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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the quarterly period ended ~~September 30, 2022~~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 .

001-35542

(Commission File number)

(Exact name of registrant as specified in its charter)


Customers Bancorp, Inc.

Pennsylvania

27-2290659

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

701 Reading Avenue

West Reading, PA 19611

(Address of principal executive offices)

(610) 933-2000

(Registrant’s telephone number, including area code)

N/A

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

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

Title of Each Class

Trading Symbols

Name of Each Exchange on which Registered

Voting Common Stock, par value $1.00 per share

CUBI

New York Stock Exchange

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

CUBI/PE

New York Stock Exchange

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

CUBI/PF

New York Stock Exchange

5.375% Subordinated Notes due 2034

CUBB

New York Stock Exchange

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated Filer

☐

Non-accelerated filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No x

________________________________________

On ~~November 4, 2022, 32,515,393~~May 5, 2023, 31,249,965 shares of Voting Common Stock were outstanding.

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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

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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.





ACL			Allowance for credit losses
AFS			Available for sale

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

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

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

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




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






EPS			Earnings per share


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

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


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

FRB			Federal Reserve Bank of Philadelphia

GDP			Gross domestic product



HTM			Held to maturity


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

NYSE			New York Stock Exchange

OCI			Other comprehensive income (loss)

OREO			Other real estate owned


PCD			Purchased Credit-Deteriorated

Table of Contents


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

~~Table of Conte~~n ts


ROU			Right-of-use

SAB			SEC Staff Accounting Bulletin
SBA			U.S. Small Business Administration
SBA loans			Loans originated pursuant to the rules and regulations of the SBA
SEC			U.S. Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended
~~Series C Preferred Stock~~			~~Fixed-to-floating rate non-cumulative perpetual preferred stock, series C~~
~~Series D Preferred Stock~~			~~Fixed-to-floating rate non-cumulative perpetual preferred stock, series D~~
Series E Preferred Stock			Fixed-to-floating rate non-cumulative perpetual preferred stock, series E
Series F Preferred Stock			Fixed-to-floating rate non-cumulative perpetual preferred stock, series F
SERP			Supplemental Executive Retirement Plan
Share Repurchase Program			Share repurchase program authorized by the Board of Directors of Customers Bancorp in 2021
SOFR			Secured Overnight Financing Rate

TDR			Troubled debt restructuring
TRAC			Terminal Rental Adjustment Clause


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

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CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET — UNAUDITED

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	41,520	$	35,238	Cash and due from banks	$	77,251	$	58,025
Interest earning deposits	Interest earning deposits	362,945		482,794		Interest earning deposits	1,969,434		397,781
Cash and cash equivalents	Cash and cash equivalents	404,465		518,032		Cash and cash equivalents	2,046,685		455,806
Investment securities, at fair value (includes allowance for credit losses of $253 at September 30, 2022)		2,943,694		3,817,150
Investment securities, at fair value (includes allowance for credit losses of $2,173 and $578, respectively)						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 maturity	Investment securities held to maturity	886,294		—		Investment securities held to maturity	870,294		840,259
Loans held for sale (includes $609 and $15,747, respectively, at fair value)		5,224		16,254
Loans held for sale (includes $314 and $322, respectively, at fair value)						Loans held for sale (includes $314 and $322, respectively, at fair value)	424,057		328,312
Loans receivable, mortgage warehouse, at fair value	Loans receivable, mortgage warehouse, at fair value	1,569,090		2,284,325		Loans receivable, mortgage warehouse, at fair value	1,247,367		1,323,312

Loans receivable, PPP	Loans receivable, PPP	1,154,632		3,250,008		Loans receivable, PPP	246,258		998,153
Loans and leases receivable	Loans and leases receivable	12,607,742		9,018,298		Loans and leases receivable	13,145,352		13,144,894
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(130,197)		(137,804)		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	Total loans and leases receivable, net of allowance for credit losses on loans and leases	15,201,267		14,414,827		Total loans and leases receivable, net of allowance for credit losses on loans and leases	14,508,696		15,335,435
FHLB, Federal Reserve Bank, and other restricted stock	FHLB, Federal Reserve Bank, and other restricted stock	64,112		64,584		FHLB, Federal Reserve Bank, and other restricted stock	124,733		74,196
Accrued interest receivable	Accrued interest receivable	107,621		92,239		Accrued interest receivable	123,754		123,374

Bank premises and equipment, net	Bank premises and equipment, net	6,610		8,890		Bank premises and equipment, net	8,581		9,025
Bank-owned life insurance	Bank-owned life insurance	336,130		333,705		Bank-owned life insurance	339,607		338,441

Goodwill and other intangibles	Goodwill and other intangibles	3,629		3,736		Goodwill and other intangibles	3,629		3,629
Other assets	Other assets	408,575		305,611		Other assets	374,609		400,135

Total assets	Total assets	$	20,367,621	$	19,575,028	Total assets	$	21,751,614	$	20,896,112
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:	Liabilities:					Liabilities:
Deposits:	Deposits:					Deposits:
Demand, non-interest bearing	Demand, non-interest bearing	$	2,993,793	$	4,459,790	Demand, non-interest bearing	$	3,487,517	$	1,885,045
Interest bearing	Interest bearing	14,528,645		12,318,134		Interest bearing	14,236,100		16,271,908
Total deposits	Total deposits	17,522,438		16,777,924		Total deposits	17,723,617		18,156,953

Federal funds purchased		365,000		75,000

FHLB advances	FHLB advances	500,000		700,000		FHLB advances	2,052,143		800,000
Other borrowings	Other borrowings	123,515		223,086		Other borrowings	123,645		123,580
Subordinated debt	Subordinated debt	181,882		181,673		Subordinated debt	182,021		181,952

Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	287,855		251,128		Accrued interest payable and other liabilities	249,168		230,666

Total liabilities	Total liabilities	18,980,690		18,208,811		Total liabilities	20,330,594		19,493,151
Commitments and contingencies (NOTE 16)
Commitments and contingencies (NOTE 15)						Commitments and contingencies (NOTE 15)
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 5,700,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021		137,794		137,794
Common stock, par value $1.00 per share; 200,000,000 shares authorized; 34,948,055 and 34,721,675 shares issued as of September 30, 2022 and December 31, 2021; 32,475,502 and 32,913,267 shares outstanding as of September 30, 2022 and December 31, 2021		34,948		34,722
Preferred stock, par value $1.00 per share; liquidation preference $25.00 per share; 100,000,000 shares authorized, 5,700,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022						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, 2022	137,794		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, 2022						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, 2022	35,258		35,012
Additional paid in capital	Additional paid in capital	549,066		542,391		Additional paid in capital	552,255		551,721
Retained earnings	Retained earnings	898,511		705,732		Retained earnings	974,399		924,134
Accumulated other comprehensive income (loss), net	Accumulated other comprehensive income (loss), net	(156,126)		(4,980)		Accumulated other comprehensive income (loss), net	(156,276)		(163,096)
Treasury stock, at cost (2,472,553 and 1,808,408 shares as of September 30, 2022 and December 31, 2021)		(77,262)		(49,442)
Treasury stock, at cost (4,018,436 and 2,638,553 shares as of March 31, 2023 and December 31, 2022)						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’ equity	Total shareholders’ equity	1,386,931		1,366,217		Total shareholders’ equity	1,421,020		1,402,961
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	20,367,621	$	19,575,028	Total liabilities and shareholders’ equity	$	21,751,614	$	20,896,112

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,
2022 2021 2022 2021
Interest income:
Loans and leases $ 200,457 $ 233,097 $ 526,573 $ 538,822
Investment securities 30,546 8,905 76,283 25,211
Other 4,913 849 12,870 2,814
Total interest income 235,916 242,851 615,726 566,847
Interest expense:
Deposits 65,380 15,915 101,873 47,226
FHLB advances 4,684 5 7,000 6,160
Subordinated debt 2,689 2,689 8,067 8,067
FRB PPP liquidity facility, federal funds purchased and other borrowings 4,131 4,350 10,203 14,014
Total interest expense 76,884 22,959 127,143 75,467
Net interest income 159,032 219,892 488,583 491,380
Provision (benefit) for credit losses (7,994) 13,164 31,850 13,536
Net interest income after provision (benefit) for credit losses 167,026 206,728 456,733 477,844
Non-interest income:
Interchange and card revenue 72 83 172 252
Deposit fees 989 994 2,893 2,748
Commercial lease income 7,097 5,213 19,584 15,729
Bank-owned life insurance 3,449 1,988 13,722 6,432
Mortgage warehouse transactional fees 1,545 3,100 5,443 10,612
Gain (loss) on sale of SBA and other loans 106 5,359 3,155 8,834
Loss on sale of consumer installment loans (23,465) — (23,465) —
Loan fees 3,008 1,909 8,171 5,015
Mortgage banking income 125 425 779 1,274
Gain (loss) on sale of investment securities (2,135) 6,063 (6,227) 31,441
Unrealized gain (loss) on investment securities (259) — (738) 2,720
Loss on sale of foreign subsidiaries — — — (2,840)
Unrealized gain (loss) on derivatives 563 524 2,348 2,622
Loss on cash flow hedge derivative terminations — — — (24,467)
Other (112) (72) (910) 504
Total non-interest income (9,017) 25,586 24,927 60,876
Non-interest expense:
Salaries and employee benefits 31,230 26,268 83,171 78,262
Technology, communication and bank operations 19,588 21,281 66,394 60,887
Professional services 6,269 6,871 20,640 19,630
Occupancy 2,605 2,704 9,934 7,807
Commercial lease depreciation 5,966 4,493 16,460 13,199
FDIC assessments, non-income taxes and regulatory fees 2,528 2,313 6,530 7,634
Loan servicing 3,851 4,265 10,563 6,402
Advertising and promotion 762 302 1,430 1,176
Merger and acquisition related expenses — — — 418
Loan workout 217 198 358 39
Deposit relationship adjustment fees — 6,216 — 6,216
Other 3,182 5,098 10,730 11,089
Total non-interest expense 76,198 80,009 226,210 212,759
Income before income tax expense 81,811 152,305 255,450 325,961
Income tax expense 17,899 36,263 56,127 73,947
Net income from continuing operations $ 63,912 $ 116,042 $ 199,323 $ 252,014
(continued)

~~Table of Conte~~n ts

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Loss from discontinued operations before income taxes $ — $ — $ — $ (20,354)
Income tax expense from discontinued operations — — — 17,682
Net loss from discontinued operations — — — (38,036)
Net income 63,912 116,042 199,323 213,978
Preferred stock dividends 2,548 2,981 6,544 9,671
Loss on redemption of preferred stock — 2,820 — 2,820
Net income available to common shareholders $ 61,364 $ 110,241 $ 192,779 $ 201,487
Basic earnings per common share from continuing operations $ 1.89 $ 3.40 $ 5.89 $ 7.44
Basic earnings per common share 1.89 3.40 5.89 6.26
Diluted earnings per common share from continuing operations 1.85 3.25 5.72 7.15
Diluted earnings per common share 1.85 3.25 5.72 6.02


	Three Months Ended March 31,
	2023		2022
Interest income:
Loans and leases	$	244,212	$	157,120
Investment securities	47,316		20,295
Loans held for sale	11,701		55
Interest earning deposits	10,395		330
Other	1,321		5,676
Total interest income	314,945		183,476
Interest expense:
Deposits	143,930		13,712
FHLB advances	10,370		—
FRB advances	6,286		—
Subordinated debt	2,689		2,689

Other borrowings	1,771		2,376
Total interest expense	165,046		18,777
Net interest income	149,899		164,699
Provision for credit losses	19,603		15,997
Net interest income after provision for credit losses	130,296		148,702
Non-interest income:


Commercial lease income	9,326		5,895
Loan fees	3,990		2,545
Bank-owned life insurance	2,647		8,326
Mortgage warehouse transactional fees	1,074		2,015




Gain (loss) on sale of SBA and other loans	—		1,507

Net gain (loss) on sale of investment securities	—		(1,063)





Other	1,084		1,973
Total non-interest income	18,121		21,198
Non-interest expense:
Salaries and employee benefits	32,345		26,607
Technology, communication and bank operations	16,589		24,068
Commercial lease depreciation	7,875		4,942
Professional services	7,596		6,956
Loan servicing	4,661		2,371
Occupancy	2,760		3,050
FDIC assessments, non-income taxes and regulatory fees	2,728		2,383
Advertising and promotion	1,049		315




Other	4,530		3,115
Total non-interest expense	80,133		73,807
Income before income tax expense	68,284		96,093
Income tax expense	14,563		19,332








Net income	53,721		76,761
Preferred stock dividends	3,456		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 share	1.55		2.18

See accompanying notes to the unaudited consolidated financial statements.

Table of ~~Conte~~n tContents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED

(amounts in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

Net income	Net income	$	63,912	$	116,042	$	199,323	$	213,978	Net income	$	53,721	$	76,761
Unrealized gains (losses) on available for sale debt securities:	Unrealized gains (losses) on available for sale debt securities:									Unrealized gains (losses) on available for sale debt securities:
Unrealized gains (losses) arising during the period	Unrealized gains (losses) arising during the period	(46,450)		958		(213,532)		1,950		Unrealized gains (losses) arising during the period	8,270		(78,858)
Income tax effect	Income tax effect	12,077		(249)		55,518		(507)		Income tax effect	(2,101)		20,503
Reclassification adjustments for (gains) losses included in net income	Reclassification adjustments for (gains) losses included in net income	4,227		(6,063)		9,281		(31,441)		Reclassification adjustments for (gains) losses included in net income	—		1,063
Income tax effect	Income tax effect	(1,099)		1,576		(2,413)		8,174		Income tax effect	—		(276)
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity										Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity	872		—
Income tax effect										Income tax effect	(221)		—
Net unrealized gains (losses) on available for sale debt securities	Net unrealized gains (losses) on available for sale debt securities	(31,245)		(3,778)		(151,146)		(21,824)		Net unrealized gains (losses) on available for sale debt securities	6,820		(57,568)
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period		—		—		—		12,321
Income tax effect		—		—		—		(3,204)
Reclassification adjustment for (gains) losses included in net income		—		—		—		26,972
Income tax effect		—		—		—		(7,013)
Net unrealized gains (losses) on cash flow hedges		—		—		—		29,076

Other comprehensive income (loss), net of income tax effect	Other comprehensive income (loss), net of income tax effect	(31,245)		(3,778)		(151,146)		7,252		Other comprehensive income (loss), net of income tax effect	6,820		(57,568)
Comprehensive income (loss)	Comprehensive income (loss)	$	32,667	$	112,264	$	48,177	$	221,230	Comprehensive income (loss)	$	60,541	$	19,193

See accompanying notes to the unaudited consolidated financial statements.

Table of ~~Conte~~n tContents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

(amounts in thousands, except shares outstanding data)


		Three Months Ended September 30, 2022																	Three Months Ended March 31, 2023
		Preferred Stock			Common Stock														Preferred Stock			Common Stock
		Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total			Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, June 30, 2022		5,700,000	$	137,794	32,449,486	$	34,922	$	545,670	$	837,147	$	(124,881)	$	(77,262)	$	1,353,390
Balance, December 31, 2022																		Balance, December 31, 2022	5,700,000	$	137,794	32,373,697	$	35,012	$	551,721	$	924,134	$	(163,096)	$	(82,604)	$	1,402,961

Net income	Net income	—	—		—	—		—		63,912		—		—		63,912		Net income	—	—		—	—		—		53,721		—		—		53,721

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—		—		—		(31,245)		—		(31,245)		Other comprehensive income (loss)	—	—		—	—		—		—		6,820		—		6,820

Preferred stock dividends (1)	Preferred stock dividends (1)	—	—		—	—		—		(2,548)		—		—		(2,548)		Preferred stock dividends (1)	—	—		—	—		—		(3,456)		—		—		(3,456)

Share-based compensation expense	Share-based compensation expense	—	—		—	—		3,336		—		—		—		3,336		Share-based compensation expense	—	—		—	—		2,980		—		—		—		2,980

Issuance of common stock under share-based compensation arrangements	Issuance of common stock under share-based compensation arrangements	—	—		26,016	26		60		—		—		—		86		Issuance of common stock under share-based compensation arrangements	—	—		245,936	246		(2,446)		—		—		—		(2,200)

Balance, September 30, 2022		5,700,000	$	137,794	32,475,502	$	34,948	$	549,066	$	898,511	$	(156,126)	$	(77,262)	$	1,386,931
Repurchase of common shares																		Repurchase of common shares	—	—		(1,379,883)	—		—		—		—		(39,806)		(39,806)
Balance, March 31, 2023																		Balance, March 31, 2023	5,700,000	$	137,794	31,239,750	$	35,258	$	552,255	$	974,399	$	(156,276)	$	(122,410)	$	1,421,020

		Three Months Ended September 30, 2021																	Three Months Ended March 31, 2022
		Preferred Stock			Common Stock														Preferred Stock			Common Stock
		Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total			Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, June 30, 2021		9,000,000	$	217,471	32,353,256	$	33,634	$	519,294	$	496,844	$	5,266	$	(21,780)	$	1,250,729
Balance, December 31, 2021																		Balance, December 31, 2021	5,700,000	$	137,794	32,913,267	$	34,722	$	542,391	$	705,732	$	(4,980)	$	(49,442)	$	1,366,217

Net income	Net income	—	—		—	—		—		116,042		—		—		116,042		Net income	—	—		—	—		—		76,761		—		—		76,761

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—		—		—		(3,778)		—		(3,778)		Other comprehensive income (loss)	—	—		—	—		—		—		(57,568)		—		(57,568)

Preferred stock dividends (1)	Preferred stock dividends (1)	—	—		—	—		—		(2,981)		—		—		(2,981)		Preferred stock dividends (1)	—	—		—	—		—		(1,865)		—		—		(1,865)
Redemption of preferred stock (2)		(3,300,000)	(79,677)		—	—		—		—		—		—		(79,677)
Loss on redemption of preferred stock (2)		—	—		—	—		—		(2,820)		—		—		(2,820)

Share-based compensation expense	Share-based compensation expense	—	—		—	—		3,289		—		—		—		3,289		Share-based compensation expense	—	—		—	—		3,703		—		—		—		3,703

Issuance of common stock under share-based compensation arrangements	Issuance of common stock under share-based compensation arrangements	—	—		184,720	184		3,311		—		—		—		3,495		Issuance of common stock under share-based compensation arrangements	—	—		159,904	160		(3,692)		—		—		—		(3,532)

Balance, September 30, 2021		5,700,000	$	137,794	32,537,976	$	33,818	$	525,894	$	607,085	$	1,488	$	(21,780)	$	1,284,299
Repurchase of common shares																		Repurchase of common shares	—	—		(115,324)	—		—		—		—		(6,310)		(6,310)
Balance, March 31, 2022																		Balance, March 31, 2022	5,700,000	$	137,794	32,957,847	$	34,882	$	542,402	$	780,628	$	(62,548)	$	(55,752)	$	1,377,406

(1)Dividends per share of ~~$0.445233~~$0.619313 and ~~$0.421083~~$0.595688 were declared on Series E and F preferred stock, respectively, for the three months ended ~~September 30, 2022.~~March 31, 2023. Dividends per share of ~~$0.346206, $0.332790, $0.335984,~~$0.333922 and ~~$0.375 were declared on Series C, D, E, and F preferred stock, respectively, for the three months ended September 30, 2021.~~

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

~~Table of Conte~~n ts

Nine Months Ended September 30, 2022
Preferred Stock Common Stock
Shares of Preferred Stock Outstanding Preferred Stock Shares of Common Stock Outstanding Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total
Balance, December 31, 2021 5,700,000 $ 137,794 32,913,267 $ 34,722 $ 542,391 $ 705,732 $ (4,980) $ (49,442) $ 1,366,217
Net income — — — — — 199,323 — — 199,323
Other comprehensive income (loss) — — — — — — (151,146) — (151,146)
Preferred stock dividends (1)
— — — — — (6,544) — — (6,544)
Share-based compensation expense — — — — 10,657 — — — 10,657
Issuance of common stock under share-based compensation arrangements — — 226,380 226 (3,982) — — — (3,756)
Repurchase of common shares — — (664,145) — — — — (27,820) (27,820)
Balance, September 30, 2022 5,700,000 $ 137,794 32,475,502 $ 34,948 $ 549,066 $ 898,511 $ (156,126) $ (77,262) $ 1,386,931
Nine Months Ended September 30, 2021
Preferred Stock Common Stock
Shares of Preferred Stock Outstanding Preferred Stock Shares of Common Stock Outstanding Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total
Balance, December 31, 2020 9,000,000 $ 217,471 31,705,088 $ 32,986 $ 455,592 $ 438,581 $ (5,764) $ (21,780) $ 1,117,086
Net income — — — — — 213,978 — — 213,978
Other comprehensive income (loss) — — — — — — 7,252 — 7,252
Preferred stock dividends (1)
— — — — — (9,671) — — (9,671)
Redemption of preferred stock (2)
(3,300,000) (79,677) — — — — — — (79,677)
Loss on redemption of preferred stock (2)
— — — — — (2,820) — — (2,820)
Sale of non-controlling interest in BMT (3)
— — — — 31,893 — — — 31,893
Distribution of investment in BM Technologies (4)
— — — — — (32,983) — — (32,983)
Restricted stock awards to certain BMT team members (5)
— — — — 19,592 — — — 19,592
Share-based compensation expense — — — — 11,162 — — — 11,162
Issuance of common stock under share-based compensation arrangements — — 832,888 832 7,655 — — — 8,487
Balance, September 30, 2021 5,700,000 $ 137,794 32,537,976 $ 33,818 $ 525,894 $ 607,085 $ 1,488 $ (21,780) $ 1,284,299

~~(1)Dividends per share of $1.160316 and $1.088391~~$0.310297 were declared on Series E and F preferred stock, respectively, for the ~~nine~~three months ended ~~September 30,~~March 31, 2022. ~~Dividends per share of $1.041346, $1.075982, $1.142234, and $1.125 were declared on Series C, D, E, and F preferred stock, respectively, for the nine months ended September 30, 2021.~~

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

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

~~(4)~~Immediately after the closing of the BMT divestiture, Customers distributed all of its remaining investment in BM Technologies' common stock to its shareholders as special dividends, equivalent to 0.15389 of BM Technologies common stock for each share of Customers common stock. Refer to NOTE 3 – DISCONTINUED OPERATIONS.

~~(5)At the closing of the BMT divestiture, certain team members of BMT received restricted stock awards in BM Technologies' common stock. Refer to NOTE 3 – DISCONTINUED OPERATIONS.~~

See accompanying notes to the unaudited consolidated financial statements.

108

Table of ~~Conte~~n tContents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(amounts in thousands)


	Three Months Ended March 31,
	2023		2022
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 losses	19,603		15,997
Depreciation and amortization	8,833		6,055

Share-based compensation expense	3,005		3,718
Deferred taxes	18,656		(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 leases	109		—
Unrealized (gain) loss on derivatives	52		(964)


Settlement of terminated fair value hedge derivatives	4,630		—


(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 sale	106,146		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 liabilities	18,064		(6,440)
Net Cash Provided By (Used In) Operating Activities	17,538		116,940
Cash Flows from Investing Activities
Proceeds from maturities, calls and principal repayments of investment securities available for sale	69,648		224,809
Proceeds from maturities, calls and principal repayments of investment securities held to maturity	44,213		—

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 loans	4,794,683		8,475,173
Net (increase) decrease in loans and leases, excluding mortgage warehouse loans	736,616		159,706
Proceeds from sales of loans and leases	—		14,281
Purchases of loans	(12,550)		(206,330)

Proceeds from bank-owned life insurance	727		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 leases	113		—
Purchases of leased assets under lessor operating leases	(2,076)		(2,930)
Net Cash Provided By (Used In) Investing Activities	804,645		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 FRB	2,565,000		—
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 stock	55		208

Net Cash Provided By (Used In) Financing Activities	768,696		(449,044)






Net Increase (Decrease) in Cash and Cash Equivalents	1,590,879		(243,432)
Cash and Cash Equivalents – Beginning	455,806		518,032
Cash and Cash Equivalents – Ending	$	2,046,685	$	274,600

	(continued)

	Three Months Ended March 31,
	2023		2022






Non-cash Investing and Financing Activities:



Transfer of loans held for investment to held for sale	$	16,000	$	—

Nine Months Ended
September 30,
2022 2021
Cash Flows from Operating Activities
Net income from continuing operations $ 199,323 $ 252,014
Adjustments to reconcile net income to net cash provided by (used in) continuing operating activities
Provision (benefit) for credit losses 31,850 13,536
Depreciation and amortization 20,027 16,221
Share-based compensation expense 10,702 11,194
Deferred taxes (436) 7,051
Net amortization (accretion) of investment securities premiums and discounts 2,139 1,171
Unrealized (gain) loss on investment securities 738 (2,720)
(Gain) loss on sale of investment securities 6,227 (31,441)
Loss on sale of foreign subsidiaries — 2,840
Impairment loss on fixed assets and leases 1,362 —
Unrealized (gain) loss on derivatives (2,348) (2,622)
Loss on cash flow hedge derivative terminations — 24,467
Settlement of terminated cash flow hedge derivatives — (27,156)
(Gain) loss on sale of leased assets under lessor operating leases 350 763
Fair value adjustment on loans held for sale — (1,115)
(Gain) loss on sale of loans (4,149) (10,067)
Loss on sale of consumer installment loans 23,465 —
Origination of loans held for sale (28,077) (55,093)
Proceeds from the sale of loans held for sale 44,209 49,674
Amortization (accretion) of loan net deferred fees, discounts and premiums (49,601) (149,647)
Earnings on investment in bank-owned life insurance (13,722) (6,432)
(Increase) decrease in accrued interest receivable and other assets 16,883 45,591
Increase (decrease) in accrued interest payable and other liabilities 16,080 136,295
Net Cash Provided By (Used In) Continuing Operating Activities 275,022 274,524
Cash Flows from Investing Activities
Proceeds from maturities, calls and principal repayments of investment securities available for sale 408,046 258,418
Proceeds from maturities, calls and principal repayments of investment securities held to maturity 13,631 —
Proceed from sales of foreign subsidiaries — 3,765
Proceeds from sales of investment securities available for sale 681,633 666,023
Purchases of investment securities available for sale (929,754) (1,423,959)
Origination of mortgage warehouse loans (23,568,943) (44,292,416)
Proceeds from repayments of mortgage warehouse loans 24,247,843 45,356,500
Net (increase) decrease in loans and leases, excluding mortgage warehouse loans (1,639,900) 521,323
Proceeds from sales of loans and leases 136,920 260,851
Purchase of loans (368,776) (1,389,512)
Purchases of bank-owned life insurance — (46,462)
Proceeds from bank-owned life insurance 11,807 1,999
Net (purchases of) proceeds from sale of FHLB, Federal Reserve Bank, and other restricted stock 6,880 14,184
Purchases of bank premises and equipment (587) (418)
Proceeds from sales of other real estate owned — 45
Proceeds from sales of leased assets under lessor operating leases 2,889 5,475
Purchases of leased assets under lessor operating leases (86,797) (16,691)
Net Cash Provided By (Used In) Continuing Investing Activities $ (1,085,108) $ (80,875)
(continued)
Nine Months Ended
September 30,
2022 2021
Cash Flows from Financing Activities
Net increase (decrease) in deposits $ 744,514 $ 5,661,096
Net increase (decrease) in short-term borrowed funds from the FHLB (700,000) (850,000)
Net increase (decrease) in federal funds purchased 290,000 (250,000)
Net increase (decrease) in borrowed funds from FRB PPP liquidity facility — (4,415,016)
Proceeds from long-term borrowed funds from the FHLB 500,000 —
Proceeds from issuance of other long-term borrowings — 98,799
Repayments of other borrowings (100,000) —
Redemption of preferred stock — (82,497)
Preferred stock dividends paid (6,374) (8,794)
Purchase of treasury stock (27,820) —
Payments of employee taxes withheld from share-based awards (4,248) (4,201)
Proceeds from issuance of common stock 447 11,660
Proceeds from sale of non-controlling interest in BMT — 26,795
Net Cash Provided By (Used In) Continuing Financing Activities 696,519 187,842
Net Increase (Decrease) in Cash and Cash Equivalents From Continuing Operations (113,567) 381,491
Discontinued Operations:
Net Cash Used In Operating Activities — (22,791)
Net Increase (Decrease) in Cash and Cash Equivalents From Discontinued Operations — (22,791)
Net Increase (Decrease) in Cash and Cash Equivalents (113,567) 358,700
Cash and Cash Equivalents – Beginning 518,032 693,354
Cash and Cash Equivalents – Ending $ 404,465 $ 1,052,054
Non-cash Investing and Financing Activities:
Transfer of investment securities available for sale to held to maturity $ 500,174 $ —
Purchases of investment securities held to maturity upon sale of consumer installment loans 400,001 —
Distribution of investment in BM Technologies common stock — 32,983
Transfer of loans held for investment to held for sale 4,108 17,155
Transfer of loans held for sale to held for investment — 55,684
Unsettled purchases of investment securities — 160,000

See accompanying notes to the unaudited consolidated financial statements.

119

Table of ~~Conte~~n tContents

CUSTOMERS BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF THE BUSINESS

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

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

The Bank is subject to regulation of the Pennsylvania Department of Banking and Securities and the Federal Reserve Bank and is periodically examined by those regulatory authorities.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation

The interim unaudited consolidated financial statements have been prepared in conformity with U.S. GAAP and pursuant to the rules and regulations of the SEC. These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the financial position and the results of operations and cash flows of Customers Bancorp and subsidiaries for the interim periods presented. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted from these interim unaudited consolidated financial statements as permitted by SEC rules and regulations. The December 31, ~~2021~~2022 consolidated balance sheet presented in this report has been derived from Customers Bancorp’s audited ~~2021~~2022 consolidated financial statements. Management believes that the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for the periods presented. These interim unaudited consolidated financial statements should be read in conjunction with the ~~2021~~2022 consolidated financial statements of Customers Bancorp and subsidiaries included in Customers' Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC on February 28, ~~2022~~2023 (the ~~"2021~~"2022 Form 10-K"). The ~~2021~~2022 Form 10-K describes Customers Bancorp’s significant accounting policies. There have been no material changes to Customers Bancorp's significant accounting policies noted above for the three ~~and nine~~ months ended ~~September 30, 2022.~~

Customers Bancorp completed the divestiture of BankMobile Technologies, Inc., the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC on January 4, 2021. Following the completion of the divestiture of BMT, BankMobile's serviced deposits and loans and the related net interest income have been combined with Customers’ financial condition and the results of operations as a single reportable segment. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation. See NOTE 3 – DISCONTINUED OPERATIONS for additional information.March 31, 2023.

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.

1210

Table of ~~Conte~~n tContents

Accounting Standards Adopted in 2022

Standard

Summary of Guidance

Effects on Financial Statements

ASU 2022-06,

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

Issued December 2022

• Defers the sunset date of ASC 848 that provides optional guidance for a limited period of time to ease the potential burden in accounting for (or derecognizing the effects of) reference rate reform on financial reporting. Specifically, ASC 848 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. These relate only to those contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition, including derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

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

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

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

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

• 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 Standards Adopted in 2023

Standard

Summary of Guidance

Effects on Financial Statements

~~SEC Staff Accounting Bulletin ("SAB") No. 121,~~ ~~Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users~~

~~Issued March 2022~~

• Provides interpretive guidance regarding the staff's views on how an entity that has an obligation to safeguard crypto-assets for another party should account for that obligation. An entity with a safeguarding obligation under SAB 121 recognizes a safeguarding liability with an accompanying safeguarding asset, measured at the fair value of the safeguarded crypto-asset.
• The guidance also requires additional disclosures related to the nature and amount of crypto-assets the entity is responsible for holding for its customers and disclosure of the potential impact of the destruction, loss, theft, or compromise or unavailability of the cryptographic key information.
• Effective for the first interim or annual period ending after June 15, 2022, with retrospective application as of the beginning of the fiscal year to which the interim or annual period relates.

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

~~Accounting Standards Issued But Not Yet Adopted~~

~~Standard~~

~~Summary of Guidance~~

~~Effects on Financial Statements~~

ASU 2022-02,

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

Issued March 2022

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

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

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

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

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

• Customers expects this guidance will result in additional disclosures related to gross write-offs by vintage year and expansive disclosures for certain loan modifications to borrowers experiencing financial difficulty.
• Customers will adoptadopted this guidance on January 1, ~~2023.~~2023 using a modified retrospective transition method for TDR recognition and measurement.

• This guidance isdid not ~~expected to~~ have a material impact on ~~its~~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.

Table of Contents

Accounting Standards Issued But Not Yet Adopted

Standard

Summary of Guidance

Effects on Financial Statements

ASU 2022-03,

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

Issued June 2022

• Clarifies that a contractual restriction on the sale of

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

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

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

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

fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

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

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

• Provides an election to account for tax equity investments, regardless of the tax credit program, using the proportional amortization method provided that certain conditions are met.

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

fiscal years. Early adoption is permitted for any interim period, as of the beginning of the fiscal year that includes that interim period.

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

~~Table of Conte~~n ts

NOTE 3 ~~– DISCONTINUED OPERATIONS~~

On January 4, 2021, Customers Bancorp completed the divestiture of BMT, the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC. Following the completion of the divestiture of BMT, BankMobile's serviced deposits and loans and the related net interest income have been combined with Customers' financial condition and the results of operations as a single reportable segment.

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

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

BMT's historical financial results for periods prior to the divestiture are reflected in Customers Bancorp’s consolidated financial statements as discontinued operations. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation.

~~The following summarized financial information related to BMT has been segregated from continuing operations and reported as discontinued operations for the periods presented.~~
Three Months Ended
September 30, Nine Months Ended
September 30,
(amounts in thousands) 2022 2021 2022 2021
Discontinued operations:
Non-interest income $ — $ — $ — $ —
Non-interest expense — — — 20,354
Loss from discontinued operations before income taxes — — — (20,354)
Income tax expense (benefit) — — — 17,682
Net loss from discontinued operations $ — $ — $ — $ (38,036)

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

~~Table of Conte~~n ts

~~NOTE 4~~ — EARNINGS (LOSS) PER SHARE

The following are the components and results of Customers' earnings ~~(loss)~~ per common share calculations for the periods presented.
Three Months Ended
September 30, Nine Months Ended
September 30,
(amounts in thousands, except share and per share data) 2022 2021 2022 2021
Net income from continuing operations available to common shareholders $ 61,364 $ 110,241 $ 192,779 $ 239,523
Net loss from discontinued operations — — — (38,036)
Net income available to common shareholders $ 61,364 $ 110,241 $ 192,779 $ 201,487
Weighted-average number of common shares outstanding – basic 32,455,814 32,449,853 32,706,652 32,206,547
Share-based compensation plans 770,793 1,418,700 1,000,212 1,281,125
Weighted-average number of common shares – diluted 33,226,607 33,868,553 33,706,864 33,487,672
Basic earnings (loss) per common share from continuing operations $ 1.89 $ 3.40 $ 5.89 $ 7.44
Basic earnings (loss) per common share from discontinued operations — — — (1.18)
Basic earnings (loss) per common share 1.89 3.40 5.89 6.26
Diluted earnings (loss) per common share from continuing operations $ 1.85 $ 3.25 $ 5.72 $ 7.15
Diluted earnings (loss) per common share from discontinued operations — — — (1.13)
Diluted earnings (loss) per common share 1.85 3.25 5.72 6.02


	Three Months Ended March 31,
(amounts in thousands, except share and per share data)	2023		2022


Net income available to common shareholders	$	50,265	$	74,896

Weighted-average number of common shares outstanding – basic	31,819,203		32,957,033
Share-based compensation plans	525,814		1,370,032

Weighted-average number of common shares – diluted	32,345,017		34,327,065



Basic earnings per common share	$	1.58	$	2.27



Diluted earnings per common share	1.55		2.18

The following are securities that could potentially dilute basic earnings per common share in future periods that were not included in the computation of diluted earnings per common share because either the performance conditions for certain of the share-based compensation awards have not been met or to do so would have been anti-dilutive for the periods presented.


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
		2022	2021	2022	2021		2023	2022
Anti-dilutive securities:	Anti-dilutive securities:					Anti-dilutive securities:
Share-based compensation awards	Share-based compensation awards	730,486	710,000	100,707	711,000	Share-based compensation awards	850,725	—

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NOTE 54 — CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT

The following tables present the changes in accumulated other comprehensive income (loss) by component for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Amounts in parentheses indicate reductions to AOCI.
Three Months Ended September 30, 2022
(amounts in thousands)
Unrealized Gains (Losses) on Available for Sale Securities (1)
Unrealized Gains (Losses) on Cash Flow Hedges (2)
Total
Balance - June 30, 2022 $ (124,881) $ — $ (124,881)
Unrealized gains (losses) arising during period, before tax (46,450) — (46,450)
Income tax effect 12,077 — 12,077
Other comprehensive income (loss) before reclassifications (34,373) — (34,373)
Reclassification adjustments for (gains) losses included in net income, before tax 4,227 — 4,227
Income tax effect (1,099) — (1,099)
Amounts reclassified from accumulated other comprehensive income (loss) to net income 3,128 — 3,128
Net current-period other comprehensive income (loss) (31,245) — (31,245)
Balance - September 30, 2022 $ (156,126) $ — $ (156,126)


	Three Months Ended March 31, 2023
(amounts in thousands)	Unrealized Gains (Losses) on Available for Sale Securities (1)
Balance - December 31, 2022	$	(163,096)



Unrealized gains (losses) arising during period, before tax	8,270
Income tax effect	(2,101)
Other comprehensive income (loss) before reclassifications	6,169
Reclassification adjustments for (gains) losses included in net income, before tax	—
Income tax effect	—
Amounts reclassified from accumulated other comprehensive income (loss) to net income	—
Amortization of unrealized loss on securities transferred from available for sale to held to maturity	872
Income tax effect	(221)
Amortization of unrealized loss on securities transferred from available for sale to held to maturity	651
Net current-period other comprehensive income (loss)	6,820
Balance - March 31, 2023	$	(156,276)

Three Months Ended September 30, 2021
(amounts in thousands)
Unrealized Gains (Losses) on Available for Sale Securities (1)
Unrealized Gains (Losses) on Cash Flow Hedges (2)
Total
Balance - June 30, 2021 $ 5,266 $ — $ 5,266
Unrealized gains (losses) arising during period, before tax 958 — 958
Income tax effect (249) — (249)
Other comprehensive income (loss) before reclassifications 709 — 709
Reclassification adjustments for (gains) losses included in net income, before tax (6,063) — (6,063)
Income tax effect 1,576 — 1,576
Amounts reclassified from accumulated other comprehensive income (loss) to net income (4,487) — (4,487)
Net current-period other comprehensive income (loss) (3,778) — (3,778)
Balance - September 30, 2021 $ 1,488 $ — $ 1,488


	Three Months Ended March 31, 2022

(amounts in 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 effect		20,503
Other comprehensive income (loss) before reclassifications		(58,355)
Reclassification adjustments for (gains) losses included in net income, before tax		1,063
Income tax effect		(276)
Amounts reclassified from accumulated other comprehensive income (loss) to net income		787
Amortization of unrealized loss on securities transferred from available for sale to held to maturity		—
Income tax effect		—
Amortization of unrealized loss on securities transferred from available for sale to held to maturity		—
Net current-period other comprehensive income (loss)		(57,568)
Balance - March 31, 2022		$	(62,548)

Nine Months Ended September 30, 2022
(amounts in thousands)
Unrealized Gains (Losses) Available for Sale Securities (1)
Unrealized
Gains (Losses) on Cash Flow Hedges (2)
Total
Balance - December 31, 2021 $ (4,980) $ — $ (4,980)
Unrealized gains (losses) arising during period, before tax (213,532) — (213,532)
Income tax effect 55,518 — 55,518
Other comprehensive income (loss) before reclassifications (158,014) — (158,014)
Reclassification adjustments for (gains) losses included in net income, before tax 9,281 — 9,281
Income tax effect (2,413) — (2,413)
Amounts reclassified from accumulated other comprehensive income (loss) to net income 6,868 — 6,868
Net current-period other comprehensive income (loss) (151,146) — (151,146)
Balance - September 30, 2022 $ (156,126) $ — $ (156,126)

~~Table of Conte~~n ts

Nine Months Ended September 30, 2021
(amounts in thousands)
Unrealized Gains (Losses) on Available for Sale Securities (1)
Unrealized
Gains (Losses) on Cash Flow Hedges (2)
Total
Balance - December 31, 2020 $ 23,312 $ (29,076) $ (5,764)
Unrealized gains (losses) arising during period, before tax 1,950 12,321 14,271
Income tax effect (507) (3,204) (3,711)
Other comprehensive income (loss) before reclassifications 1,443 9,117 10,560
Reclassification adjustments for (gains) losses included in net income, before tax (31,441) 26,972 (4,469)
Income tax effect 8,174 (7,013) 1,161
Amounts reclassified from accumulated other comprehensive income (loss) to net income (23,267) 19,959 (3,308)
Net current-period other comprehensive income (21,824) 29,076 7,252
Balance - September 30, 2021 $ 1,488 $ — $ 1,488

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

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

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NOTE 65 — INVESTMENT SECURITIES

Investment securities at fair value

The amortized cost, approximate fair value and allowance for credit losses of investment securities at fair value as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are summarized as follows:


		September 30, 2022 (1)											March 31, 2023 (1)
(amounts in thousands)	(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale debt securities:	Available for sale debt securities:											Available for sale debt securities:
Asset-backed securities	Asset-backed securities	$	200,171	$	(253)	$	—	$	(6,657)	$	193,261	Asset-backed securities	$	154,151	$	(790)	$	—	$	(5,426)	$	147,935

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	152,008		—		—		(13,786)		138,222		Agency-guaranteed residential collateralized mortgage obligations	143,717		—		—		(9,964)		133,753

Collateralized loan obligations	Collateralized loan obligations	855,959		—		10		(28,156)		827,813		Collateralized loan obligations	875,303		—		285		(21,488)		854,100
Commercial mortgage-backed securities	Commercial mortgage-backed securities	138,972		—		—		(4,129)		134,843		Commercial mortgage-backed securities	142,050		—		4		(5,236)		136,818
Corporate notes	Corporate notes	587,987		—		23		(55,355)		532,655		Corporate notes	642,859		(1,383)		379		(55,060)		586,795
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	1,141,340		—		—		(56,655)		1,084,685		Private label collateralized mortgage obligations	1,111,256		—		951		(71,349)		1,040,858
State and political subdivision debt securities (2)		8,523		—				(1,172)		7,351

Available for sale debt securities	Available for sale debt securities	$	3,084,960	$	(253)	$	33	$	(165,910)	2,918,830		Available for sale debt securities	$	3,069,336	$	(2,173)	$	1,619	$	(168,523)	2,900,259

Equity securities ~~(3)~~(2)	Equity securities ~~(3)~~(2)									24,864		Equity securities ~~(3)~~(2)									26,710
Total investment securities, at fair value	Total investment securities, at fair value									$	2,943,694	Total investment securities, at fair value									$	2,926,969

December 31, 2021 (1)
(amounts in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Available for sale debt securities:
Asset-backed securities $ 297,291 $ 253 $ (119) $ 297,425
Agency-guaranteed residential mortgage-backed securities 9,865 — (312) 9,553
Agency-guaranteed commercial mortgage-backed securities 2,162 — (10) 2,152
Agency-guaranteed residential collateralized mortgage obligations 199,091 154 (2,315) 196,930
Agency-guaranteed commercial collateralized mortgage obligations 242,668 53 (3,877) 238,844
Collateralized loan obligations 1,067,770 247 (1,215) 1,066,802
Commercial mortgage-backed securities 149,054 53 (180) 148,927
Corporate notes 575,273 6,334 (1,561) 580,046
Private label collateralized mortgage obligations 1,248,142 333 (6,010) 1,242,465
State and political subdivision debt securities (2)
8,535 — (104) 8,431
Available for sale debt securities $ 3,799,851 $ 7,427 $ (15,703) 3,791,575
Equity securities (3)
25,575
Total investment securities, at fair value $ 3,817,150


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



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

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

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

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

(1)Accrued interest on AFS debt securities totaled ~~$15.0~~$19.6 million and ~~$11.0~~$16.7 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

(2)~~Includes both taxable and non-taxable municipal securities.~~

~~(3)~~Includes perpetual preferred stock issued by domestic banks and domestic bank holding companies and equity securities issued by fintech companies, without a readily determinable fair value, and CRA-qualified mutual fund shares at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~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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In June 2021, Customers sold all of the outstanding shares in CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which held the equity securities issued by a foreign entity, for $3.8 million, and recognized $2.8 million in loss on sale of foreign subsidiaries within non-interest income on the consolidated statement of income. During the nine months ended September 30, 2021, Customers recognized unrealized gains of $2.7 million on its equity securities issued by a foreign entity that were held by CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., prior to the sale of these foreign subsidiaries. These unrealized gains and losses were reported as unrealized gain (loss) on investment securities within non-interest income on the consolidated statements of income.

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

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 ~~$126.6 million and $681.6~~$156.0 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively. Proceeds from the sale of AFS debt securities were $258.4 million and $666.0 million for the three and nine months ended September 30, 2021, respectively.~~March 31, 2022. The following table presents gross realized gains and realized losses from the sale of AFS debt securities for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~

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


	Three Months Ended March 31,
(amounts in thousands)	2023		2022
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 within non-interest income on the consolidated statements of income.

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


		September 30, 2022					March 31, 2023
(amounts in thousands)	(amounts in thousands)	Amortized Cost		Fair Value		(amounts in thousands)	Amortized Cost		Fair Value
Due in one year or less	Due in one year or less	$	—	$	—	Due in one year or less	$	7,500	$	7,500
Due after one year through five years	Due after one year through five years	463,431		421,935		Due after one year through five years	506,934		469,143
Due after five years through ten years	Due after five years through ten years	133,079		118,071		Due after five years through ten years	128,425		110,152

Asset-backed securities	Asset-backed securities	200,171		193,261		Asset-backed securities	154,151		147,935
Agency-guaranteed residential collateralized mortgage obligations						Agency-guaranteed residential collateralized mortgage obligations	143,717		133,753
Collateralized loan obligations	Collateralized loan obligations	855,959		827,813		Collateralized loan obligations	875,303		854,100
Commercial mortgage-backed securities	Commercial mortgage-backed securities	138,972		134,843		Commercial mortgage-backed securities	142,050		136,818

Agency-guaranteed residential collateralized mortgage obligations		152,008		138,222

Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	1,141,340		1,084,685		Private label collateralized mortgage obligations	1,111,256		1,040,858

Total available for sale debt securities	Total available for sale debt securities	$	3,084,960	$	2,918,830	Total available for sale debt securities	$	3,069,336	$	2,900,259

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Gross unrealized losses and fair value of Customers' AFS debt securities for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		September 30, 2022													March 31, 2023
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
(amounts in thousands)	(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale debt securities:	Available for sale debt securities:													Available for sale debt securities:
Asset-backed securities	Asset-backed securities	$	186,085	$	(5,811)	$	11,154	$	(846)	$	197,239	$	(6,657)	Asset-backed securities	$	21,902	$	(46)	$	99,525	$	(3,968)	$	121,427	$	(4,014)

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	138,222		(13,786)		—		—		138,222		(13,786)		Agency-guaranteed residential collateralized mortgage obligations	—		—		133,753		(9,964)		133,753		(9,964)

Collateralized loan obligations	Collateralized loan obligations	787,365		(27,078)		35,670		(1,078)		823,035		(28,156)		Collateralized loan obligations	209,389		(3,648)		582,070		(17,840)		791,459		(21,488)
Commercial mortgage-backed securities	Commercial mortgage-backed securities	130,010		(4,027)		4,847		(102)		134,857		(4,129)		Commercial mortgage-backed securities	17,742		(520)		115,676		(4,716)		133,418		(5,236)
Corporate notes	Corporate notes	454,386		(49,635)		55,850		(5,720)		510,236		(55,355)		Corporate notes	152,391		(8,607)		341,401		(42,169)		493,792		(50,776)
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	720,076		(45,150)		129,973		(11,505)		850,049		(56,655)		Private label collateralized mortgage obligations	288,509		(15,128)		563,437		(56,221)		851,946		(71,349)
State and political subdivision debt securities		—		—		7,351		(1,172)		7,351		(1,172)

Total	Total	$	2,416,144	$	(145,487)	$	244,845	$	(20,423)	$	2,660,989	$	(165,910)	Total	$	689,933	$	(27,949)	$	1,835,862	$	(134,878)	$	2,525,795	$	(162,827)


		December 31, 2021													December 31, 2022
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
(amounts in thousands)	(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale debt securities:	Available for sale debt securities:													Available for sale debt securities:
Asset-backed securities	Asset-backed securities	$	54,753	$	(119)	$	—	$	—	$	54,753	$	(119)	Asset-backed securities	$	160,542	$	(8,050)	$	—	$	—	$	160,542	$	(8,050)
Agency-guaranteed residential mortgage-backed securities		9,554		(312)		—		—		9,554		(312)
Agency-guaranteed commercial mortgage-backed securities		2,152		(10)		—		—		2,152		(10)

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	173,492		(2,315)		—		—		173,492		(2,315)		Agency-guaranteed residential collateralized mortgage obligations	133,864		(13,617)		—		—		133,864		(13,617)
Agency-guaranteed commercial collateralized mortgage obligations		118,334		(3,877)		—		—		118,334		(3,877)

Collateralized loan obligations	Collateralized loan obligations	715,250		(1,215)		—		—		715,250		(1,215)		Collateralized loan obligations	386,701		(13,516)		315,270		(10,826)		701,971		(24,342)
Commercial mortgage-backed securities	Commercial mortgage-backed securities	122,597		(180)		—		—		122,597		(180)		Commercial mortgage-backed securities	39,828		(1,410)		93,005		(4,456)		132,833		(5,866)
Corporate notes	Corporate notes	188,100		(1,561)		—		—		188,100		(1,561)		Corporate notes	386,464		(36,119)		178,955		(25,759)		565,419		(61,878)
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	632,091		(5,874)		6,818		(136)		638,909		(6,010)		Private label collateralized mortgage obligations	478,096		(29,364)		314,332		(34,266)		792,428		(63,630)
State and political subdivision debt securities		8,430		(104)		—		—		8,430		(104)

Total	Total	$	2,024,753	$	(15,567)	$	6,818	$	(136)	$	2,031,571	$	(15,703)	Total	$	1,585,495	$	(102,076)	$	901,562	$	(75,307)	$	2,487,057	$	(177,383)

At ~~September 30, 2022,~~March 31, 2023, there were ~~128~~50 AFS debt securities with unrealized losses in the less-than-twelve-months category and 19112 AFS debt securities with unrealized losses in the twelve-months-or-more category. Except 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 were principally due to changes in market interest rates that resulted in a negative impact on the respective securities' fair value and are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell any of the ~~147~~162 securities, and it is not more likely than not that Customers will be required to sell any of the ~~147~~162 securities before recovery of the amortized cost basis. At December 31, ~~2021,~~2022, there were ~~117~~156 AFS debt securities in an unrealized loss position.

~~Table of Conte~~n ts

Customers recorded an allowance for credit losses on four asset-backed securities and six corporate notes where there was a deterioration in future estimated cash flows during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and on four asset-backed securities during the three months ended March 31, 2022. A discounted cash flow approach is used to determine the amount of the allowance. The cash flows expected to be collected, after considering expected prepayments, are discounted at the original effective interest rate. The amount of the allowance is limited to the difference between the amortized cost basis of the security and its estimated fair value.

Table of Contents

The following tables present the activity in the allowance for credit losses on AFS debt securities, by major security type, for the periods presented:


	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
(amounts in thousands)	Asset-backed securities		Corporate notes		Total		Asset-backed securities		Corporate notes		Total
Balance at January 1,	$	578	$	—	$	578	$	—	$	—	$	—
Credit losses on securities for which credit losses were not previously recorded	—		1,383		1,383		728		—		728
Credit losses on previously impaired securities	273		—		273		—		—		—
Decrease in allowance for credit losses on previously impaired securities	(61)		—		(61)		—		—		—
Balance at March 31,	$	790	$	1,383	$	2,173	$	728	$	—	$	728

~~Asset-backed securities~~

~~(amounts in thousands)~~

~~Three Months Ended September 30, 2022~~

~~Balance at July 1~~

~~411~~

~~Decrease in allowance for credit losses on previously impaired securities~~

~~(158)~~

~~Balance at September 30~~

~~253~~

~~Asset-backed securities~~

~~(amounts in thousands)~~

~~Nine Months Ended September 30, 2022~~

~~Balance at January 1~~

—

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

~~253~~

~~Balance at September 30~~

~~253~~

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~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 $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 ~~September 30,~~March 31, 2023 and December 31, 2022 are summarized as follows:


		September 30, 2022 (1)													March 31, 2023 (1)
(amounts in thousands)	(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(amounts in thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held to maturity debt securities:	Held to maturity debt securities:													Held to maturity debt securities:
Asset-backed securities	Asset-backed securities	$	400,001	$	—	$	400,001	$	—	$	—	$	400,001	Asset-backed securities	$	322,877	$	—	$	322,877	$	—	$	(3,142)	$	319,735

Agency-guaranteed residential mortgage-backed securities	Agency-guaranteed residential mortgage-backed securities	7,781		—		7,781				(702)		7,079		Agency-guaranteed residential mortgage-backed securities	7,152		—		7,152				(513)		6,639
Agency-guaranteed commercial mortgage-backed securities	Agency-guaranteed commercial mortgage-backed securities	1,947		—		1,947		—		(96)		1,851		Agency-guaranteed commercial mortgage-backed securities	1,909		—		1,909		—		(61)		1,848
Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	209,519		—		209,519		—		(16,681)		192,838		Agency-guaranteed residential collateralized mortgage obligations	201,097		—		201,097		—		(13,136)		187,961
Agency-guaranteed commercial collateralized mortgage obligations	Agency-guaranteed commercial collateralized mortgage obligations	152,794		—		152,794		—		(6,189)		146,605		Agency-guaranteed commercial collateralized mortgage obligations	150,852		—		150,852		—		(7,239)		143,613

Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	114,252		—		114,252		—		(7,889)		106,363		Private label collateralized mortgage obligations	186,407		—		186,407		—		(9,490)		176,917

Total held to maturity debt securities	Total held to maturity debt securities	$	886,294	$	—	$	886,294	$	—	$	(31,557)	$	854,737	Total held to maturity debt securities	$	870,294	$	—	$	870,294	$	—	$	(33,581)	$	836,713

Table of Contents


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

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



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

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

(1)Accrued interest on HTM debt securities totaled ~~$0.8~~$1.5 million and $1.0 million at ~~September 30,~~March 31, 2023 and December 31, 2022, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

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

~~Table of Conte~~n ts

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

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

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


		September 30, 2022					March 31, 2023
(amounts in thousands)	(amounts in thousands)	Amortized Cost		Fair Value		(amounts in thousands)	Amortized Cost		Fair Value

Asset-backed securities	Asset-backed securities	$	400,001	$	400,001	Asset-backed securities	$	322,877	$	319,735

Agency-guaranteed residential mortgage-backed securities	Agency-guaranteed residential mortgage-backed securities	7,781		7,079		Agency-guaranteed residential mortgage-backed securities	7,152		6,639
Agency-guaranteed commercial mortgage-backed securities	Agency-guaranteed commercial mortgage-backed securities	1,947		1,851		Agency-guaranteed commercial mortgage-backed securities	1,909		1,848
Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	209,519		192,838		Agency-guaranteed residential collateralized mortgage obligations	201,097		187,961
Agency-guaranteed commercial collateralized mortgage obligations	Agency-guaranteed commercial collateralized mortgage obligations	152,794		146,605		Agency-guaranteed commercial collateralized mortgage obligations	150,852		143,613
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	114,252		106,363		Private label collateralized mortgage obligations	186,407		176,917
Total held to maturity debt securities	Total held to maturity debt securities	$	886,294	$	854,737	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 ~~September 30,~~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. ~~The~~Most of the private label collateralized mortgage obligations are highly rated and with sufficient overcollateralization, ~~and~~ therefore have zero expected credit losses. Customers recorded no allowance for its investment in the asset-backed ~~securities related to the sale of consumer installment loans to a third-party sponsored VIE on September 30, 2022.~~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 ~~September 30,~~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 ~~September 30,~~March 31, 2023 and December 31, 2022. ~~Customers purchased the~~The asset-backed securities ~~classified as HTM debt securities in connection with the sale of the consumer installment loans to~~and a ~~third-party sponsored VIE on September 30, 2022. These asset-backed securities~~private label collateralized mortgage obligation are not rated by rating agencies. Customers ~~will monitor~~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 ~~asset-backed~~ securities.

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


		September 30, 2022						March 31, 2023
(amounts in thousands)	(amounts in thousands)	AAA		AA		A			BBB		Not Rated		Total		(amounts in thousands)	AAA		AA		A		BBB		Not Rated		Total
Held to maturity debt securities:	Held to maturity debt securities:														Held to maturity debt securities:
Asset-backed securities	Asset-backed securities	$	—	$	—	$	—		$	—	$	400,001	$	400,001	Asset-backed securities	$	—	$	—	$	—	$	—	$	322,877	$	322,877

Agency-guaranteed residential mortgage-backed securities	Agency-guaranteed residential mortgage-backed securities	—		—		—			—		7,781		7,781		Agency-guaranteed residential mortgage-backed securities	—		—		—		—		7,152		7,152
Agency-guaranteed commercial mortgage-backed securities	Agency-guaranteed commercial mortgage-backed securities	—		—		—			—		1,947		1,947		Agency-guaranteed commercial mortgage-backed securities	—		—		—		—		1,909		1,909
Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	—		—		—			—		209,519		209,519		Agency-guaranteed residential collateralized mortgage obligations	—		—		—		—		201,097		201,097
Agency-guaranteed commercial collateralized mortgage obligations	Agency-guaranteed commercial collateralized mortgage obligations	—		—		—			—		152,794		152,794		Agency-guaranteed commercial collateralized mortgage obligations	—		—		—		—		150,852		150,852

Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	63,767		7,077		34,189			9,219		—		114,252		Private label collateralized mortgage obligations	62,327		7,132		34,563		9,256		73,129		186,407

Total held to maturity debt securities	Total held to maturity debt securities	$	63,767	$	7,077	$	34,189		$	9,219	$	772,042	$	886,294	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 ~~September 30,~~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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Customers Bank had pledged HTM investment securities ~~which were transferred from available for sale to held to maturity category in June 2022,~~ aggregating ~~$17.5~~$443.8 million and ~~$11.3~~$16.7 million in fair value, respectively, as collateral primarily for immediate available liquidity from FRB, including the BTFP and unused lines of credit with another financial institution. The ~~counterparty does~~counterparties do not have the ability to sell or repledge these securities.

NOTE 76 – LOANS HELD FOR SALE

The composition of loans held for sale as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was as follows:


(amounts in thousands)	(amounts in thousands)	September 30, 2022		December 31, 2021		(amounts in thousands)	March 31, 2023		December 31, 2022
Commercial loans:	Commercial loans:					Commercial loans:

Multi-family loans, at lower of cost or fair value		$	4,108	$	—
Multifamily loans, at lower of cost or fair value						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 value						Commercial real estate non-owner occupied loans, at lower of cost or fair value	16,000		—
Total commercial loans held for sale	Total commercial loans held for sale	4,108		—		Total commercial loans held for sale	20,051		4,079
Consumer loans:	Consumer loans:					Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value	Home equity conversion mortgages, at lower of cost or fair value	507		507		Home equity conversion mortgages, at lower of cost or fair value	507		507
Residential mortgage loans, at fair value	Residential mortgage loans, at fair value	609		15,747		Residential mortgage loans, at fair value	314		322

Personal installment loans, at lower of cost or fair value						Personal installment loans, at lower of cost or fair value	307,336		133,801
Other installment loans, at lower of cost or fair value						Other installment loans, at lower of cost or fair value	95,849		189,603

Total consumer loans held for sale	Total consumer loans held for sale	1,116		16,254		Total consumer loans held for sale	404,006		324,233
Loans held for sale	Loans held for sale	$	5,224	$	16,254	Loans held for sale	$	424,057	$	328,312

Total loans held for sale as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 included NPLs of ~~$4.6~~$6.0 million and ~~$0.5~~$6.2 million, respectively.

2319

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NOTE 87 — LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

The following table presents loans and leases receivable as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


(amounts in thousands)	(amounts in thousands)	September 30, 2022		December 31, 2021		(amounts in thousands)	March 31, 2023		December 31, 2022
Loans and leases receivable, mortgage warehouse, at fair value	Loans and leases receivable, mortgage warehouse, at fair value	$	1,569,090	$	2,284,325	Loans and leases receivable, mortgage warehouse, at fair value	$	1,247,367	$	1,323,312

Loans receivable, PPP	Loans receivable, PPP	1,154,632		3,250,008		Loans receivable, PPP	246,258		998,153
Loans and leases receivable:	Loans and leases receivable:					Loans and leases receivable:
Commercial:	Commercial:					Commercial:
Commercial and industrial:	Commercial and industrial:					Commercial and industrial:

Specialty lending (1)	Specialty lending (1)	5,103,974		2,403,991		Specialty lending (1)	5,519,176		5,412,887
Other commercial and industrial	Other commercial and industrial	1,203,829		1,020,792		Other commercial and industrial	1,295,688		1,259,943
Multi-family		2,263,268		1,486,308
Multifamily						Multifamily	2,195,211		2,213,019
Commercial real estate owner occupied	Commercial real estate owner occupied	726,670		654,922		Commercial real estate owner occupied	895,314		885,339
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,263,211		1,121,238		Commercial real estate non-owner occupied	1,245,248		1,290,730
Construction	Construction	136,133		198,981		Construction	188,123		162,009
Total commercial loans and leases receivable	Total commercial loans and leases receivable	10,697,085		6,886,232		Total commercial loans and leases receivable	11,338,760		11,223,927
Consumer:	Consumer:					Consumer:
Residential real estate	Residential real estate	465,772		334,730		Residential real estate	494,815		497,952
Manufactured housing	Manufactured housing	46,990		52,861		Manufactured housing	43,272		45,076
Installment:	Installment:					Installment:

Personal	Personal	1,056,432		1,392,862		Personal	849,420		964,641
Other	Other	341,463		351,613		Other	419,085		413,298

Total consumer loans receivable	Total consumer loans receivable	1,910,657		2,132,066		Total consumer loans receivable	1,806,592		1,920,967
Loans and leases receivable	Loans and leases receivable	12,607,742		9,018,298		Loans and leases receivable	13,145,352		13,144,894

Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(130,197)		(137,804)		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)	Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	$	15,201,267	$	14,414,827	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 ~~$145.6~~$168.8 million and ~~$146.5~~$157.4 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of ~~$(21.0)~~$(0.7) million and ~~$(52.0)~~$(21.5) million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Customers' total loans and leases receivable ~~portfolio~~ includes loans receivable which are reported at fair value based on an election made to account for these loans at fair value and loans and leases receivable which are predominately reported at their outstanding unpaid principal balance, net of charge-offs, 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 ~~$92.0~~$100.9 million and ~~$81.6~~$105.5 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there were ~~$32.0~~$13.8 million and ~~$38.9~~$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.

Table of Contents

Loans receivable, mortgage warehouse, at fair value

Mortgage warehouse loans consist of commercial loans to mortgage companies. These mortgage warehouse lending transactions are subject to master repurchase agreements. As a result of the contractual provisions, for accounting purposes, control of the underlying mortgage loan has not transferred and the rewards and risks of the mortgage loans are not assumed by Customers. The mortgage warehouse loans are designated as loans held for investment and reported at fair value based on an election made to account for the loans at fair value. Pursuant to the agreements, Customers funds the pipelines for these mortgage lenders by sending payments directly to the closing agents for funded mortgage loans and receives proceeds directly from third party investors when the underlying mortgage loans are sold into the secondary market. The fair value of the mortgage warehouse loans is estimated as the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The interest rates on these loans are

~~Table of Conte~~n ts

variable, and the lending transactions are short-term, with an average life under 30 days from purchase to sale. The primary goal of these lending transactions is to provide liquidity to mortgage companies.

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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, PPP

Customers had ~~$1.2 billion~~$246.3 million and ~~$3.3 billion~~$998.2 million of PPP loans outstanding as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~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 ~~$14.7~~$23.6 million and ~~$72.1~~$36.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively. Customers recognized interest income, including origination fees, of $117.1 million and $197.1 million for the three and nine months ended September 30, 2021,~~ respectively.

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

Loans and leases receivable

The following tables summarize loans and leases receivable by loan and lease type and performance status as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


		September 30, 2022													March 31, 2023
(amounts in thousands)	(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)		(amounts in thousands)	30-59 Days past due (1)		60-89 Days past due (1)		90 Days or more past due (2)		Total past due		Loans and leases not past due (3)		Total loans and leases (4)
Commercial and industrial, including specialty lending	Commercial and industrial, including specialty lending	$	739	$	419	$	3,950	$	5,108	$	6,302,695	$	6,307,803	Commercial and industrial, including specialty lending	$	1,158	$	172	$	3,422	$	4,752	$	6,810,112	$	6,814,864

Multi-family		—		—		1,159		1,159		2,262,109		2,263,268
Multifamily														Multifamily	—		5,189		881		6,070		2,189,141		2,195,211

Commercial real estate owner occupied	Commercial real estate owner occupied	115		—		2,127		2,242		724,428		726,670		Commercial real estate owner occupied	2,412		—		3,563		5,975		889,339		895,314
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	—		324		—		324		1,262,887		1,263,211		Commercial real estate non-owner occupied	—		—		11		11		1,245,237		1,245,248
Construction	Construction	—		—		—		—		136,133		136,133		Construction	—		—		—		—		188,123		188,123
Residential real estate	Residential real estate	746		1,313		2,377		4,436		461,336		465,772		Residential real estate	6,808		420		2,563		9,791		485,024		494,815
Manufactured housing	Manufactured housing	1,416		410		3,438		5,264		41,726		46,990		Manufactured housing	819		771		3,333		4,923		38,349		43,272
Installment	Installment	10,906		8,697		6,847		26,450		1,371,445		1,397,895		Installment	11,393		8,257		8,720		28,370		1,240,135		1,268,505

Total	Total	$	13,922	$	11,163	$	19,898	$	44,983	$	12,562,759	$	12,607,742	Total	$	22,590	$	14,809	$	22,493	$	59,892	$	13,085,460	$	13,145,352

December 31, 2021
(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 $ 2,093 $ 95 $ 5,929 $ 8,117 $ 3,416,666 $ 3,424,783
Multi-family 1,682 2,707 18,235 22,624 1,463,684 1,486,308
Commercial real estate owner occupied 287 — 1,304 1,591 653,331 654,922
Commercial real estate non-owner occupied — — 2,815 2,815 1,118,423 1,121,238
Construction — — — — 198,981 198,981
Residential real estate 4,655 789 4,390 9,834 324,896 334,730
Manufactured housing 2,308 768 4,949 8,025 44,836 52,861
Installment 7,349 4,295 3,783 15,427 1,729,048 1,744,475
Total $ 18,374 $ 8,654 $ 41,405 $ 68,433 $ 8,949,865 $ 9,018,298

Table of Contents


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


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

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



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

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

(2)Includes loans amounting to ~~$1.5~~$1.7 million and ~~$1.4~~$1.9 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, that are still accruing interest because collection is considered probable.

~~Table of Conte~~n ts

(3)Loans and leases where next payment due is less than 30 days from the report date. The tables exclude PPP loans of ~~$1.2 billion,~~$246.3 million, of which ~~$274.4~~$0.8 million were 30-59 days past due and ~~$178.2~~$117.9 million were 60 days or more past due as of ~~September 30, 2022,~~March 31, 2023, and PPP loans of ~~$3.3 billion,~~$998.2 million, of which ~~$6.3~~$0.6 million were 30-59 days past due and ~~$21.8~~$36.0 million were 60 days or more past due as of December 31, ~~2021.~~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 ~~$8.7~~$7.9 million and ~~$9.9~~$8.3 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Nonaccrual Loans and Leases

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


		September 30, 2022 (1)						December 31, 2021 (1)						March 31, 2023 (1)				December 31, 2022 (1)
(amounts in thousands)	(amounts in thousands)	Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans		Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans			(amounts in thousands)	Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans		Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans
Commercial and industrial, including specialty lending	Commercial and industrial, including specialty lending	$	4,054	$	24	$	4,078	$	5,837	$	259	$	6,096		Commercial and industrial, including specialty lending	$	3,742	$	144	$	3,886	$	1,731	$	30	$	1,761

Multi-family		1,158		—		1,158		22,654		—		22,654
Multifamily															Multifamily	881		—		881		1,143		—		1,143

Commercial real estate owner occupied	Commercial real estate owner occupied	2,198		—		2,198		2,475		—		2,475			Commercial real estate owner occupied	3,621		—		3,621		2,768		—		2,768
Commercial real estate non-owner occupied		—		—		—		2,815		—		2,815

Residential real estate	Residential real estate	6,438		—		6,438		7,727		—		7,727			Residential real estate	6,473		—		6,473		6,922		—		6,922
Manufactured housing	Manufactured housing	—		2,584		2,584		—		3,563		3,563			Manufactured housing	—		2,568		2,568		—		2,410		2,410
Installment	Installment	—		6,848		6,848		—		3,783		3,783			Installment	—		8,720		8,720		—		9,527		9,527

Total	Total	$	13,848	$	9,456	$	23,304	$	41,508	$	7,605	$	49,113		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 ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Accrued interest reversed when the loans went to nonaccrual status was insignificant ~~during~~for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Table of Contents

Allowance for credit losses on loans and leases

The changes in the ACL on loans and leases by loan and lease type for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ are presented in the tables below.

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


(amounts in thousands)	Commercial and industrial (1)		Multifamily		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Three Months Ended 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)
Recoveries	231		—		—		5		116		2		—		2,109		2,463
Provision (benefit) for credit losses on loans and leases	2,397		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

~~Table of Conte~~n ts


(amounts in thousands)	(amounts in thousands)	Commercial and industrial (1)		Multi-family		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total		(amounts in thousands)	Commercial and industrial (1)		Multifamily		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
Three Months Ended September 30, 2021
Ending Balance, June 30, 2021		$	8,127	$	5,028	$	4,464	$	7,374	$	2,643	$	2,299	$	4,372	$	91,129	$	125,436
Three Months Ended March 31, 2022																				Three Months Ended March 31, 2022
Ending Balance, December 31, 2021																				Ending Balance, December 31, 2021	$	12,702	$	4,477	$	3,213	$	6,210	$	692	$	2,383	$	4,278	$	103,849	$	137,804
Charge-offs	Charge-offs	(516)		—		(524)		(943)		—		(79)		—		(6,693)		(8,755)		Charge-offs	(301)		—		—		—		—		(4)		—		(8,865)		(9,170)
Recoveries	Recoveries	400		—		474		—		3		25		—		749		1,651		Recoveries	360		337		7		8		113		6		—		1,113		1,944
Provision (benefit) for credit losses on loans and leases	Provision (benefit) for credit losses on loans and leases	2,849		(631)		(797)		944		(1,760)		(333)		38		12,854		13,164		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, September 30, 2021		$	10,860	$	4,397	$	3,617	$	7,375	$	886	$	1,912	$	4,410	$	98,039	$	131,496
Nine Months Ended September 30, 2021
Ending Balance, December 31, 2020		$	12,239	$	12,620	$	9,512	$	19,452	$	5,871	$	3,977	$	5,190	$	75,315	$	144,176
Charge-offs		(1,153)		(1,132)		(666)		(943)		—		(129)		—		(27,338)		(31,361)
Recoveries		945		—		483		69		122		47		—		3,479		5,145
Provision (benefit) for credit losses on loans and leases		(1,171)		(7,091)		(5,712)		(11,203)		(5,107)		(1,983)		(780)		46,583		13,536
Ending Balance, September 30, 2021		$	10,860	$	4,397	$	3,617	$	7,375	$	886	$	1,912	$	4,410	$	98,039	$	131,496
Ending Balance, March 31, 2022																				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.

At ~~September 30, 2022,~~March 31, 2023, the ACL on loans and leases was ~~$130.2~~$130.3 million, a decrease of ~~$7.6~~$0.6 million from the December 31, ~~2021~~2022 balance of ~~$137.8~~$130.9 million. The decrease in ACL for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was primarily attributable to ~~the sale of~~a decrease in consumer installment loans, ~~to a third-party sponsored VIE,~~ partially offset by ~~loan growth and deteriorating~~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 62 – ~~INVESTMENT SECURITIES~~SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION for additional information on the ~~sale~~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 ~~consumer installment loans.~~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.

Table of Contents

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 Extension		Payment Deferral		Debt Forgiveness		Interest Rate Reduction and Term Extension		Total		Percentage of Total by Financing Class


Commercial and industrial, including specialty lending	$	172	$	—	$	—	$	—	$	172	0.00	%


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





Manufactured housing	7		—		—		63		70		0.16	%

Personal installment	4,833		131		114		—		5,078		0.60	%

Total	$	5,181	$	131	$	114	$	63	$	5,489

As of March 31, 2023, there were no commitments to lend additional funds to debtors experiencing financial difficulty whose loans have been modified during the three months ended March 31, 2023.

The following table summarizes the impacts of loan modifications made to borrowers experiencing financial difficulty for the three months ended March 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	—%	4	0	$	—



Commercial real estate owner occupied	—	4	0	—





Manufactured housing	0.8	55	0	—

Personal installment	—	5	6	66

The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored to understand the effectiveness of modification efforts. Loans are considered to be in payment default at 90 days or more past due. The following table presents an aging analysis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023.


	March 31, 2023
(dollars in thousands)	30-59 Days past due		60-89 Days past due		90 Days or more past due		Current		Total

Commercial and industrial, including specialty lending	$	—	$	172	$	—	$	—	$	172



Commercial real estate owner occupied	—		—		169		—		169





Manufactured housing	—		—		—		70		70

Personal installment	202		44		21		4,811		5,078

Total	$	202	$	216	$	190	$	4,881	$	5,489

As of March 31, 2023, Customers did not have 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 such loan level characteristics, such as payment performance. Loans made to borrowers experiencing financial difficulty can be classified as either accrual or nonaccrual.

Table of Contents

Troubled Debt ~~Restructurings~~Restructuring

At ~~September 30, 2022 and~~ December 31, ~~2021,~~2022, there were ~~$16.9~~$16.8 million ~~and $16.5 million, respectively,~~ in loans reported as TDRs. TDRs are reported as impaired loans in the quarter of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent quarters, a TDR may be returned to accrual status if it satisfies a minimum performance requirement of six months, however, it will remain classified as impaired. Generally, the Bank requires sustained performance for nine months before returning a TDR to accrual status. Customers had no lease receivables that had been restructured as a TDR as of September 30, 2022 and December 31, 2021, respectively.

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(dollars in thousands) Number of loans Recorded investment Number of loans Recorded investment Number of loans Recorded investment Number of loans Recorded investment
Interest-rate reductions — $ — 4 $ 244 14 $ 470 16 $ 585
Other (1)
71 739 39 687 170 1,933 158 2,369
Total 71 $ 739 43 $ 931 184 $ 2,403 174 $ 2,954
March 31, 2022.


	Three Months Ended March 31, 2022
(dollars in thousands)	Number of loans	Recorded investment
Interest-rate reductions	10	$	346
Other (1)	32	451
Total	42	$	797

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

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

~~Table of Conte~~n ts

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

September 30, 2022 September 30, 2021
(dollars in thousands) Number of loans Recorded investment Number of loans Recorded investment
Manufactured housing 1 $ 46 2 $ 71
Residential real estate 1 119 — —
Installment 34 420 19 231
Total loans 36 $ 585 21 $ 302
modification.


	March 31, 2022
(dollars in thousands)	Number of loans	Recorded investment
Manufactured housing	1	$	49



Installment	23	276


Total loans	24	$	325

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

Credit Quality Indicators

The ACL represents management's estimate of expected losses in Customers' loans and leases receivable portfolio, excluding commercial mortgage warehouse loans reported at fair value pursuant to a fair value option election and PPP loans receivable. ~~Multi-family, commercial~~Commercial and industrial including specialty lending, multifamily, owner occupied commercial real estate, non-owner occupied commercial real estate, and construction loans are rated based on an internally assigned risk rating system which is assigned at the time of loan origination and reviewed on a periodic, or on an “as needed” basis. Residential real estate, manufactured housing and installment loans are evaluated based on the payment activity of the loan.

To facilitate the monitoring of credit quality within the ~~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 as an input in the ACL lifetime loss rate model for the commercial and industrial loan portfolio, the Bank utilizes the following categories of risk ratings: pass/satisfactory (includes risk rating 1 through 6), special mention, substandard, doubtful, and loss. The risk rating categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass ratings, which are assigned to those borrowers who do not have identified potential or well-defined weaknesses and for whom there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on a quarterly basis during the month preceding the end of the calendar quarter. While assigning risk ratings involves judgment, the risk-rating process allows management to identify riskier credits in a timely manner and allocate the appropriate resources to manage those loans and leases. The ~~2021~~2022 Form 10-K describes Customers Bancorp’s risk rating grades.

~~Table of Conte~~n ts

Risk ratings are not established for certain consumer loans, including residential real estate, home equity, manufactured housing, and installment loans, mainly because these portfolios consist of a larger number of homogeneous loans with smaller balances. Instead, these portfolios are evaluated for risk mainly based upon aggregate payment history through the monitoring of delinquency levels and trends and are classified as performing and non-performing. The following tables present the credit ratings of loans and leases receivable and current period gross write-offs as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~

Term Loans Amortized Cost Basis by Origination Year as of
September 30, 2022
(amounts in thousands) 2022 2021 2020 2019 2018 Prior Revolving loans amortized cost basis Revolving loans converted to term Total
Commercial and industrial loans and leases, including specialty lending:
Pass $ 2,811,777 $ 638,308 $ 290,113 $ 210,755 $ 72,613 $ 87,766 $ 2,091,816 $ — $ 6,203,148
Special mention — 6,000 — — — 290 2,816 — 9,106
Substandard — 22,733 8,800 8,798 7,429 43,134 4,655 — 95,549
Doubtful — — — — — — — — —
Total commercial and industrial loans and leases $ 2,811,777 $ 667,041 $ 298,913 $ 219,553 $ 80,042 $ 131,190 $ 2,099,287 $ — $ 6,307,803
Multi-family loans:
Pass $ 1,257,398 $ 364,730 $ 131,310 $ 22,364 $ 114,430 $ 241,843 $ — $ — $ 2,132,075
Special mention — — — — 4,984 58,964 — — 63,948
Substandard — 1,508 — — — 65,737 — — 67,245
Doubtful — — — — — — — — —
Total multi-family loans $ 1,257,398 $ 366,238 $ 131,310 $ 22,364 $ 119,414 $ 366,544 $ — $ — $ 2,263,268
Commercial real estate owner occupied loans:
Pass $ 186,167 $ 203,200 $ 56,956 $ 92,437 $ 36,062 $ 129,565 $ — $ — $ 704,387
Special mention — — — — 461 3,858 — — 4,319
Substandard — — — 134 9,447 8,383 — — 17,964
Doubtful — — — — — — — —
Total commercial real estate owner occupied loans $ 186,167 $ 203,200 $ 56,956 $ 92,571 $ 45,970 $ 141,806 $ — $ — $ 726,670
Commercial real estate non-owner occupied:
Pass $ 279,854 $ 119,817 $ 144,199 $ 74,694 $ 63,318 $ 405,022 $ — $ — $ 1,086,904
Special mention — — 21,335 — — 5,852 — — 27,187
Substandard — — — 28,833 20,753 99,534 — — 149,120
Doubtful — — — — — — — — —
Total commercial real estate non-owner occupied loans $ 279,854 $ 119,817 $ 165,534 $ 103,527 $ 84,071 $ 510,408 $ — $ — $ 1,263,211
Construction:
Pass $ 49,417 $ 32,431 $ 9,510 $ 28,817 $ 4,722 $ 9,161 $ 2,075 $ — $ 136,133
Special mention — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total construction loans $ 49,417 $ 32,431 $ 9,510 $ 28,817 $ 4,722 $ 9,161 $ 2,075 $ — $ 136,133
Total commercial loans and leases receivable $ 4,584,613 $ 1,388,727 $ 662,223 $ 466,832 $ 334,219 $ 1,159,109 $ 2,101,362 $ — $ 10,697,085
Residential real estate loans:
Performing $ 136,267 $ 144,010 $ 7,420 $ 16,643 $ 10,471 $ 75,826 $ 68,839 $ — $ 459,476
Non-performing — — 177 372 1,378 3,713 656 — 6,296
Total residential real estate loans $ 136,267 $ 144,010 $ 7,597 $ 17,015 $ 11,849 $ 79,539 $ 69,495 $ — $ 465,772
Manufactured housing loans:
Performing $ — $ — $ — $ 218 $ 105 $ 43,801 $ — $ — $ 44,124
Non-performing — — — — — 2,866 — — 2,866
Total manufactured housing loans $ — $ — $ — $ 218 $ 105 $ 46,667 $ — $ — $ 46,990
Installment loans:
Performing $ 580,370 $ 427,400 $ 148,318 $ 152,836 $ 13,033 $ 1,132 $ 67,288 $ — $ 1,390,377
Non-performing 1,133 3,919 904 1,336 85 60 81 — 7,518
Total installment loans $ 581,503 $ 431,319 $ 149,222 $ 154,172 $ 13,118 $ 1,192 $ 67,369 $ — $ 1,397,895
Total consumer loans $ 717,770 $ 575,329 $ 156,819 $ 171,405 $ 25,072 $ 127,398 $ 136,864 $ — $ 1,910,657
Loans and leases receivable $ 5,302,383 $ 1,964,056 $ 819,042 $ 638,237 $ 359,291 $ 1,286,507 $ 2,238,226 $ — $ 12,607,742

2022.

2925

Table of ~~Conte~~n tContents

Term Loans Amortized Cost Basis by Origination Year as of December 31, 2021
(amounts in thousands) 2021 2020 2019 2018 2017 Prior Revolving loans amortized cost basis Revolving loans converted to term Total
Commercial and industrial loans and leases, including specialty lending:
Pass $ 974,016 $ 337,045 $ 266,677 $ 86,691 $ 55,536 $ 89,860 $ 1,484,287 $ — $ 3,294,112
Special mention 476 1,408 3,325 4,904 36,252 92 14,662 — 61,119
Substandard 18,786 10,257 9,543 11,586 5,682 6,764 6,934 — 69,552
Doubtful — — — — — — — — —
Total commercial and industrial loans and leases $ 993,278 $ 348,710 $ 279,545 $ 103,181 $ 97,470 $ 96,716 $ 1,505,883 $ — $ 3,424,783
Multi-family loans:
Pass $ 403,075 $ 133,452 $ 23,068 $ 209,070 $ 282,663 $ 316,491 $ — $ — $ 1,367,819
Special mention — — — 9,936 18,489 28,776 — — 57,201
Substandard — — — — 38,216 23,072 — — 61,288
Doubtful — — — — — — — — —
Total multi-family loans $ 403,075 $ 133,452 $ 23,068 $ 219,006 $ 339,368 $ 368,339 $ — $ — $ 1,486,308
Commercial real estate owner occupied loans:
Pass $ 213,102 $ 59,348 $ 124,626 $ 60,993 $ 58,073 $ 99,219 $ 672 $ — $ 616,033
Special mention — — 2,876 318 2,044 572 — — 5,810
Substandard — — 3,750 9,682 8,824 10,823 — — 33,079
Doubtful — — — — — — — — —
Total commercial real estate owner occupied loans $ 213,102 $ 59,348 $ 131,252 $ 70,993 $ 68,941 $ 110,614 $ 672 $ — $ 654,922
Commercial real estate non-owner occupied:
Pass $ 136,897 $ 149,898 $ 95,504 $ 66,040 $ 153,509 $ 310,435 $ — $ — $ 912,283
Special mention — 21,694 11,113 9,373 43,215 20,540 — — 105,935
Substandard — — — 35,846 20,516 46,658 — — 103,020
Doubtful — — — — — — — — —
Total commercial real estate non-owner occupied loans $ 136,897 $ 171,592 $ 106,617 $ 111,259 $ 217,240 $ 377,633 $ — $ — $ 1,121,238
Construction:
Pass $ 57,105 $ 49,199 $ 77,622 $ 4,828 $ — $ 9,414 $ 813 $ — $ 198,981
Special mention — — — — — — — — —
Substandard — — — — — — — — —
Doubtful — — — — — — — — —
Total construction loans $ 57,105 $ 49,199 $ 77,622 $ 4,828 $ — $ 9,414 $ 813 $ — $ 198,981
Total commercial loans and leases receivable $ 1,803,457 $ 762,301 $ 618,104 $ 509,267 $ 723,019 $ 962,716 $ 1,507,368 $ — $ 6,886,232
Residential real estate loans:
Performing $ 107,854 $ 8,251 $ 21,096 $ 11,389 $ 6,707 $ 84,035 $ 87,438 $ — $ 326,770
Non-performing — — 335 1,015 669 3,587 2,354 — 7,960
Total residential real estate loans $ 107,854 $ 8,251 $ 21,431 $ 12,404 $ 7,376 $ 87,622 $ 89,792 $ — $ 334,730
Manufactured housing loans:
Performing $ — $ — $ 253 $ 299 $ 73 $ 47,537 $ — $ — 48,162
Non-performing — — — — — 4,699 — �� 4,699
Total manufactured housing loans $ — $ — $ 253 $ 299 $ 73 $ 52,236 $ — $ — $ 52,861
Installment loans:
Performing $ 973,525 $ 390,788 $ 341,582 $ 31,481 $ 1,601 $ 1,016 $ 25 $ — $ 1,740,018
Non-performing 1,162 1,002 2,074 156 2 61 — — 4,457
Total installment loans $ 974,687 $ 391,790 $ 343,656 $ 31,637 $ 1,603 $ 1,077 $ 25 $ — $ 1,744,475
Total consumer loans $ 1,082,541 $ 400,041 $ 365,340 $ 44,340 $ 9,052 $ 140,935 $ 89,817 $ — $ 2,132,066
Loans and leases receivable $ 2,885,998 $ 1,162,342 $ 983,444 $ 553,607 $ 732,071 $ 1,103,651 $ 1,597,185 $ — $ 9,018,298


	Term Loans Amortized Cost Basis by Origination Year as of March 31, 2023
(amounts in thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total







Commercial and industrial loans and leases, including 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 mention	6,000		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

Table of ~~Conte~~Contents


	Term Loans Amortized Cost Basis by Origination Year as of March 31, 2023
(amounts in thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total

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

nTable of Contents


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






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












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












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

tTable of Contents

Loan Purchases and Sales

Purchases and sales of loans were as follows for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(amounts in thousands)	(amounts in thousands)	2022		2021		2022		2021		(amounts in thousands)	2023		2022
Purchases (1)	Purchases (1)									Purchases (1)
Other commercial and industrial										Other commercial and industrial	$	5,445	$	—

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

Commercial real estate owner occupied										Commercial real estate owner occupied	2,867		—

Residential real estate	Residential real estate	15,067		—		170,022		—		Residential real estate	4,238		146,874

Personal installment (2)	Personal installment (2)	47,778		—		123,785		109,142		Personal installment (2)	—		59,456
Other installment (2)		74,969		50,001		74,969		56,708

Total	Total	$	137,814	$	652,176	$	368,776	$	1,389,512	Total	$	12,550	$	206,330
Sales (3)	Sales (3)									Sales (3)
Specialty lending		$	2,200	$	—	$	2,200	$	—

Other commercial and industrial (4)	Other commercial and industrial (4)	—		6,176		22,880		35,166		Other commercial and industrial (4)	$	—	$	8,840
Multi-family		—		—		2,879		19,443

Commercial real estate owner occupied (4)	Commercial real estate owner occupied (4)	—		5,728		8,960		12,426		Commercial real estate owner occupied (4)	—		5,441
Commercial real estate non-owner occupied		—		—		—		18,366

Residential real estate		—		14,549		—		42,735

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

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

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was ~~99.9%~~101.9% and ~~99.2%~~98.1% of the loans' unpaid principal balance for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. The purchase price was 98.7% and 101.0% of the loans' unpaid principal balance for the nine months ended September 30, 2022 and 2021,~~ respectively.

(2)Installment loan purchases for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ consist of third-party originated unsecured consumer loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

(3)~~For~~There were no sales of loans held for investment for the three months ended ~~September 30,~~March 31, 2023. Gains of $1.5 million from the sales of loans held for investment for the three months ended March 31, 2022 ~~and 2021, loan sales resulted in net losses of $23.4 million and net gains of $5.8 million, respectively,~~are included in gain (loss) on sale of SBA and other loans ~~and in loss on sale of consumer installment loans (refer to (5) below)~~ in the consolidated ~~statements~~statement of income. ~~For the nine months ended September 30, 2022 and 2021, loan sales resulted in net losses of $19.7 million and net gains of $10.1 million, respectively.~~

(4)Primarily sales of SBA loans.

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

Loans Pledged as Collateral

Customers has pledged eligible real estate, ~~and~~ commercial and industrial, mortgage warehouse, PPP and consumer installment loans as collateral for borrowings outstanding or available immediately from the FHLB and FRB in the amount of ~~$6.6~~$9.9 billion and ~~$3.7~~$7.1 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. ~~No PPP loans were pledged to the FRB in accordance with borrowing from the PPPLF at September 30, 2022 and December 31, 2021.~~

NOTE 98 — LEASES

Lessee

Customers has operating leases for its branches, certain LPOs, and administrative offices, with remaining lease terms ranging between one month and 8ten 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 1one and 10ten years, with options to renew the leases or extend the term up to 10ten years at Customers' sole discretion. Some operating leases include variable lease payments that are based on an index or rate, such as the CPI. Variable lease payments are not included in the liability or ROU asset and are recognized in the period in which the obligation for those payments are incurred. Customers' operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. Pursuant to these agreements, Customers does not have any commitments that would meet the definition of a finance lease.

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

~~Table of Conte~~n ts

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

(amounts in thousands)

Classification

September 30, 2022

December 31, 2021

(amounts in thousands)

Classification

March 31, 2023

December 31, 2022

ASSETS

Operating lease ROU assets

Other assets

16,827

12,677

Operating lease ROU assets

Other assets

18,509

16,133

LIABILITIES

Operating lease liabilities

Other liabilities

19,720

14,524

Operating lease liabilities

Other liabilities

21,067

19,046

Table of Contents

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


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
(amounts in thousands)	(amounts in thousands)	Classification	2022		2021		2022		2021		(amounts in thousands)	Classification	2023		2022
Operating lease cost (1)	Operating lease cost (1)	Occupancy expenses	$	1,137	$	1,147	$	3,352	$	3,394	Operating lease cost (1)	Occupancy expenses	$	1,218	$	998

(1) There were no variable lease costs for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and sublease income for operating leases iswas immaterial.

Maturities of non-cancelable operating lease liabilities were as follows at ~~September 30, 2022:~~March 31, 2023:


(amounts in thousands)	(amounts in thousands)	September 30, 2022		(amounts in thousands)	March 31, 2023
2022		$	1,565
2023	2023	5,201		2023	$	4,096
2024	2024	4,206		2024	4,701
2025	2025	3,291		2025	3,650
2026	2026	2,465		2026	2,880
2027				2027	2,369
Thereafter	Thereafter	5,016		Thereafter	5,524
Total minimum payments	Total minimum payments	21,744		Total minimum payments	23,220
Less: interest	Less: interest	2,024		Less: interest	2,153
Present value of lease liabilities	Present value of lease liabilities	$	19,720	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. ~~Customers has a signed lease that has not yet commenced as of September 30, 2022 with future minimum lease payments of $4.2 million.~~ Cash paid pursuant to the operating lease ~~liability~~liabilities was ~~$1.2~~$1.7 million and ~~$3.6~~$1.2 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively. Cash paid pursuant to the operating lease liability was $1.3 million and $3.8 million for the three and nine months ended September 30, 2021,~~ respectively. These payments were reported as cash flows used in operating activities in the statement of cash flows.

The following table summarizes the weighted average remaining lease term and discount rate for Customers' operating leases at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

September 30, 2022

December 31, 2021

March 31, 2023

December 31, 2022

Weighted average remaining lease term (years)

Operating leases

5.2 years

3.9 years

Operating leases

5.9 years

5.1 years

Weighted average discount rate

Operating leases

2.89

2.74

Operating leases

3.15

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. ~~Terms~~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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


(amounts in thousands)	(amounts in thousands)	Classification	September 30, 2022		December 31, 2021		(amounts in thousands)	Classification	March 31, 2023		December 31, 2022
ASSETS	ASSETS						ASSETS
Direct financing leases	Direct financing leases						Direct financing leases
Lease receivables	Lease receivables	Loans and leases receivable	$	131,731	$	134,855	Lease receivables	Loans and leases receivable	$	152,650	$	140,182
Guaranteed residual assets	Guaranteed residual assets	Loans and leases receivable	11,854		11,397		Guaranteed residual assets	Loans and leases receivable	12,043		12,370
Unguaranteed residual assets	Unguaranteed residual assets	Loans and leases receivable	6,347		5,665		Unguaranteed residual assets	Loans and leases receivable	8,419		7,555
Deferred initial direct costs	Deferred initial direct costs	Loans and leases receivable	566		448		Deferred initial direct costs	Loans and leases receivable	1,056		667
Unearned income	Unearned income	Loans and leases receivable	(4,929)		(5,383)		Unearned income	Loans and leases receivable	(5,398)		(3,404)
Net investment in direct financing leases	Net investment in direct financing leases		$	145,569	$	146,982	Net investment in direct financing leases		$	168,770	$	157,370

Operating leases	Operating leases						Operating leases
Investment in operating leases	Investment in operating leases	Other assets	$	241,079	$	158,135	Investment in operating leases	Other assets	$	251,027	$	248,454
Accumulated depreciation	Accumulated depreciation	Other assets	(54,009)		(40,749)		Accumulated depreciation	Other assets	(60,350)		(52,585)
Deferred initial direct costs	Deferred initial direct costs	Other assets	1,535		872		Deferred initial direct costs	Other assets	1,385		1,461
Net investment in operating leases	Net investment in operating leases		188,605		118,258		Net investment in operating leases		192,062		197,330
Total lease assets	Total lease assets		$	334,174	$	265,240	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 leases		Direct financing leases
2023	$	37,253	$	30,229
2024	35,972		37,402
2025	32,256		28,074
2026	37,305		22,519
2027	26,746		18,792
Thereafter	59,528		17,585
Total minimum payments	$	229,060	154,601
Less: interest			1,951
Present value of lease receivables			$	152,650

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NOTE 109 – DEPOSITS

The components of deposits at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(amounts in thousands)	(amounts in thousands)					(amounts in thousands)
Demand, non-interest bearing	Demand, non-interest bearing	$	2,993,793	$	4,459,790	Demand, non-interest bearing	$	3,487,517	$	1,885,045
Demand, interest bearing	Demand, interest bearing	7,124,663		6,488,406		Demand, interest bearing	5,791,302		8,476,027
Savings, including money market deposit accounts	Savings, including money market deposit accounts	5,505,969		5,322,390		Savings, including money market deposit accounts	2,943,992		3,546,015

Time	Time	1,898,013		507,338		Time	5,500,806		4,249,866
Total deposits	Total deposits	$	17,522,438	$	16,777,924	Total deposits	$	17,723,617	$	18,156,953

The scheduled maturities for time deposits at ~~September 30, 2022~~March 31, 2023 were as follows:


(amounts in thousands)	(amounts in thousands)	September 30, 2022		(amounts in thousands)	March 31, 2023
2022		$	459,951
2023	2023	1,357,068		2023	$	2,846,450
2024	2024	75,623		2024	2,255,828
2025	2025	2,415		2025	121,435
2026	2026	1,567		2026	275,909
2027				2027	1,144
Thereafter	Thereafter	1,389		Thereafter	40
Total time deposits	Total time deposits	$	1,898,013	Total time deposits	$	5,500,806

Time deposits greater than the FDIC limit of $250,000 totaled ~~$1.7 billion~~$61.1 million and ~~$259.0~~$85.5 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Included in the demand, interest bearing balances above were ~~$1.4 billion~~$755.4 million and ~~$1.7 billion~~$553.2 million of brokered demand deposits at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Included in the savings and money market deposit account ~~("MMDA")~~ balances above were ~~$715.6~~$10.4 million and ~~$480.5~~$415.7 million of brokered money market deposits at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Included in time deposits above were ~~$1.6~~$5.3 billion and $4.0 billion of brokered time deposits at ~~September 30, 2022. There were no brokered time deposits included in time deposits above as of~~March 31, 2023 and December 31, ~~2021.~~2022, respectively.

Demand deposit overdrafts reclassified as loans were ~~$4.2~~$2.4 million and ~~$2.8~~$3.7 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~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 1110 - BORROWINGS

Short-term debt

Short-term debt at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was as follows:
September 30, 2022 December 31, 2021
(dollars in thousands) Amount Rate Amount Rate
FHLB advances $ — — % $ 700,000 0.26 %
Federal funds purchased 365,000 3.23 % 75,000 0.05 %
Total short-term debt $ 365,000 $ 775,000

~~Table of Conte~~n ts


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

FHLB advances	—		—	%	300,000		4.54	%

Total short-term debt	$	—			$	300,000

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


(dollars in thousands)	(dollars in thousands)	September 30, 2022 (1)			December 31, 2021 (2)			(dollars in thousands)	March 31, 2023 (1)			December 31, 2022 (2)

FRB advances (3)								FRB advances (3)
Maximum outstanding at any month end								Maximum outstanding at any month end	$	—		$	—
Average balance during the period								Average balance during the period	487,067			—
Weighted-average interest rate during the period								Weighted-average interest rate during the period	5.23		%	—		%
FHLB advances	FHLB advances							FHLB advances
Maximum outstanding at any month end	Maximum outstanding at any month end	$	775,000		$	850,000		Maximum outstanding at any month end	—			775,000
Average balance during the period	Average balance during the period	189,175			264,704			Average balance during the period	354,482			144,918
Weighted-average interest rate during the period	Weighted-average interest rate during the period	2.34		%	2.35		%	Weighted-average interest rate during the period	5.16		%	1.07		%
Federal funds purchased	Federal funds purchased							Federal funds purchased
Maximum outstanding at any month end	Maximum outstanding at any month end	895,000			365,000			Maximum outstanding at any month end	—			895,000
Average balance during the period	Average balance during the period	416,344			22,110			Average balance during the period	15,333			349,581
Weighted-average interest rate during the period	Weighted-average interest rate during the period	1.40		%	0.07		%	Weighted-average interest rate during the period	4.97		%	1.66		%

(1) For the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

(2) For the year ended December 31, ~~2021.~~2022.

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

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Customers Bank had aggregate availability under federal funds lines totaling ~~$1.4 billion and $1.3 billion, respectively.~~$1.7 billion.

Long-term debt

FHLB and FRB advances

Long-term FHLB and FRB advances at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(dollars in thousands)	(dollars in thousands)	Amount		Rate		Amount		Rate		(dollars in thousands)	Amount		Rate		Amount		Rate
FHLB advances ~~(1)~~(2)	FHLB advances ~~(1)~~(2)	$	500,000	3.37	%	$	—	—	%	FHLB advances ~~(1)~~(2)	$	2,052,143	4.64	%	$	500,000	3.37	%

Total long-term FHLB and FRB advances	Total long-term FHLB and FRB advances	$	500,000			$	—			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 ~~$250 million~~$1.1 billion with ~~a fixed rate of 3.44%, maturity of~~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.~~2027, at March 31, 2023.

Table of Contents

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	%
2025	540,000		5.21	%
2026	540,000		5.23	%
2027	450,000		3.70	%
Thereafter	100,000		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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was as follows:


(amounts in thousands)	(amounts in thousands)	September 30, 2022		December 31, 2021		(amounts in thousands)	March 31, 2023		December 31, 2022
Total maximum borrowing capacity with the FHLB	Total maximum borrowing capacity with the FHLB	$	3,560,959	$	2,973,635	Total maximum borrowing capacity with the FHLB	$	3,307,772	$	3,241,120
Total maximum borrowing capacity with the FRB (1)	Total maximum borrowing capacity with the FRB (1)	2,557,704		183,052		Total maximum borrowing capacity with the FRB (1)	6,516,922		2,510,189
Qualifying loans serving as collateral against FHLB and FRB advances (1)		7,543,384		3,594,339
Qualifying loans and securities (1) serving as collateral against FHLB and FRB advances						Qualifying loans and securities (1) serving as collateral against FHLB and FRB advances	12,079,694		7,142,865

(1) ~~Amounts reported in the above table exclude borrowings~~Includes $508.2 million of borrowing capacity available under the ~~PPPLF,~~BTFP, which offers loans of up to one year to eligible depository institutions pledging any collateral valued at par, that are ~~limited to~~eligible for purchase by the unpaid principal balance of the loans originated under the PPP. During the three months ended September 30, 2021, Customers repaid the PPPLF advances. No new advances are available from the PPPLF after July 30, 2021. Customers had no borrowings under the PPPLF at September 30, 2022Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and ~~December 31, 2021.~~U.S. agency mortgage-backed securities.

~~Table of Conte~~n ts

Senior and Subordinated Debt

Long-term senior notes and subordinated debt at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


			September 30, 2022			December 31, 2021															March 31, 2023			December 31, 2022
(dollars in thousands)	(dollars in thousands)													(dollars in thousands)
Issued by	Issued by	Ranking			Carrying Amount			Carrying Amount		Rate		Issued Amount	Date Issued		Maturity			Price		Issued by			Ranking			Carrying Amount		Carrying Amount		Rate	Issued Amount	Date Issued		Maturity	Price
Customers Bancorp	Customers Bancorp	Senior (1)	$	98,753		$	98,642	2.875	%	$	100,000	August 2021	August 2031		100.000	%	Customers Bancorp		Senior (1)		$	98,823		$	98,788	2.875	%	$	100,000	August 2021	August 2031	100.000	%
Customers Bancorp	Customers Bancorp	Senior	24,762			24,672		4.500	%	25,000		September 2019	September 2024		100.000	%	Customers Bancorp		Senior		24,822			24,792		4.500	%	25,000		September 2019	September 2024	100.000	%
Customers Bancorp		Senior	—			99,772		3.950	%	100,000		June 2017	June 2022		99.775	%

Total other borrowings	Total other borrowings		$	123,515		$	223,086										Total other borrowings				$	123,645		$	123,580

Customers Bancorp	Customers Bancorp	Subordinated (2)(3)	$	72,539		$	72,403	5.375	%	$	74,750	December 2019	December 2034		100.000	%	Customers Bancorp		Subordinated (2)(3)		$	72,630		$	72,585	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Customers Bank	Subordinated (2)(4)	109,343			109,270		6.125	%	110,000		June 2014	June 2029		100.000	%	Customers Bank		Subordinated (2)(4)		109,391			109,367		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt	Total subordinated debt		$	181,882		$	181,673										Total subordinated debt				$	182,021		$	181,952

(1)The senior notes will bear an annual fixed rate of 2.875% until August 15, 2026. From August 15, 2026 until maturity, the notes will bear an annual interest rate equal to a benchmark rate, which is expected to be the three-month term SOFR 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 26, 2024. From June 26, 2024 until maturity, the notes will bear an annual interest rate equal to the three-month LIBOR plus 344.3 basis points. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.

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NOTE 1211 — SHAREHOLDERS’ EQUITY

Common Stock

On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). The term of the Share Repurchase Program ~~will extend for~~ ~~one~~ ~~additional year~~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 to be made will be at the discretion of the Company and will comply with all applicable regulatory limitations. Customers Bancorp ~~did not purchase any~~purchased 1,379,883 shares of its common stock for $39.8 million and 115,324 shares for $6.3 million under the Share Repurchase Program during the three months ended September 30, 2022. Customers Bancorp purchased 664,145 shares of its common stock for $27.8 million under the Share Repurchase Program on various dates during the nine months ended September 30, 2022.March 31, 2023 and 2022, respectively.

Preferred Stock

As of ~~September 30,~~March 31, 2023 and December 31, 2022, Customers Bancorp has two series of preferred stock outstanding. On September 15, 2021, Customers redeemed all of the outstanding shares of Series C and Series D Preferred Stock for an aggregate payment of $82.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series C and Series D Preferred Stock of $2.8 million is included as a loss on redemption of preferred stock in the consolidated statement of income for the three and nine months ended September 30, 2021. After giving effect to the redemption, no shares of the Series C and Series D Preferred Stock remained outstanding.

~~Table of Conte~~n ts

The table below summarizes Customers' issuances of preferred stock that remain outstanding at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 and the dividends paid per share.


(amounts in thousands except share and per share data)	(amounts in thousands except share and per share data)		Shares at		Carrying value at				Initial Fixed Rate		Date at which dividend rate becomes floating and earliest redemption date		Floating rate of Three-Month LIBOR Plus:				Dividend Paid Per Share in 2022 (1)		(amounts in thousands except share and per share data)						Shares at						Carrying value at							Initial Fixed Rate			Date at which dividend rate becomes floating and earliest redemption date			Floating rate of Three-Month LIBOR Plus:			Dividend Paid Per Share in 2023 (1)
Fixed-to-floating rate:	Fixed-to-floating rate:	Issue Date	September 30, 2022	December 31, 2021	September 30, 2022		December 31, 2021								Fixed-to-floating rate:				Issue Date				March 31, 2023			December 31, 2022			March 31, 2023			December 31, 2022

Series E	Series E	April 28, 2016	2,300,000	2,300,000	$	55,593	$	55,593	6.45	%		June 15, 2021			5.140	%				$	1.16	Series E		April 28, 2016			2,300,000			2,300,000			$	55,593		$	55,593			6.45		%	June 15, 2021			5.140		%	$	0.62
Series F	Series F	September 16, 2016	3,400,000	3,400,000	82,201		82,201		6.00	%	December 15, 2021		4.762	%			$	1.09	Series F			September 16, 2016			3,400,000			3,400,000			82,201			82,201				6.00	%		December 15, 2021			4.762	%		$	0.60
Totals	Totals		5,700,000	5,700,000	$	137,794	$	137,794											Totals						5,700,000			5,700,000			$	137,794		$	137,794

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

On March 15, 2021, Series D Preferred Stock became floating at three-month LIBOR plus 5.09%, compared to a fixed rate of 6.50%. On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%. On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%.31, 2023.

NOTE 1312 — REGULATORY CAPITAL

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

In first quarter 2020, the U.S federal banking regulatory agencies permitted banking organizations to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 31, 2020, the U.S. federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows banking organizations to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. Customers has elected to adopt the interim final rule, which is reflected in the regulatory capital data presented below. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of ~~September 30, 2022,~~March 31, 2023, our regulatory capital ratios reflected ~~75%~~50%, or ~~$46.2~~$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, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Bank and the Bancorp satisfied all capital requirements to which they were subject.

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


						Minimum Capital Levels to be Classified as:																	Minimum Capital Levels to be Classified as:
		Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant					Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant
(dollars in thousands)	(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2022:
As of March 31, 2023:																		As of March 31, 2023:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)																	Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,447,890	9.845	%	$	661,804	4.500	%	N/A		N/A		$	1,029,472	7.000	%	Customers Bancorp, Inc.	$	1,466,676	9.624	%	$	685,809	4.500	%	N/A		N/A		$	1,066,814	7.000	%
Customers Bank	Customers Bank	$	1,676,998	11.420	%	$	660,807	4.500	%	$	954,499	6.500	%	$	1,027,922	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)	Tier 1 capital (to risk-weighted assets)																	Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,585,683	10.782	%	$	882,405	6.000	%	N/A		N/A		$	1,250,073	8.500	%	Customers Bancorp, Inc.	$	1,604,469	10.528	%	$	914,412	6.000	%	N/A		N/A		$	1,295,417	8.500	%
Customers Bank	Customers Bank	$	1,676,998	11.420	%	$	881,076	6.000	%	$	1,174,768	8.000	%	$	1,248,191	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)	Total capital (to risk-weighted assets)																	Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,838,179	12.499	%	$	1,176,540	8.000	%	N/A		N/A		$	1,544,208	10.500	%	Customers Bancorp, Inc.	$	1,878,449	12.326	%	$	1,219,216	8.000	%	N/A		N/A		$	1,600,221	10.500	%
Customers Bank	Customers Bank	$	1,856,955	12.646	%	$	1,174,768	8.000	%	$	1,468,460	10.000	%	$	1,541,883	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)	Tier 1 capital (to average assets)																	Tier 1 capital (to average assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,585,683	7.650	%	$	829,133	4.000	%	N/A		N/A		$	829,133	4.000	%	Customers Bancorp, Inc.	$	1,604,469	7.534	%	$	851,851	4.000	%	N/A		N/A		$	851,851	4.000	%
Customers Bank	Customers Bank	$	1,676,998	8.099	%	$	828,289	4.000	%	$	1,035,361	5.000	%	$	828,289	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, 2021:
As of December 31, 2022:																		As of December 31, 2022:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)																	Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,291,270	9.981	%	$	582,179	4.500	%	N/A		N/A		$	905,611	7.000	%	Customers Bancorp, Inc.	$	1,470,837	9.637	%	$	686,838	4.500	%	N/A		N/A		$	1,068,415	7.000	%
Customers Bank	Customers Bank	$	1,526,583	11.825	%	$	580,943	4.500	%	$	839,140	6.500	%	$	903,689	7.000	%	Customers Bank	$	1,708,598	11.213	%	$	685,694	4.500	%	$	990,447	6.500	%	$	1,066,636	7.000	%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)																	Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,429,063	11.046	%	$	776,238	6.000	%	N/A		N/A		$	1,099,671	8.500	%	Customers Bancorp, Inc.	$	1,608,630	10.539	%	$	915,784	6.000	%	N/A		N/A		$	1,297,361	8.500	%
Customers Bank	Customers Bank	$	1,526,583	11.825	%	$	774,591	6.000	%	$	1,032,788	8.000	%	$	1,097,337	8.500	%	Customers Bank	$	1,708,598	11.213	%	$	914,259	6.000	%	$	1,219,012	8.000	%	$	1,295,201	8.500	%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)																	Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,667,395	12.888	%	$	1,034,984	8.000	%	N/A		N/A		$	1,358,417	10.500	%	Customers Bancorp, Inc.	$	1,862,089	12.200	%	$	1,221,045	8.000	%	N/A		N/A		$	1,602,622	10.500	%
Customers Bank	Customers Bank	$	1,692,512	13.110	%	$	1,032,788	8.000	%	$	1,290,985	10.000	%	$	1,355,534	10.500	%	Customers Bank	$	1,889,472	12.400	%	$	1,219,012	8.000	%	$	1,523,765	10.000	%	$	1,599,954	10.500	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)																	Tier 1 capital (to average assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,429,063	7.413	%	$	771,084	4.000	%	N/A		N/A		$	771,084	4.000	%	Customers Bancorp, Inc.	$	1,608,630	7.664	%	$	839,547	4.000	%	N/A		N/A		$	839,547	4.000	%
Customers Bank	Customers Bank	$	1,526,583	7.925	%	$	770,528	4.000	%	$	963,160	5.000	%	$	770,528	4.000	%	Customers Bank	$	1,708,598	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 conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.

NOTE 1413 — DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Customers uses fair value measurements to record fair value adjustments to certain assets and liabilities and to disclose the fair value of its financial instruments. ASC 825, Financial Instruments, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For Customers, as for most financial institutions, the majority of its assets and liabilities are considered to be financial instruments. Many of these instruments lack an available trading market as characterized by a willing buyer and a willing seller engaging in an exchange transaction. For fair value disclosure purposes, Customers utilized certain fair value measurement criteria under ASC 820, Fair Value Measurements and Disclosures ("ASC 820"), as explained below.

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

~~Table of Conte~~n ts

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, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

Financial Instruments Recorded at Fair Value on a Recurring Basis

Investment securities:

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

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

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

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

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

~~Table of Conte~~n ts

Loans receivable - Commercial mortgage warehouse loans (fair value option):

The fair value of commercial mortgage warehouse loans is the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The loan is used by mortgage companies as short-term bridge financing between the funding of the mortgage loans and the finalization of the sale of the loans to an investor. Changes in fair value are not generally expected to be recognized because at inception of the transaction the underlying mortgage loans have already been sold to an approved investor. Additionally, the interest rate is variable, and the transaction is short-term, with an average life of under 30 days from purchase to sale. These assets are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Derivatives (assets and liabilities):

The fair values of interest rate swaps, interest rate caps and credit derivatives are determined using models that incorporate readily observable market data into a market standard methodology. This methodology nets the discounted future cash receipts and the discounted expected cash payments. The discounted variable cash receipts and payments are based on expectations of future interest rates derived from observable market interest rate curves. In addition, fair value is adjusted for the effect of nonperformance risk by incorporating credit valuation adjustments for Customers and its counterparties. These assets and liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.

The fair values of the residential mortgage loan commitments are derived from the estimated fair values that can be generated when the underlying mortgage loan is sold in the secondary market. Customers generally uses commitments on hand from third party investors to estimate an exit price and adjusts for the probability of the commitment being exercised based on Customers' internal experience (i.e., pull-through rate). These assets and liabilities are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

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

Financial Instruments Recorded at Fair Value on a Nonrecurring Basis

Collateral-dependent loans:

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

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

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The estimated fair values of Customers' financial instruments at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as ~~follows.~~follows:


						Fair Value Measurements at September 30, 2022											Fair Value Measurements at March 31, 2023
(amounts in thousands)	(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	404,465	$	404,465	$	404,465	$	—	$	—	Cash and cash equivalents	$	2,046,685	$	2,046,685	$	2,046,685	$	—	$	—
Debt securities, available for sale	Debt securities, available for sale	2,918,830		2,918,830		—		2,830,944		87,886		Debt securities, available for sale	2,900,259		2,900,259		—		2,836,883		63,376
Debt securities, held to maturity	Debt securities, held to maturity	886,294		854,737		—		454,736		400,001		Debt securities, held to maturity	870,294		836,713		—		516,978		319,735

Loans held for sale	Loans held for sale	5,224		5,224		—		609		4,615		Loans held for sale	424,057		424,057		—		16,314		407,743

Total loans and leases receivable, net of allowance for credit losses on loans and leases	Total loans and leases receivable, net of allowance for credit losses on loans and leases	15,201,267		14,905,661		—		1,569,090		13,336,571		Total loans and leases receivable, net of allowance for credit losses on loans and leases	14,508,696		13,973,288		—		1,247,367		12,725,921
FHLB, Federal Reserve Bank and other restricted stock		64,112		64,112		—		64,112		—
FHLB, Federal Reserve Bank, and other restricted stock												FHLB, Federal Reserve Bank, and other restricted stock	124,733		124,733		—		124,733		—
Derivatives	Derivatives	46,451		46,451		—		46,410		41		Derivatives	34,751		34,751		—		34,686		65

Liabilities:	Liabilities:											Liabilities:
Deposits	Deposits	$	17,522,438	$	17,502,691	$	15,624,425	$	1,878,266	$	—	Deposits	$	17,723,617	$	17,707,705	$	12,222,811	$	5,484,894	$	—

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

FHLB advances	FHLB advances	500,000		480,319		—		480,319		—		FHLB advances	2,052,143		2,047,365		—		2,047,365		—
Other borrowings	Other borrowings	123,515		120,888		—		120,888		—		Other borrowings	123,645		108,381		—		108,381		—
Subordinated debt	Subordinated debt	181,882		171,722		—		171,722		—		Subordinated debt	182,021		152,769		—		152,769		—
Derivatives	Derivatives	43,727		43,727		—		43,727		—		Derivatives	32,999		32,999		—		32,999		—


						Fair Value Measurements at December 31, 2021											Fair Value Measurements at December 31, 2022
(amounts in thousands)	(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	518,032	$	518,032	$	518,032	$	—	$	—	Cash and cash equivalents	$	455,806	$	455,806	$	455,806	$	—	$	—
Debt securities, available for sale	Debt securities, available for sale	3,791,575		3,791,575		—		3,648,690		142,885		Debt securities, available for sale	2,961,015		2,961,015		—		2,887,749		73,266

Debt securities, held to maturity												Debt securities, held to maturity	840,259		793,813		—		437,680		356,133

Loans held for sale	Loans held for sale	16,254		16,254		—		15,747		507		Loans held for sale	328,312		328,312		—		322		327,990

Total loans and leases receivable, net of allowance for credit losses on loans and leases	Total loans and leases receivable, net of allowance for credit losses on loans and leases	14,414,827		14,207,811		—		2,284,325		11,923,486		Total loans and leases receivable, net of allowance for credit losses on loans and leases	15,335,435		14,890,823		—		1,323,312		13,567,511
FHLB, Federal Reserve Bank and other restricted stock		64,584		64,584		—		64,584		—
FHLB, Federal Reserve Bank, and other restricted stock												FHLB, Federal Reserve Bank, and other restricted stock	74,196		74,196		—		74,196		—
Derivatives	Derivatives	27,295		27,295		—		27,116		179		Derivatives	44,435		44,435		—		44,380		55

Liabilities:	Liabilities:											Liabilities:
Deposits	Deposits	$	16,777,924	$	16,777,236	$	16,270,586	$	506,650	$	—	Deposits	$	18,156,953	$	18,127,338	$	13,907,087	$	4,220,251	$	—

Federal funds purchased		75,000		75,000		75,000		—		—

FHLB advances	FHLB advances	700,000		700,000		—		700,000		—		FHLB advances	800,000		781,113		—		781,113		—
Other borrowings	Other borrowings	223,086		226,585		—		226,585		—		Other borrowings	123,580		108,081		—		108,081		—
Subordinated debt	Subordinated debt	181,673		204,782		—		204,782		—		Subordinated debt	181,952		168,441		—		168,441		—
Derivatives	Derivatives	26,544		26,544		—		26,544		—		Derivatives	42,106		42,106		—		42,106		—

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For financial assets and liabilities measured at fair value on a recurring and nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		September 30, 2022									March 31, 2023
		Fair Value Measurements at the End of the Reporting Period Using									Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)	(amounts in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		(amounts in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Measured at Fair Value on a Recurring Basis:	Measured at Fair Value on a Recurring Basis:									Measured at Fair Value on a Recurring Basis:
Assets	Assets									Assets
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
Asset-backed securities	Asset-backed securities	$	—	$	105,375	$	87,886	$	193,261	Asset-backed securities	$	—	$	84,559	$	63,376	$	147,935

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	—		138,222		—		138,222		Agency-guaranteed residential collateralized mortgage obligations	—		133,753		—		133,753

Collateralized loan obligations	Collateralized loan obligations	—		827,813		—		827,813		Collateralized loan obligations	—		854,100		—		854,100
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		134,843		—		134,843		Commercial mortgage-backed securities	—		136,818		—		136,818
Corporate notes	Corporate notes	—		532,655		—		532,655		Corporate notes	—		586,795		—		586,795
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	—		1,084,685		—		1,084,685		Private label collateralized mortgage obligations	—		1,040,858		—		1,040,858
State and political subdivision debt securities		—		7,351		—		7,351

Derivatives	Derivatives	—		46,410		41		46,451		Derivatives	—		34,686		65		34,751
Loans held for sale – fair value option	Loans held for sale – fair value option	—		609		—		609		Loans held for sale – fair value option	—		314		—		314
Loans receivable, mortgage warehouse – fair value option	Loans receivable, mortgage warehouse – fair value option	—		1,569,090		—		1,569,090		Loans receivable, mortgage warehouse – fair value option	—		1,247,367		—		1,247,367

Total assets – recurring fair value measurements	Total assets – recurring fair value measurements	$	—	$	4,447,053	$	87,927	$	4,534,980	Total assets – recurring fair value measurements	$	—	$	4,119,250	$	63,441	$	4,182,691
Liabilities	Liabilities									Liabilities
Derivatives	Derivatives	$	—	$	43,727	$	—	$	43,727	Derivatives	$	—	$	32,999	$	—	$	32,999
Measured at Fair Value on a Nonrecurring Basis:	Measured at Fair Value on a Nonrecurring Basis:									Measured at Fair Value on a Nonrecurring Basis:
Assets	Assets									Assets

Collateral-dependent loans	Collateral-dependent loans	$	—	$	—	$	4,853	$	4,853	Collateral-dependent loans	$	—	$	16,000	$	6,569	$	22,569

Total assets – nonrecurring fair value measurements	Total assets – nonrecurring fair value measurements	$	—	$	—	$	4,853	$	4,853	Total assets – nonrecurring fair value measurements	$	—	$	16,000	$	6,569	$	22,569

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		December 31, 2021									December 31, 2022
		Fair Value Measurements at the End of the Reporting Period Using									Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)	(amounts in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		(amounts in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Measured at Fair Value on a Recurring Basis:	Measured at Fair Value on a Recurring Basis:									Measured at Fair Value on a Recurring Basis:
Assets	Assets									Assets
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
Asset-backed securities	Asset-backed securities	$	—	$	154,540	$	142,885	$	297,425	Asset-backed securities	$	—	$	87,276	$	73,266	$	160,542

Agency-guaranteed residential mortgage–backed securities		—		9,553		—		9,553
Agency-guaranteed commercial mortgage–backed securities		—		2,152		—		2,152

Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	—		196,930		—		196,930		Agency-guaranteed residential collateralized mortgage obligations	—		133,864		—		133,864
Agency-guaranteed commercial collateralized mortgage obligations		—		238,844		—		238,844

Collateralized loan obligations	Collateralized loan obligations	—		1,066,802		—		1,066,802		Collateralized loan obligations	—		872,738		—		872,738
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		148,927		—		148,927		Commercial mortgage-backed securities	—		136,357		—		136,357
Corporate notes	Corporate notes	—		580,046		—		580,046		Corporate notes	—		595,253		—		595,253
Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	—		1,242,465		—		1,242,465		Private label collateralized mortgage obligations	—		1,062,261		—		1,062,261
State and political subdivision debt securities		—		8,431		—		8,431

Derivatives	Derivatives	—		27,116		179		27,295		Derivatives	—		44,380		55		44,435
Loans held for sale – fair value option	Loans held for sale – fair value option	—		15,747		—		15,747		Loans held for sale – fair value option	—		322		—		322
Loans receivable, mortgage warehouse – fair value option	Loans receivable, mortgage warehouse – fair value option	—		2,284,325		—		2,284,325		Loans receivable, mortgage warehouse – fair value option	—		1,323,312		—		1,323,312

Total assets – recurring fair value measurements	Total assets – recurring fair value measurements	$	—	$	5,975,878	$	143,064	$	6,118,942	Total assets – recurring fair value measurements	$	—	$	4,255,763	$	73,321	$	4,329,084
Liabilities	Liabilities									Liabilities
Derivatives	Derivatives	$	—	$	26,544	$	—	$	26,544	Derivatives	$	—	$	42,106	$	—	$	42,106
Measured at Fair Value on a Nonrecurring Basis:	Measured at Fair Value on a Nonrecurring Basis:									Measured at Fair Value on a Nonrecurring Basis:
Assets	Assets									Assets

Collateral-dependent loans	Collateral-dependent loans	$	—	$	—	$	5,121	$	5,121	Collateral-dependent loans	$	—	$	—	$	4,819	$	4,819

Total assets – nonrecurring fair value measurements	Total assets – nonrecurring fair value measurements	$	—	$	—	$	5,121	$	5,121	Total assets – nonrecurring fair value measurements	$	—	$	—	$	4,819	$	4,819

The changes in residential mortgage loan commitments (Level 3 assets) measured at fair value on a recurring basis for the three and nine months ended September 30, 2022 and 2021 are summarized in the tables below. Additional information about residential mortgage loan commitments can be found in NOTE 15 – ~~DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.~~
Residential Mortgage Loan Commitments
Three Months Ended September 30,
(amounts in thousands) 2022 2021
Balance at July 1 $ 98 $ 301
Issuances 41 163
Settlements (98) (301)
Balance at September 30 $ 41 $ 163

~~Table of Conte~~n ts

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

The changes in asset-backed securities (Level 3 assets) measured at fair value on a recurring basis for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 are summarized in the ~~tables~~table below.


	Asset-backed securities
(amounts in thousands)	Three Months Ended March 31,
	2023		2022
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 losses	61		—
Change in fair value recognized in OCI	1,538		(3,955)
Balance at March 31,	$	63,376	$	121,853


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

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


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

~~Principal payments and premium amortization~~	~~(51,348)~~
~~Credit losses~~	~~(253)~~
~~Change in fair value recognized in OCI~~	~~(3,398)~~
~~Balance at September 30~~	$		~~87,886~~

There were no transfers between levels during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

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The following tables summarize financial assets and financial liabilities measured at fair value as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 on a recurring and nonrecurring basis for which Customers utilized Level 3 inputs to measure fair value. The unobservable Level 3 inputs noted below contain a level of uncertainty that may differ from what is realized in an immediate settlement of the assets. Therefore, Customers may realize a value higher or lower than the current estimated fair value of the assets.

Quantitative Information about Level 3 Fair Value Measurements

(dollars in thousands)

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range

(Weighted Average)~~(4)~~

~~September 30, 2022~~March 31, 2023

Asset-backed securities

~~87,886~~63,376

Discounted cash flow

Discount rate

Annualized loss rate

Constant prepayment rate

7%9% - 7%9%

~~(7%~~(9%)

4% - 6%5%

~~(5%~~(4%)

~~22% - 24%~~

~~(23%)~~

~~Collateral-dependent loans – real estate~~

~~4,615~~

~~Collateral appraisal~~ ~~(1)~~

~~Liquidation expenses~~ ~~(2)~~

~~0% - 0%~~

~~(0%)~~

~~Collateral-dependent loans – commercial and industrial~~

~~238~~

~~Collateral appraisal~~ ~~(1)~~

~~Business asset valuation~~ ~~(3)~~

~~Liquidation expenses~~ ~~(2)~~

~~Business asset valuation adjustments~~ ~~(4)~~

~~8% - 8%~~

~~(8%)~~

~~25%~~17% - 27%

~~(26%~~(24%)

~~Residential mortgage loan commitments~~

~~Adjusted market bid~~

~~Pull-through rate~~

~~82% - 100%~~

~~(86%)~~

Quantitative Information about Level 3 Fair Value Measurements

(dollars in thousands)

Fair Value
Estimate

Valuation Technique

Unobservable Input

Range

(Weighted Average)~~(4)~~

December 31, ~~2021~~2022

Asset-backed securities

~~142,885~~73,266

Discounted cash flow

Discount rate

Annualized loss rate

Constant prepayment rate

9% - 9%

(9%)

4% - 5%

(5%)

4%19% - 4%25%

~~(4%)~~

~~17% - 33%~~

~~(19%)~~

~~Collateral-dependent loans – real estate~~

~~4,170~~

~~Collateral appraisal~~ ~~(1)~~

~~Liquidation expenses~~ ~~(2)~~

~~8% - 8%~~

~~(8%)~~

~~Collateral-dependent loans – commercial and industrial~~

~~951~~

~~Collateral appraisal~~ ~~(1)~~

~~Business asset valuation~~ ~~(3)~~

~~Liquidation expenses~~ ~~(2)~~

~~Business asset valuation adjustments~~ ~~(4)~~

~~8% - 26%~~

~~(12%)~~

~~20% - 20%~~

~~(20%~~(23%)

~~Residential mortgage loan commitments~~

~~179~~

~~Adjusted market bid~~

~~Pull-through rate~~

~~76% - 89%~~

~~(85%)~~

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

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

~~(3)Business asset valuation obtained from independent party.~~

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

~~Table of Conte~~n ts

NOTE 1514 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Risk Management Objectives of Using Derivatives

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

~~Cash Flow Hedges of Interest-Rate Risk~~

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

The changes in the fair value of derivatives designated and qualifying as cash flow hedges are recorded in AOCI and subsequently reclassified into earnings in the period that the hedged item affects earnings. To date, such derivatives were used to hedge the variable cash flows associated with the forecasted issuances of debt and a certain variable-rate deposit relationship.

Customers discontinues cash flow hedge accounting if it is probable the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in AOCI are reclassified immediately into earnings and any subsequent changes in the fair value of such derivatives are recognized directly in earnings. During the nine months ended September 30, 2021, Customers terminated four interest rate derivatives with notional amounts totaling $850 million that were designated as cash flow hedges of interest-rate risk associated with 3-month FHLB advances, and reclassified $25.9 million of the realized losses and accrued interest from AOCI to current earnings because the hedged forecasted transactions were determined to be no longer probable of occurring. Customers hedged its exposure to the variability in future cash flows for a variable-rate deposit, which matured in June 2021. At September 30, 2022 and December 31, 2021, Customers had no interest rate derivative designated as cash flow hedges of interest rate risk.

Fair Value Hedges of Benchmark Interest-Rate Risk

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

Table of Contents

At ~~September 30, 2022,~~March 31, 2023, Customers had three outstanding interest rate derivatives with notional amounts totaling $22.5 million that were designated as fair value hedges of certain AFS debt securities. During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, Customers entered into, and terminated ~~four and thirteen~~two interest rate derivatives with notional amounts totaling ~~$10.0~~$550.0 million ~~and $58.0 million, respectively,~~ that were designated as fair value hedges ~~together with~~of certain deposits and FHLB advances resulting in $4.6 million of basis adjustments which will be amortized over the ~~sale~~remaining terms of the hedged ~~AFS debt securities.~~items as a reduction in interest expense. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, Customers terminated ~~eight~~two interest rate derivatives with notional amounts totaling ~~$191.8~~$16.5 million that were designated as fair value hedges together with the sale of hedged AFS debt securities. At December 31, ~~2021,~~2022, Customers had 16three outstanding interest rate derivatives with notional amounts totaling ~~$80.5~~$22.5 million designated as fair value ~~hedges.~~

~~Table~~hedges of ~~Conte~~n ts

certain AFS debt securities.

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


		Amortized Cost				Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items					Amortized Cost				Cumulative Amount of Fair Value Hedging Adjustment to Hedged Items
(amounts in thousands)	(amounts in thousands)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021		(amounts in thousands)	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
AFS debt securities	AFS debt securities	$	22,500	$	80,500	$	1,885	$	1,750	AFS debt securities	$	22,500	$	22,500	$	1,476	$	1,777
Deposits										Deposits	300,000		—		2,487		—
FHLB advances										FHLB advances	250,000		—		2,143		—

Derivatives Not Designated as Hedging Instruments

Customers executes interest rate swaps (typically the loan customers will swap a floating-rate loan for a fixed-rate loan) and interest rate caps with commercial banking customers to facilitate their respective risk management strategies. The customer interest rate swaps and interest rate caps are simultaneously offset by interest rate swaps and interest rate caps that Customers executes with a third party in order to minimize interest-rate risk exposure resulting from such transactions. As the interest rate swaps and interest rate caps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and caps and the offsetting third-party market swaps and caps are recognized directly in earnings. At ~~September 30, 2022,~~March 31, 2023, Customers had ~~147~~139 interest rate swaps with an aggregate notional amount of $1.3 billion and 12 interest rate caps with an aggregated notional amount of ~~$242.3~~$244.6 million related to this program. At December 31, ~~2021,~~2022, Customers had ~~153~~141 interest rate swaps with an aggregate notional amount of ~~$1.4~~$1.3 billion and 1412 interest rate caps with an aggregate notional amount of ~~$264.7~~$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 applicable accounting guidance and are reported at fair value, with changes in fair value recorded directly in earnings. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Customers had an aggregate notional amount of residential mortgage loan commitments of ~~$1.8~~$3.3 million and ~~$8.2~~$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 recorded directly in earnings. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Customers had an aggregate notional amount of credit derivatives of ~~$143.1~~$123.5 million and ~~$129.9~~$142.0 million, respectively.

Table of Contents

Fair Value of Derivative Instruments on the Balance Sheet

The following tables present the fair value of Customers' derivative financial instruments as well as their presentation on the consolidated balance sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		September 30, 2022							March 31, 2023
		Derivative Assets			Derivative Liabilities				Derivative Assets			Derivative Liabilities
(amounts in thousands)	(amounts in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		(amounts in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Derivatives designated as fair value hedges:	Derivatives designated as fair value hedges:							Derivatives designated as fair value hedges:
Interest rate swaps	Interest rate swaps	Other assets	$	1,885	Other liabilities	$	—	Interest rate swaps	Other assets	$	1,476	Other liabilities	$	—
Total	Total		$	1,885		$	—	Total		$	1,476		$	—
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Interest rate swaps and caps	Interest rate swaps and caps	Other assets	$	44,492	Other liabilities	$	43,727	Interest rate swaps and caps	Other assets	$	33,210	Other liabilities	$	32,956

Credit contracts	Credit contracts	Other assets	33		Other liabilities	—		Credit contracts	Other assets	—		Other liabilities	43
Residential mortgage loan commitments	Residential mortgage loan commitments	Other assets	41		Other liabilities	—		Residential mortgage loan commitments	Other assets	65		Other liabilities	—

Total	Total		$	44,566		$	43,727	Total		$	33,275		$	32,999

~~Table of Conte~~n ts


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

Derivatives designated as fair value hedges:	Derivatives designated as fair value hedges:							Derivatives designated as fair value hedges:
Interest rate swaps	Interest rate swaps	Other assets	$	1,750	Other liabilities	$	—	Interest rate swaps	Other assets	$	1,777	Other liabilities	$	—
Total	Total		$	1,750		$	—	Total		$	1,777		$	—
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Interest rate swaps and caps	Interest rate swaps and caps	Other assets	$	25,235	Other liabilities	$	26,343	Interest rate swaps and caps	Other assets	$	42,589	Other liabilities	$	42,076

Credit contracts	Credit contracts	Other assets	131		Other liabilities	201		Credit contracts	Other assets	14		Other liabilities	30
Residential mortgage loan commitments	Residential mortgage loan commitments	Other assets	179		Other liabilities	—		Residential mortgage loan commitments	Other assets	55		Other liabilities	—

Total	Total		$	25,545		$	26,544	Total		$	42,658		$	42,106

Effect of Derivative Instruments on Net Income

The following table presents amounts included in the consolidated statements of income related to derivatives designated as fair value hedges and derivatives not designated as hedges for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.


			Amount of Income (Loss) Recognized in Earnings										Amount of Income (Loss) Recognized in Earnings
			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
(amounts in thousands)	(amounts in thousands)	Income Statement Location	2022		2021		2022		2021		(amounts in thousands)	Income Statement Location	2023		2022
Derivatives designated as fair value hedges:	Derivatives designated as fair value hedges:										Derivatives designated as fair value hedges:
Recognized on interest rate swaps	Recognized on interest rate swaps	Net interest income	$	510	$	—	$	3,530	$	4,777	Recognized on interest rate swaps	Net interest income	$	(301)	$	2,521
Recognized on hedged AFS debt securities	Recognized on hedged AFS debt securities	Net interest income	(510)		—		(3,530)		(4,777)		Recognized on hedged AFS debt securities	Net interest income	301		(2,521)

Total	Total		$	—	$	—	$	—	$	—	Total		$	—	$	—
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:										Derivatives not designated as hedging instruments:
Interest rate swaps and caps	Interest rate swaps and caps	Non-interest income (1)	$	503	$	517	$	2,244	$	2,540	Interest rate swaps and caps	Other non-interest income	$	(24)	$	961

Credit contracts	Credit contracts	Non-interest income (1)	60		7		104		81		Credit contracts	Other non-interest income	(28)		3
Residential mortgage loan commitments	Residential mortgage loan commitments	Non-interest income (2)	(57)		(138)		(139)		(37)		Residential mortgage loan commitments	Other non-interest income	11		(31)

Total	Total		$	506	$	386	$	2,209	$	2,584	Total		$	(41)	$	933

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

~~(2) Included in mortgage banking income.~~

~~Effect of Derivative Instruments on Comprehensive Income~~

~~The following tables present the effect of Customers' derivative financial instruments on comprehensive income for the three and nine months ended September 30, 2022 and 2021.~~
Amount of Gain (Loss) Recognized in OCI on Derivatives (1)
Location of Gain (Loss) Reclassified from Accumulated OCI into Income Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
Three Months Ended September 30, Three Months Ended September 30,
(amounts in thousands) 2022 2021 2022 2021
Derivatives in cash flow hedging relationships:
Interest rate swaps $ — $ — Interest expense $ — $ —

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Table of ~~Conte~~n tContents

Amount of Gain (Loss) Recognized in OCI on Derivatives (1)
Location of Gain (Loss) Reclassified from Accumulated OCI into Income Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
Nine Months Ended September 30, Nine Months Ended September 30,
(amounts in thousands) 2022 2021 2022 2021
Derivatives in cash flow hedging relationships:
Interest rate swaps $ — $ 9,117 Interest expense $ — $ (2,505)
Non-interest income (2)
— (24,467)
Total $ — $ (26,972)

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

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

Credit-risk-related Contingent Features

By entering into derivative contracts, Customers is exposed to credit risk. The credit risk associated with derivatives executed with customers is the same as that involved in extending the related loans and is subject to the same standard credit policies. To mitigate the credit-risk exposure to major derivative dealer counterparties, Customers only enters into agreements with those counterparties that maintain credit ratings of high quality or with central clearing parties.

Agreements with major derivative dealer counterparties contain provisions whereby default on any of Customers' indebtedness would be considered a default on its derivative obligations. Customers also has entered into agreements that contain provisions under which the counterparty could require Customers to settle its obligations if Customers fails to maintain its status as a well/adequately capitalized institution. As of ~~September 30, 2022,~~March 31, 2023, the fair value of derivatives in a net asset position (which includes accrued interest but excludes any adjustment for nonperformance-risk) related to these agreements was ~~$31.5~~$21.0 million. In addition, Customers, which has collateral posting thresholds with certain of these counterparties, had received ~~$29.8~~$23.0 million of cash as collateral at ~~September 30, 2022.~~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 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 tables below. Interest rate swaps and interest rate caps with commercial banking customers and residential mortgage loan commitments are not subject to master netting arrangements and are excluded from the tables below. Customers has not made a policy election to offset its derivative positions.


		Gross Amounts Recognized on the Consolidated Balance Sheets				Gross Amounts Not Offset in the Consolidated Balance Sheet							Net Amount			Gross Amounts Recognized on the Consolidated Balance Sheet			Gross Amounts Not Offset in the Consolidated Balance Sheet				Net Amount
(amounts in thousands)	(amounts in thousands)			Financial Instruments	Cash Collateral Received/Posted	Net Amount		(amounts in thousands)	Gross Amounts Recognized on the Consolidated Balance Sheet			Financial Instruments						Net Amount
September 30, 2022
March 31, 2023															March 31, 2023
Interest rate derivative assets with institutional counterparties	Interest rate derivative assets with institutional counterparties	$	31,495			$	—			$	(31,495)		$	—	Interest rate derivative assets with institutional counterparties	$	22,073		$	(1,061)	$	(21,012)	$	—

Interest rate derivative liabilities with institutional counterparties	Interest rate derivative liabilities with institutional counterparties	$	—			$	—			$	—		$	—	Interest rate derivative liabilities with institutional counterparties	$	1,061		$	(1,061)	$	—	$	—

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		Gross Amounts Recognized on the Consolidated Balance Sheets				Gross Amounts Not Offset in the Consolidated Balance Sheet							Net Amount			Gross Amounts Recognized on the Consolidated Balance Sheet			Gross Amounts Not Offset in the Consolidated Balance Sheet				Net Amount
(amounts in thousands)	(amounts in thousands)			Financial Instruments	Cash Collateral Received/Posted	Net Amount		(amounts in thousands)	Gross Amounts Recognized on the Consolidated Balance Sheet			Financial Instruments						Net Amount
December 31, 2021
December 31, 2022															December 31, 2022
Interest rate derivative assets with institutional counterparties	Interest rate derivative assets with institutional counterparties	$	—			$	—			$	—		$	—	Interest rate derivative assets with institutional counterparties	$	29,706		$	(619)	$	(29,087)	$	—

Interest rate derivative liabilities with institutional counterparties	Interest rate derivative liabilities with institutional counterparties	$	23,348			$	—			$	(23,348)		$	—	Interest rate derivative liabilities with institutional counterparties	$	619		$	(619)	$	—	$	—

NOTE 1615 — LOSS CONTINGENCIES

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

~~Specialty’s Café Bakery, Inc. Matter~~

On May 27, 2020, the appointed Chapter 7 Trustee for Specialty’s Café Bakery, Inc. (“Debtor”) filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Central District of California. On October 28, 2020, the Trustee, as plaintiff, filed her amended adversary complaint (“Adversary Complaint”) against the Bank and the SBA seeking to avoid and recover for the benefit of the Debtor’s estate and its creditors the payment made by the Debtor to the Bank in the amount of $8.1 million in satisfaction of a PPP loan made by the Bank to the Debtor (the “PPP Loan Payment”). The Trustee sought to avoid and recover the entire PPP Loan Payment from the Bank under the authority provided in 11 U.S.C. §547 and §550, which together permit a trustee of a bankruptcy debtor to avoid and recover, for a more equitable distribution among all creditors, certain transfers made within ninety (90) days before the filing of the bankruptcy petition. On December 2, 2021, the Bank filed a motion for summary judgement, arguing that the Trustee had failed to establish the elements under 11 U.S.C. §547 necessary to recover the PPP Loan Payment and other affirmative defenses to any such recovery. On February 2, 2022, the United States Bankruptcy Court for the Central District of California granted the Bank’s motion for summary judgment, finding that the PPP Loan Payment was not recoverable by the Trustee. The Trustee has elected not to appeal this decision and, on February 23, 2022, the case against the Bank was closed by the United States Bankruptcy Court for the Central District of California.

~~NOTE 17 – SUBSEQUENT EVENTS~~

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

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

Cautionary Note Regarding Forward-Looking Statements

This report and all attachments hereto, as well as other written or oral communications made from time to time by us, may contain forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “~~may,~~“may,” “~~could,~~“could,” “~~should,~~“should,” “~~pro~~“pro forma,” “~~looking~~“looking forward,” “~~would,~~“would,” “~~believe,~~“believe,” “~~expect,~~“expect,” “~~anticipate,~~“anticipate,” “~~estimate,~~“estimate,” “~~intend,~~“intend,” “~~plan,~~“plan,” “~~project,~~“project,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, the impact of ~~the ongoing pandemic~~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 the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, ~~2021,~~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 to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.

Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the "Bancorp" or "Customers Bancorp"), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the "Bank"), collectively referred to as "Customers" herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers' financial condition and results of operations as of and for the three ~~and nine~~ months ended ~~September 30, 2022.~~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' ~~2021~~2022 Form 10-K.

Overview

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

Customers Bancorp completed the divestiture of BankMobile Technologies, Inc., the technology arm of its BankMobile segment, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC on January 4, 2021. Following the completion of the divestiture of BMT, BankMobile's serviced deposits and loans and the related net interest income have been combined with Customers’ financial condition and the results of operations as a single reportable segment. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation. For additional information refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements.

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~~Customers Bank provides blockchain-based digital payments via the Customers Bank Instant Token, or CBIT~~TM~~, which allows commercial clients to make instant payments in U.S. dollars. CBIT on the TassatPay~~TM blockchain-based instant B2B payments platform serves a growing array of B2B clients who want the benefit of instant payments: including key over-the-counter desks, exchanges, liquidity providers, market makers, funds, and B2B verticals such as trading operations, real estate, manufacturing, and logistics. CBIT may only be created or minted by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. CBIT is not listed or traded on any digital currency exchange. As of September 30, 2022 and December 31, 2021, Customers Bank held $1.9 billion of low cost deposits from customers participating in CBIT, which are reported as deposit liabilities in the consolidated balance sheets.

The primary business purpose for the CBIT instant payment platform is to provide a closed-system for intrabank commercial transactions and is not intended to be a trading platform for tokens or digital assets. 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 payment platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The omnibus deposit account had an outstanding balance of $50 thousand at September 30, 2022 and no outstanding balance at December 31, 2021.

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 87 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' unaudited consolidated financial statements.

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

The spread of COVID-19 and its variants since early 2020 has created a global public health crisis that has resulted in volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that Customers serves. Governmental responses during the early stages of the pandemic have included emergency response legislation including the CARES Act and subsequent amendments and the Federal Reserve Board maintaining a low interest rate environment. The CARES Act included the SBA's PPP, a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. The PPP ended on May 31, 2021. Customers has helped thousands of small businesses by funding over $10 billion in PPP loans directly or through partnerships. The Federal Reserve Board also established a range of facilities and programs to support the U.S. economy and U.S. marketplace participants in response to economic disruptions associated with COVID-19, including among others, the PPPLF, which was created to bolster the effectiveness of the PPP by taking PPP loans as collateral at face value. Customers participated in some of these facilities and programs, primarily the PPPLF. Customers fully repaid the borrowings from the PPPLF during the three months ended September 30, 2021. No new advances are available from the PPPLF after July 30, 2021. The U.S. economy has ~~since~~ strengthened ~~despite~~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 ~~Board has begun~~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 ~~with future~~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 ~~expected through 2022~~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 ~~beyond.~~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 ~~issues,~~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 ~~also~~ shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates ~~and increased its non-interest bearing and interest-bearing demand deposits~~ to position the Bank for ~~future~~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, ~~and macroeconomic uncertainties,~~ as well as any effects that may result from the federal government's responses including future rate ~~hikes;~~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 ~~macroeconomic factors~~developments in the U.S. banking system will impact Customers' operations and financial results during the remainder of ~~2022 and into~~ 2023 is highly uncertain.

New Accounting Pronouncements

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

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Critical Accounting Policies and Estimates

Customers has adopted various accounting policies that govern the application of U.S. GAAP and that are consistent with general practices within the banking industry in the preparation of its consolidated financial statements. Customers' significant accounting policies are described in "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" in Customers' audited consolidated financial statements included in its ~~2021~~2022 Form 10-K and updated in this Form 10-Q for the quarterly period ended ~~September 30, 2022~~March 31, 2023 in "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" in Customers' unaudited consolidated financial statements.

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

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

Allowance for Credit Losses

Customers' ACL at ~~September 30, 2022~~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 ~~judgement~~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 ~~Bank's Chief Executive Officer,~~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 ~~judgements~~judgments and the related disclosures are reviewed by Customers' Audit Committee of the Board of Directors.

The net decrease in our estimated ACL as of ~~September 30, 2022~~March 31, 2023 as compared to our December 31, ~~2021~~2022 estimate was primarily attributable to ~~the sale of $521.8 million~~a decrease in consumer installment loans, ~~inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE,~~ partially offset by loan growth and deteriorating macroeconomic forecasts. The sale of consumer installment loans was a part of Customers' balance sheet optimization initiatives to deploy capital efficiently in a rising interest rate and uncertain macroeconomic environment. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional ~~information on the sale of consumer installment loans. There was a benefit to~~ provision for credit losses ~~on loans and leases~~from the recognition of ~~$7.8 million and~~weaker macroeconomic forecasts. There was a provision for credit losses on loans and leases of ~~$31.6~~$18.0 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, resulting in an ACL ending balance of ~~$133.1~~$133.6 million ($~~130.2~~130.3 million for loans and leases and ~~$2.9~~$3.3 million for unfunded lending-related commitments) as of ~~September 30, 2022.~~

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March 31, 2023.

To determine the ACL as of ~~September 30,~~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.

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As of December 31, 2022, the ACL ending balance was $133.9 million ($130.9 million for loans and leases and $3.0 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2022, Customers utilized the Moody's ~~September~~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 ~~September~~December 31, 2022 assumed lower growth ~~rate~~rates in macroeconomic forecasts compared to the ~~second quarter 2022~~macroeconomic forecasts ~~of macroeconomic conditions~~ used by ~~Customers;~~Customers in 2021; oil prices remaining volatile, but gradually declining by mid-2023, from recession fears, weakening global economies and the ~~impact of~~embargo on Russian crude oil from the Russian invasion of ~~Ukraine on the U.S. economy would be limited and the disruptions to oil, natural gas and other commodity markets will be temporary;~~Ukraine; COVID-19 ~~will be endemic and seasonal and~~ becoming less disruptive to global supply chains, tourism and business travel, immigration and labor markets; the Federal Reserve ~~Board front-loading rate hikes and~~ raising the effective fed funds rate to ~~3.5% by~~just under 5.0% and cutting the ~~end of 2022;~~fed funds rate beginning in late 2023 and throughout 2024; the CPI rising ~~8.0%~~4.1% in ~~2022~~2023 and ~~3.8%~~2.4% in ~~2023;~~2024; and the ~~U.S. economy achieving full-employment with a 3.5%~~ unemployment rate ~~in 2022 and~~ rising to 4.0% in 2023 ~~as the effect of tighter monetary policy starts to be felt. Customers continues to monitor the impact of the military conflict between Russia~~ and Ukraine, COVID-19 and its variants, supply-chain disruptions, inflation, and related policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

As of December 31, 2021, the ACL ending balance was $139.9 million ($137.8 million for loans and leases and $2.1 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2021, Customers utilized the Moody's December 2021 Baseline forecast to generate its modelled expected losses by loan portfolio4.1% in order to reflect management's reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2021 assumed continued improvement in forecasts of macroeconomic conditions compared to the forecasts of macroeconomic conditions used by Customers in 2020; the Federal Reserve Board has accelerated its tapering process in the fourth quarter of 2021 and the first rate hike is assumed to occur in 2022; a continuing U.S. economic recovery from federal spending and abatement of the COVID-19 pandemic, notwithstanding the impact of the Omicron variant; and the acceleration in consumer prices is expected to peak and moderate in the near-term as the supply chain issues subside.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 ~~worsening significantly and~~ persisting longer ~~causing oil prices to rise more sharply~~ than the Baseline projections, new infections, hospitalizations and COVID-19 deaths rising significantly again as compared to the Baseline projections, slowing growth in consumer spending on air travel, retail and hotels,expected, worsening supply chain ~~issues boosting inflation, the Fed’s response to raise interest rates higher than the Baseline projections,~~conditions, rising unemployment and the U.S. economy falling into recession in the ~~fourth~~second quarter of ~~2022.~~2023. Under this scenario, as an example, the unemployment rate is estimated at ~~4.2%~~5.6% and ~~7.3% at the end of 2022~~7.6% in 2023 and ~~2023,~~2024, respectively. These numbers represent a ~~0.5%~~2.1% and ~~3.4%~~3.7% higher unemployment estimate than the Baseline scenario projection of ~~3.7%~~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 ~~$50.9~~$38 million at ~~September 30, 2022.~~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, ~~see~~refer to "NOTE 87 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' unaudited consolidated financial statements.

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Results of Operations

The following table sets forth the condensed statements of income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended September 30,				QTD				Nine Months Ended September 30,				YTD					Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2022		2021		Change		% Change		2022		2021		Change		% Change		(dollars in thousands)	2023		2022		Change		% Change
Net interest income	Net interest income	$	159,032	$	219,892	$	(60,860)	(27.7)	%	$	488,583	$	491,380	$	(2,797)	(0.6)	%	Net interest income	$	149,899	$	164,699	$	(14,800)	(9.0)	%
Provision for credit losses	Provision for credit losses	(7,994)		13,164		(21,158)		(160.7)	%	31,850		13,536		18,314		135.3	%	Provision for credit losses	19,603		15,997		3,606		22.5	%
Total non-interest income	Total non-interest income	(9,017)		25,586		(34,603)		(135.2)	%	24,927		60,876		(35,949)		(59.1)	%	Total non-interest income	18,121		21,198		(3,077)		(14.5)	%
Total non-interest expense	Total non-interest expense	76,198		80,009		(3,811)		(4.8)	%	226,210		212,759		13,451		6.3	%	Total non-interest expense	80,133		73,807		6,326		8.6	%
Income before income tax expense	Income before income tax expense	81,811		152,305		(70,494)		(46.3)	%	255,450		325,961		(70,511)		(21.6)	%	Income before income tax expense	68,284		96,093		(27,809)		(28.9)	%
Income tax expense	Income tax expense	17,899		36,263		(18,364)		(50.6)	%	56,127		73,947		(17,820)		(24.1)	%	Income tax expense	14,563		19,332		(4,769)		(24.7)	%
Net income from continuing operations		63,912		116,042		(52,130)		(44.9)	%	199,323		252,014		(52,691)		(20.9)	%
Loss from discontinued operations before income taxes		—		—		—		NM		—		(20,354)		20,354		(100.0)	%
Income tax expense from discontinued operations		—		—		—		NM		—		17,682		(17,682)		(100.0)	%
Net loss from discontinued operations		—		—		—		NM		—		(38,036)		38,036		(100.0)	%

Net income	Net income	63,912		116,042		(52,130)		(44.9)	%	199,323		213,978		(14,655)		(6.8)	%	Net income	53,721		76,761		(23,040)		(30.0)	%
Preferred stock dividends	Preferred stock dividends	2,548		2,981		(433)		(14.5)	%	6,544		9,671		(3,127)		(32.3)	%	Preferred stock dividends	3,456		1,865		1,591		85.3	%
Loss on redemption of preferred stock		—		2,820		(2,820)		(100.0)	%	—		2,820		(2,820)		(100.0)	%

Net income available to common shareholders	Net income available to common shareholders	$	61,364	$	110,241	$	(48,877)	(44.3)	%	$	192,779	$	201,487	$	(8,708)	(4.3)	%	Net income available to common shareholders	$	50,265	$	74,896	$	(24,631)	(32.9)	%

Customers reported net income available to common shareholders of ~~$61.4 million and $192.8~~$50.3 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, compared to net income available to common shareholders of ~~$110.2 million and $201.5~~$74.9 million for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022. Factors contributing to the change in net income available to common shareholders for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 were as follows.

Net interest income

recognition of net deferred loan origination fees, offset in part by an increase in commercial and industrial loans and leases, ~~primarily~~mostly due to higher interest rates on variable rate loans in specialty lending. Average interest-earning assets increased by ~~$987.6 million, and NIM decreased by 143 basis points to 3.16%~~$1.9 billion for the three months ended ~~September 30, 2022 from 4.59% for~~March 31, 2023, compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in interest-earning assets was driven by increases in commercial and industrial loans and leases, primarily in specialty lending ~~investment securities, multi-family, installment~~ and ~~residential mortgage~~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 lower level of PPP loan forgiveness, which accelerated~~NIM decreased by 64 basis points to 2.96% for the ~~recognition of net deferred loan origination fees, offset in part by a shift in~~three months ended March 31, 2023 from 3.60% for the ~~mix of interest-earning assets in a rising interest rate environment drove a 38 basis point decrease in the yield on interest-earning assets and contributed to the NIM decrease.~~three months ended March 31, 2022. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a ~~133~~331 basis point increase in the cost of interest-bearing liabilities and ~~also~~ contributed to the NIM decrease for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the~~ NIM decrease was $1.2 billion ($1.3 billion average balance) of PPP loans yielding 4.31% and $7.1 billion ($6.7 billion average balance) of interest checking accounts costing 2.00%. Non-interest bearing demand deposits were $3.0 billion ($3.2 billion average balance). PPPLF borrowings costing 0.35% were fully repaid during the three months ended September 30, 2021. Customers' total cost of funds, including non-interest bearing deposits was 1.62% and 0.50% for the three months ended September 30, 2022 and 2021, respectively.

~~Table of Conte~~n ts

~~recognition of net deferred loan origination fees,~~partially offset ~~in part~~ by an increase in commercial and industrial loans and leases, primarily in specialty lending. Average interest-earning assets increased by $815.6 million, and NIM decreased by 17 basis points to 3.38% for the nine months ended September 30, 2022 from 3.55% for the nine months ended September 30, 2021. The increase in interest-earning assets was driven by increases in commercial and industrial loans and leases, primarily in specialty lending, investment securities, installment, multi-family and residential mortgage loans, offset in part by decreases in PPP loans due to PPP loan forgiveness and commercial loans to mortgage companies. Thea 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, ~~and equity investment distributions,~~ which ~~are included in other interest income,~~ drove a 17221 basis point increase in the yield on interest-earning assets. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 52 basis point increase in the cost of interest-bearing liabilities and contributed to the NIM decrease for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was ~~$1.2~~$5.5 billion in ending balance ($~~1.9~~5.7 billion average balance) of ~~PPP~~commercial and industrial loans and leases in specialty lending yielding ~~4.95%~~7.38% and ~~$7.1~~$5.5 billion in ending balance ($~~6.3~~4.5 billion average balance) of ~~interest checking accounts~~certificates of deposit costing ~~1.17%. Non-interest bearing demand deposits were $3.0 billion ($4.2 billion average balance). PPPLF borrowings costing 0.35% were fully repaid during~~4.18% at and for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2023. Customers' total cost of funds, including non-interest bearing deposits was ~~0.93%~~3.45% and ~~0.57%~~0.43% for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Provision ~~(benefit)~~ for credit losses

The ~~$21.2~~$3.6 million ~~decrease~~increase in the provision for credit losses for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021,~~March 31, 2022, primarily reflects the ~~sale~~recognition of ~~consumer installment loans to a third-party sponsored VIE, partially offset by loan growth and deteriorating~~weaker macroeconomic forecasts. ~~Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans.~~ The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment represented ~~1.03%~~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)~~Risk), at ~~September 30, 2022,~~March 31, 2023, compared to ~~1.65%~~1.44% at ~~September 30, 2021.~~March 31, 2022. Net charge-offs for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$18.5~~$18.7 million, or 4749 basis points of average loans and leases on an annualized basis, compared to net charge-offs of ~~$7.1~~$7.2 million, or 1721 basis points on an annualized basis, for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in net charge-offs for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021,~~March 31, 2022, was primarily due to ~~a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit and~~ higher charge-offs for consumer installment loans.

Table of Contents

The ~~$18.3 million increase in the~~ provision for credit losses for the ~~nine~~three months ended ~~September 30, 2022 compared to the nine months ended September 30, 2021, primarily reflects loan growth~~March 31, 2023 and deteriorating macroeconomic forecasts, partially offset by the sale of consumer installment loans to a third-party sponsored VIE. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans. Net charge-offs for the nine months ended September 30, 2022 were $39.2 million, or 36 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $26.2 million, or 22 basis points of average loans and leases on an annualized basis, for the nine months ended September 30, 2021. The increase in net charge-offs for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, was primarily due to a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit, and higher charge-offs for consumer installment loans and overdrawn deposit accounts.

~~The provision (benefit) for credit losses for the three and nine months ended September 30,~~ 2022 also included ~~a benefit to provision for credit losses of $0.2 million and~~ a provision for credit losses of ~~$0.3~~$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 65 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

Non-interest income

The ~~$34.6~~$3.1 million decrease in non-interest income for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 primarily resulted from ~~$23.5~~decreases of $5.7 million in ~~loss on sale of consumer installment loans to a third-party sponsored VIE, and decreases of $8.2~~bank-owned life insurance income, $1.5 million in gain ~~(loss) on sale of investment securities, $5.3 million in gain (loss)~~ on sale of SBA and other loans, and $1.6 million in mortgage warehouse transactional fees. These decreases were offset in part by increases of $1.9 million in commercial lease income, $1.5 million in bank-owned life insurance income and $1.1 million in loan fees for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

~~Table of Conte~~n ts

The $35.9 million decrease in non-interest income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from $23.5 million in loss on sale of consumer installment loans to a third-party sponsored VIE, and decreases of $37.7 million in gain (loss) on sale of investment securities, $5.7 million in gain (loss) on sale of SBA and other loans, $5.2$0.9 million in mortgage warehouse transactional fees ~~$3.5 million in unrealized gain (loss) on investment securities~~ and ~~$1.4~~$0.9 million in other non-interest income. These decreases were offset in part by ~~$24.5 million of loss on cash flow hedge derivative terminations and $2.8 million of loss on sale of foreign subsidiaries for the nine months ended September 30, 2021, and~~ increases of ~~$7.3 million in bank-owned life insurance income, $3.9~~$3.4 million in commercial lease income and ~~$3.2~~$1.4 million in loan fees and a decrease of $1.1 million in net loss on sale of investment securities for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Non-interest expense

The ~~$3.8~~$6.3 million ~~decrease~~increase in non-interest expense for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 primarily resulted from $6.2 million in deposit relationship adjustment fees for the three months ended September 30, 2021, and decreases of $1.9 million in other non-interest expense, $1.7 million in technology, communication and bank operations, $0.6 million in professional services and $0.4 million in loan servicing. These decreases were offset in part by increases of ~~$5.0~~$5.7 million in salaries and employee benefits, ~~$1.5~~$2.9 million in commercial lease depreciation, ~~$0.5~~$2.3 million in loan servicing, $1.4 million in other non-interest expense, $0.7 million in advertising and promotion and ~~$0.2 million in FDIC assessments, non-income taxes, and regulatory fees for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.~~

The $13.5 million increase in non-interest expense for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from increases of $5.5 million in technology, communication and bank operations, $4.9 million in salaries and employee benefits, $4.2 million in loan servicing, $3.3 million in commercial lease depreciation, $2.1 million in occupancy and $1.0$0.6 million in professional services. These increases were offset in part by ~~$6.2~~a decrease of $7.5 million in ~~deposit relationship adjustment fees~~technology, communication and bank operations for the ~~nine~~three months ended ~~September 30, 2021, and decreases of $1.1 million in FDIC assessments, non-income taxes, and regulatory fees for the nine months ended September 30, 2022~~March 31, 2023 compared to the ~~nine~~three months ended September 30, 2021. The merger and acquisition related expenses decreased $0.4 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 as the divestiture of BMT was completed on January 4, 2021.March 31, 2022.

Income tax expense

Customers' effective tax rate ~~from continuing operations~~ was ~~21.9%~~21.3% for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~23.8%~~20.1% for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~decrease~~increase in the effective tax rate primarily resulted from ~~higher investment tax credits and~~lower death benefits from bank-owned life insurance policies ~~for 2022~~ and ~~a decrease in~~stock-based compensation ~~expense associated with an executive's retirement that exceeded the limit for tax deduction purposes for 2021.~~

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

~~Net loss from discontinued operations~~

BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying unaudited consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation.

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

Customers had no loss from discontinued operations, net of income taxes for the nine months ended September 30, 2022 compared to $38.0 million for the nine months ended September 30, 2021. The $38.0 million decrease primarily resulted from restricted stock awards of BM Technologies' common stock granted to certain team members of BMT and the effect of the divestiture being treated as a taxable asset sale for tax purposes, offset in part by a tax benefit related to the restricted stock awards during the nine months ended September 30, 2021. Refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements for additional information.

~~Table of Conte~~n ts

credits.

Preferred stock dividends ~~and loss on redemption of preferred stock~~

Preferred stock dividends were ~~$2.5~~$3.5 million and ~~$3.0~~$1.9 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~Preferred stock dividends were $6.5 million and $9.7 million for the nine months ended September 30, 2022 and 2021, respectively.~~

On September 15, 2021, Customers redeemed all of the outstanding shares of Series C and Series D Preferred Stock for an aggregate payment of $82.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series C and Series D Preferred Stock of $2.8 million was included as a loss on redemption of preferred stock in the consolidated statement of income for the three and nine months ended September 30, 2021. After giving effect to the redemption, no shares of the Series C and Series D Preferred Stock remained outstanding. There were no changes to the amount of preferred stock outstanding during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022.

~~On March 15, 2021, the Series D Preferred Stock became floating at three-month LIBOR plus 5.09%, compared to a fixed rate of 6.50%.~~ On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%. On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%. Pursuant to the Adjustable 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 26.161 basis points for three-month LIBOR as the benchmark reference rate in order to calculate dividends after June 30, 2023.

NET INTEREST INCOME

Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers' earnings. The following table summarizes Customers' net interest income, related interest spread, net interest margin and the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~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.

5851

Table of ~~Conte~~n tContents


		Three Months Ended September 30,												Three Months Ended September 30,							Three Months Ended March 31,												Three Months Ended March 31,
		2022						2021						2022 vs. 2021							2023						2022						2023 vs. 2022
(dollars in thousands)	(dollars in thousands)	Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Due to rate		Due to volume		Total		(dollars in thousands)	Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Average Balance		Interest Income or Expense		Average Yield or Cost (%)		Due to rate		Due to volume		Total
Assets	Assets																			Assets
Interest-earning deposits	Interest-earning deposits	$	528,001	$	2,949	2.22	%	$	1,279,983	$	490	0.15	%	$	2,904	$	(445)	$	2,459	Interest-earning deposits	$	914,149	$	10,395	4.61	%	$	826,240	$	329	0.16	%	$	10,027	$	39	$	10,066
Investment securities (1)	Investment securities (1)	3,770,922		30,546		3.24	%	1,511,319		8,905		2.36	%	4,320		17,321		21,641		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:	Loans and leases:																			Loans and leases:

Commercial and industrial:	Commercial and industrial:																			Commercial and industrial:
Specialty lending loans and leases (2)	Specialty lending loans and leases (2)	5,064,730		64,753		5.07	%	1,732,323		16,393		3.75	%	7,481		40,879		48,360		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)	Other commercial and industrial loans (2)	1,585,136		18,794		4.70	%	1,292,297		12,259		3.76	%	3,435		3,100		6,535		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 companies	Commercial loans to mortgage companies	1,623,624		17,092		4.18	%	2,658,020		21,065		3.14	%	5,702		(9,675)		(3,973)		Commercial loans to mortgage companies	1,262,139		17,412		5.59	%	1,836,647		14,006		3.09	%	8,770		(5,364)		3,406
Multi-family loans		2,206,953		20,427		3.67	%	1,443,846		13,259		3.64	%	110		7,058		7,168
Multifamily loans																				Multifamily loans	2,206,600		20,470		3.76	%	1,531,846		13,766		3.64	%	467		6,237		6,704
PPP loans	PPP loans	1,349,403		14,666		4.31	%	5,778,367		117,102		8.04	%	(38,624)		(63,812)		(102,436)		PPP loans	889,235		23,551		10.74	%	2,641,318		36,894		5.66	%	20,448		(33,791)		(13,343)
Non-owner occupied commercial real estate loans	Non-owner occupied commercial real estate loans	1,372,244		15,595		4.51	%	1,346,629		12,656		3.73	%	2,694		245		2,939		Non-owner occupied commercial real estate loans	1,449,722		20,199		5.65	%	1,312,210		12,207		3.77	%	6,604		1,388		7,992
Residential mortgages	Residential mortgages	513,694		5,008		3.87	%	325,851		2,874		3.50	%	331		1,803		2,134		Residential mortgages	542,909		5,598		4.18	%	416,417		3,680		3.58	%	682		1,236		1,918
Installment loans	Installment loans	1,938,199		44,122		9.03	%	1,615,411		37,489		9.21	%	(745)		7,378		6,633		Installment loans	1,727,995		39,425		9.25	%	1,794,145		39,963		9.03	%	958		(1,496)		(538)

Total loans and leases (3)	Total loans and leases (3)	15,653,983		200,457		5.08	%	16,192,744		233,097		5.71	%	(25,078)		(7,562)		(32,640)		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 assets	Other interest-earning assets	68,549		1,964		11.37	%	49,780		359		2.86	%	1,425		180		1,605		Other interest-earning assets	91,308		1,321		5.87	%	52,111		5,677		NM(6)		(6,906)		2,550		(4,356)
Total interest-earning assets	Total interest-earning assets	20,021,455		235,916		4.68	%	19,033,826		242,851		5.06	%	(19,000)		12,065		(6,935)		Total interest-earning assets	20,514,677		314,945		6.21	%	18,572,308		183,476		4.00	%	110,543		20,926		131,469
Non-interest-earning assets	Non-interest-earning assets	492,911						705,514												Non-interest-earning assets	538,243						557,022

Total assets	Total assets	$	20,514,366					$	19,739,340											Total assets	$	21,052,920					$	19,129,330
Liabilities	Liabilities																			Liabilities
Interest checking accounts	Interest checking accounts	$	6,669,787	33,685		2.00	%	$	4,537,421	7,677		0.67	%	21,030		4,978		26,008		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 accounts	Money market deposit accounts	5,789,991		24,348		1.67	%	5,131,433		5,569		0.43	%	17,979		800		18,779		Money market deposit accounts	2,470,004		20,783		3.41	%	4,880,051		4,674		0.39	%	19,501		(3,392)		16,109
Other savings accounts	Other savings accounts	625,908		1,818		1.15	%	1,376,077		1,750		0.50	%	1,380		(1,312)		68		Other savings accounts	822,312		6,286		3.10	%	880,113		784		0.36	%	5,556		(54)		5,502
Certificates of deposit	Certificates of deposit	1,141,970		5,529		1.92	%	614,404		919		0.59	%	3,338		1,272		4,610		Certificates of deposit	4,504,333		46,376		4.18	%	450,644		524		0.47	%	21,429		24,423		45,852
Total interest-bearing deposits (4)	Total interest-bearing deposits (4)	14,227,656		65,380		1.82	%	11,659,335		15,915		0.54	%	45,259		4,206		49,465		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 purchased	Federal funds purchased	513,011		2,871		2.22	%	—		—		—	%	—		2,871		2,871		Federal funds purchased	15,333		188		4.97	%	88,611		73		0.33	%	222		(107)		115
FRB PPP liquidity facility		—		—		—	%	2,788,897		2,460		0.35	%	—		(2,460)		(2,460)

Borrowings	Borrowings	874,497		8,633		3.92	%	371,077		4,584		4.90	%	(1,078)		5,127		4,049		Borrowings	1,788,116		20,928		4.75	%	532,610		4,992		3.80	%	1,528		14,408		15,936
Total interest-bearing liabilities	Total interest-bearing liabilities	15,615,164		76,884		1.95	%	14,819,309		22,959		0.62	%	52,608		1,317		53,925		Total interest-bearing liabilities	17,094,477		165,046		3.91	%	12,601,401		18,777		0.60	%	137,390		8,879		146,269
Non-interest-bearing deposits (4)	Non-interest-bearing deposits (4)	3,245,963						3,335,198												Non-interest-bearing deposits (4)	2,299,295						4,900,983
Total deposits and borrowings	Total deposits and borrowings	18,861,127				1.62	%	18,154,507				0.50	%							Total deposits and borrowings	19,393,772				3.45	%	17,502,384				0.43	%
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	255,735						310,519												Other non-interest-bearing liabilities	247,575						237,131

Total liabilities	Total liabilities	19,116,862						18,465,026												Total liabilities	19,641,347						17,739,515
Shareholders' equity	Shareholders' equity	1,397,504						1,274,314												Shareholders' equity	1,411,573						1,389,815
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	20,514,366					$	19,739,340											Total liabilities and shareholders' equity	$	21,052,920					$	19,129,330
Net interest income	Net interest income			159,032						219,892				$	(71,608)	$	10,748	$	(60,860)	Net interest income			149,899						164,699				$	(26,847)	$	12,047	$	(14,800)
Tax-equivalent adjustment ~~(5)~~	Tax-equivalent adjustment ~~(5)~~			334						290��										Tax-equivalent adjustment ~~(5)~~			375						239
Net interest earnings	Net interest earnings			$	159,366					$	220,182									Net interest earnings			$	150,274					$	164,938
Interest spread	Interest spread					3.06	%					4.56	%							Interest spread					2.76	%					3.57	%
Net interest margin	Net interest margin					3.16	%					4.58	%							Net interest margin					2.95	%					3.59	%
Net interest margin tax equivalent ~~(5)~~	Net interest margin tax equivalent ~~(5)~~					3.16	%					4.59	%							Net interest margin tax equivalent ~~(5)~~					2.96	%					3.60	%
Net interest margin tax equivalent, excluding PPP loans ~~(6)~~(5)	Net interest margin tax equivalent, excluding PPP loans ~~(6)~~(5)					3.18	%					3.24	%							Net interest margin tax equivalent, excluding PPP loans ~~(6)~~(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.

(2)Includes owner occupied commercial real estate loans.

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

(4)Total costs of deposits (including interest bearing and non-interest-bearing) were ~~1.48%~~3.32% and ~~0.42%~~0.33% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

(5)Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

~~Table of Conte~~n ts

~~(6)Non-GAAP tax-equivalent basis, as described in note (5) for the three months ended September 30, 2022~~asset and ~~2021,~~ excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities. Please refer to the reconciliation schedule that follows this table.

Table of Contents

(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 ~~$60.9~~$14.8 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021 as~~March 31, 2022 due to higher funding costs from a shift in the mix of interest-bearing liabilities in a rising interest ~~income~~rate environment and reduced recognition of net deferred loan origination fees from PPP loans ~~decreased due to~~driven by lower ~~levels of PPP~~ loan forgiveness, which accelerated the recognition of net deferred loan origination fees, offset in part by an increase in commercial and industrial loans and leases, ~~primarily~~mostly due to higher interest rates on variable rate loans in specialty lending. Average interest-earning assets increased by ~~$987.6 million,~~$1.9 billion, primarily related to increases in commercial and industrial loans and leases, primarily in specialty lending ~~investment securities, multi-family, installment~~ and ~~residential mortgage~~multifamily loans, ~~partially~~ 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. ~~Up until late 2021, the~~The commercial loans to mortgage companies trend had been a function of ~~greater~~ refinance activity, ~~due to sharply lower interest rates, an increase in home purchase volumes and market share gains from other banks since early 2020. The refinancing activity has~~which had slowed since reaching its high level in early 2021, and into 2022 and 2023 with rising interest rates.

The NIM decreased by ~~143~~64 basis points to ~~3.16%~~2.96% for the three months ended ~~September 30, 2022~~March 31, 2023 from ~~4.59%~~3.60% for the three months ended September 30, 2021 resulting primarily from lower PPP loan forgiveness and a shift in the mix of interest-bearing liabilities in a rising interest rate environment, offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment. The lower level of PPP loan forgiveness, which accelerated the recognition of net deferred loan origination fees, drove a 38 basis point decrease in the yield on interest-earning assets and contributed to the NIM decrease. The decrease in NIM was offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment, mostly in commercial and industrial loans and leases, primarily specialty lending. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 133 basis point increase in the cost of interest-bearing liabilities and also contributed to the NIM decrease for the three months ended September 30,March 31, 2022 compared to the three months ended September 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was $1.2 billion ($1.3 billion average balance) of PPP loans yielding 4.31% and $7.1 billion ($6.7 billion average balance) of interest checking accounts costing 2.00%. Non-interest bearing demand deposits were $3.0 billion ($3.2 billion average balance). PPPLF borrowings costing 0.35% were fully repaid during the three months ended September 30, 2021. Customers' total cost of funds, including non-interest bearing deposits was 1.62% and 0.50% for the three months ended September 30, 2022 and 2021, respectively.

~~Table of Conte~~n ts

Nine Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 vs. 2021
(dollars in thousands) Average
Balance Interest
Income or
Expense Average
Yield or
Cost (%) Average
Balance Interest
Income or
Expense Average
Yield or
Cost (%) Due to rate Due to volume Total
Assets
Interest-earning deposits $ 595,305 $ 4,197 0.94 % $ 1,034,923 $ 980 0.13 % $ 3,811 $ (594) $ 3,217
Investment securities (1)
3,969,809 76,283 2.56 % 1,461,070 25,211 2.30 % 3,154 47,918 51,072
Loans and leases:
Commercial and industrial:
Specialty lending loans and leases (2)
3,963,180 127,304 4.29 % 1,560,615 43,658 3.74 % 7,294 76,352 83,646
Other commercial and industrial loans (2)
1,496,772 46,768 4.18 % 1,357,028 38,631 3.81 % 3,949 4,188 8,137
Commercial loans to mortgage companies 1,785,495 46,713 3.50 % 2,837,549 65,925 3.11 % 7,514 (26,726) (19,212)
Multi-family loans 1,863,915 51,506 3.69 % 1,560,565 44,120 3.78 % (1,065) 8,451 7,386
PPP loans 1,946,651 72,132 4.95 % 5,515,819 197,071 4.78 % 6,786 (131,725) (124,939)
Non-owner occupied commercial real estate loans 1,331,037 40,551 4.07 % 1,354,745 38,637 3.81 % 2,599 (685) 1,914
Residential mortgages 482,263 13,586 3.77 % 348,369 9,486 3.64 % 349 3,751 4,100
Installment loans 1,881,160 128,013 9.10 % 1,470,024 101,294 9.21 % (1,225) 27,944 26,719
Total loans and leases (3)
14,750,473 526,573 4.77 % 16,004,714 538,822 4.50 % 31,300 (43,549) (12,249)
Other interest-earning assets 62,955 8,673
NM (7)
62,205 1,834 3.94 % 6,817 22 6,839
Total interest-earning assets 19,378,542 615,726 4.25 % 18,562,912 566,847 4.08 % 23,791 25,088 48,879
Non-interest-earning assets 526,437 632,202
Total assets $ 19,904,979 $ 19,195,114
Liabilities
Interest checking accounts $ 6,286,224 55,059 1.17 % $ 3,584,223 19,929 0.74 % 15,291 19,839 35,130
Money market deposit accounts 5,128,270 36,545 0.95 % 4,811,540 17,278 0.48 % 18,053 1,214 19,267
Other savings accounts 732,801 3,359 0.61 % 1,415,595 6,227 0.59 % 208 (3,076) (2,868)
Certificates of deposit 710,130 6,910 1.30 % 646,257 3,792 0.78 % 2,715 403 3,118
Total interest-bearing deposits (4)
12,857,425 101,873 1.06 % 10,457,615 47,226 0.60 % 42,058 12,589 54,647
Federal funds purchased 416,344 4,374 1.40 % 29,286 15 0.07 % 2,568 1,791 4,359
FRB PPP liquidity facility — — — % 3,525,560 9,229 0.35 % — (9,229) (9,229)
Borrowings 783,644 20,896 3.57 % 659,334 18,997 3.85 % (1,465) 3,364 1,899
Total interest-bearing liabilities 14,057,413 127,143 1.21 % 14,671,795 75,467 0.69 % 54,964 (3,288) 51,676
Non-interest-bearing deposits (4)
4,206,778 3,016,837
Total deposits and borrowings 18,264,191 0.93 % 17,688,632 0.57 %
Other non-interest-bearing liabilities 250,783 295,752
Total liabilities 18,514,974 17,984,384
Shareholders' equity 1,390,005 1,210,730
Total liabilities and shareholders' equity $ 19,904,979 $ 19,195,114
Net interest income 488,583 491,380 $ (31,173) $ 28,376 $ (2,797)
Tax-equivalent adjustment (5)
843 871
Net interest earnings $ 489,426 $ 492,251
Interest spread 3.32 % 3.51 %
Net interest margin 3.37 % 3.54 %
Net interest margin tax equivalent (5)
3.38 % 3.55 %
Net interest margin tax equivalent, excluding PPP loans (6)
3.27 % 3.17 %

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

~~(2)Includes owner occupied commercial real estate loans.~~

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

~~(4)Total costs of deposits (including interest bearing and non-interest-bearing) were 0.80% and 0.47% for the nine months ended September 30, 2022 and 2021, respectively.~~

~~(5)~~Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2022 and 2021, presented to approximate interest income as a taxable asset. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

~~Table of Conte~~n ts

~~(6)~~Non-GAAP tax-equivalent basis, as described in note (5) for the nine months ended September 30, 2022 and 2021, excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets. Management uses non-GAAP measures to present historical periods comparable to the current period presentation. In addition, management believes the use of these non-GAAP measures provides additional clarity when assessing Customers’ financial results. These disclosures should not be viewed as substitutes for results determined to be in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other entities.

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

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

~~The NIM decreased by 17 basis points to 3.38% for the nine months ended September 30, 2022 from 3.55% for the nine months ended September 30, 2021~~ resulting primarily from a shift in the mix of interest-bearing liabilities in a rising interest rate environment, offset in part by a shift in the mix of interest-earning assets in a rising interest rate environment. The 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 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, ~~and equity investment distributions,~~ which ~~are included in other interest income,~~ drove a 17221 basis point increase in the yield on interest-earning assets. The shift in the mix of interest-bearing liabilities in a rising interest rate environment drove a 52 basis point increase in the cost of interest-bearing liabilities and contributed to the NIM decrease for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The largest shift in the mix of interest-earning assets and interest-bearing liabilities impacting the NIM was ~~$1.2~~$5.5 billion in ending balance ($~~1.9~~5.7 billion average balance) of ~~PPP~~commercial and industrial loans and leases within specialty lending yielding ~~4.95%~~7.38% and ~~$7.1~~$5.5 billion in ending balance ($~~6.3~~4.5 billion average balance) of ~~interest checking accounts~~certificates of deposit costing ~~1.17%. Non-interest bearing demand deposits were $3.0 billion ($4.2 billion average balance). PPPLF borrowings costing 0.35% were fully repaid during~~4.18% at and for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2023. Customers' total cost of funds, including non-interest bearing deposits was ~~0.93%~~3.45% and ~~0.57%~~0.43% for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

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

A reconciliation of net interest margin tax equivalent, ~~and net interest margin tax equivalent,~~ excluding PPP loans for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ is set forth below.


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2022			2021			2022			2021			(dollars in thousands)	2023			2022
Net interest income (GAAP)	Net interest income (GAAP)	$	159,032		$	219,892		$	488,583		$	491,380		Net interest income (GAAP)	$	149,899		$	164,699
Tax-equivalent adjustment	Tax-equivalent adjustment	334			290			843			871			Tax-equivalent adjustment	375			239
Net interest income tax equivalent (Non-GAAP)		159,366			220,182			489,426			492,251
Net interest income tax equivalent (GAAP)														Net interest income tax equivalent (GAAP)	150,274			164,938
Loans receivable, PPP net interest income	Loans receivable, PPP net interest income	(9,632)			(112,005)			(63,193)			(182,632)			Loans receivable, PPP net interest income	(14,106)			(34,615)
Net interest income tax equivalent, excluding PPP loans (Non-GAAP)	Net interest income tax equivalent, excluding PPP loans (Non-GAAP)	$	149,734		$	108,177		$	426,233		$	309,619		Net interest income tax equivalent, excluding PPP loans (Non-GAAP)	$	136,168		$	130,323

Average total interest-earning assets (GAAP)	Average total interest-earning assets (GAAP)	$	20,021,455		$	19,033,826		$	19,378,542		$	18,562,912		Average total interest-earning assets (GAAP)	$	20,514,677		$	18,572,308
Average PPP loans	Average PPP loans	(1,349,403)			(5,778,367)			(1,946,651)			(5,515,819)			Average PPP loans	(889,235)			(2,641,318)
Adjusted average total interest-earning assets (Non-GAAP)	Adjusted average total interest-earning assets (Non-GAAP)	$	18,672,052		$	13,255,459		$	17,431,891		$	13,047,093		Adjusted average total interest-earning assets (Non-GAAP)	$	19,625,442		$	15,930,990

Net interest margin (GAAP)	Net interest margin (GAAP)	3.16		%	4.58		%	3.37		%	3.54		%	Net interest margin (GAAP)	2.95		%	3.59		%
Net interest margin tax equivalent (Non-GAAP)		3.16		%	4.59		%	3.38		%	3.55		%
Net interest margin tax equivalent (GAAP)														Net interest margin tax equivalent (GAAP)	2.96		%	3.60		%
Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)	Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)	3.18		%	3.24		%	3.27		%	3.17		%	Net interest margin tax equivalent, excluding PPP loans (Non-GAAP)	2.80		%	3.32		%

6253

Table of ~~Conte~~n tContents

PROVISION ~~(BENEFIT)~~ FOR CREDIT LOSSES

The provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management’s assessment of expected lifetime losses in the loan and lease portfolio at the balance sheet date. Customers recorded a ~~benefit to~~ provision for credit losses on loans and leases during the three months ended ~~September 30, 2022,~~March 31, 2023, which resulted primarily from the ~~sale~~recognition of ~~consumer installment loans to a third-party sponsored VIE, partially offset by loan growth and deteriorating~~weaker macroeconomic forecasts. ~~Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans.~~ Customers recorded a ~~benefit to~~ provision for credit losses of ~~$7.8~~$18.0 million for loans and leases and ~~a provision for credit losses of~~ $0.3 million for lending-related commitments, respectively, for the three months ended ~~September 30, 2022.~~March 31, 2023. Customers recorded a provision for credit losses ~~of $13.2 million and $0.7 million~~ 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 ~~September 30, 2021.~~March 31, 2022. Net charge-offs for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$18.5~~$18.7 million, or 4749 basis points of average loans and leases on an annualized basis, compared to net charge-offs of ~~$7.1~~$7.2 million, or 1721 basis points of average loans and leases on an annualized basis, for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in net charge-offs for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to the three months ended ~~September 30, 2021,~~March 31, 2022, was primarily due to ~~a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit and~~ higher charge-offs for consumer installment loans.

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

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

The provision ~~(benefit)~~ for credit losses for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 also included ~~a benefit to provision for credit losses of $0.2 million and~~ a provision for credit losses of ~~$0.3~~$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 65 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information.

~~Table of Conte~~n ts

NON-INTEREST INCOME

The table below presents the components of non-interest income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.
Three Months Ended September 30, QTD Nine Months Ended September 30, YTD
(dollars in thousands) 2022 2021 Change % Change 2022 2021 Change % Change
Interchange and card revenue $ 72 $ 83 $ (11) (13.3) % $ 172 $ 252 $ (80) (31.7) %
Deposit fees 989 994 (5) (0.5) % 2,893 2,748 145 5.3 %
Commercial lease income 7,097 5,213 1,884 36.1 % 19,584 15,729 3,855 24.5 %
Bank-owned life insurance 3,449 1,988 1,461 73.5 % 13,722 6,432 7,290 113.3 %
Mortgage warehouse transactional fees 1,545 3,100 (1,555) (50.2) % 5,443 10,612 (5,169) (48.7) %
Gain (loss) on sale of SBA and other loans 106 5,359 (5,253) (98.0) % 3,155 8,834 (5,679) (64.3) %
Loss on sale of consumer installment loans (23,465) — (23,465) NM (23,465) — (23,465) NM
Loan fees 3,008 1,909 1,099 57.6 % 8,171 5,015 3,156 62.9 %
Mortgage banking income 125 425 (300) (70.6) % 779 1,274 (495) (38.9) %
Gain (loss) on sale of investment securities (2,135) 6,063 (8,198) (135.2) % (6,227) 31,441 (37,668) (119.8) %
Unrealized gain (loss) on investment securities (259) — (259) NM (738) 2,720 (3,458) (127.1) %
Loss on sale of foreign subsidiaries — — — NM — (2,840) 2,840 (100.0) %
Unrealized gain (loss) on derivatives 563 524 39 7.4 % 2,348 2,622 (274) (10.5) %
Loss on cash flow hedge derivative terminations — — — NM — (24,467) 24,467 (100.0) %
Other (112) (72) (40) 55.6 % (910) 504 (1,414) (280.6) %
Total non-interest income $ (9,017) $ 25,586 $ (34,603) (135.2) % $ 24,927 $ 60,876 $ (35,949) (59.1) %


	Three Months Ended March 31,
(dollars in thousands)	2023		2022		Change		% Change
Commercial lease income	$	9,326	$	5,895	$	3,431	58.2	%
Loan fees	3,990		2,545		1,445		56.8	%
Bank-owned life insurance	2,647		8,326		(5,679)		(68.2)	%
Mortgage warehouse transactional fees	1,074		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)	%





Other	1,084		1,973		(889)		(45.1)	%
Total non-interest income	$	18,121	$	21,198	$	(3,077)	(14.5)	%

Commercial lease income

Commercial lease income represents income earned on commercial operating leases originated by Customers' Equipment Finance Group in which Customers is the lessor. The ~~$1.9~~$3.4 million increase in commercial lease income for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 primarily resulted from the continued growth of Customers' equipment finance business.

Loan fees

The ~~$3.9~~$1.4 million increase in ~~commercial lease income~~loan fees for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 primarily resulted from ~~the continued growth~~an increase in fees earned on unused lines of ~~Customers' equipment finance business.~~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 ~~$1.5~~$5.7 million ~~increase~~decrease in bank-owned life insurance income for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 resulted from ~~an increase~~a decrease in ~~cash surrender value of the policies and~~ death benefits paid by insurance carriers under the policies.

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

Table of ~~the policies and death benefits paid by insurance carriers under the policies.~~Contents

Mortgage warehouse transactional fees

The ~~$1.6~~$0.9 million decrease in mortgage warehouse transactional fees for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~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 ~~2022 and~~ 2023 comparable to ~~2021,~~prior periods, given the lower mortgage banking activity in a ~~rising~~higher interest rate ~~environment that is expected to continue into 2023.~~

~~Table of Conte~~n ts

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

Gain (loss) on sale of SBA and other loans

The ~~$5.3~~$1.5 million decrease in gain on sale of SBA and other loans for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 reflects ~~a gain on sale of a commercial lease as compared to $5.4~~$1.5 million in ~~gain~~gains on sales of ~~$103.9 million of consumer installment loans and a decrease in sales of SBA loans. There were no SBA loan sales in the three months ended September 30, 2022, compared to sales of $11.9~~$14.3 million of SBA loans in the three months ended ~~September 30, 2021.~~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 ~~on the sale~~from sales of loans in ~~2022 and~~ 2023 comparable to ~~2021,~~prior periods given the significant uncertainty in the capital ~~markets that is expected to continue into 2023.~~markets.

Net gain (loss) on sale of investment securities

The ~~$5.7~~$1.1 million decrease in ~~gain~~net loss on sale of ~~SBA and other loans~~investment securities for the ~~nine~~three months ended ~~September 30,~~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 the nine months ended September 30, 2021 reflects $3.2 million in gain on sales of SBA loans and a commercial lease as compared to $8.8 million in gain on sales of $130.9 million of consumer installment loans and a decrease in sales of SBA loans. There were $31.8 million of SBA loanno such sales in the ~~nine~~three months ended ~~September 30, 2022, compared to $47.6 million of SBA loans in the nine months ended September 30, 2021.~~March 31, 2023. There can be no assurance that Customers will realize gains ~~on the sale of loans in 2022 and 2023 comparable to 2021, given the significant uncertainty in the capital markets that is expected to continue into 2023.~~

~~Loss on sale of consumer installment loans~~

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

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

~~Loan fees~~

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

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

~~Gain (loss) on sale of investment securities~~

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

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

~~Table of Conte~~n ts

~~Unrealized gain (loss) on investment securities~~

The $0.3 million increase in unrealized loss on investment securities for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 primarily reflects the unrealized loss on CRA-qualified mutual fund shares for the three months ended September 30, 2022. Customers sold all outstanding shares in CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which held the equity securities issued by a foreign entity, for $3.8 million in June 2021.

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

~~Loss on sale of foreign subsidiaries~~

The $2.8 million decrease in loss on sale of foreign subsidiaries for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 reflects the realized loss from the sale of CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which held the equity securities issued by a foreign entity. Customers sold all outstanding shares in CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd. for $3.8 million in June 2021.

~~Loss on cash flow hedge derivative terminations~~

The $24.5 million decrease in loss on cash flow hedge derivative terminations for the nine months ended September 30, 2022 compared to nine months ended September 30, 2021 reflects the early terminations of derivatives designated in cash flow hedging relationships and reclassification of the realized losses from accumulated other comprehensive income to earnings during the nine months ended September 30, 2021 because the hedged forecasted transactions were no longer probable of occurring.

Other non-interest income

The ~~$40 thousand~~$0.9 million decrease in other non-interest income for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~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 commercial lease assets.

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

~~Table of Conte~~n ts

NON-INTEREST EXPENSE

The table below presents the components of non-interest expense for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.


		Three Months Ended September 30,				QTD				Nine Months Ended September 30,				YTD					Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2022		2021		Change		% Change		2022		2021		Change		% Change		(dollars in thousands)	2023		2022		Change		% Change
Salaries and employee benefits	Salaries and employee benefits	$	31,230	$	26,268	$	4,962	18.9	%	$	83,171	$	78,262	$	4,909	6.3	%	Salaries and employee benefits	$	32,345	$	26,607	$	5,738	21.6	%
Technology, communication and bank operations	Technology, communication and bank operations	19,588		21,281		(1,693)		(8.0)	%	66,394		60,887		5,507		9.0	%	Technology, communication and bank operations	16,589		24,068		(7,479)		(31.1)	%
Commercial lease depreciation																		Commercial lease depreciation	7,875		4,942		2,933		59.3	%
Professional services	Professional services	6,269		6,871		(602)		(8.8)	%	20,640		19,630		1,010		5.1	%	Professional services	7,596		6,956		640		9.2	%
Loan servicing																		Loan servicing	4,661		2,371		2,290		96.6	%
Occupancy	Occupancy	2,605		2,704		(99)		(3.7)	%	9,934		7,807		2,127		27.2	%	Occupancy	2,760		3,050		(290)		(9.5)	%
Commercial lease depreciation		5,966		4,493		1,473		32.8	%	16,460		13,199		3,261		24.7	%
FDIC assessments, non-income taxes and regulatory fees	FDIC assessments, non-income taxes and regulatory fees	2,528		2,313		215		9.3	%	6,530		7,634		(1,104)		(14.5)	%	FDIC assessments, non-income taxes and regulatory fees	2,728		2,383		345		14.5	%
Loan servicing		3,851		4,265		(414)		(9.7)	%	10,563		6,402		4,161		65.0	%
Advertising and promotion	Advertising and promotion	762		302		460		152.3	%	1,430		1,176		254		21.6	%	Advertising and promotion	1,049		315		734		233.0	%
Merger and acquisition related expenses		—		—		—		NM		—		418		(418)		(100.0)	%
Loan workout		217		198		19		9.6	%	358		39		319		817.9	%
Deposit relationship adjustment fees		—		6,216		(6,216)		(100.0)	%	—		6,216		(6,216)		(100.0)	%

Other	Other	3,182		5,098		(1,916)		(37.6)	%	10,730		11,089		(359)		(3.2)	%	Other	4,530		3,115		1,415		45.4	%
Total non-interest expense	Total non-interest expense	$	76,198	$	80,009	$	(3,811)	(4.8)	%	$	226,210	$	212,759	$	13,451	6.3	%	Total non-interest expense	$	80,133	$	73,807	$	6,326	8.6	%

Salaries and employee benefits

The ~~$5.0~~$5.7 million increase in salaries and employee benefits for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 primarily resulted from ~~$1.4 million in severance,~~ an increase in average full-time equivalent team members, ~~needed for future growth,~~ annual merit increases, incentives, severance accruals and ~~commissions, offset in part by a decrease in stock based compensation.~~SERP expenses.

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

Table of Contents

Technology, communication and bank operations

The ~~$1.7~~$7.5 million decrease in technology, communication and bank operations expense for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~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 ~~due~~pursuant to ~~lower deposits and debit card transactions,~~the amended deposit servicing agreement, partially offset by ~~$1.0~~$2.7 million increase in higher software licenses, ~~and~~ fees paid for software as a service.

~~The $5.5 million increase in technology, communication,~~ and bank operations expense for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from an increase in deposit servicing fees paid to BM Technologies due to higher depositsother processing and ~~$2.3 million increase in~~ ~~software licenses and fees paid for software as a service, offset in part by a decrease in~~ ~~interchange maintenance fees paid to BM Technologies due to lower debit card transactions.~~technology-related expenses.

Customers incurred expenses of ~~$13.0~~$7.6 million and ~~$15.1~~$17.8 million to BM Technologies under the deposit servicing agreement, included within the technology, communication and bank operations expense ~~in the income from continuing operations~~ during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~Customers incurred expenses~~As of ~~$46.7 million~~March 31, 2023 and $43.0 million to BM Technologies under the deposit servicing agreement during the nine months ended September 30, 2022 and 2021, respectively. The deposit servicing agreement was scheduled to expire on December 31, ~~2022.~~2022, Customers held $1.1 billion of deposits serviced by BM Technologies. On ~~November 7, 2022,~~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, ~~2023.~~2024. Customers ~~and~~expects that approximately $514 million of these serviced deposits held on March 31, 2023 in connection with BM ~~Technologies also agreed to remove Customers' obligation under~~Technologies' Higher Education business will leave Customers Bank by the ~~deposit servicing agreement to pay~~earlier of BM ~~Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms~~Technologies' successful completion of the ~~deposit servicing agreement~~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 ~~in effect through the new termination date. For~~

~~Table of Conte~~n ts

~~additional information refer~~at Customers Bank and continue to ~~NOTE 17 — SUBSEQUENT EVENTS in Customers' unaudited consolidated financial statements. As of September 30, 2022 and December 31, 2021, Customers held $1.6 billion and $1.8 billion of deposits~~be serviced by BM Technologies, which ~~are expected to leave Customers Bank by June 30,~~was also renewed on March 22, 2023. Refer to "NOTE 39 – ~~DISCONTINUED OPERATIONS"~~DEPOSITS" to Customers' unaudited consolidated financial statements for additional information.

~~Professional services~~

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

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

~~Occupancy~~

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

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

Commercial lease depreciation

The ~~$1.5~~$2.9 million increase in commercial lease depreciation for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~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.

Professional services

The ~~$3.3~~$0.6 million increase in commercial lease depreciation for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor.

~~FDIC assessments, non-income taxes, and regulatory fees~~

~~The $0.2 million increase in FDIC assessments, non-income taxes, and regulatory fees~~professional services for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 was primarily ~~resulted from higher FDIC assessment rates. In October 2022, FDIC issued a final rule~~due to an increase ~~the initial base deposit insurance assessment rate~~in legal fees related to PPP related matters, partially offset by ~~2 basis points for all insured depository institutions beginning in 2023.~~

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

Loan servicing

The ~~$0.4~~$2.3 million ~~decrease~~increase in loan servicing for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021 primarily resulted from lower PPP forgiveness, partially offset by the growth in consumer installment loans and residential mortgages.~~

~~The $4.2 million increase in loan servicing for the nine months ended September 30,~~March 31, 2022 ~~compared to the nine months ended September 30, 2021~~ primarily resulted from the growth in ~~consumer installment loans and residential mortgages, partially offset~~loan portfolios serviced by ~~lower PPP forgiveness.~~third parties.

Advertising and promotion

The ~~$0.5~~$0.7 million increase in advertising and promotion for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 primarily resulted from ~~increased~~higher spending on media and advertising agencies ~~and media.~~

~~Table of Conte~~n ts

~~The $0.3 million increase in advertising and promotion~~ for ~~the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily resulted from increased spending on advertising agencies and media.~~

~~Deposit relationship adjustment fees~~

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

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

Other non-interest expense

The ~~$1.9~~$1.4 million ~~decrease~~increase in other non-interest expense for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 primarily resulted from ~~a decrease~~increases in ~~loan origination expenses associated with the latest round of PPP loan originations, litigation settlement of $1.2 million in the three months ended September 30, 2021~~operating losses and ~~a decrease in~~ 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 ~~September 30, 2022~~March 31, 2023 was $0.3 million, compared to a ~~provision~~credit or ~~addition~~release to the reserve for unfunded commitments of ~~$0.7~~$0.1 million for the three months ended ~~September 30, 2021.~~

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

INCOME TAXES

The table below presents income tax expense ~~from continuing operations~~ and the effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.


		Three Months Ended September 30,						QTD				Nine Months Ended September 30,						YTD					Three Months Ended March 31,
(dollars in thousands)	(dollars in thousands)	2022			2021			Change		% Change		2022			2021			Change		% Change		(dollars in thousands)	2023			2022			Change		% Change
Income before income tax expense	Income before income tax expense	$	81,811		$	152,305		$	(70,494)	(46.3)	%	$	255,450		$	325,961		$	(70,511)	(21.6)	%	Income before income tax expense	$	68,284		$	96,093		$	(27,809)	(28.9)	%
Income tax expense	Income tax expense	17,899			36,263			(18,364)		(50.6)	%	56,127			73,947			(17,820)		(24.1)	%	Income tax expense	14,563			19,332			(4,769)		(24.7)	%
Effective tax rate	Effective tax rate	21.88		%	23.81		%					21.97		%	22.69		%					Effective tax rate	21.33		%	20.12		%

Table of Contents

The ~~$18.4~~$4.8 million decrease in income tax expense for the three months ended ~~September 30, 2022,~~March 31, 2023, when compared to the same period in the prior year, primarily resulted from a decrease in pre-tax ~~income.~~income and increased income tax credits. The ~~decrease~~increase in the effective tax rate for the three months ended ~~September 30, 2022,~~March 31, 2023, when compared to the same period in the prior year, primarily resulted from ~~higher investment tax credits and~~lower death benefits from bank-owned life insurance policies ~~for 2022~~ and ~~a decrease in~~stock-based compensation ~~expense associated with~~benefits, partially offset by an ~~executive's retirement that exceeded the limit for tax deduction purposes for 2021.~~

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

~~NET LOSS FROM DISCONTINUED OPERATIONS~~

~~Table of Conte~~n ts

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

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

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

Loss from discontinued operations, net of income taxes decreased $38.0 million for the nine months ended September 30, 2022, when compared to the nine months ended September 30, 2021 primarily due to restricted stock awards in BM Technologies' common stock granted to certain team members of BMT and the effect of the divestiture being treated as a taxable asset sale for tax purposes, offset in part by a tax benefit related to the restricted stock awards during the nine months ended September 30, 2021.

In connection with the divestiture, Customers entered into various agreements with BM Technologies, including a transition services agreement, software license agreement, deposit servicing agreement, non-competition agreement and loan agreement for periods ranging from one to ten years. Customers incurred expenses of $13.0 million and $15.1 million to BM Technologies under the deposit servicing agreement included in technology, communication and bank operations within the income from continuing operations during the three months ended September 30, 2022 and 2021, respectively. Customers incurred expenses of $46.7 million and $43.0 million to BM Technologies under the deposit servicing agreement for the nine months ended September 30, 2022 and 2021, respectively. The deposit servicing agreement was scheduled to expire on December 31, 2022. On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. Customers and BM Technologies also agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date. Refer to NOTE 17 — SUBSEQUENT EVENTS for additional information. As of September 30, 2022 and December 31, 2021, Customers held $1.6 billion and $1.8 billion of deposits serviced by BM Technologies, which are expected to leave Customers Bank by the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. The loan agreement with BM Technologies was terminated early in November 2021. The transition services agreement with BM Technologies, as amended, expired on March 31, 2022. Customers entered into a special limited agency agreement with BM Technologies, whereby Customers will originate consumer installment loans referred by BM Technologies for an initial period from April 20, 2022 to December 31, 2022, which is renewable annually. Refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements for additional information.credits.

PREFERRED STOCK DIVIDENDS ~~AND LOSS ON REDEMPTION OF PREFERRED STOCK~~

~~Table of Conte~~n ts

Pursuant to the Adjustable 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 26.161 basis points for three-month LIBOR as the benchmark reference rate in order to calculate dividends after June 30, 2023.

~~Table of Conte~~n ts

Financial Condition

General

~~Total~~Customers' total assets were ~~$20.4~~$21.8 billion at ~~September 30, 2022.~~March 31, 2023. This represented ~~a $792.6~~an increase of $855.5 million ~~increase~~ from total assets of ~~$19.6~~$20.9 billion at December 31, ~~2021.~~2022. The increase in total assets was primarily driven by increases of ~~$3.6~~$1.6 billion in cash and cash equivalents, $95.7 million in loans held for sale and ~~leases receivable and $886.3~~$30.0 million in investment securities held to maturity, partially offset by decreases of ~~$2.1 billion~~$751.9 million in loans receivable, PPP, ~~$873.5 million in investment securities, at fair value, $715.2~~$75.9 million in loans receivable, mortgage warehouse, at fair value and ~~$113.6~~$60.5 million in ~~cash and cash equivalents.~~investment securities, at fair value.

Total liabilities were ~~$19.0~~$20.3 billion at ~~September 30, 2022.~~March 31, 2023. This represented ~~a $771.9~~an increase of $837.4 million ~~increase~~ from ~~$18.2~~$19.5 billion at December 31, ~~2021.~~2022. The increase in total liabilities primarily resulted from ~~increases~~an increase of ~~$744.5~~$1.3 billion in FHLB advances, partially offset by a decrease of $433.3 million in total ~~deposits and $290.0 million in federal funds purchased, partially offset by decreases of $200.0 million in FHLB advances and $99.6 million in other borrowings.~~deposits.

The following table ~~presents~~sets forth certain key condensed balance sheet data as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


(dollars in thousands)	(dollars in thousands)	September 30, 2022		December 31, 2021		Change		% Change		(dollars in thousands)	March 31, 2023		December 31, 2022		Change		% Change
Cash and cash equivalents	Cash and cash equivalents	$	404,465	$	518,032	$	(113,567)	(21.9)	%	Cash and cash equivalents	$	2,046,685	$	455,806	$	1,590,879	349.0	%
Investment securities, at fair value	Investment securities, at fair value	2,943,694		3,817,150		(873,456)		(22.9)	%	Investment securities, at fair value	2,926,969		2,987,500		(60,531)		(2.0)	%
Investment securities held to maturity	Investment securities held to maturity	886,294		—		886,294		NM		Investment securities held to maturity	870,294		840,259		30,035		3.6	%
Loans held for sale	Loans held for sale	5,224		16,254		(11,030)		(67.9)	%	Loans held for sale	424,057		328,312		95,745		29.2	%
Loans receivable, mortgage warehouse, at fair value	Loans receivable, mortgage warehouse, at fair value	1,569,090		2,284,325		(715,235)		(31.3)	%	Loans receivable, mortgage warehouse, at fair value	1,247,367		1,323,312		(75,945)		(5.7)	%

Loans receivable, PPP	Loans receivable, PPP	1,154,632		3,250,008		(2,095,376)		(64.5)	%	Loans receivable, PPP	246,258		998,153		(751,895)		(75.3)	%
Loans and leases receivable	Loans and leases receivable	12,607,742		9,018,298		3,589,444		39.8	%	Loans and leases receivable	13,145,352		13,144,894		458		0.0	%
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(130,197)		(137,804)		7,607		(5.5)	%	Allowance for credit losses on loans and leases	(130,281)		(130,924)		643		(0.5)	%
Bank-owned life insurance	Bank-owned life insurance	336,130		333,705		2,425		0.7	%	Bank-owned life insurance	339,607		338,441		1,166		0.3	%
Other assets	Other assets	408,575		305,611		102,964		33.7	%	Other assets	374,609		400,135		(25,526)		(6.4)	%

Total assets	Total assets	20,367,621		19,575,028		792,593		4.0	%	Total assets	21,751,614		20,896,112		855,502		4.1	%
Total deposits	Total deposits	17,522,438		16,777,924		744,514		4.4	%	Total deposits	17,723,617		18,156,953		(433,336)		(2.4)	%

Federal funds purchased		365,000		75,000		290,000		NM

FHLB advances	FHLB advances	500,000		700,000		(200,000)		(28.6)	%	FHLB advances	2,052,143		800,000		1,252,143		156.5	%
Other borrowings	Other borrowings	123,515		223,086		(99,571)		(44.6)	%	Other borrowings	123,645		123,580		65		0.1	%
Subordinated debt	Subordinated debt	181,882		181,673		209		0.1	%	Subordinated debt	182,021		181,952		69		0.0	%

Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	287,855		251,128		36,727		14.6	%	Accrued interest payable and other liabilities	249,168		230,666		18,502		8.0	%

Total liabilities	Total liabilities	18,980,690		18,208,811		771,879		4.2	%	Total liabilities	20,330,594		19,493,151		837,443		4.3	%
Total shareholders’ equity	Total shareholders’ equity	1,386,931		1,366,217		20,714		1.5	%	Total shareholders’ equity	1,421,020		1,402,961		18,059		1.3	%
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	20,367,621	$	19,575,028	$	792,593	4.0	%	Total liabilities and shareholders’ equity	$	21,751,614	$	20,896,112	$	855,502	4.1	%

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Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and interest-earning deposits. Cash and due from banks consists mainly of vault cash and cash items in the process of collection. Cash and due from banks were ~~$41.5~~$77.3 million and ~~$35.2~~$58.0 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Cash and due from banks balances vary from day to day, primarily due to variations in customers’ deposit activities with the Bank.

Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were ~~$362.9 million~~$2.0 billion and ~~$482.8~~$397.8 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The balance of interest-earning deposits varies from day to day, depending on several factors, such as fluctuations in customers' deposits with Customers, payment of checks drawn on customers' accounts and strategic investment decisions made to maximize Customers' net interest income, while effectively managing interest-rate risk and liquidity. The ~~decrease~~increase in interest-earning deposits from December 31, ~~2021~~2022 primarily resulted from ~~recent deposits that were deployed into~~maintaining a higher ~~interest-earning assets.~~

~~Table~~level of ~~Conte~~n ts

liquidity in response to heightened liquidity risk to the U.S. banking system, particularly to the regional banks.

Investment securities at fair value

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

At ~~September 30, 2022,~~March 31, 2023, investment securities at fair value totaled $2.9 billion compared to ~~$3.8~~$3.0 billion at December 31, ~~2021.~~2022. The decrease ~~in investment securities~~ primarily resulted from the sale of $681.6 million of asset-backed securities, agency-guaranteed collateralized mortgage obligations, collateralized loan obligations, commercial mortgage-backed securities, private label collateralized mortgage obligations and corporate notes, the transfer of certain agency-guaranteed mortgage-backed securities and collateralized mortgage obligations and private label collateralized mortgage obligations totaling $500.2 million to investment securities held to maturity in June 2022, maturities, calls and principal repayments totaling ~~$408.0~~$69.6 million, ~~and a decline~~partially offset by an increase in the fair value of AFS debt securities, or a decline in unrealized losses of ~~$213.5~~$8.2 million due to changes in market interest rates partially offset by the purchases of asset-backed securities, collateralized loan obligations, agency-guaranteed collateralized mortgage obligations, private label collateralized mortgage obligations and corporate notes totaling $929.8 million for the ~~nine~~three months ended ~~September 30, 2022.~~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 ~~$0.3~~$1.6 million on certain asset-backed securities and corporate notes included in our investment securities at fair value during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. Refer to "NOTE 65 – 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 year		After one but within five years		After five but within ten years		No 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 notes	6.75		6.76		4.77		—		6.36
Private label collateralized mortgage obligations	—		—		—		3.04		3.04

Weighted-average yield	6.75	%	6.76	%	4.77	%	4.48	%	4.86	%

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

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Investment securities held to maturity

At ~~September 30, 2022,~~March 31, 2023, investment securities held to maturity totaled ~~$886.3~~$870.3 million compared to $840.3 million at December 31, 2022. The increase in investment securities held to maturity resulted from ~~the transfer~~a purchase of ~~$500.2~~$73.1 million ~~in AFS debt securities, primarily agency-guaranteed mortgage-backed securities and collateralized mortgage obligations and~~of private label collateralized mortgage obligations, ~~in June 2022 and $400.0 million of asset-backed securities investment in a VIE in connection with the sale of consumer installment loans,~~ partially offset by maturities, calls and principal repayments totaling ~~$13.6~~$44.2 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

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

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

~~Table of Conte~~n ts


		September 30, 2022								March 31, 2023
		Within one year		After one but within five years		After five but within ten years		No specific maturity			Total			Within one year		After one but within five years		After five but within ten years		No specific maturity		Total
Asset-backed securities	Asset-backed securities	—	%	—	%	—	%	5.50	%		5.50	%	Asset-backed securities	—	%	—	%	—	%	5.50	%	5.50	%

Agency-guaranteed residential mortgage-backed securities	Agency-guaranteed residential mortgage-backed securities	—		—		—		1.80			1.80		Agency-guaranteed residential mortgage-backed securities	—		—		—		1.80		1.80
Agency-guaranteed commercial mortgage-backed securities	Agency-guaranteed commercial mortgage-backed securities	—		—		—		1.77			1.77		Agency-guaranteed commercial mortgage-backed securities	—		—		—		1.77		1.77
Agency-guaranteed residential collateralized mortgage obligations	Agency-guaranteed residential collateralized mortgage obligations	—		—		—		1.45			1.45		Agency-guaranteed residential collateralized mortgage obligations	—		—		—		1.90		1.90
Agency-guaranteed commercial collateralized mortgage obligations	Agency-guaranteed commercial collateralized mortgage obligations	—		—		—		2.09			2.09		Agency-guaranteed commercial collateralized mortgage obligations	—		—		—		2.15		2.15

Private label collateralized mortgage obligations	Private label collateralized mortgage obligations	—		—		—		2.30			2.30		Private label collateralized mortgage obligations	—		—		—		4.58		4.58

Weighted-average yield	Weighted-average yield	—	%	—	%	—	%	2.24	%		2.24	%	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 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 65 – INVESTMENT SECURITIES" and "NOTE 13 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS" to Customers' unaudited consolidated financial statements for additional information.

LOANS AND LEASES

Existing lending relationships are primarily with small and middle market businesses and individual consumers primarily in 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 and Wilmington, North ~~Carolina.~~Carolina; and nationally for certain loan and deposit products. The portfolio of loans to mortgage companies is nationwide. The loan portfolio consists primarily of loans to support mortgage companies’ funding needs, ~~multi-family/~~multifamily, commercial real estate and commercial and industrial loans. Customers continues to focus on small and middle market business loans to grow its commercial lending efforts, particularly its commercial and industrial loan and lease portfolio and its specialty lending business. Customers also focuses its lending efforts on local-market mortgage and home equity lending and the origination and purchase of unsecured consumer loans (installment loans), including personal, student loan refinancing, home improvement and medical loans through arrangements with fintech companies and other market place lenders nationwide.

Commercial Lending

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

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As of ~~September 30, 2022,~~March 31, 2023, Customers had ~~$13.4~~$12.9 billion in commercial loans outstanding, totaling approximately ~~87.5%~~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 ~~$12.4~~$13.5 billion, comprising approximately ~~85.3%~~85.8% of its total loan and lease portfolio at December 31, ~~2021.~~2022. Included in the ~~$13.4~~$12.9 billion and ~~$12.4~~$13.5 billion in commercial loans outstanding as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, were ~~$1.2 billion~~$246.3 million and ~~$3.3 billion~~$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 SBA loans, through the branch network sales force and a team of dedicated relationship managers. The support administration of this platform is centralized, including technology, risk management, product management, marketing, performance tracking and overall strategy. Credit and sales training has been established for Customers' sales force, ensuring that it has small business experts in place providing appropriate financial solutions to the small business owners in its communities. The division approach focuses on industries that offer high asset quality and are deposit rich to drive profitability. Customers' SBA Lending includes digital small balance 7(a) lending.

~~Table of Conte~~n ts

Customers' Specialty Banking includes lending to mortgage companies, equipment finance, warehouse lending, healthcare lending, real estate specialty ~~finance, lender~~ finance, fund finance, technology and venture capital banking and financial institutions group. Customers added three new verticals within its Specialty Banking, which included ~~fund finance,~~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 ~~and~~vertical within fund ~~finance provide secured and variable rate financing to private debt funds and private equity funds, respectively, and cash management services to the alternative investment industry. Customers' lender~~ finance provides variable rate loans secured by diverse collateral pools to private debt funds. Customers' capital call lines vertical within fund finance ~~vertical~~ provides variable rate loans secured by collateral pools and limited partnership commitments from institutional investors in private equity ~~funds.~~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, recurring 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. The underlying residential loans are taken as collateral for Customers' commercial loans to the mortgage companies. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, commercial loans to mortgage companies totaled ~~$1.6~~$1.2 billion and ~~$2.3~~$1.3 billion, respectively, and are reported as loans receivable, mortgage warehouse, at fair value on the consolidated balance sheet.

The Equipment Finance Group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The Equipment Finance Group is primarily focused on serving the following segments: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Customers had ~~$520.0~~$526.8 million and ~~$378.7~~$560.3 million, respectively, of equipment finance loans outstanding. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Customers had ~~$145.6~~$168.8 million and ~~$146.5~~$157.4 million of equipment finance leases outstanding, respectively. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Customers had ~~$188.6~~$192.1 million and ~~$117.4~~$197.3 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of ~~$54.0~~$60.4 million and ~~$40.7~~$52.6 million, respectively.

Customers had been deemphasizing its multi-family loan portfolio, and investing in high credit quality higher-yielding commercial and industrial loans with the multi-family run-off. Customers began to grow the multi-family loan portfolio in late 2021. Customers' ~~multi-family~~multifamily lending group is focused on retaining a portfolio of high-quality ~~multi-family~~multifamily loans within Customers' covered markets. These lending activities use conservative underwriting standards and primarily target the refinancing of loans with other banks ~~using conservative underwriting standards and~~or provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the ~~multi-family~~multifamily property, plus an assignment of all leases related to such property. As of ~~September 30, 2022,~~March 31, 2023, Customers had ~~multi-family~~multifamily loans of ~~$2.3~~$2.2 billion outstanding, comprising approximately ~~14.8%~~14.6% of the total loan and lease portfolio, compared to ~~$1.5~~$2.2 billion, or approximately ~~10.2%~~14.0% of the total loan and lease portfolio, at December 31, ~~2021.~~2022.

Customers ~~directly or through fintech partnerships~~had $246.3 million and ~~acquisitions, had $1.2 billion and $3.3 billion~~$998.2 million of PPP loans outstanding as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~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%. ~~The average loan size~~

Table of ~~the PPP portfolio from the first two rounds is approximately $50 thousand and approximately $20 thousand from the latest round.~~Contents

Consumer Lending

Customers provides unsecured consumer installment loans, residential mortgage and home equity loans to customers nationwide ~~primarily~~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 improvement and medical loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660. Customers has been selective in the consumer loans it has been purchasing. Home equity lending is offered to solidify customer relationships and grow relationship revenues in the long term. This lending is important in Customers' efforts to grow total relationship revenues for its consumer households. As of ~~September 30, 2022,~~March 31, 2023, Customers had ~~$1.9~~$2.2 billion in consumer loans outstanding (including consumer loans held for investment and held for sale), or ~~12.5%~~14.7% of the total loan and lease portfolio, compared to ~~$2.1~~$2.2 billion, or ~~14.7%~~14.2% of the total loan and lease portfolio, as of December 31, ~~2021.~~

~~Table of Conte~~n ts

2022.

Purchases and sales of loans were as follows for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(amounts in thousands)	(amounts in thousands)	2022		2021		2022		2021		(amounts in thousands)	2023		2022
Purchases (1)	Purchases (1)									Purchases (1)
Other commercial and industrial										Other commercial and industrial	$	5,445	$	—

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

Commercial real estate owner occupied										Commercial real estate owner occupied	2,867		—

Residential real estate	Residential real estate	15,067		—		170,022		—		Residential real estate	4,238		146,874

Personal installment (2)	Personal installment (2)	47,778		—		123,785		109,142		Personal installment (2)	—		59,456
Other installment (2)		74,969		50,001		74,969		56,708

Total	Total	$	137,814	$	652,176	$	368,776	$	1,389,512	Total	$	12,550	$	206,330
Sales (3)	Sales (3)									Sales (3)
Specialty lending		$	2,200	$	—	$	2,200	$	—

Other commercial and industrial (4)	Other commercial and industrial (4)	—		6,176		22,880		35,166		Other commercial and industrial (4)	$	—	$	8,840
Multi-family		—		—		2,879		19,443

Commercial real estate owner occupied (4)	Commercial real estate owner occupied (4)	—		5,728		8,960		12,426		Commercial real estate owner occupied (4)	—		5,441
Commercial real estate non-owner occupied		—		—		—		18,366

Residential real estate		—		14,549		—		42,735

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

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

(1)Amounts reported ~~in the above table are~~represent the unpaid principal balance at time of purchase. The purchase price was ~~99.9%~~101.9% and ~~99.2%~~98.1% of the loans' unpaid principal balance for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. The purchase price was 98.7% and 101.0% of the loans' unpaid principal balance for the nine months ended September 30, 2022 and 2021,~~ respectively.

(3)~~For~~There were no sales of loans held for investment for the three months ended ~~September 30,~~March 31, 2023. Gains of $1.5 million from the sales of loans held for investment for the three months ended March 31, 2022 ~~and 2021, loan sales resulted in net losses of $23.4 million and net gains of $5.8 million, respectively,~~are included in gain (loss) on sale of SBA and other loans ~~and loss on sale of consumer installment loans (refer to (5) below)~~ in the consolidated statements of income. ~~For the nine months ended September 30, 2022 and 2021, loan sales resulted in net gains of $19.7 million and $10.1 million, respectively.~~

(4)Primarily sales of SBA loans.

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

Loans Held for Sale

The composition of loans held for sale as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was as follows:


(amounts in thousands)	(amounts in thousands)	September 30, 2022		December 31, 2021		(amounts in thousands)	March 31, 2023		December 31, 2022
Commercial loans:	Commercial loans:					Commercial loans:
Multi-family loans, at lower of cost or fair value		$	4,108	$	—
Multifamily loans, at lower of cost or fair value						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 value						Commercial real estate non-owner occupied loans, at lower of cost or fair value	16,000		—
Total commercial loans held for sale	Total commercial loans held for sale	4,108		—		Total commercial loans held for sale	20,051		4,079
Consumer loans:	Consumer loans:					Consumer loans:
Home equity conversion mortgages, at lower of cost or fair value	Home equity conversion mortgages, at lower of cost or fair value	507		507		Home equity conversion mortgages, at lower of cost or fair value	507		507
Residential mortgage loans, at fair value	Residential mortgage loans, at fair value	609		15,747		Residential mortgage loans, at fair value	314		322

Personal installment loans, at lower of cost or fair value						Personal installment loans, at lower of cost or fair value	307,336		133,801
Other installment loans, at lower of cost or fair value						Other installment loans, at lower of cost or fair value	95,849		189,603

Total consumer loans held for sale	Total consumer loans held for sale	1,116		16,254		Total consumer loans held for sale	404,006		324,233
Loans held for sale	Loans held for sale	$	5,224	$	16,254	Loans held for sale	$	424,057	$	328,312

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

7661

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Total Loans and Leases Receivable

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


(amounts in thousands)	(amounts in thousands)	September 30, 2022		December 31, 2021		(amounts in thousands)	March 31, 2023		December 31, 2022
Loans and leases receivable, mortgage warehouse, at fair value	Loans and leases receivable, mortgage warehouse, at fair value	$	1,569,090	$	2,284,325	Loans and leases receivable, mortgage warehouse, at fair value	$	1,247,367	$	1,323,312

Loans receivable, PPP	Loans receivable, PPP	1,154,632		3,250,008		Loans receivable, PPP	246,258		998,153
Loans and leases receivable:	Loans and leases receivable:					Loans and leases receivable:
Commercial:	Commercial:					Commercial:
Commercial and industrial:	Commercial and industrial:					Commercial and industrial:

Specialty lending (1)	Specialty lending (1)	5,103,974		2,403,991		Specialty lending (1)	5,519,176		5,412,887
Other commercial and industrial	Other commercial and industrial	1,203,829		1,020,792		Other commercial and industrial	1,295,688		1,259,943
Multi-family		2,263,268		1,486,308
Multifamily						Multifamily	2,195,211		2,213,019
Commercial real estate owner occupied	Commercial real estate owner occupied	726,670		654,922		Commercial real estate owner occupied	895,314		885,339
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,263,211		1,121,238		Commercial real estate non-owner occupied	1,245,248		1,290,730
Construction	Construction	136,133		198,981		Construction	188,123		162,009
Total commercial loans and leases receivable	Total commercial loans and leases receivable	10,697,085		6,886,232		Total commercial loans and leases receivable	11,338,760		11,223,927
Consumer:	Consumer:					Consumer:
Residential real estate	Residential real estate	465,772		334,730		Residential real estate	494,815		497,952
Manufactured housing	Manufactured housing	46,990		52,861		Manufactured housing	43,272		45,076

Installment:	Installment:					Installment:
Personal	Personal	1,056,432		1,392,862		Personal	849,420		964,641
Other	Other	341,463		351,613		Other	419,085		413,298

Total consumer loans receivable	Total consumer loans receivable	1,910,657		2,132,066		Total consumer loans receivable	1,806,592		1,920,967
Loans and leases receivable	Loans and leases receivable	12,607,742		9,018,298		Loans and leases receivable	13,145,352		13,144,894
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	(130,197)		(137,804)		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)	Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)	$	15,201,267	$	14,414,827	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 ~~$145.6~~$168.8 million and ~~$146.5~~$157.4 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~Loans receivable, PPP~~

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

Loans receivable, mortgage warehouse, at fair value

The mortgage warehouse product line primarily provides financing to mortgage companies nationwide from the time of origination of the underlying mortgage loans until the mortgage loans are sold into the secondary market. As a mortgage warehouse lender, Customers provides a form of financing to mortgage bankers by purchasing for resale the underlying residential mortgages on a short-term basis under a master repurchase agreement. These loans are reported as loans receivable, mortgage warehouse, at fair value on the consolidated balance sheets. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At ~~September 30, 2022,~~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 ~~$1.6~~$1.2 billion and ~~$2.3~~$1.3 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~Table of Conte~~n ts

On June 30, 2022, one of Customers’ commercial mortgage warehouse borrowers filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. As of ~~September 30, 2022,~~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. ~~Customers' loan to~~

Table of Contents

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 ~~borrower subject to~~SBA, provided that the SBA's eligibility criteria are met and earn a ~~master repurchase agreement secured by first lien residential mortgages was fully repaid during~~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 ~~September 30, 2022.~~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 and collection efforts, and continuous and periodic loan and lease classification reviews. Management also considers the effect of credit risk on financial performance by reviewing quarterly and maintaining an adequate ACL. Credit losses are charged-off when they are identified, and provisions are added for current expected credit losses, to the ACL at least quarterly. The ACL is estimated at least quarterly.

The provision ~~(benefit)~~ for credit losses on loans and leases was ~~a benefit to provision for credit losses of $7.8~~$18.0 million and ~~a provision for credit losses of $13.2~~$15.3 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. The provision for credit losses on loans and leases was $31.6 million and $13.5 million for the nine months ended September 30, 2022 and 2021,~~ respectively. The ACL maintained for loans and leases receivable (excluding loans held for sale and loans receivable, mortgage warehouse, at fair ~~value and PPP loans)~~value) was ~~$130.2~~$130.3 million, or ~~1.03%~~0.97% of loans and leases receivable and 0.99% of loans and leases receivable, excluding PPP (a non-GAAP measure) at March 31, 2023, and $130.9 million or 0.93% of loans and leases receivable and 1.00% of loans and leases receivable, excluding PPP loans ~~at September 30, 2022 and $137.8 million, or 1.53% of loans and leases receivable, excluding PPP loans,~~(a non-GAAP measure) at December 31, ~~2021.~~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 ~~the sale of~~a decrease in consumer installment loans, ~~to a third-party sponsored VIE,~~ partially offset by ~~loan growth and deteriorating~~additional provision for credit losses from the recognition of weaker macroeconomic forecasts. ~~Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans.~~ Net charge-offs were ~~$18.5~~$18.7 million for the three months ended ~~September 30, 2022,~~March 31, 2023, an increase of $11.4 million compared to the same period in ~~2021. Net charge-offs were $39.2 million for the nine months ended September 30, 2022, an increase of $13.0 million compared to the same period in 2021.~~2022. The increase in net charge-offs was primarily due to ~~a partial charge-off of $7.0 million for a performing non-owner occupied commercial real estate loan that Customers has decided to exit,~~ higher charge-offs for consumer installment ~~loans and overdrawn deposit accounts.~~loans. Installment charge-offs were attributable to unsecured consumer installment loans originated or purchased through arrangements with fintech companies and other market place lenders. ~~Please refer~~Refer to the table of changes in Customers' ACL for annualized net-charge offs to average loans by loan type for the periods indicated.

A reconciliation of the coverage of ACL for loans and leases held for investment to the ACL for loans and leases held for investment, excluding PPP loans as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 is set forth below.


(dollars in thousands)	(dollars in thousands)	September 30, 2022			December 31, 2021			(dollars in thousands)	March 31, 2023			December 31, 2022
Loans and leases receivable (GAAP)	Loans and leases receivable (GAAP)	$	13,762,374		$	12,268,306		Loans and leases receivable (GAAP)	$	13,391,610		$	14,143,047
Less: Loans receivable, PPP	Less: Loans receivable, PPP	1,154,632			3,250,008			Less: Loans receivable, PPP	246,258			998,153
Loans and leases held for investment, excluding PPP (Non-GAAP)	Loans and leases held for investment, excluding PPP (Non-GAAP)	$	12,607,742		$	9,018,298		Loans and leases held for investment, excluding PPP (Non-GAAP)	$	13,145,352		$	13,144,894

ACL for loans and leases (GAAP)	ACL for loans and leases (GAAP)	$	130,197		$	137,804		ACL for loans and leases (GAAP)	$	130,281		$	130,924

Coverage of ACL for loans and leases held for investment (GAAP)								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)	Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP)	1.03		%	1.53		%	Coverage of ACL for loans and leases held for investment, excluding PPP (Non-GAAP)	0.99		%	1.00		%

7863

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


(amounts in thousands)	(amounts in thousands)	Commercial and industrial (2)			Multi-family			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Construction			Residential real estate			Manufactured housing			Installment			Total			(amounts in thousands)	Commercial and industrial (2)			Multifamily			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Construction			Residential real estate			Manufactured housing			Installment			Total
Three Months Ended September 30, 2022
Ending Balance, June 30, 2022		$	11,081		$	9,765		$	4,745		$	8,880		$	1,179		$	5,578		$	4,080		$	111,222		$	156,530
Three Months Ended March 31, 2023																													Three Months Ended March 31, 2023
Ending Balance, December 31, 2022																													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)	Charge-offs (1)	(2,657)			—			—			(4,862)			—			—			—			(13,965)			(21,484)			Charge-offs (1)	(160)			—			—			(4,239)			—			—			—			(16,715)			(21,114)
Recoveries (1)	Recoveries (1)	76			—			—			31			10			13			—			2,857			2,987			Recoveries (1)	231			—			—			5			116			2			—			2,109			2,463
Provision (benefit) for credit losses on loans and leases	Provision (benefit) for credit losses on loans and leases	6,631			4,479			1,475			7,283			425			(138)			402			(28,393)			(7,836)			Provision (benefit) for credit losses on loans and leases	2,397			543			2,018			4,047			307			757			(91)			8,030			18,008
Ending Balance, September 30, 2022		$	15,131		$	14,244		$	6,220		$	11,332		$	1,614		$	5,453		$	4,482		$	71,721		$	130,197
Nine Months Ended September 30, 2022
Ending Balance, December 31, 2021		$	12,702		$	4,477		$	3,213		$	6,210		$	692		$	2,383		$	4,278		$	103,849		$	137,804
Charge-offs (1)		(3,235)			(1,990)			—			(5,025)			—			(4)			—			(35,681)			(45,935)
Recoveries (1)		1,129			337			49			43			226			58			—			4,889			6,731
Provision (benefit) for credit losses on loans and leases		4,535			11,420			2,958			10,104			696			3,016			204			(1,336)			31,597
Ending Balance, September 30, 2022		$	15,131		$	14,244		$	6,220		$	11,332		$	1,614		$	5,453		$	4,482		$	71,721		$	130,197
Ending Balance, March 31, 2023																													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	Annualized Net Charge-offs to Average Loans and Leases																												Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended September 30, 2022		(0.17)		%	—		%	—		%	(1.59)		%	0.02		%	0.01		%	—		%	(2.27)		%	(0.58)		%
Nine Months Ended September 30, 2022		(0.06)		%	(0.12)		%	0.01		%	(0.58)		%	0.17		%	0.02		%	—		%	(2.19)		%	(0.48)		%
Three Months Ended March 31, 2023																													Three Months Ended March 31, 2023	0.00		%	—		%	—		%	(1.34)		%	0.27		%	0.00		%	—		%	(4.35)		%	(0.58)		%

~~Table of Conte~~n ts


(amounts in thousands)	(amounts in thousands)	Commercial and industrial (2)			Multi-family			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Construction			Residential real estate			Manufactured housing			Installment			Total			(amounts in thousands)	Commercial and industrial (2)			Multifamily			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Construction			Residential real estate			Manufactured housing			Installment			Total
Three Months Ended September 30, 2021
Ending Balance, June 30, 2021		$	8,127		$	5,028		$	4,464		$	7,374		$	2,643		$	2,299		$	4,372		$	91,129		$	125,436
Three Months Ended March 31, 2022																													Three Months Ended March 31, 2022
Ending Balance, December 31, 2021																													Ending Balance, December 31, 2021	$	12,702		$	4,477		$	3,213		$	6,210		$	692		$	2,383		$	4,278		$	103,849		$	137,804
Charge-offs (1)	Charge-offs (1)	(516)			—			(524)			(943)			—			(79)			—			(6,693)			(8,755)			Charge-offs (1)	(301)			—			—			—			—			(4)			—			(8,865)			(9,170)
Recoveries (1)	Recoveries (1)	400			—			474			—			3			25			—			749			1,651			Recoveries (1)	360			337			7			8			113			6			—			1,113			1,944
Provision (benefit) for credit losses on loans and leases	Provision (benefit) for credit losses on loans and leases	2,849			(631)			(797)			944			(1,760)			(333)			38			12,854			13,164			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, September 30, 2021		$	10,860		$	4,397		$	3,617		$	7,375		$	886		$	1,912		$	4,410		$	98,039		$	131,496
Nine Months Ended September 30, 2021
Ending Balance, December 31, 2020		$	12,239		$	12,620		$	9,512		$	19,452		$	5,871		$	3,977		$	5,190		$	75,315		$	144,176
Charge-offs (1)		(1,153)			(1,132)			(666)			(943)			—			(129)			—			(27,338)			(31,361)
Recoveries (1)		945			—			483			69			122			47			—			3,479			5,145
Provision (benefit) for credit losses on loans and leases		(1,171)			(7,091)			(5,712)			(11,203)			(5,107)			(1,983)			(780)			46,583			13,536
Ending Balance, September 30, 2021		$	10,860		$	4,397		$	3,617		$	7,375		$	886		$	1,912		$	4,410		$	98,039		$	131,496
Ending Balance, March 31, 2022																													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	Annualized Net Charge-offs to Average Loans and Leases																												Annualized Net Charge-offs to Average Loans and Leases
Three Months Ended September 30, 2021		(0.02)		%	—		%	(0.03)		%	(0.32)		%	0.01		%	(0.08)		%	—		%	(1.48)		%	(0.36)		%
Nine Months Ended September 30, 2021		(0.01)		%	(0.10)		%	(0.04)		%	(0.10)		%	0.10		%	(0.04)		%	—		%	(2.19)		%	(0.46)		%
Three Months Ended March 31, 2022																													Three Months Ended March 31, 2022	0.01		%	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 in pools are recognized on a net basis when the pool matures.

(2)Includes specialty lending.

The ACL is based on a quarterly evaluation of the loan and lease portfolio and is maintained at a level that management considers adequate to absorb expected losses as of the balance sheet date. All commercial loans, with the exception of PPP loans and commercial mortgage warehouse loans, which are reported at fair value, are assigned internal credit-risk ratings, based upon an assessment of the borrower, the structure of the transaction and the available collateral and/or guarantees. All loans and leases are monitored regularly by the responsible officer, and the risk ratings are adjusted when considered appropriate. The risk assessment allows management to identify problem loans and leases timely. Management considers a variety of factors and recognizes the inherent risk of loss that always exists in the lending process. Management uses a disciplined methodology to estimate an appropriate level of ACL. Refer to Critical Accounting Policies and Estimates herein and "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' unaudited consolidated financial statements, also, refer to "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' audited consolidated financial statements in its ~~2021~~2022 Form 10-K for further discussion on management's methodology for estimating the ACL.

Table of Contents

Approximately ~~44%~~42% of Customers' commercial real estate, commercial and residential construction, consumer residential and commercial and industrial loan types have real estate as collateral (collectively, “the real estate portfolio”), primarily in the form of a first lien position. Current appraisals providing current value estimates of the property are received when Customers' credit group determines that the facts and circumstances have significantly changed since the date of the last appraisal, including that real estate values have deteriorated. The credit committee and loan officers review loans that are 15 or more days delinquent and all non-accrual loans on a periodic basis. In addition, loans where the loan officers have identified a “borrower of interest” are discussed to determine if additional analysis is necessary to apply the risk-rating criteria properly. The risk ratings for the real estate loan portfolio are determined based upon the current information available, including but not limited to discussions with the borrower, updated financial information, economic conditions within the geographic area and other factors that may affect the cash flow of the loan. If a loan is individually evaluated for impairment, the collateral value or discounted cash flow analysis is generally used to determine the estimated fair value of the underlying collateral, net of estimated selling costs, and compared to the outstanding loan balance to determine the amount of reserve necessary, if any. Appraisals used in this evaluation process are typically less than two years aged. For loans where real estate is not the primary source of collateral, updated financial information is obtained, including accounts receivable and inventory aging reports and relevant supplemental financial data to estimate the fair value of the loan, net of estimated selling costs, and compared to the outstanding loan balance to estimate the required reserve.

~~Table of Conte~~n ts

These impairment measurements are inherently subjective as they require material estimates, including, among others, estimates of property values in appraisals, the amounts and timing of expected future cash flows on individual loans, and general considerations for historical loss experience, economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios, all of which require judgment and may be susceptible to significant change over time and as a result of changing economic conditions or other factors. Pursuant to ASC 326, individually assessed loans, consisting primarily of non-accrual and restructured loans, are considered in the methodology for determining the ACL. Individually assessed loans are generally evaluated based on the expected future cash flows or the fair value of the underlying collateral ~~(less estimated costs to sell)~~ if principal repayment is expected to 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 segments the loan and lease receivables by product or other characteristic generally defining a shared characteristic with other loans or leases in the same group. Charge-offs from originated and acquired loans and leases are absorbed by the ACL. The schedule that follows includes both loans held for sale and loans held for investment.

~~Asset Quality at September 30, 2022~~
(dollars in thousands) Total Loans and Leases Current 30-89 Days Past Due 90 Days or More Past Due and Accruing Non-accrual/NPL (a) OREO and Repossessed Assets (b) NPA (a)+(b) NPL to Loan and Lease Type (%) NPA to Loans and Leases + OREO and Repossessed Assets (%)
Loan and Lease Type
Commercial and industrial, including specialty lending $ 6,307,803 $ 6,300,457 $ 2,658 $ 610 $ 4,078 $ — $ 4,078 0.06 % 0.06 %
Multi-family 2,263,268 2,262,110 — — 1,158 — 1,158 0.05 % 0.05 %
Commercial real estate owner occupied 726,670 724,357 115 — 2,198 — 2,198 0.30 % 0.30 %
Commercial real estate non-owner occupied 1,263,211 1,262,887 324 — — — — — % — %
Construction 136,133 136,133 — — — — — — % — %
Total commercial loans and leases receivable 10,697,085 10,685,944 3,097 610 7,434 — 7,434 0.07 % 0.07 %
Residential 465,772 457,619 1,715 — 6,438 35 6,473 1.38 % 1.39 %
Manufactured housing 46,990 41,727 1,826 853 2,584 11 2,595 5.50 % 5.52 %
Installment 1,397,895 1,371,444 19,603 — 6,848 — 6,848 0.49 % 0.49 %
Total consumer loans receivable 1,910,657 1,870,790 23,144 853 15,870 46 15,916 0.83 % 0.83 %
Loans and leases receivable (1)
12,607,742 12,556,734 26,241 1,463 23,304 46 23,350 0.18 % 0.19 %
Loans receivable, PPP (2)
1,154,632 1,154,632 — — — — — — % — %
Loans receivable, mortgage warehouse, at fair value 1,569,090 1,569,090 — — — — — — % — %
Total loans held for sale 5,224 609 — — 4,615 — 4,615 88.34 % 88.34 %
Total portfolio $ 15,336,688 $ 15,281,065 $ 26,241 $ 1,463 $ 27,919 $ 46 $ 27,965 0.18 % 0.18 %

8165

Table of ~~Conte~~n tContents

Asset Quality at ~~September 30, 2022~~March 31, 2023


(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)
Loan and Lease Type
Commercial and industrial, including specialty lending	$	6,814,864	$	6,808,780	$	1,252	$	946	$	3,886	$	—	$	3,886	0.06	%	0.06	%


Multifamily	2,195,211		2,189,141		5,189		—		881		—		881		0.04	%	0.04	%
Commercial real estate owner occupied	895,314		889,281		2,412		—		3,621		—		3,621		0.40	%	0.40	%
Commercial real estate non-owner occupied	1,245,248		1,245,248		—		—		—		37		37		—	%	0.00	%
Construction	188,123		188,123		—		—		—		—		—		—	%	—	%
Total commercial loans and leases receivable	11,338,760		11,320,573		8,853		946		8,388		37		8,425		0.07	%	0.07	%
Residential	494,815		482,250		6,092		—		6,473		35		6,508		1.31	%	1.32	%
Manufactured housing	43,272		38,348		1,590		766		2,568		64		2,632		5.93	%	6.07	%
Installment	1,268,505		1,240,135		19,650		—		8,720		—		8,720		0.69	%	0.69	%



Total consumer loans receivable	1,806,592		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 value	1,247,367		1,247,367		—		—		—		—		—		—	%	—	%

Total loans held for sale	424,057		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	%

Asset Quality at March 31, 2023 (continued)


(dollars in thousands)	(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL			Reserves to Loans and Leases (%)		Reserves to NPLs (%)		(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)
Loan and Lease Type	Loan and Lease Type							Loan and Lease Type
Commercial and industrial, including specialty lending	Commercial and industrial, including specialty lending	$	6,307,803	$	4,078	$	15,131		0.24	%	371.04	%	Commercial and industrial, including specialty lending	$	6,814,864	$	3,886	$	20,050	0.29	%	515.95	%

Multi-family		2,263,268		1,158		14,244			0.63	%	1,230.05	%
Multifamily													Multifamily	2,195,211		881		15,084		0.69	%	1,712.15	%
Commercial real estate owner occupied	Commercial real estate owner occupied	726,670		2,198		6,220			0.86	%	282.98	%	Commercial real estate owner occupied	895,314		3,621		8,472		0.95	%	233.97	%
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,263,211		—		11,332			0.90	%	—	%	Commercial real estate non-owner occupied	1,245,248		—		11,032		0.89	%	—	%
Construction	Construction	136,133		—		1,614			1.19	%	—	%	Construction	188,123		—		2,336		1.24	%	—	%
Total commercial loans and leases receivable	Total commercial loans and leases receivable	10,697,085		7,434		48,541			0.45	%	652.96	%	Total commercial loans and leases receivable	11,338,760		8,388		56,974		0.50	%	679.23	%
Residential	Residential	465,772		6,438		5,453			1.17	%	84.70	%	Residential	494,815		6,473		6,853		1.38	%	105.87	%
Manufactured housing	Manufactured housing	46,990		2,584		4,482			9.54	%	173.45	%	Manufactured housing	43,272		2,568		4,339		10.03	%	168.96	%
Installment	Installment	1,397,895		6,848		71,721			5.13	%	1,047.33	%	Installment	1,268,505		8,720		62,115		4.90	%	712.33	%

Total consumer loans receivable	Total consumer loans receivable	1,910,657		15,870		81,656			4.27	%	514.53	%	Total consumer loans receivable	1,806,592		17,761		73,307		4.06	%	412.74	%
Loans and leases receivable (1)	Loans and leases receivable (1)	12,607,742		23,304		130,197			1.03	%	558.69	%	Loans and leases receivable (1)	13,145,352		26,149		130,281		0.99	%	498.23	%
Loans receivable, PPP (2)	Loans receivable, PPP (2)	1,154,632		—		—			—	%	—	%	Loans receivable, PPP (2)	246,258		—		—		—	%	—	%
Loans receivable, mortgage warehouse, at fair value	Loans receivable, mortgage warehouse, at fair value	1,569,090		—		—			—	%	—	%	Loans receivable, mortgage warehouse, at fair value	1,247,367		—		—		—	%	—	%

Total loans held for sale	Total loans held for sale	5,224		4,615		—			—	%	—	%	Total loans held for sale	424,057		5,975		—		—	%	—	%
Total portfolio	Total portfolio	$	15,336,688	$	27,919	$	130,197		0.85	%	466.34	%	Total portfolio	$	15,063,034	$	32,124	$	130,281	0.86	%	405.56	%

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

(2) The tables exclude PPP loans of ~~$1.2 billion,~~$246.3 million, of which ~~$274.4~~$0.8 million were 30-59 days past due and ~~$178.2~~$117.9 million were 60 days or more past due as of ~~September 30, 2022,~~March 31, 2023, and PPP loans of ~~$3.3 billion,~~$998.2 million, of which ~~$6.3~~$0.6 million were 30-59 days past due and ~~$21.8~~$36.0 million were 60 days or more past due as of December 31, ~~2021.~~2022. Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.

Table of Contents

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

A reconciliation of total loans and lease portfolio, excluding loans receivable, PPP and other related amounts, at ~~September 30, 2022,~~March 31, 2023, is set forth below.


(dollars in thousands)	(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)		(dollars in thousands)	Total Loans and Leases		Current		30-89 Days Past Due		90 Days or More Past Due and Accruing		Non-accrual/NPL (a)		OREO and Repossessed Assets (b)		NPA (a)+(b)		NPL to Loan and Lease Type (%)		NPA to Loans and Leases + OREO and Repossessed Assets (%)
Loans and leases receivable (GAAP)		$	15,336,688	$	15,281,065	$	26,241	$	1,463	$	27,919	$	46	$	27,965	0.18	%	0.18	%
Total loans and leases portfolio (GAAP)																				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)	Less: Loans receivable, PPP (1)	1,154,632		1,154,632		—		—		—		—		—		—	%	—	%	Less: Loans receivable, PPP (1)	246,258		246,258		—		—		—		—		—		—	%	—	%
Loans receivable, excluding loans receivable, PPP (Non-GAAP)		$	14,182,056	$	14,126,433	$	26,241	$	1,463	$	27,919	$	46	$	27,965	0.20	%	0.20	%
Total loans and leases portfolio, excluding loans receivable, PPP (Non-GAAP)																				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 sale																				Less: Loans held for sale	424,057		399,170		18,912		—		5,975		—		5,975		1.41	%	1.41	%
Less: Loans receivable, mortgage warehouse, at fair value																				Less: Loans receivable, mortgage warehouse, at fair value	1,247,367		1,247,367		—		—		—		—		—		—	%	—	%
Loans and leases receivable, excluding loans receivable, PPP (Non-GAAP)																				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)	(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)		(dollars in thousands)	Total Loans and Leases		Non-accrual / NPL		ACL		Reserves to Loans and Leases (%)		Reserves to NPLs (%)
Loans and leases receivable (GAAP)		$	15,336,688	$	27,919	$	130,197	0.85	%	466.34	%
Total loans and leases portfolio (GAAP)												Total loans and leases portfolio (GAAP)	$	15,063,034	$	32,124	$	130,281	0.86	%	405.56	%
Less: Loans receivable, PPP (1)	Less: Loans receivable, PPP (1)	1,154,632		—		—		—	%	—	%	Less: Loans receivable, PPP (1)	246,258		—		—		—	%	—	%
Loans receivable, excluding loans receivable, PPP (Non-GAAP)		$	14,182,056	$	27,919	$	130,197	0.92	%	466.34	%
Total loans and leases portfolio, excluding loans receivable, PPP (Non-GAAP)												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 sale												Less: Loans held for sale	424,057		5,975		—		—	%	—	%
Less: Loans receivable, mortgage warehouse, at fair value												Less: Loans receivable, mortgage warehouse, at fair value	1,247,367		—		—		—	%	—	%
Loans and leases receivable, excluding loans receivable, PPP (Non-GAAP)												Loans and leases receivable, excluding loans receivable, PPP (Non-GAAP)	$	13,145,352	$	26,149	$	130,281	0.99	%	498.23	%

(1) Loans ~~and leases~~ receivable, ~~include~~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 ~~$15.3~~$15.1 billion at ~~September 30, 2022~~March 31, 2023 compared to ~~$14.6~~$15.8 billion at December 31, ~~2021,~~2022, and ~~$27.9~~$32.1 million, or ~~0.18%~~0.21% of loans and leases, were non-performing at ~~September 30, 2022~~March 31, 2023 compared to ~~$49.6~~$30.7 million, or ~~0.34%~~0.19% of loans and leases, at December 31, ~~2021.~~2022. The total loan and lease portfolio was supported by an ACL of ~~$130.2~~$130.3 million ~~(466.34%~~(405.56% of NPLs and ~~0.85%~~0.86% of total loans and leases) and ~~$137.8~~$130.9 million ~~(277.72%~~(425.95% of NPLs and ~~0.95%~~0.83% of total loans and leases), at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

~~Table of Conte~~n ts

DEPOSITS

Customers offers a variety of deposit accounts, including checking, savings, MMDA, and time deposits. Deposits are primarily obtained from Customers' geographic service area and nationwide through branchless digital banking, our white label relationship, deposit brokers, listing services and other relationships. ~~In 2021, Customers began accepting non-interest bearing demand deposits from new customers for the TassatPay instant blockchain payments platform.~~ Customers Bank provides TassatPayTM instant blockchain-based digital payments platform via CBITTM, which allows clients to make instant payments in U.S. dollars. CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~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. Each CBIT is minted with precisely one U.S. dollar equivalent, and those dollars are held in a non-interest bearing omnibus deposit account until the CBIT is burned or redeemed. The number of CBIT outstanding in the CBIT instant ~~payment~~payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet. The deposits from customers participating in CBIT include the omnibus deposit account established for the CBIT instant ~~payment~~payments platform, which had an outstanding balance of ~~$50~~$254.7 million and $23 thousand at ~~September 30, 2022~~March 31, 2023 and ~~no outstanding balance at~~ December 31, ~~2021.~~2022, respectively.

Table of Contents

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


(dollars in thousands)	(dollars in thousands)	September 30, 2022		December 31, 2021		Change		% Change		(dollars in thousands)	March 31, 2023		December 31, 2022		Change		% Change
Demand, non-interest bearing	Demand, non-interest bearing	$	2,993,793	$	4,459,790	$	(1,465,997)	(32.9)	%	Demand, non-interest bearing	$	3,487,517	$	1,885,045	$	1,602,472	85.0	%
Demand, interest bearing	Demand, interest bearing	7,124,663		6,488,406		636,257		9.8	%	Demand, interest bearing	5,791,302		8,476,027		(2,684,725)		(31.7)	%
Savings, including MMDA	Savings, including MMDA	5,505,969		5,322,390		183,579		3.4	%	Savings, including MMDA	2,943,992		3,546,015		(602,023)		(17.0)	%
Non-time deposits	Non-time deposits	15,624,425		16,270,586		(646,161)		(4.0)	%	Non-time deposits	12,222,811		13,907,087		(1,684,276)		(12.1)	%

Time deposits	Time deposits	1,898,013		507,338		1,390,675		274.1	%	Time deposits	5,500,806		4,249,866		1,250,940		29.4	%
Total deposits	Total deposits	$	17,522,438	$	16,777,924	$	744,514	4.4	%	Total deposits	$	17,723,617	$	18,156,953	$	(433,336)	(2.4)	%

Total deposits were ~~$17.5~~$17.7 billion at ~~September 30, 2022, an increase~~March 31, 2023, a decrease of ~~$744.5~~$433.3 million, or ~~4.4%~~2.4%, from ~~$16.8~~$18.2 billion at December 31, ~~2021. Time deposits increased by $1.4 billion, or 274.1%, to $1.9 billion at September 30, 2022, from $507.3 million at December 31, 2021, interest~~2022. Interest bearing demand deposits ~~increased~~decreased by ~~$636.3 million~~$2.7 billion, or ~~9.8%~~31.7%, to ~~$7.1~~$5.8 billion at ~~September 30, 2022,~~March 31, 2023, from ~~$6.5~~$8.5 billion at December 31, ~~2021~~2022 and savings, including MMDA ~~increased~~decreased by ~~$183.6~~$602.0 million, or ~~3.4%~~17.0%, to ~~$5.5~~$2.9 billion at ~~September 30, 2022,~~March 31, 2023, from ~~$5.3~~$3.5 billion at December 31, ~~2021.~~2022. These ~~increases~~decreases were partially offset by ~~a decrease~~increases in non-interest bearing demand deposits of ~~$1.5~~$1.6 billion, or ~~32.9%~~85.0%, to ~~$3.0~~$3.5 billion at ~~September 30, 2022~~March 31, 2023 from ~~$4.5~~$1.9 billion at December 31, ~~2021, primarily due~~2022 and time deposits of $1.3 billion, or 29.4%, to ~~a transfer by a customer participating in CBIT to a MMDA during the three months ended September 30,~~$5.5 billion at March 31, 2023, from $4.2 billion at December 31, 2022.

Total deposits at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 include ~~$1.6~~$1.1 billion ~~and $1.8 billion, respectively,~~ of deposits serviced by BM Technologies under a deposit servicing ~~agreement, which are expected to leave Customers Bank by June 30, 2023. The deposit servicing agreement was scheduled to expire on December 31, 2022.~~agreement. On ~~June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022,~~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, ~~2023.~~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 agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date. For additional information refer to NOTE 17 — SUBSEQUENT EVENTS in Customers' unaudited consolidated financial statements.renewed on March 22, 2023.

The total amount of estimated uninsured deposits totaled ~~$12.5~~$3.9 billion and ~~$12.1~~$6.4 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Time deposits greater than the FDIC limit of $250,000 totaled ~~$1.7 billion~~$61.1 million and ~~$259.0~~$85.5 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

At ~~September 30, 2022,~~March 31, 2023, the Bank had ~~$61.1~~$393.9 million in state and municipal deposits to which it had pledged ~~$61.4~~$397.2 million of available borrowing capacity through the FHLB to the depositors through a letter of credit arrangement.

FHLB ADVANCES AND OTHER BORROWINGS

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

Short-term debt

Short-term debt at March 31, 2023 and December 31, 2022 was as follows:


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

FHLB advances	—		—	%	300,000		4.54	%

Total short-term debt	$	—			$	300,000

Table of ~~Conte~~n tContents

~~Short-term debt~~

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

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

Long-term debt

FHLB and FRB Advances

Long-term FHLB and FRB advances at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as ~~follows.~~follows:


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(dollars in thousands)	(dollars in thousands)	Amount		Rate		Amount		Rate		(dollars in thousands)	Amount		Rate		Amount		Rate
FHLB advances ~~(1)~~(2)	FHLB advances ~~(1)~~(2)	$	500,000	3.37	%	$	—	—	%	FHLB advances ~~(1)~~(2)	$	2,052,143	4.64	%	$	500,000	3.37	%

Total long-term FHLB and FRB advances	Total long-term FHLB and FRB advances	$	500,000			$	—			Total long-term FHLB and FRB advances	$	2,052,143			$	500,000

The maximum borrowing capacity with the FHLB and FRB at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was as follows:


(dollars in thousands)	(dollars in thousands)	September 30, 2022		December 31, 2021		(dollars in thousands)	March 31, 2023		December 31, 2022
Total maximum borrowing capacity with the FHLB	Total maximum borrowing capacity with the FHLB	$	3,560,959	$	2,973,635	Total maximum borrowing capacity with the FHLB	$	3,307,772	$	3,241,120
Total maximum borrowing capacity with the FRB (1)	Total maximum borrowing capacity with the FRB (1)	2,557,704		183,052		Total maximum borrowing capacity with the FRB (1)	6,516,922		2,510,189
Qualifying loans serving as collateral against FHLB and FRB advances (1)		7,543,384		3,594,339
Qualifying loans and securities (1) serving as collateral against FHLB and FRB advances						Qualifying loans and securities (1) serving as collateral against FHLB and FRB advances	12,079,694		7,142,865

~~Table of Conte~~n ts

Senior Notes and Subordinated Debt

Long-term senior notes and subordinated debt at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


			September 30, 2022			December 31, 2021															March 31, 2023			December 31, 2022
(dollars in thousands)	(dollars in thousands)													(dollars in thousands)
Issued by	Issued by	Ranking			Carrying Amount			Carrying Amount		Rate		Issued Amount	Date Issued		Maturity			Price		Issued by			Ranking			Carrying Amount		Carrying Amount		Rate	Issued Amount	Date Issued		Maturity	Price
Customers Bancorp	Customers Bancorp	Senior (1)	$	98,753		$	98,642	2.875	%	$	100,000	August 2021	August 2031		100.000	%	Customers Bancorp		Senior (1)		$	98,823		$	98,788	2.875	%	$	100,000	August 2021	August 2031	100.000	%
Customers Bancorp	Customers Bancorp	Senior	24,762			24,672		4.500	%	25,000		September 2019	September 2024		100.000	%	Customers Bancorp		Senior		24,822			24,792		4.500	%	25,000		September 2019	September 2024	100.000	%
Customers Bancorp		Senior	—			99,772		3.950	%	100,000		June 2017	June 2022		99.775	%

Total other borrowings	Total other borrowings		$	123,515		$	223,086										Total other borrowings				$	123,645		$	123,580

Customers Bancorp	Customers Bancorp	Subordinated (2)(3)	$	72,539		$	72,403	5.375	%	$	74,750	December 2019	December 2034		100.000	%	Customers Bancorp		Subordinated (2)(3)		$	72,630		$	72,585	5.375	%	$	74,750	December 2019	December 2034	100.000	%
Customers Bank	Customers Bank	Subordinated (2)(4)	109,343			109,270		6.125	%	110,000		June 2014	June 2029		100.000	%	Customers Bank		Subordinated (2)(4)		109,391			109,367		6.125	%	110,000		June 2014	June 2029	100.000	%
Total subordinated debt	Total subordinated debt		$	181,882		$	181,673										Total subordinated debt				$	182,021		$	181,952

(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 bear an annual interest rate equal to the three-month term SOFR plus a comparable spread beginning in June 2024. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.

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SHAREHOLDERS' EQUITY

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


(dollars in thousands)	(dollars in thousands)	September 30, 2022		December 31, 2021		Change		% Change		(dollars in thousands)	March 31, 2023		December 31, 2022		Change		% Change
Preferred stock	Preferred stock	$	137,794	$	137,794	$	—	—	%	Preferred stock	$	137,794	$	137,794	$	—	—	%
Common stock	Common stock	34,948		34,722		226		0.7	%	Common stock	35,258		35,012		246		0.7	%
Additional paid in capital	Additional paid in capital	549,066		542,391		6,675		1.2	%	Additional paid in capital	552,255		551,721		534		0.1	%
Retained earnings	Retained earnings	898,511		705,732		192,779		27.3	%	Retained earnings	974,399		924,134		50,265		5.4	%
Accumulated other comprehensive income (loss), net	Accumulated other comprehensive income (loss), net	(156,126)		(4,980)		(151,146)		NM		Accumulated other comprehensive income (loss), net	(156,276)		(163,096)		6,820		(4.2)	%
Treasury stock	Treasury stock	(77,262)		(49,442)		(27,820)		56.3	%	Treasury stock	(122,410)		(82,604)		(39,806)		48.2	%
Total shareholders' equity	Total shareholders' equity	$	1,386,931	$	1,366,217	$	20,714	1.5	%	Total shareholders' equity	$	1,421,020	$	1,402,961	$	18,059	1.3	%

Shareholders’ equity increased ~~$20.7~~$18.1 million, or ~~1.5%~~1.3%, to $1.4 billion at ~~September 30, 2022~~March 31, 2023 when compared to shareholders' equity of $1.4 billion at December 31, ~~2021.~~2022. The increase primarily resulted from ~~an increase~~increases of ~~$192.8~~$50.3 million in retained earnings ~~which was partially offset by a decrease of $151.1~~and $6.8 million in accumulated other comprehensive income (loss), net, ~~and~~partially offset by an increase of ~~$27.8~~$39.8 million in treasury stock.

The ~~increase~~increases in common stock and additional paid in capital resulted primarily from the issuance of common stock under share-based compensation arrangements for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

The increase in retained earnings resulted from net income of ~~$199.3~~$53.7 million, partially offset by preferred stock dividends of ~~$6.5~~$3.5 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

The ~~decrease~~increase in accumulated other comprehensive income (loss), net primarily resulted from a decrease of ~~$213.5~~$8.3 million in ~~the fair value of~~unrealized losses on AFS debt securities and income tax effect of ~~$55.5~~$2.1 million ~~due to changes in market interest rates, partially offset by reclassification of $9.3 million in net losses and income tax effect of $2.4 million resulting from the sales of AFS debt securities~~ during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

~~Table~~The increase in treasury stock resulted from repurchase of ~~Conte~~n ts

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 ~~will extend for one additional year~~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 to be made will be at the discretion of the Company and will comply with all applicable regulatory limitations. Customers Bancorp purchased 664,145 shares of its common stock for $27.8 million pursuant to the Share Repurchase Program during the nine months ended September 30, 2022. Refer to "NOTE 12 – SHAREHOLDERS' EQUITY" to Customers' unaudited consolidated financial statements for additional information on the repurchase of common shares.

LIQUIDITY AND CAPITAL RESOURCES

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

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

With commitments to extend credit, exposure to credit loss in the event of non-performance by the other party to the financial instrument is represented by the contractual amount of those instruments. The same credit policies are used in making commitments and conditional obligations as for on-balance sheet instruments. Because they involve credit risk similar to extending a loan and lease, these financial instruments are subject to the Bank’s credit policy and other underwriting standards.

Customers recognized a provision for credit losses on unfunded lending-related commitments of $0.3 million ~~and $0.8 million~~ during the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, resulting in an ACL of ~~$2.9~~$3.3 million as of ~~September 30, 2022.~~March 31, 2023. Customers had an ACL on unfunded lending-related commitments of ~~$2.1~~$3.0 million as of December 31, ~~2021.~~2022.

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Customers' contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, ~~federal funds purchased, short-term and~~ long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of ~~September 30, 2022.~~March 31, 2023. These obligations and commitments include the transfer of deposits serviced by BM Technologies under the deposit service agreement ~~described further below under cash flows from discontinued operations, which are expected to leave Customers Bank~~ on the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, ~~2023.~~2024. As of March 31, 2023 and December 31, 2022, Customers ~~repaid $100.0~~held $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 ~~3.950% senior notes that matured~~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 ~~June 2022.~~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. Refer to "NOTE 98 – LEASES", "NOTE 109 – DEPOSITS" and "NOTE 1110 – BORROWINGS" to Customers' unaudited consolidated financial statements for additional information.

Customers' investment portfolio, including debt securities available for sale and held to maturity provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional funding. Customers' principal sources of funds are deposits, borrowings, principal and interest payments on loans and leases, other funds from operations, and proceeds from common and preferred stock issuances. Borrowing arrangements are maintained with the FHLB and the FRB, including the BTFP to meet short-term liquidity needs. Longer-term borrowing arrangements are also maintained with the FHLB and the FRB. As of ~~September 30, 2022,~~March 31, 2023, Customers' borrowing capacity with the FHLB was ~~$3.6~~$3.3 billion, of which ~~$500.0 million~~$2.1 billion was utilized in borrowings and ~~$61.4~~$397.2 million of available capacity was utilized to collateralize state and municipal deposits. As of December 31, ~~2021,~~2022, Customers' borrowing capacity with the FHLB was ~~$3.0~~$3.2 billion, of which ~~$700.0~~$800.0 million was utilized in borrowings and ~~$475.3~~$175.6 million of available capacity was utilized to collateralize state and municipal deposits. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, Customers' borrowing capacity with the FRB was ~~$2.6~~$6.5 billion and ~~$183.1 million,~~$2.5 billion, respectively.

Beginning in second quarter 2020, Customers began participating in the PPPLF, in which Federal Reserve Banks extend non-recourse loans to institutions that are eligible to make PPP loans. Only PPP loans that are guaranteed by the SBA under the PPP, with respect to both principal and interest that are originated or purchased by an eligible institution, may be pledged as collateral to the Federal Reserve Banks. As of September 30, 2022, Customers had $1.2 billion of PPP loans outstanding, which are eligible for forgiveness by the federal government. As of September 30, 2022 and December 31, 2021, Customers had no borrowings under the PPPLF. No new advances are available from the PPPLF after July 30, 2021.

~~Table of Conte~~n ts

Customers Bank provides blockchain-based digital payments via CBIT, which allows clients to make instant payments in U.S. dollars. CBIT may only be created or minted by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. CBIT is not listed or traded on any digital currency exchange. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~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 ~~payment~~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 ~~$50~~$254.7 million and $23 thousand at ~~September 30, 2022~~March 31, 2023 and ~~no outstanding balance at~~ December 31, ~~2021.~~2022, respectively.

The table below summarizes Customers' cash flows ~~from continuing operations~~ for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Nine Months Ended September 30,
(dollars in thousands) 2022 2021 Change % Change
Net cash provided by (used in) continuing operating activities $ 275,022 $ 274,524 $ 498 0.2 %
Net cash provided by (used in) continuing investing activities (1,085,108) (80,875) (1,004,233) NM
Net cash provided by (used in) continuing financing activities 696,519 187,842 508,677 270.8 %
Net increase (decrease) in cash and cash equivalents from continuing operations $ (113,567) $ 381,491 $ (495,058) (129.8) %


	Three Months Ended March 31,
(dollars in thousands)	2023		2022		Change		% Change
Net cash provided by (used in) operating activities	$	17,538	$	116,940	$	(99,402)	(85.0)	%
Net cash provided by (used in) investing activities	804,645		88,672		715,973		807.4	%
Net cash provided by (used in) financing activities	768,696		(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) ~~continuing~~ operating activities

Cash provided by ~~continuing~~ operating activities of ~~$275.0~~$17.5 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 resulted from net income ~~from continuing operations~~ of ~~$199.3~~$53.7 million, net non-cash operating adjustments of ~~$42.7 million, a decrease in accrued interest receivable and other assets of $16.9~~$26.5 million and an increase in accrued interest payable and other liabilities of ~~$16.1~~$18.1 million, partially offset by origination of loans held for sale, net of proceeds 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 ~~continuing~~ operating activities of ~~$274.5~~$116.9 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 resulted from net income ~~from continuing operations~~ of ~~$252.0~~$76.8 million ~~an increase~~and a decrease in accrued interest receivable and other assets of $66.9 million, partially offset by a decrease in accrued interest payable and other liabilities of ~~$136.3~~$6.4 million and ~~a decrease of $45.6 million in accrued interest receivable and other assets, partially offset by~~ net non-cash operating adjustments of ~~$159.4~~$20.2 million.

Cash flows provided by (used in) ~~continuing~~ investing activities

Cash ~~used in continuing~~provided by investing activities of ~~$1.1 billion~~$804.6 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 primarily resulted from a net ~~increase~~decrease in loans and leases, excluding mortgage warehouse loans of ~~$1.6 billion, purchases of investment securities available for sale of $929.8~~$736.6 million ~~purchases of loans of $368.8 million~~primarily from PPP loan forgiveness and ~~purchases of leased assets under lessor operating leases of $86.8 million, partially offset~~guarantee payments by ~~proceeds from sales of investment securities available for sale of $681.6 million,~~the SBA, proceeds from net repayments of mortgage warehouse loans of ~~$678.9~~$91.7 million, proceeds from maturities, calls, and principal repayments of investment securities available for sale of ~~$408.0~~$69.6 million and ~~proceeds from sales~~held to maturity of ~~loans and leases of $136.9~~$44.2 million, which included the cash proceeds of the sale of $521.8 million of consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE. Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' unaudited consolidated financial statements for additional information on the sale of consumer installment loans.

~~Cash used in continuing investing activities of $80.9 million for the nine months ended September 30, 2021 primarily resulted from~~partially offset by purchases of investment securities ~~available for sale~~held to maturity of ~~$1.4 billion,~~$73.1 million, net purchases of ~~PPP~~FHLB, Federal Reserve Bank, and other ~~loans~~restricted stock of ~~$1.4 billion~~$50.5 million and purchases of ~~bank-owned life insurance~~loans of ~~$46.5~~$12.6 million.

Cash provided by investing activities of $88.7 million ~~partially offset by~~for the three months ended March 31, 2022 primarily resulted from proceeds from net repayments of mortgage warehouse loans of $1.1 billion, proceeds from sales of investment securities available for sale of $666.0 million, a net decrease in loans and leases, excluding mortgage warehouse loans of $521.3 million primarily from PPP loan forgiveness, proceeds from sales of loans and leases of $260.9$536.6 million, proceeds from maturities, calls, and principal repayments of investment securities available for sale of ~~$258.4~~$224.8 million, proceeds from sales of investment securities available for sale of $156.0 million, a net decrease in loans and leases, excluding mortgage warehouse loans of $159.7 million primarily from PPP loan forgiveness, proceeds from sales of loans and leases of $14.3 million, and net proceeds from sale of FHLB, FRB, and other restricted stock of ~~$14.2~~$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) ~~continuing~~ financing activities

Cash provided by ~~continuing~~ financing activities of ~~$696.5~~$768.7 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 primarily resulted from ~~a net increase in deposits of $744.5 million,~~ proceeds from long-term borrowed funds from the FHLB and the FRB of ~~$500.0~~$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 of $435.8 million, a net ~~increase~~decrease in ~~federal~~short-term borrowed funds ~~purchased~~from the FHLB of ~~$290.0~~$300.0 million ~~partially offset by~~and purchases of treasury stock of $39.8 million.

Cash used in 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, ~~repayments~~a net decrease in deposits of ~~other borrowings of $100.0~~$362.4 million ~~upon maturity of the Customers Bancorp 3.950% senior notes in June 2022~~ and purchases of treasury stock of ~~$27.8 million.~~

~~Table of Conte~~n ts

Cash provided by continuing financing activities of $187.8 million for the nine months ended September 30, 2021 primarily resulted from net increases in deposits of $5.7 billion and the proceeds from issuance of the 2.875% fixed-to-floating rate senior notes of $98.8$6.3 million, partially offset by a net ~~decrease~~increase in ~~long-term borrowed funds from the PPPLF of $4.4 billion, the redemption of preferred stock of $82.5 million and decreases in short-term borrowed funds from the FHLB and~~ federal funds purchased of ~~$1.1 billion. Customers fully repaid the borrowings from the PPPLF during the nine months ended September 30, 2021 due to increased PPP forgiveness and funding from deposits.~~

~~Cash flows from discontinued operations~~

Customers Bancorp completed the divestiture of BMT on January 4, 2021. BMT's operating results and associated cash flows have been presented as "Discontinued operations" within the consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation. In connection with the divestiture, Customers entered into various agreements with BM Technologies, including a transition services agreement, software license agreement, deposit servicing agreement, non-competition agreement and loan agreement for periods ranging from one to ten years. The deposit servicing agreement was scheduled to expire on December 31, 2022. On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. Customers and BM Technologies also agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date. For additional information refer to NOTE 17 — SUBSEQUENT EVENTS in Customers' unaudited consolidated financial statements. As of September 30, 2022 and December 31, 2021, Customers held $1.6 billion and $1.8 billion of deposits serviced by BM Technologies, respectively, which are expected to leave Customers Bank by the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023. The loan agreement with BM Technologies was terminated early in November 2021. Customers entered into a special limited agency agreement with BM Technologies, whereby Customers will originate consumer installment loans referred by BM Technologies for an initial period from April 20, 2022 to December 31, 2022, which is renewable annually. For additional information refer to "NOTE 3 – DISCONTINUED OPERATIONS" to Customers' unaudited consolidated financial statements.

~~The table below summarizes Customers' cash flows from discontinued operations for the nine months ended September 30, 2022 and 2021:~~
Nine Months Ended September 30,
(dollars in thousands) 2022 2021 Change % Change
Net cash provided by (used in) discontinued operating activities $ — $ (22,791) $ 22,791 (100.0) %
Net increase (decrease) in cash and cash equivalents from discontinued operations $ — $ (22,791) $ 22,791 (100.0) %

~~Cash flows provided by (used in) discontinued operating activities~~

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

~~Table of Conte~~n ts

rule, which is reflected in the regulatory capital data presented below. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of ~~September 30, 2022,~~March 31, 2023, our regulatory capital ratios reflected ~~75%~~50%, or ~~$46.2~~$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. leverage ratio). Customers applied this regulatory guidance in the calculation of its regulatory capital ratios presented below.

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Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Bancorp to maintain minimum amounts and ratios (set forth in the following table) of common equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~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:																	Minimum Capital Levels to be Classified as:
		Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant					Actual				Adequately Capitalized				Well Capitalized				Basel III Compliant
(dollars in thousands)	(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2022:
As of March 31, 2023:																		As of March 31, 2023:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)																	Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,447,890	9.845	%	$	661,804	4.500	%	N/A		N/A		$	1,029,472	7.000	%	Customers Bancorp, Inc.	$	1,466,676	9.624	%	$	685,809	4.500	%	N/A		N/A		$	1,066,814	7.000	%
Customers Bank	Customers Bank	$	1,676,998	11.420	%	$	660,807	4.500	%	$	954,499	6.500	%	$	1,027,922	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)	Tier 1 capital (to risk-weighted assets)																	Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,585,683	10.782	%	$	882,405	6.000	%	N/A		N/A		$	1,250,073	8.500	%	Customers Bancorp, Inc.	$	1,604,469	10.528	%	$	914,412	6.000	%	N/A		N/A		$	1,295,417	8.500	%
Customers Bank	Customers Bank	$	1,676,998	11.420	%	$	881,076	6.000	%	$	1,174,768	8.000	%	$	1,248,191	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)	Total capital (to risk-weighted assets)																	Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,838,179	12.499	%	$	1,176,540	8.000	%	N/A		N/A		$	1,544,208	10.500	%	Customers Bancorp, Inc.	$	1,878,449	12.326	%	$	1,219,216	8.000	%	N/A		N/A		$	1,600,221	10.500	%
Customers Bank	Customers Bank	$	1,856,955	12.646	%	$	1,174,768	8.000	%	$	1,468,460	10.000	%	$	1,541,883	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)	Tier 1 capital (to average assets)																	Tier 1 capital (to average assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,585,683	7.650	%	$	829,133	4.000	%	N/A		N/A		$	829,133	4.000	%	Customers Bancorp, Inc.	$	1,604,469	7.534	%	$	851,851	4.000	%	N/A		N/A		$	851,851	4.000	%
Customers Bank	Customers Bank	$	1,676,998	8.099	%	$	828,289	4.000	%	$	1,035,361	5.000	%	$	828,289	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, 2021:
As of December 31, 2022:																		As of December 31, 2022:
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)																	Common equity Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,291,270	9.981	%	$	582,179	4.500	%	N/A		N/A		$	905,611	7.000	%	Customers Bancorp, Inc.	$	1,470,837	9.637	%	$	686,838	4.500	%	N/A		N/A		$	1,068,415	7.000	%
Customers Bank	Customers Bank	$	1,526,583	11.825	%	$	580,943	4.500	%	$	839,140	6.500	%	$	903,689	7.000	%	Customers Bank	$	1,708,598	11.213	%	$	685,694	4.500	%	$	990,447	6.500	%	$	1,066,636	7.000	%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)																	Tier 1 capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,429,063	11.046	%	$	776,238	6.000	%	N/A		N/A		$	1,099,671	8.500	%	Customers Bancorp, Inc.	$	1,608,630	10.539	%	$	915,784	6.000	%	N/A		N/A		$	1,297,361	8.500	%
Customers Bank	Customers Bank	$	1,526,583	11.825	%	$	774,591	6.000	%	$	1,032,788	8.000	%	$	1,097,337	8.500	%	Customers Bank	$	1,708,598	11.213	%	$	914,259	6.000	%	$	1,219,012	8.000	%	$	1,295,201	8.500	%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)																	Total capital (to risk-weighted assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,667,395	12.888	%	$	1,034,984	8.000	%	N/A		N/A		$	1,358,417	10.500	%	Customers Bancorp, Inc.	$	1,862,089	12.200	%	$	1,221,045	8.000	%	N/A		N/A		$	1,602,622	10.500	%
Customers Bank	Customers Bank	$	1,692,512	13.110	%	$	1,032,788	8.000	%	$	1,290,985	10.000	%	$	1,355,534	10.500	%	Customers Bank	$	1,889,472	12.400	%	$	1,219,012	8.000	%	$	1,523,765	10.000	%	$	1,599,954	10.500	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)																	Tier 1 capital (to average assets)
Customers Bancorp, Inc.	Customers Bancorp, Inc.	$	1,429,063	7.413	%	$	771,084	4.000	%	N/A		N/A		$	771,084	4.000	%	Customers Bancorp, Inc.	$	1,608,630	7.664	%	$	839,547	4.000	%	N/A		N/A		$	839,547	4.000	%
Customers Bank	Customers Bank	$	1,526,583	7.925	%	$	770,528	4.000	%	$	963,160	5.000	%	$	770,528	4.000	%	Customers Bank	$	1,708,598	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

~~Table of Conte~~n ts

capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. As of ~~September 30, 2022,~~March 31, 2023, the Bank and the Bancorp were in compliance with the Basel III requirements. ~~See "NOTE 13 – REGULATORY CAPITAL" to Customers' unaudited consolidated financial statements for additional discussion regarding regulatory capital requirements.~~

Effect of Government Monetary Policies

Our earnings are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans and leases, investments, and deposits, and their use may also affect rates charged on loans and leases or paid for deposits.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

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

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

Income scenario modeling is used to measure interest rate sensitivity and manage interest rate risk. Income scenario considers not only the impact of changing market interest rates upon forecasted net interest income but also other factors such as yield curve relationships, the volume and mix of assets and liabilities, customer preferences and general market conditions.

Through the use of income scenario modeling, Customers has estimated the net interest income for the twelve months ending ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, based upon the assets, liabilities and off-balance sheet financial instruments in existence at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Customers has also estimated changes to that estimated net interest income based upon interest rates rising or falling immediately (“rate shocks”). For upward rate shocks modeling a rising rate environment at ~~September 30, 2022,~~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 ~~on September 30, 2022,~~at March 31, 2023, current market interest rates were decreased immediately by 100, 200 and 300 basis points. The following table reflects the estimated percentage change in estimated net interest income for the twelve months ending ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, resulting from changes in interest rates.

Net change in net interest income


		% Change			% Change
Rate Shocks	Rate Shocks	September 30, 2022	December 31, 2021	Rate Shocks	March 31, 2023	December 31, 2022
Up 3%	Up 3%	8.1%	16.0%	Up 3%	14.2%	0.4%
Up 2%	Up 2%	5.5%	10.8%	Up 2%	9.5%	0.4%
Up 1%	Up 1%	2.1%	5.7%	Up 1%	5.1%	0.3%
Down 1%	Down 1%	(5.2)%	N/A	Down 1%	(5.4)%	(0.9)%
Down 2%	Down 2%	(8.3)%	N/A	Down 2%	(11.1)%	(2.0)%
Down 3%	Down 3%	(13.3)%	N/A	Down 3%	(16.8)%	(4.8)%

EVE estimates the discounted present value of asset and liability cash flows. Discount rates are based upon market prices for comparable assets and liabilities. Upward and downward rate shocks are used to measure volatility of EVE in relation to a constant rate environment. For upward rate shocks modeling a rising rate environment at ~~September 30, 2022,~~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 ~~on September 30, 2022,~~at March 31, 2023, current market interest rates were decreased immediately by 100, 200 and 300 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, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, resulting from shocks to interest rates.


	From Base
Rate Shocks	March 31, 2023	December 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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~~rates.~~
From Base
Rate Shocks September 30, 2022 December 31, 2021
Up 3% (18.2)% 100.7%
Up 2% (11.4)% 79.8%
Up 1% (6.0)% 51.5%
Down 1% (8.6)% N/A
Down 2% (39.1)% N/A
Down 3% (61.1)% N/A

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

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 as of ~~September 30, 2022.~~March 31, 2023.

(b) Changes in Internal Control Over Financial ~~Reporting~~Reporting.. During the quarter ended ~~September 30, 2022,~~March 31, 2023, there have been no changes in Customers Bancorp's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Customers Bancorp's internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

For information on Customers' legal proceedings, refer to “NOTE 1615 – LOSS CONTINGENCIES” to the unaudited consolidated financial statements.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Risk Factors” included within the ~~2021~~2022 Form 10-K. There are no material changes from the risk factors included within the ~~2021~~2022 Form 10-K, except ~~for the risk factors involving third-party service providers~~ as further discussed below. The risks described within the ~~2021~~2022 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or operating results. ~~See~~Refer to “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Note Regarding Forward-Looking Statements.”

~~We are dependent on our information technology~~A continuation of recent turmoil in the financial services industry, and ~~telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security~~responsive measures to manage it, could have ~~a material~~an adverse effect on ~~us.~~

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

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

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

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Additionally, financial products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively and in a cost-efficient manner is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes available. Certain competitors may have greater resources to invest in technology and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so could have a material adverse impact on our business and therefore on ourstock price, 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 August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021). The term of the Share Repurchase Program ~~will extend for one additional year~~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 to be made will be at the discretion of the Company and will comply with all applicable regulatory limitations. The common shares repurchased during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 pursuant to the Share Repurchase Program were as follows:

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


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares purchased as part of publicly announced plans or programs	Maximum Number of Shares that may yet be purchased under the plans or programs
January 1 - January 31, 2023	—	$	—	—	1,877,392
February 1 - February 28, 2023	1,013,283	31.48		1,013,283	864,109
March 1 - March 31, 2023	366,600	20.57		366,600	497,509
Total	1,379,883	$	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 subject to general regulatory restrictions on the payment of cash dividends. Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which, depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends. Further, various federal and state statutory provisions limit the amount of dividends that bank subsidiaries can pay to their parent holding company without regulatory approval. Generally, subsidiaries are prohibited from paying dividends when doing so would cause them to fall below the regulatory minimum capital levels, and limits exist on paying dividends in excess of net income for specified periods.

Beginning January 1, 2015, the ability to pay dividends and the amounts that can be paid will be limited to the extent the Bank's capital ratios do not exceed the minimum required levels plus 250 basis points, as these requirements were phased in through January 1, 2019.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

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

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Item 6. Exhibits


Exhibit No.		Description

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

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

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

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

3.2		Amended and Restated Bylaws of Customers Bancorp, incorporated by reference to Exhibit 3.2 to the Customers Bancorp Form 8-K filed with the SEC on April 30, 2012

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

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

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

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

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





















































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

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

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

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

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

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

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

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definitions Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

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

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SIGNATURES

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


	Customers Bancorp, Inc.

~~November 8, 2022~~May 9, 2023	By:	/s/ Jay S. Sidhu
	Name:	Jay S. Sidhu
	Title:	Chairman and Chief Executive Officer (Principal Executive Officer)



~~November 8, 2022~~May 9, 2023	By:	/s/ Carla A. Leibold
	Name:	Carla A. Leibold
	Title:	Chief Financial Officer (Principal Financial Officer)

9679


Part I

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

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5146

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	9074

Item 4.	Controls and Procedures	9175

PART II

Item 1.	Legal Proceedings	9276

Item 1A.	Risk Factors	9276

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9377

Item 3.	Defaults Upon Senior Securities	9477

Item 4.	Mine Safety Disclosures	9477

Item 5.	Other Information	9477

Item 6.	Exhibits	9578

SIGNATURES		9679



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



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

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


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





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

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

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



Net income	—	—		—	—		—		213,978		—		—		213,978

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


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

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

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



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



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


	September 30, 2022			September 30, 2021
(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment
Manufactured housing	1	$	46	2	$	71


Residential real estate	1	119		—	—
Installment	34	420		19	231


Total loans	36	$	585	21	$	302


	Amount of Gain (Loss) Recognized in OCI on Derivatives (1)				Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	Three Months Ended September 30,					Three Months Ended September 30,
(amounts in thousands)	2022		2021			2022		2021
Derivatives in cash flow hedging relationships:
Interest rate swaps	$	—	$	—	Interest expense	$	—	$	—