate, which is expected to be the need for short-term borrowings. Inthree-month term SOFR after June 2017,30, 2023, plus 235 basis points. Customers Bancorp issued $100 million ofhas the ability to call the senior notes, in whole, or in part, at 99.775%a redemption price equal to 100% of face valuethe principal balance at certain times on or after August 15, 2026.
(2)The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.
(3)Customers Bancorp has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after December 30, 2029.
(4)The subordinated notes will bear an annual fixed rate of 6.125% until June 26, 2024. From June 26, 2024 until maturity, the notes will bear an annual interest rate equal to the three-month LIBOR plus 344.3 basis points. It is expected that the notes will maturebear an annual interest rate equal to the three-month term SOFR plus a comparable spread beginning in June 2022.2024. Customers will useBank has the net proceeds for general corporate purposes, which may include working capital andability to call the fundingsubordinated notes, in whole, or in part, at a redemption price equal to 100% of organic growththe principal balance at Customers Bank. For more information about Customers' borrowings, refer to NOTE 10 - BORROWINGS.certain times on or after June 26, 2024.

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SHAREHOLDERS' EQUITY
Capital Adequacy and Shareholders’ EquityThe components of shareholders' equity were as follows at the dates indicated:
(dollars in thousands)March 31, 2023December 31, 2022Change% Change
Preferred stock$137,794 $137,794 $— — %
Common stock35,258 35,012 246 0.7 %
Additional paid in capital552,255 551,721 534 0.1 %
Retained earnings974,399 924,134 50,265 5.4 %
Accumulated other comprehensive income (loss), net(156,276)(163,096)6,820 (4.2)%
Treasury stock(122,410)(82,604)(39,806)48.2 %
Total shareholders' equity$1,421,020 $1,402,961 $18,059 1.3 %
Shareholders’ equity increased $54.8$18.1 million, or 1.3%, to $910.6 million$1.4 billion at September 30, 2017March 31, 2023 when compared to shareholders' equity of $855.9 million$1.4 billion at December 31, 2016, a 6.4%2022. The increase primarily resulted from increases of $50.3 million in the first nine months of 2017. The primary components of the net increase were as follows:
net income of $57.2retained earnings and $6.8 million for the nine months ended September 30, 2017;
in accumulated other comprehensive income (loss), net, partially offset by an increase of $5.3$39.8 million for the nine months ended September 30, 2017, arisingin treasury stock.
The increases in common stock and additional paid in capital resulted primarily from unrealized gains on available-for-sale securities;
share-based compensation expense of $4.5 million for the nine months ended September 30, 2017;
offset in part by preferred stock dividends of $10.8 million for the nine months ended September 30, 2017; and
issuance of common stock under share-based compensation arrangements for the three months ended March 31, 2023.
The increase in retained earnings resulted from net income of $2.0$53.7 million, partially offset by preferred stock dividends of $3.5 million for the ninethree months ended September 30, 2017.March 31, 2023.
The Bankincrease in accumulated other comprehensive income (loss), net primarily resulted from a decrease of $8.3 million in unrealized losses on AFS debt securities and income tax effect of $2.1 million during the three months ended March 31, 2023.
The increase in treasury stock resulted from repurchase of 1,379,883 shares of common stock for $39.8 million pursuant to the Share Repurchase Program during the three months ended March 31, 2023. On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). The term of the Share Repurchase Program was extended to September 27, 2023, unless earlier terminated. Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise. The exact number of shares, timing for such purchases, and the price and terms at and on which such purchases are subject to variousbe made will be at the discretion of the Company and will comply with all applicable regulatory capital requirementslimitations.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity for a financial institution is a measure of that are monitored by federal banking agencies. Failureinstitution’s ability to meet minimumdepositors’ needs for funds, to satisfy or fund loan and lease commitments, and for other operating purposes. Ensuring adequate liquidity is an objective of the asset/liability management process. Customers coordinates its management of liquidity with its interest rate sensitivity and capital requirements can lead to supervisory actions by regulators; any supervisory action could have a direct material effect on Customers' financial performance. At September 30, 2017, the Bankposition, and Customers Bancorp met all capital adequacy requirements to which they were subject. Capital levels continue to exceed the well-capitalized threshold established by regulation at the Bank and exceed the applicable Basel III regulatory thresholds for Customers Bancorp and the Bank.

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

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

Off-Balance Sheet Arrangements
The BankCustomers is involved with financial instruments and other commitments with off-balance sheet risks. Financial instruments with off-balance sheet risks are incurred in the normal course of business to meet the financing needs of the Bank's customers. These financial instruments include commitments to extend credit, including unused portions of lines of credit, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the consolidated balance sheets.sheet.
With commitments to extend credit, exposuresexposure to credit loss in the event of non-performance by the other party to the financial instrument is represented by the contractual amount of those instruments. The same credit policies are used in making commitments and conditional obligations as for on-balance sheet instruments. Because they involve credit risk similar to extending a loan commitments to extend creditand 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 $0.3 million during the three months ended March 31, 2023, resulting in an ACL of $3.3 million as of March 31, 2023. Customers had an ACL on unfunded lending-related commitments of $3.0 million as of December 31, 2022.
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Customers' contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of March 31, 2023. These obligations and commitments include the transfer of deposits serviced by BM Technologies under the deposit service agreement on the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2024. As of September 30, 2017March 31, 2023 and December 31, 2016, the following off-balance sheet commitments, financial instruments and other arrangements were outstanding:
 September 30, 2017 December 31, 2016
(amounts in thousands) 
Commitments to fund loans$261,878
 $244,784
Unfunded commitments to fund mortgage warehouse loans1,385,192
 1,230,596
Unfunded commitments under lines of credit498,316
 480,446
Letters of credit38,842
 40,223
Commitments to fund loans, unfunded commitments to fund mortgage warehouse loans, unfunded commitments2022, Customers held $1.1 billion of deposits serviced by BM Technologies under lines of credit and letters of credit are agreementsa deposit servicing agreement. On March 22, 2023, Customers agreed to extend creditthe deposit servicing agreement to or for the benefitearlier of a customer in the ordinary courseBM Technologies' successful completion of the Bank's business.
Commitments to fund loans and unfunded commitments under lines of credit may be obligationstransfer of the serviced deposits to a new sponsor bank or June 30, 2024. Customers expects that approximately $514 million of these serviced deposits held on March 31, 2023 in connection with BM Technologies' Higher Education business will leave Customers Bank as long as there is no violationby the earlier of any condition established in the contract. Because manyBM Technologies' successful completion of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require paymenttransfer of a fee. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if the Bank deems it necessary upon extension of credit, is based upon management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.
Mortgage warehouse loan commitments are agreements to fund the pipelines of mortgage banking businesses from closing of individual mortgage loans until their sale into the secondary market. Most of the individual mortgage loans are insured or guaranteed by the U.S. government through one of its programs such as FHA, VA, or are conventional loans eligible for sale to Fannie Mae and Freddie Mac. These commitments generally fluctuate monthly based on changes in interest rates, refinance activity, new home sales and laws and regulation.
Outstanding letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customerdeposits to a third party. Lettersnew sponsor bank or June 30, 2024. The remaining serviced deposits of credit may obligate theapproximately $569 million in connection with an existing white label relationship will remain at Customers Bank and continue to fund draws under those letters of credit whether or not a customer continuesbe serviced by BM Technologies, which was also renewed on March 22, 2023. Refer to meet the conditions of the extension of credit. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities"NOTE 8 – LEASES", "NOTE 9 – DEPOSITS" and "NOTE 10 – BORROWINGS" to customers.

Liquidity and Capital Resources
LiquidityCustomers' unaudited consolidated financial statements for a financial institution is a measure of that institution’s ability to meet depositors’ needs for funds, to satisfy or fund loan commitments, and for other operating purposes. Ensuring adequate liquidity is an objective of the asset/liability management process. Customers coordinates its management of liquidity with its interest rate sensitivity and capital position, and strives to maintain a strong liquidity position.additional information.
Customers' investment portfolio, including debt securities available for sale and held to maturity provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional liquidity funding. OurCustomers' principal sources of funds are deposits, proceeds from debt issuances,borrowings, principal and interest payments on loans and leases, other funds from operations, and proceeds from common and preferred stock issuances. Borrowing arrangements are maintained with the Federal Home Loan BankFHLB and the Federal Reserve Bank of PhiladelphiaFRB, including the BTFP to meet short-term liquidity needs. Longer-term borrowing arrangements are also maintained with the Federal Home Loan Bank.FHLB and the FRB. As of September 30, 2017, ourMarch 31, 2023, Customers' borrowing capacity with the Federal Home Loan BankFHLB was $4.7$3.3 billion, of which $1.5$2.1 billion was utilized in borrowings and $1.9 billion$397.2 million of available capacity was utilized to collateralize state and municipal deposits. As of December 31, 2016, our2022, Customers' borrowing capacity with the Federal Home Loan BankFHLB was $4.1$3.2 billion, of which $0.9 billion$800.0 million was utilized in borrowings and $1.7 billion$175.6 million of available capacity was utilized to collateralize state and municipal deposits. As of September 30, 2017March 31, 2023 and December 31, 2016, our2022, Customers' borrowing capacity with the Federal ReserveFRB was $6.5 billion and $2.5 billion, respectively.
Customers Bank provides blockchain-based digital payments via CBIT, which allows clients to make instant payments in U.S. dollars. CBIT may only be created or minted by, transferred to and redeemed by commercial customers of Philadelphia was $151.1Customers 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 March 31, 2023 and December 31, 2022, Customers Bank held $1.9 billion and $2.3 billion, respectively, of deposits from customers participating in CBIT, which are reported as deposit liabilities in the consolidated balance sheets. At March 31, 2023, substantially all the CBIT-related deposit accounts are non-interest bearing.
The CBIT instant payments platform provides a closed-system for intrabank commercial transactions and is not intended to be a trading platform for tokens or digital assets. CBIT tokens are used only in connection with the CBIT instant payments platform and are not securities for purposes of applicable securities laws. There are no scenarios in which the transaction or redemption value of one CBIT would not be equal to one U.S. dollar. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The deposits from customers participating in CBIT include the omnibus deposit account, which had an outstanding balance of $254.7 million and $158.6 million,$23 thousand at March 31, 2023 and December 31, 2022, respectively.
NetThe table below summarizes Customers' cash flows for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
(dollars in thousands)20232022Change% Change
Net cash provided by (used in) operating activities$17,538 $116,940 $(99,402)(85.0)%
Net cash provided by (used in) investing activities804,645 88,672 715,973 807.4 %
Net cash provided by (used in) financing activities768,696 (449,044)1,217,740 (271.2)%
Net increase (decrease) in cash and cash equivalents$1,590,879 $(243,432)$1,834,311 (753.5)%
Cash flows provided by (used in) operating activities
Cash provided by operating activities were $185.9of $17.5 million duringfor the ninethree months ended September 30, 2017, compared toMarch 31, 2023 resulted from net cash flows usedincome of $53.7 million, net non-cash operating adjustments of $26.5 million and an increase in operating activitiesaccrued interest payable and other liabilities of $528.7$18.1 million, during the nine months ended September 30, 2016. During the nine months ended September 30, 2017, proceeds from salespartially offset by origination of loans held for sale, exceeded originationsnet of loans heldproceeds from the sales of $79.8 million and an increase in accrued interest receivable and other assets of $0.9 million.
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Cash provided by operating activities of $116.9 million for sale by $154.9 million. During the ninethree months ended September 30, 2016, originationsMarch 31, 2022 resulted from net income of loans held for sale exceeded proceeds from sales$76.8 million and a decrease in accrued interest receivable and other assets of loans held for sale$66.9 million, partially offset by $619.1a decrease in accrued interest payable and other liabilities of $6.4 million and net non-cash operating adjustments of $20.2 million.
InvestingCash flows provided by (used in) investing activities used net cash flows of $1.3 billion during the nine months ended September 30, 2017, compared to net cash flows used in
Cash provided by investing activities of $507.4$804.6 million duringfor the ninethree months ended September 30, 2016. PurchasesMarch 31, 2023 primarily resulted from a net decrease in loans and leases, excluding mortgage warehouse loans of $736.6 million primarily from PPP loan forgiveness and guarantee payments by the SBA, proceeds from net repayments of mortgage warehouse loans of $91.7 million, proceeds from maturities, calls, and principal repayments of investment securities available for sale totaled $796.6of $69.6 million duringand held to maturity of $44.2 million, partially offset by purchases of investment securities held to maturity of $73.1 million, net purchases of FHLB, Federal Reserve Bank, and other restricted stock of $50.5 million and purchases of loans of $12.6 million.
Cash provided by investing activities of $88.7 million for the ninethree months ended September 30, 2017, compared to $5.0March 31, 2022 primarily resulted from proceeds from net repayments of mortgage warehouse loans of $536.6 million, during the nine months ended September 30, 2016. Proceedsproceeds from maturities, calls, and principal repayments of investment securities available for sale of $224.8 million, proceeds from sales of investment securities available for sale were $698.5of $156.0 million, for the nine month ended September 30, 2017, compared to $2.9a net decrease in loans and leases, excluding mortgage warehouse loans of $159.7 million during the nine months ended September 30, 2016. Purchasesprimarily from PPP loan forgiveness, proceeds from sales of loans held for investment and bank owned life insurance policies totaled $262.6 million and $90.0 million, respectively, for the nine months ended September 30, 2017, compared to no similar purchases during the nine months ended September 30, 2016. Proceeds from the saleleases of loans held for investment totaled $124.7 million during the nine months ended September 30, 2017, compared to $91.9 million during the nine months ended September 30, 2016. Cash flows used to fund new loans held for investment totaled $921.0 million and $641.1 million during the nine months ended September 30, 2017 and 2016, respectively.
Financing activities provided a net aggregate of $1.0 billion for each of the nine months ended September 30, 2017 and 2016. During the nine months ended September 30, 2017, increases in deposits provided net cash flows of $293.3 million, net increases in short-term borrowed funds provided $593.5 million, net increases in federal funds provided $64.0 million, proceeds from the issuance of five-year senior notes provided $98.6 million, payment of preferred stock dividends used $10.8$14.3 million, and net proceeds from sale of FHLB, FRB, and other restricted stock of $15.2 million, partially offset by purchases of investment securities available for sale of $814.2 million and purchases of loans of $206.3 million.
Cash flows provided by (used in) financing activities
Cash provided by financing activities of $768.7 million for the issuance of common stock provided $2.1 million. During the ninethree months ended September 30, 2016, increasesMarch 31, 2023 primarily resulted from proceeds from long-term borrowed funds from the FHLB and the FRB of $2.6 billion, partially offset by repayments of long-term borrowed funds from the FHLB and FRB of $1.0 billion, a net decrease in deposits provided $1.5 billion,of $435.8 million, a net repayments ofdecrease in short-term borrowed funds from the FHLB of $300.0 million and purchases of treasury stock of $39.8 million.
Cash used $663.6in financing activities of $449.0 million for the three months ended March 31, 2022 primarily resulted from a net decrease in short-term borrowed funds from the FHLB of $700.0 million, a net decrease in deposits of $362.4 million and purchases of treasury stock of $6.3 million, partially offset by a net increase in federal funds purchased used $18.0of $625.0 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 net proceedswill be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of March 31, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions.
In April 2020, the U.S. federal banking regulatory agencies issued an interim final rule that permits banks to exclude the impact of participating in the SBA PPP program in their regulatory capital ratios. Specifically, PPP loans are zero percent risk weighted and a bank can exclude all PPP loans pledged as collateral to the PPPLF from long-term FHLB advances provided $75.0 million, net proceeds fromits average total consolidated assets for purposes of calculating the issuanceTier 1 capital to average assets ratio (i.e. leverage ratio). Customers applied this regulatory guidance in the calculation of preferred stock provided $162.0 million, paymentits regulatory capital ratios presented below.
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Quantitative measures established by regulation to ensure capital adequacy require the Bank and net proceeds from the issuanceBancorp to maintain minimum amounts and ratios (set forth in the following table) of common equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). At March 31, 2023 and December 31, 2022, the Bank and the Bancorp met all capital adequacy requirements to which they were subject.
Generally, to comply with the regulatory definition of adequately capitalized, or well capitalized, respectively, or to comply with the Basel III capital requirements, an institution must at least maintain the common equity Tier 1, Tier 1, and total risk-based capital ratios and the Tier 1 leverage ratio in excess of the related minimum ratios set forth in the following table:
Minimum Capital Levels to be Classified as:
 ActualAdequately CapitalizedWell CapitalizedBasel III Compliant
(dollars in thousands)AmountRatioAmountRatioAmountRatioAmountRatio
As of March 31, 2023:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,466,676 9.624 %$685,809 4.500 %N/AN/A$1,066,814 7.000 %
Customers Bank$1,721,118 11.313 %$684,636 4.500 %$988,919 6.500 %$1,064,990 7.000 %
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,604,469 10.528 %$914,412 6.000 %N/AN/A$1,295,417 8.500 %
Customers Bank$1,721,118 11.313 %$912,848 6.000 %$1,217,131 8.000 %$1,293,202 8.500 %
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,878,449 12.326 %$1,219,216 8.000 %N/AN/A$1,600,221 10.500 %
Customers Bank$1,922,468 12.636 %$1,217,131 8.000 %$1,521,414 10.000 %$1,597,485 10.500 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc.$1,604,469 7.534 %$851,851 4.000 %N/AN/A$851,851 4.000 %
Customers Bank$1,721,118 8.092 %$850,809 4.000 %$1,063,511 5.000 %$850,809 4.000 %
As of December 31, 2022:
Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,470,837 9.637 %$686,838 4.500 %N/AN/A$1,068,415 7.000 %
Customers Bank$1,708,598 11.213 %$685,694 4.500 %$990,447 6.500 %$1,066,636 7.000 %
Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,608,630 10.539 %$915,784 6.000 %N/AN/A$1,297,361 8.500 %
Customers Bank$1,708,598 11.213 %$914,259 6.000 %$1,219,012 8.000 %$1,295,201 8.500 %
Total capital (to risk-weighted assets)
Customers Bancorp, Inc.$1,862,089 12.200 %$1,221,045 8.000 %N/AN/A$1,602,622 10.500 %
Customers Bank$1,889,472 12.400 %$1,219,012 8.000 %$1,523,765 10.000 %$1,599,954 10.500 %
Tier 1 capital (to average assets)
Customers Bancorp, Inc.$1,608,630 7.664 %$839,547 4.000 %N/AN/A$839,547 4.000 %
Customers Bank$1,708,598 8.150 %$838,611 4.000 %$1,048,264 5.000 %$838,611 4.000 %
The Basel III Capital Rules require that we maintain a 2.500% capital conservation buffer with respect to each of common equity Tier 1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a capital conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock provided $7.3 million. These financing activities provided sufficient cash flowsrepurchases, and certain discretionary bonus payments to support Customers' investingexecutive officers. As of March 31, 2023, the Bank and operating activities.the Bancorp were in compliance with the Basel III requirements.
Overall, based on our core deposit base and available sources of borrowed funds, management believes that Customers has adequate resources to meet its short-term and long-term cash requirements for the foreseeable future.
Effect of Government Monetary Policies
Our earnings are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans and leases, investments, and deposits, and their use may also affect rates charged on loans and leases or paid for deposits.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity

The largest component of ourCustomers' net income is net interest income, and the majority of ourits financial instruments are interest rate sensitive assets and liabilities with various term structures and maturities. One of the primary objectives of management is to maximizeoptimize net interest income while minimizing interest rate risk. Interest rate risk is derived from timing differences in the repricing of assets and liabilities, loan prepayments, deposit withdrawals and differences in lending and funding rates. Our Asset/Liability CommitteeCustomers' asset/liability committee actively seeks to monitor and control the mix of interest rate sensitive assets and interest rate sensitive liabilities.

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

Income simulationscenario modeling is used to measure our interest rate sensitivity and manage our interest rate risk. Income simulationscenario 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 simulationscenario modeling, we haveCustomers has estimated the net interest income for the periodtwelve months ending September 30, 2018,March 31, 2024 and December 31, 2023, based upon the assets, liabilities and off-balance sheet financial instruments in existence at September 30, 2017. We haveMarch 31, 2023 and December 31, 2022. Customers has also estimated changes to that estimated net interest income based upon interest rates rising or falling immediately (“rate shocks”). For upward rate shocks modeling a rising rate environment at March 31, 2023, current market interest rates were increased immediately by 100, 200, and 300 basis points. For downward rate shocks modeling a falling rate environment at March 31, 2023, current market interest rates were only decreased immediately by 100, basis points due to the limitations of the current low interest rate environment that renders the Down 200 and Down 300 rate shocks impractical.basis points. The following table reflects the estimated percentage change in estimated net interest income for the periodtwelve months ending September 30, 2018,March 31, 2024 and December 31, 2023, resulting from changes in interest rates.

Net change in net interest income
% Change
Rate ShocksMarch 31, 2023December 31, 2022
Up 3%14.2%0.4%
Up 2%9.5%0.4%
Up 1%5.1%0.3%
Down 1%(5.4)%(0.9)%
Down 2%(11.1)%(2.0)%
Down 3%(16.8)%(4.8)%
Rate Shocks% Change
Up 3%(8.2)%
Up 2%(3.0)%
Up 1%(0.3)%
Down 1%(2.4)%
Economic Value of Equity (“EVE”)EVE estimates the discounted present value of asset and liability cash flows. Discount rates are based upon market prices for comparable assets and liabilities. Upward and downward rate shocks are used to measure volatility of EVE in relation to a constant rate environment. For upward rate shocks modeling a rising rate environment at March 31, 2023, current market interest rates were increased immediately by 100, 200, and 300 basis points. For downward rate shocks modeling a falling rate environment at March 31, 2023, current market interest rates were only decreased immediately by 100, basis points due to the limitations of the current low interest rate environment that renders the Down 200 and Down 300 rate shocks impractical.basis points. This method of measurement primarily evaluates the longer term repricing risks and options in Customers Bank’s balance sheet. The following table reflects the estimated EVE at risk and the ratio of EVE to EVE adjusted assets at September 30, 2017,March 31, 2023 and December 31, 2022, resulting from shocks to interest rates.

From Base
Rate ShocksMarch 31, 2023December 31, 2022
Up 3%(2.2)%(27.8)%
Up 2%(0.4)%(16.9)%
Up 1%1.9%(6.6)%
Down 1%(6.6)%0.0%
Down 2%(37.2)%(31.3)%
Down 3%(64.1)%(57.2)%
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Rate ShocksFrom base
Up 3%(30.9)%
Up 2%(18.7)%
Up 1%(8.3)%
Down 1%4.2 %

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

LIBOR Transition
Customers has variable rate loans, investment securities, fixed-to-floating rate senior and subordinated debt, preferred stocks and derivatives that reference LIBOR. Various regulatory bodies have encouraged banks to transition away from LIBOR as soon as practicable, generally cease entering new contracts that use LIBOR as a reference rate no later than December 31, 2021, and for new contracts to utilize a reference rate other than LIBOR or include robust language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation. Certain tenors of LIBOR have ceased publication and complete cessation of LIBOR publication is expected by June 30, 2023. Effective December 31, 2021, Customers has essentially discontinued entering into new LIBOR-based contracts. Customers established an enterprise-wide LIBOR transition program, which includes a LIBOR transition team with senior management level leadership. Progress on the LIBOR transition effort is monitored by executive management as well as the asset/liability committee of Customers' Board of Directors.
At March 31, 2023, Customers had LIBOR-based commercial loans and leases, commercial real estate loans and residential mortgages of $1.6 billion, which either mature before June 30, 2023 or have been amended to include appropriate alternative language to be effective upon cessation of LIBOR publication. In addition, $110.0 million of fixed-to-floating rate borrowings and $137.8 million of preferred equity instruments reference LIBOR. Customers' derivatives primarily reference LIBOR. In October 2020, the International Swaps and Derivatives Association, Inc. published the IBOR Fallbacks Supplement (“Supplement”) and the IBOR Fallback Protocol (“Protocol”). The Protocol enables market participants to incorporate certain revisions into their legacy non-cleared derivatives with other counterparties that also choose to adhere to the Protocol. Customers adhered to the IBOR Protocol in November 2020 and is in the process of remediating its interest rate swap transactions with its end-user customers. With respect to Customers' cleared interest rate swap agreements that reference LIBOR, clearinghouses have adopted the same relevant SOFR benchmark alternatives of the IBOR Supplement and IBOR Protocol. As loans mature and new originations occur a larger percentage of Customers' variable-rate loans are expected to reference SOFR. At March 31, 2023, the Company had approximately $4.4 billion of outstanding loan balances that reference SOFR. Customers’ usage of interest rate swap agreements referenced to SOFR is expected to increase in response to the discontinuation of LIBOR. Customers continues to work with its customers and other counterparties to remediate LIBOR-based agreements which expire after June 30, 2023 by incorporating alternative language, negotiating new agreements, or other means. The discontinuation of LIBOR and uncertainty relating to the emergence of one or more alternative benchmark indexes to replace LIBOR could materially impact the Customers’ interest rate risk profile and its management thereof. For a discussion of the risks associated with the LIBOR transition to alternative reference rates, refer to Part I, Item 1A. "Risk Factors" included in Customers' 2022 Form 10-K.
Item 4. Controls and Procedures
(a) Management's Evaluation of Disclosure Controls and Procedures.As of the end of the period covered by this report, Customers Bancorp carried out an evaluation, under the supervision and with the participation of Customers Bancorp’s management, including Customers Bancorp’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Customers Bancorp’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Customers Bancorp’s disclosure controls and procedures were effective at September 30, 2017.as of March 31, 2023.
(b)Changes in Internal Control Over Financial Reporting.During the quarter ended September 30, 2017,March 31, 2023, there have been no changes in Customers Bancorp’sBancorp's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Customers Bancorp’sBancorp's internal control over financial reporting.

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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changesFor information on Customers' legal proceedings, refer to “NOTE 15 – LOSS CONTINGENCIES” to the legal proceedings disclosed within our 2016 Form 10-K, as supplemented and amended within our quarterly report on Form 10-Q for the quarter ended March 31, 2017.unaudited consolidated financial statements.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Risk Factors” included within the 20162022 Form 10-K and our quarterly reports on Form 10-Q for the quarter ended March 31, 2017 ("the March 31, 2017 Quarterly Report") and for the quarter ended June 30, 2017 ("the June 30, 2017 Quarterly Report").10-K. There are no material changes from the risk factors included within the 20162022 Form 10-K, March 31, 2017 Quarterly Report, and June 30, 2017 Quarterly Report other than the risks describedexcept as further discussed below. The risks described within the 20162022 Form 10-K the March 31, 2017 Quarterly Report, the June 30, 2017 Quarterly Report and below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or operating results. SeeRefer to “Item 2 -– Management’s Discussion and Analysis of Financial Condition and Results of Operations -– Cautionary Note Regarding Forward-Looking Statements.”

We face a numberA continuation of risks relating to our announced plans to dispose of BankMobile through a spin-off and merger.

We have announced our plans to dispose of our BankMobile business through a spin-off of BankMobile to our shareholders, to be followed by a merger of our BankMobile Technologies, Inc. subsidiary, which we refer to as BMT, into Flagship Community Bank, which we refer to as Flagship. While we currently expect to execute a definitive agreement with Flagship for this transaction, as of the date of filing of this Form 10-Q, a definitive agreement has not been executed. We expect that completion of the spin-off and merger will be subject to a number of conditions, including receipt of all necessary regulatory approvals, receipt by Flagship of shareholder approvals of certain matters relating to its acquisition of BMT, Flagship’s ability to raise approximately $100 million through the issuance of shares of its common stock, and other conditions. Certain of the conditions will not be within our control and we cannot guarantee you that we will enter into a definitive agreement or that we will be able to complete the spin-off and merger on the terms we have agreed to with Flagship, or at all.

Our announcement of the spin-off and merger and the steps we take to complete those transactions may adversely affect our business and the value of Customers and/or BankMobile. Uncertainty as to our ability to execute a definitive agreement or to complete the transactions and uncertainty as to the timing of the execution of a definitive agreement or the completion of the transactions may adversely affect analyst and shareholder views of our business and prospects, which could adversely affect our share price. These uncertainties also may adversely impact our relationships with our current and potential higher education institution customers and our BankMobile employees, and could resultrecent turmoil in the loss of customersfinancial services industry, and key employees. Because we cannot be certain of completing the spin-offresponsive measures to manage it, could have an adverse effect on our stock price, financial position and merger by July 1, 2018, we are also taking steps to reduce our assets below $10 billion at December 31, 2017 in order to eliminate the risk of not receiving full interchange fees, which would occur if we no longer qualified for the smaller issuer exemption from the Durbin Amendment for 2018.

Executing the spin-off and merger also may result in the diversion of management’s attention from Customers’ day-to-day operations generally, and the expenses we incur in executing the transactions may exceed our expectations, which may adversely affect our results of operations. In addition, even if we are successful in completing the spin-off and merger, it is possible that Customers and our shareholders may not receive the benefits we presently anticipate from these transactions.

If we are unable to reduceadequately manage our total assets to below $10 billion asliquidity, deposits, capital levels, interest rate risk or reputation risk, which have come under greater scrutiny in light of December 31, 2017, our business and potential for future success could be materially adversely affected.
Under federal law and regulation, if our total assets exceed $10 billion as of December 31, 2017, we will no longer qualify as a small issuer of debit cards and we will not receive the optimal debit card processing fee. Failure to qualify for the small issuer exception would result in a significant reduction in interchange fee income beginning July 1, 2018 and could result in the BankMobile segment operating unprofitably or charging additional fees to students to replace the lost revenue. Customers plans to reduce total assets by approximately $500 million by year-end 2017 through normal seasonality of the mortgage warehouse business, which tends to decline in the winter months, selling multi-family and residential mortgage loans, and selling investment securities as needed. In addition, Customers expects to moderately grow its commercial and industrial loan portfolio while limiting growth in its multi-family loan portfolio by disciplined pricing. If Customers is unable to reduce total

assets to below $10 billion as of December 31, 2017, our financial condition and results of operations could be adversely affected.
The fair value of our investment securities can fluctuate due to market conditions. Adverse economic performance can lead to adverse security performance and other-than-temporary impairment.
As of September 30, 2017, the fair value of our investment securities portfolio was $584.8 million. We have historically followed a conservative investment strategy, with concentrations in securities that are backed by government sponsored enterprises. In the future, we may seek to increase yields through more aggressive strategies, which may include a greater percentage of corporate securities, structured credit products or non-agency mortgage backed securities. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets. Any of these factors, among others, such as a change in management's intent to hold the securities until recovery in fair value, could cause other-than-temporary impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, whichrecent bank failures, it could have a material adverse effect on us. The process for determining whether impairment of a security is other-than-temporary usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

As of September 30, 2017, management evaluated its equity holdings issued by Religare for other-than-temporary impairment. Because management no longer has the intent to hold these securities until a recovery in fair value, Customers recorded other-than-temporary impairment losses of $8.3 million in third quarter 2017, $2.9 million in second quarter 2017, $1.7 million in first quarter 2017, and $7.3 million in fourth quarter 2016 for the full amount of the decline in fair value below the cost basis. The fair value of the equity securities at September 30, 2017 of $2.3 million became the new cost basis of the securities.
We may suffer losses due to minority investments in other financial institutions or related companies.
From time to time, we may make or consider making minority investments in other financial institutions or technology companies in the financial services business. If we do so, we may not be able to influence the activities of companies in which we invest, and may suffer losses due to these activities. Investments in foreign companies could pose additional risks as a result of distance, language barriers and potential lack of information (for example, foreign institutions, including foreign financial institutions, may not be obligated to provide as much information regarding their operations as those in the United States). Our investment in Religare, which is a diversified financial services company in India, represents such an investment. In fourth quarter 2016, we announced our decision to exit our investment in Religare. As a result of that decision, we recorded an other-than-temporary impairment loss of $7.3 million in earnings in fourth quarter 2016 and adjusted our cost basis of the Religare securities to their estimated fair value of $15.2 million at December 31, 2016. In first quarter 2017, we recognized an other-than-temporary impairment loss of $1.7 million and adjusted our cost basis of the Religare securities to their estimated fair value of $13.5 million at March 31, 2017. In second quarter 2017, we recognized an other-than-temporary impairment loss of $2.9 million and adjusted our cost basis of the Religare securities to their estimated fair value of $10.7 million at June 30, 2017. In third quarter 2017, we recognized an other-than-temporary impairment loss of $8.3 million and adjusted our cost of the Religare equity securities to their estimated fair value of $2.3 million at September 30, 2017. To the extent we are unable to exit the Religare investment as planned, and pursuant to the terms contemplated, further declines in the marketstock price, per share of the Religare common stock and adverse changes in foreign currency exchange rates, may have an adverse effect on our financial condition and results of operations.

In recent months, several financial services institutions have failed or required outside liquidity support. The impact of this situation has led to market volatility and risk of additional stress to other financial services institutions and the financial services industry generally, in part as a result of increased lack of confidence in the financial services sector. While the U.S. Department of the Treasury, the Federal Reserve, and the FDIC have made statements regarding the safety and soundness of the banking system and taken actions, such as establishing the Bank Term Funding Program, as an additional source of liquidity for banks, there is no guarantee that such actions will be successful in restoring customer confidence. As a result of these events, certain of our customers chose, and may choose in the future, to withdraw deposit amounts in favor of keeping deposits at larger financial institutions that may be perceived to be more stable, or seek to switch their existing deposits into other higher yielding alternatives, any of which could materially adversely affect our liquidity, loan funding capacity, net interest margin, capital and results of operations.
In addition, these recent events may result in potentially adverse changes to laws or regulations governing banks and bank holding companies, increased oversight by regulatory authorities and/or the imposition of restrictions on certain business activities through supervisory or enforcement activities, including higher capital or liquidity requirements, which could have a material impact on our current and planned business. The cost of resolving the recent bank failures is also expected to result in action by the FDIC to increase its deposit insurance premiums or assessments.
These recent events also have led to a greater focus by regulators and investors on liquidity of existing assets and funding sources for financial institutions, the composition of deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. The increased influence of social media and other communication channels on the public perception of financial institutions and their operations can create reputation risk, which can adversely affect our stock price or the public’s perception of our stability or viability, even where such concerns are unwarranted. If we are unable to adequately manage our liquidity, deposits, capital levels, interest rate risk or reputation risk, it could have a material adverse effect on our stock price, financial condition, results of operations or regulatory standing.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On November 26, 2013, Customers announced thatAugust 25, 2021, the Board of Directors hadof Customers Bancorp authorized a stockthe Share Repurchase Program to repurchase plan in which the Bancorp could acquire up to 5%3,235,326 shares of its currentthe Company's common stock (representing 10% of the Company’s outstanding shares at prices notof common stock on June 30, 2021). The term of the Share Repurchase Program was extended to exceed a 20% premium overSeptember 27, 2023, unless earlier terminated. Purchases of shares under the then current book value. The repurchase program has no expiration date butShare Repurchase Program may be suspended, modifiedexecuted through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or discontinued at any time, and the Bancorp has no obligation to repurchase any amount of its common stock under the program.
During the three and nine months ended September 30, 2017, Customers did not repurchase any of its shares.otherwise. The maximumexact number of shares, availabletiming for such purchases, and the price and terms at and on which such purchases are to be purchased undermade will be at the plandiscretion of the Company and will comply with all applicable regulatory limitations. The common shares repurchased during the three months ended March 31, 2023 pursuant to the Share Repurchase Program were as follows:
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares purchased as part of publicly announced plans or programsMaximum Number of Shares that may yet be purchased under the plans or programs
January 1 - January 31, 2023— $— — 1,877,392 
February 1 - February 28, 20231,013,283 31.48 1,013,283 864,109 
March 1 - March 31, 2023366,600 20.57 366,600 497,509 
Total1,379,883 $28.58 1,379,883 497,509 
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 750,551 shares.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.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.

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Table of Contents
Item 6. Exhibits
Exhibit No.Description
Exhibit
No.2.1
*Description
2.2
2.3
3.1
3.2
3.3
3.4
3.5
3.63.6
3.73.7
4.131.1
4.2
First Supplemental Indenture, dated as of July 30, 2013, by and between Customers Bancorp, Inc., as Issuer, and Wilmington Trust, National Association, as Trustee, incorporated by reference to Exhibit 4.2 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013
4.3
6.375% Global Note in aggregate principal amount of $55,000,000, incorporated by reference to Exhibit 4.3 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013
4.4
Amendment to First Supplemental Indenture, dated August 27, 2013, by and between Customers Bancorp, Inc. and Wilmington Trust Company, National Association, as trustee, incorporated by reference to Exhibit 4.1 to the Customers Bancorp Form 8-K filed with the SEC on August 29, 2013
4.5
6.375% Global Note in aggregate principal amount of $8,250,000, incorporated by reference to Exhibit 4.2 to the Customers Bancorp Form 8-K filed with the SEC on August 29, 2013
4.6
Form of Note Subscription Agreement (including form of Subordinated Note Certificate and Senior Note Certificate), incorporated by reference to Exhibit 10.1 to the Customers Bancorp Form 8-K filed with the SEC on June 26, 2014
4.7
Form of Warrant issued by Berkshire Bancorp, Inc., incorporated by reference to Exhibit 10.23 to the Customers Bancorp Form S-1/A filed with the SEC on April 25, 2012
4.8
Second Supplemental Indenture, dated as of June 30, 2017, by and between Customers Bancorp, Inc, as Issuer, and Wilmington Trust, National Association, As Trustee, incorporated by reference to Exhibit 4.1 to the Customers Bancorp Form 8-K filed with the SEC on June 30, 2017
31.1
Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)
31.2
32.1
32.2

101
The Exhibits filedfollowing financial statements from the Customers’ Quarterly Report on Form 10-Q as part of this report are as follows:and for the quarterly period ended March 31, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.
101.INS104Cover Page Interactive Data File - the cover page XBRL Instance Document.tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB101.DEFXBRL Taxonomy Extension Definitions Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definitions Linkbase Document.

* Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished to the SEC upon its request.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Customers Bancorp, Inc.
May 9, 2023By:/s/ Jay S. Sidhu
Name:Jay S. Sidhu
Title:Chairman and Chief Executive Officer
(Principal Executive Officer)
Customers Bancorp, Inc.
November 3, 2017By:/s/ Jay S. Sidhu
Name:Jay S. Sidhu
Title:
Chairman and Chief Executive Officer
(Principal Executive Officer)
November 3, 2017By:/s/ Robert E. Wahlman
Name:Robert E. Wahlman
Title:
Chief Financial Officer
(Principal Financial Officer)

Exhibit Index
Exhibit
No.
May 9, 2023		By:Description
3.1
Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers Bancorp’s Form 8-K filed with the SEC on April 30, 2012
3.2
Amended and Restated Bylaws of Customers Bancorp, incorporated by reference to Exhibit 3.2 to the Customers Bancorp’s Form 8-K filed with the SEC on April 30, 2012
3.3
Articles of Amendment to the Amended and Restated Articles of Incorporation of Customers Bancorp, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on July 2, 2012
3.4
Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on May 18, 2015
3.5
Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on January 29, 2016
3.6
Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series E, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on April 28, 2016
3.7
Statement with Respect to Shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series F, incorporated by reference to Exhibit 3.1 to the Customers Bancorp Form 8-K filed with the SEC on September 16, 2016
4.1
Indenture, dated as of July 30, 2013, by and between Customers Bancorp, Inc., as Issuer, and Wilmington Trust, National Association, as Trustee, incorporated by reference to Exhibit 4.1 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013
4.2
First Supplemental Indenture, dated as of July 30, 2013, by and between Customers Bancorp, Inc., as Issuer, and Wilmington Trust, National Association, as Trustee, incorporated by reference to Exhibit 4.2 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013
4.3
6.375% Global Note in aggregate principal amount of $55,000,000, incorporated by reference to Exhibit 4.3 to the Customers Bancorp Form 8-K filed with the SEC on July 31, 2013
4.4
Amendment to First Supplemental Indenture, dated August 27, 2013, by and between Customers Bancorp, Inc. and Wilmington Trust Company, National Association, as trustee, incorporated by reference to Exhibit 4.1 to the Customers Bancorp Form 8-K filed with the SEC on August 29, 2013
4.5
6.375% Global Note in aggregate principal amount of $8,250,000, incorporated by reference to Exhibit 4.2 to the Customers Bancorp Form 8-K filed with the SEC on August 29, 2013
4.6
Form of Note Subscription Agreement (including form of Subordinated Note Certificate and Senior Note Certificate), incorporated by reference to Exhibit 10.1 to the Customers Bancorp Form 8-K filed with the SEC on June 26, 2014
4.7
Form of Warrant issued by Berkshire Bancorp, Inc., incorporated by reference to Exhibit 10.23 to the Customers Bancorp Form S-1/A filed with the SEC on April 25, 2012
4.8
Second Supplemental Indenture, dated as of June 30, 2017, by and between Customers Bancorp, Inc, as Issuer, and Wilmington Trust, National Association, As Trustee, incorporated by reference to Exhibit 4.1 to the Customers Bancorp Form 8-K filed with the SEC on June 30, 2017
31.1
Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)
31.2
Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule15d-14(a)
32.1
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
32.2
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

/s/ Carla A. Leibold
Name:Carla A. Leibold
101Title:The Exhibits filed as part of this report are as follows:
101.INSXBRL Instance Document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definitions Linkbase Document.Chief Financial Officer
(Principal Financial Officer)


86
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