Customers Bancorp Inc

Previous wording

This report and all attachments hereto, as well as other written or oral communications made from time to time by us, may contain forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, such as the FDIC special assessments, the impact of COVID-19 and its variants on the U.S. economy and customer behavior, the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the continued success and acceptance of our blockchain payments system, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; higher inflation and its impacts; and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that 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 Cus…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This report and all attachments hereto, as well as other written or oral communications made from time to time by us, may contain forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, such as the FDIC special assessments; the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to our reputation; effects of competition on deposit rates and growth, loan rates and growth and net interest margin; failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks; public health crises and pandemics and their effects on the economic and business environments in which we operate; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and military conflicts, including the war between Russia and Ukraine and escalating conflict in the Middle East, which could impact the economic conditions in the United States; the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the “Bancorp” or “Customers Bancorp”), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the “Bank”), collectively referred to as “Customers” herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers’ financial condition and results of operations as of and for the three and six months ended June 30, 2024. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers’ 2023 Form 10-K.

Current wording

Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the “Bancorp” or “Customers Bancorp”), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the “Bank”), collectively referred to as “Customers” herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers’ financial condition and results of operations as of and for the three and nine months ended September 30, 2024. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers’ 2023 Form 10-K.

Previous wording

Inflation remains elevated in 2024. The Federal Reserve has raised interest rates significantly throughout 2022 and into 2023 in attempts to bring the inflation to its long run target rate of two percent. The Federal Reserve is expected to start lowering interest rates in 2024, however significant uncertainties exist as to the extent and timing of any future rate cuts.

Current wording

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

Previous wording

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 and the exposure to the U.S. commercial real estate market, particularly to the regional banks, disruptions to global supply chain and labor markets and higher oil and commodity prices exacerbated by the military conflicts between Russia and Ukraine and in Israel. Customers has taken deliberate actions in response, including maintaining higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios. Customers has shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates to position the Bank for higher interest rates. Customers’ exposure to higher risk commercial real estate such as the office sector is minimal, representing approximately 1% of the loan portfolio as of June 30, 2024. The Bank’s debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity. The Bank had approximately $5.3 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $3.0 billion as of June 30, 2024. The Bank’s estimated FDIC insured deposits represented approximately 66% of our deposits (inclusive of accrued interest) as of June 30, 2024. When including collateralized and affiliate deposits as FDIC insured, this number increased to 74% of our deposits as of June 30, 2024. 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, the military conflicts between Russia and Ukraine and in Israel, as well as any effects that may result from the federal government’s responses including future rate and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, the geopolitical conflicts and developments in the U.S. banking system will impact Customers’ operations and financial results during the remainder of 2024 is highly uncertain.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The net decrease in our estimated ACL as of June 30, 2024 as compared to our December 31, 2023 resulted primarily from lower consumer installment loan balances held for investment. The provision for credit losses on loans and leases was $17.9 million and $33.8 million for the three and six months ended June 30, 2024, respectively, for an ending ACL balance of $137.3 million ($132.4 million for loans and leases and $4.9 million for unfunded lending-related commitments) as of June 30, 2024.

Current wording

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

Previous wording

To determine the ACL as of June 30, 2024, Customers utilized Moody’s June 2024 Baseline forecast to generate its modelled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at June 2024 assumed slight improvements in forecasts of macroeconomic variables from the first quarter 2024 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board lowering interest rates by 0.25 percentage point in September and December 2024; failures of several regional banks in the first half of 2023 and recent issues around other banks are not symptomatic of a broader problem in the U.S. financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or further undermine economic growth; the military conflict between Russia and Ukraine continuing for the foreseeable future but its fallout on energy, agriculture and other commodity markets and the global economy fading; the war in Israel not broadening to a regional conflict and disrupting global energy markets; the CPI rising 3.2% in 2024 and 2.5% in 2025; and the unemployment rate rising to 4.0% in 2024 and 4.1% in 2025. Customers continues to monitor the impact of the U.S. banking system weaknesses, military conflicts between Russia and Ukraine and in Israel, inflation, and monetary and fiscal policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

Current wording

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

Previous wording

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody’s. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers’ modelling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around the elevated interest rates weakening consumer spending and confidence much more than expected; concerns about bank failures raising fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards; the Federal Reserve keeping the fed funds rate at the target range throughout the second quarter of 2024 but easing beginning in the third quarter 2024 as the economy weakens further; military conflict between Russia and Ukraine persisting longer than expected; worries grow that the military conflict in Israel leading to a wider military conflict; rising unemployment and the U.S. economy falling into recession in the third quarter of 2024. Under this scenario, as an example, the unemployment rate is estimated at 5.1% and 7.8% in 2024 and 2025, respectively. These numbers represent a 1.1% and 3.7% higher unemployment estimate than the Baseline scenario projection of 4.0% and 4.1% for the same time periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modelled results. This would result in an incremental quantitative impact to the ACL of approximately $56 million at June 30, 2024. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

Current wording

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody’s. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers’ modelling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around the elevated interest rates weakening credit-sensitive consumer spending and confidence much more than expected; concerns about bank failures raising fears of further collapse in the banking industry, reducing consumer confidence and causing banks to tighten lending standards; the Federal Reserve keeping the fed funds rate at the target range throughout the second quarter of 2024 but easing beginning in the third quarter 2024 as the economy weakens, and below the target range under the Baseline scenario beginning in the first quarter of 2025; military conflict between Russia and Ukraine persisting longer than expected; worries grow that the military conflict in Israel leading to a wider military conflict; unemployment beginning to increase significantly in the fourth quarter of 2024 and the U.S. economy falling into recession in the fourth quarter of 2024. Under this scenario, as an example, the unemployment rate is estimated at 4.5% and 7.9% in 2024 and 2025, respectively. These numbers represent a 0.4% and 3.8% higher unemployment estimate than the Baseline scenario projection of 4.1% for the same time periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modelled results. This would result in an incremental quantitative impact to the ACL of approximately $64 million at September 30, 2024. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

Previous wording

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

Current wording

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

Previous wording

Customers reported net income available to common shareholders of $54.3 million and $100.2 million for the three and six months ended June 30, 2024, respectively, compared to net income available to common shareholders of $44.0 million and $94.3 million for the three and six months ended June 30, 2023, respectively. Factors contributing to the change in net income available to common shareholders for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 were as follows:

Current wording

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

Previous wording

Net interest income increased $12.9 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to higher average balances and market interest rates on higher interest-earning deposits, higher market interest rates on variable rate loans in specialized lending, consumer installment loans and investments and lower interest expense from lower average balances of borrowings, offset in part by higher interest expense on deposits. Average interest-earning assets decreased by $99.5 million, primarily related to decreases in commercial and industrial loans and leases, primarily in variable rate lower credit risk specialized lending, PPP loans included in other commercial and industrial loans and leases and consumer installment loans as Customers continued its de-risking strategy, partially offset by an increase in interest-earning deposits.

Current wording

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

Previous wording

The $5.5 million decrease in the provision for credit losses for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily reflects the recognition of slight improvements in macroeconomic forecasts and lower consumer installment loan balances held for investment. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment represented 1.08% of total loans and leases receivable at June 30, 2024, compared to 1.09% of total loans and leases receivable at June 30, 2023. Net charge-offs for the three months ended June 30, 2024 were $18.7 million, or 56 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $15.6 million, or 42 basis points on an annualized basis, for the three months ended June 30, 2023. The net charge-offs of $15.6 million for three months ended June 30, 2023 excluded $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the venture banking loan portfolio on June 15, 2023. The increase in net charge-offs for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, excluding the charge-offs for certain PCD loans acquired from the FDIC, was primarily due to higher charge-offs for commercial and industrial loans.

Current wording

The $0.8 million decrease in the provision for credit losses included $0.7 million increase in provision for credit losses on loans and leases for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, which primarily reflects higher balances in commercial and industrial loan balances held for investment, partially offset by lower consumer installment loan balances held for investment. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment represented 1.06% of total loans and leases receivable at September 30, 2024, compared to 1.10% of total loans and leases receivable at September 30, 2023. Net charge-offs for the three months ended September 30, 2024 were $17.0 million, or 50 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $17.5 million, or 50 basis points on an annualized basis, for the three months ended September 30, 2023. The decrease in net charge-offs for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was primarily due to lower charge-offs for consumer installment loans, partially offset by higher charge-offs for commercial and industrial loans.

Previous wording

The $8.0 million decrease in the provision for credit losses for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily reflects the recognition of slight improvements in macroeconomic forecasts and lower consumer installment loan balances held for investment. Net charge-offs for the six months ended June 30, 2024 were $36.7 million, or 56 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $34.2 million, or 46 basis points on an annualized basis, for the six months ended June 30, 2023. The increase in net charge-offs for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, excluding the charge-offs for certain PCD loans acquired from the FDIC, was primarily due to higher charge-offs for commercial and industrial loans, partially offset by a decrease in charge-offs for non-owner occupied commercial real estate loans.

Current wording

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

Previous wording

The provision for credit losses for the three months ended June 30, 2024 and 2023 also included a provision for credit losses of $0.3 million and $1.3 million on certain asset-backed securities and corporate notes, respectively, included in our investment securities available for sale. The provision for credit losses on certain asset-backed securities and corporate notes included in our investment securities available for sale was $1.4 million and $2.9 million for the six months ended June 30, 2024 and 2023, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Current wording

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

Previous wording

The $18.2 million increase in non-interest income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily resulted from $11.0 million of unrealized gain on equity method investment with a fair value of $16.0 million purchased at a discount for the six months ended June 30, 2024, $5.0 million of loss on sale of capital call lines of credit for the six months ended June 30, 2023, increases of $2.3 million in loan fees and $1.7 million in commercial lease income, and a decrease of $0.5 million in net loss on sale of loans. These increases were offset in part by a decrease of $2.4 million in bank-owned life insurance income and an increase of $0.7 million in net loss on sale of investment securities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

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

Previous wording

The $14.2 million increase in non-interest expense for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily resulted from increases of $11.8 million in salaries and employee benefits, $4.6 million in other non-interest expense and $0.5 million in FDIC assessments, non-income taxes and regulatory fees. These increases were offset in part by decreases of $3.1 million in professional services, $1.3 million in loan servicing and $0.2 million in technology, communication and bank operations for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

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

Previous wording

The $33.2 million increase in non-interest expense for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily resulted from increases of $15.5 million in salaries and employee benefits, $11.2 million in FDIC assessments, non-income taxes and regulatory fees, $6.4 million in other non-interest expense and $5.1 million in technology, communication and bank operations. These increases were offset in part by decreases of $4.3 million in professional services and $1.9 million in loan servicing for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

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

Previous wording

Included in the $11.2 million increase in FDIC assessments, non-income taxes and regulatory fees for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was $4.2 million in FDIC premiums related to periods prior to 2024 and $0.7 million related to an increase in industry-wide FDIC special assessment associated with the bank failures of March 2023. Included in the $5.1 million increase in technology, communication and bank operations for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was $7.1 million of deposit servicing-related fees related to periods prior to 2024.

Current wording

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

Previous wording

Customers’ effective tax rate was 24.34% for the six months ended June 30, 2024 compared to 25.86% for the six months ended June 30, 2023. The decrease in the effective tax rate primarily resulted from tax expense on surrendered bank-owned life insurance policies of $4.1 million for the six months ended June 30, 2023, partially offset by a decrease in estimated income tax credits for the year ending December 31, 2024.

Current wording

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

Previous wording

Preferred stock dividends were $3.8 million and $3.6 million for the three months ended June 30, 2024 and 2023, respectively. Preferred stock dividends were $7.6 million and $7.0 million for the six months ended June 30, 2024 and 2023, respectively. There were no changes to the amount of preferred stock outstanding during the three and six months ended June 30, 2024 and 2023.

Current wording

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

Previous wording

Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers’ earnings. The following table summarizes Customers’ net interest income, related interest spread, net interest margin and the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities for the three and six months ended June 30, 2024 and 2023. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

Current wording

Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers’ earnings. The following table summarizes Customers’ net interest income, related interest spread, net interest margin and the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities for the three and nine months ended September 30, 2024 and 2023. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

Previous wording

(5)Total costs of deposits (including interest bearing and non-interest-bearing) were 3.40% and 3.11% for the three months ended June 30, 2024 and 2023, respectively.

Current wording

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

Previous wording

Net interest income increased $2.4 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to higher average balances and market interest rates on interest-earning deposits and lower interest expense from lower average balances of borrowings, offset in part by higher interest expense on deposits. Average interest-earning assets decreased by $553.4 million, primarily related to decreases in commercial and industrial loans and consumer installment loans, offset in part by an increase in interest-earning deposits. Total consumer installment loans decreased for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, as consumer installment loans held for investment decreased primarily for risk management purposes and the build out of our held for sale strategy in 2024 in which we accumulate loans with the intent to sell in the future.

Current wording

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

Previous wording

(5)Total costs of deposits (including interest bearing and non-interest-bearing) were 3.43% and 3.22% for the six months ended June 30, 2024 and 2023, respectively.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management’s assessment of expected lifetime losses in the loan and lease portfolio at the balance sheet date. Customers recorded a provision for credit losses on loans and leases during the three months ended June 30, 2024, which resulted primarily from the recognition of slight improvements in macroeconomic forecasts and lower consumer installment loan balances held for investment. Customers recorded a provision for credit losses of $17.9 million for loans and leases and $1.6 million for lending-related commitments, respectively, for the three months ended June 30, 2024. Customers recorded a provision for credit losses of $22.4 million for loans and leases, which resulted primarily from increased uncertainty and slightly weaker macroeconomic forecasts, partially offset by lower consumer installment loan balances held for investment, and a benefit to provision for credit losses of $0.3 million for lending-related commitments, respectively, for the three months ended June 30, 2023. Net charge-offs for the three months ended June 30, 2024 were $18.7 million, or 56 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $15.6 million, or 42 basis points of average loans and leases on an annualized basis, for the three months ended June 30, 2023. The net charge-offs of $15.6 million for three months ended June 30, 2023 excluded $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the venture banking loan portfolio on June 15, 2023. The increase in net charge-offs for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, excluding the charge-offs for certain PCD loans acquired from the FDIC, was primarily due to higher charge-offs for commercial and industrial loans.

Current wording

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

Previous wording

Customers recorded a provision for credit losses of $33.8 million for loans and leases and $2.0 million for lending-related commitments, respectively, for the six months ended June 30, 2024, which resulted primarily from the recognition of slight improvements in macroeconomic forecasts and lower consumer installment loan balances held for investment. Customers recorded a provision for credit losses of $40.4 million for loans and leases and a benefit to provision of $24 thousand for lending-related commitments, respectively, for the six months ended June 30, 2023. Net charge-offs for the six months ended June 30, 2024 were $36.7 million, or 56 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $34.2 million, or 46 basis points of average loans and leases on an annualized basis, for the six months ended June 30, 2023. The increase in net charge-offs for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, excluding the charge-offs for certain PCD loans acquired from the FDIC, was primarily due to higher charge-offs for commercial and industrial loans, partially offset by a decrease in charge-offs for non-owner occupied commercial real estate loans.

Current wording

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

Previous wording

The provision for credit losses for the three months ended June 30, 2024 and 2023 also included a provision for credit losses of $0.3 million and $1.3 million on certain asset-backed securities and corporate notes, respectively, included in our investment securities available for sale. The provision for credit losses on certain asset-backed securities and corporate notes included in our investment securities available for sale was $1.4 million and $2.9 million for the six months ended June 30, 2024 and 2023, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Commercial lease income represents income earned on commercial operating leases originated by Customers’ commercial equipment financing group in which Customers is the lessor. The $1.4 million increase in commercial lease income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily resulted from the growth of Customers’ equipment finance business.

Current wording

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

Previous wording

The $1.7 million increase in commercial lease income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily resulted from the growth of Customers’ equipment finance business.

Current wording

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

Previous wording

The $1.0 million increase in loan fees for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily resulted from increases in fees earned on unused lines of credit and other fees from commercial and consumer borrowers.

Current wording

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

Previous wording

The $2.3 million increase in loan fees for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily resulted from increases in fees earned on unused lines of credit and other fees from commercial and consumer borrowers.

Current wording

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

Previous wording

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 $3.0 million decrease in bank-owned life insurance income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily resulted from a decrease in death benefits paid by insurance carriers under the policies.

Current wording

Bank-owned life insurance income represents income earned on life insurance policies owned by Customers including an increase in cash surrender value of the policies and any benefits paid by insurance carriers under the policies. The $0.1 million increase in bank-owned life insurance income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from an increase in cash surrender value of the policies.

Previous wording

The $2.4 million decrease in bank-owned life insurance income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily resulted from a decrease in death benefits paid by insurance carriers under the policies.

Current wording

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

Previous wording

Net gain (loss) on sale of loans

Current wording

Net gain (loss) on sale of loans and leases

Previous wording

The $0.5 million decrease in net loss on sale of loans for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily resulted from a loss of $0.2 million, inclusive of transaction costs, on sale of $23.7 million in commercial and industrial loans for the three months ended June 30, 2024, compared to $0.4 million in gains on sales of $66.2 million of SBA loans and a loss of $1.2 million, inclusive of transaction costs, on sales of $556.7 million in consumer installment loans that were classified as held for sale, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to third-party sponsored VIEs for the three months ended June 30, 2023. Customers has continued to build out its held-for-sale strategy in 2024 in which we accumulate loans with the intent to sell in the future. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs. There can be no assurance that Customers will realize gains from sales of loans in 2024 given the significant uncertainty in the capital markets.

Current wording

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

Previous wording

The $0.5 million decrease in net loss on sale of loans for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily resulted from a loss of $0.2 million, inclusive of transaction costs, on sale of $23.7 million in commercial and industrial loans for the six months ended June 30, 2024, compared to $0.4 million in gains on sales of $66.2 million of SBA loans and a loss of $1.2 million, inclusive of transaction costs, on sales of $556.7 million in consumer installment loans that were classified as held for sale, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to third-party sponsored VIEs for the six months ended June 30, 2023. Customers has continued to build out our held-for-sale strategy in 2024 in which we accumulate loans with the intent to sell in the future. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs. There can be no assurance that Customers will realize gains from sales of loans in 2024 given the significant uncertainty in the capital markets.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The $0.7 million increase in net loss on sale of investment securities for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 reflects net losses realized from the sales of $218.7 million in AFS debt securities for the three months ended June 30, 2024, compared to no such sales during the three months ended June 30, 2023. There can be no assurance that Customers will realize gains from sales of investment securities in 2024, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

Current wording

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