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 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.

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 ongoing 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 ra…

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 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.

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 months ended March 31, 2025. 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’ 2024 Form 10-K.

Previous 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.

Current wording

Inflation remains slightly elevated in 2025. 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 began lowering the federal funds rate in late 2024. Most recently, the Federal Reserve has maintained the federal funds rate, and stated that they would assess incoming data, the evolving outlook and the balance of risks in further lowering the federal funds rate. 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 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.

Current wording

Significant uncertainties as to future economic conditions continue to exist, including risks of higher inflation and sustained higher interest rate environment, changes in U.S. trade policies including the imposition of tariffs and retaliatory tariffs on its trading partners, 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 March 31, 2025. 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 $3.4 billion as of March 31, 2025. The Bank’s estimated FDIC insured deposits represented approximately 61% of our deposits (inclusive of accrued interest) as of March 31, 2025. When including collateralized and affiliate deposits as FDIC insured, this number increased to 70% of our deposits as of March 31, 2025. 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 2025 is highly uncertain.

Previous 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.

Current wording

The net increase in our estimated ACL as of March 31, 2025 as compared to December 31, 2024 resulted primarily from slight deterioration in macroeconomic forecasts and higher loan balances held for investment. The provision for credit losses on loans and leases was $21.4 million for the three months ended March 31, 2025, for an ending ACL balance of $147.2 million ($141.1 million for loans and leases and $6.1 million for unfunded lending-related commitments) as of March 31, 2025.

Previous 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.

Current wording

To determine the ACL as of March 31, 2025, Customers utilized Moody’s March 2025 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 2025 assumed slight deterioration in macroeconomic forecasts from the fourth quarter 2024 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board lowering interest rates twice in 2025 and gradually reducing the policy rate to its neutral level by late 2026, as uncertainty of economic policies weighs on near-term growth including inflationary pressures from the new administration’s tariff increases, immigrant deportations, federal government payroll and funding cuts, and corporate and individual tax cuts; failures of several banks in the first half of 2023 are not symptomatic of a serious broader problem in the financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or undermine economic growth; a cessation of the military conflict between Russia and Ukraine looks increasingly likely but the impact on energy, agriculture and other commodity markets will be modest; the war in Israel not spreading to other parts of the Middle East and mitigating any disruption to global energy markets and global shipping; the CPI rising 3.1% in 2025 and 2.8% in 2026; and the unemployment rate rising to 4.1% in 2025 and 4.3% in 2026. Customers continues to monitor the impact of the U.S. banking system weaknesses, the 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

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

Current wording

As of December 31, 2024, the ACL ending balance was $141.7 million ($136.8 million for loans and leases and $4.9 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2024, Customers utilized the Moody’s December 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 December 31, 2024 assumed slight improvements in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2023; the Federal Reserve Board lowering interest rates twice in 2025 and gradually reducing the policy rate to its neutral level by late 2026, as slower progress in reducing inflation and additional inflationary pressures from the new administration’s fiscal, tariff and immigration plans suggest a slower pace of normalization than previously expected; 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 has largely faded; the war in Israel not spreading to other parts of the Middle East and disrupting global energy markets and global shipping; the CPI rising 2.3% in 2025 and 2.8% in 2026; and the unemployment rate rising to 4.1% in 2025 and 2026.

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 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.

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 impact of the new administration’s tariffs and deportations on the economy being significantly worse than expected causing inflation to accelerate; elevated interest rates weakening credit-sensitive spending more than anticipated, and rising inflation causing the Federal Reserve Board to raise the fed fund rate; military conflict between Russia and Ukraine persisting longer than expected; the ceasefire in Israel collapsing; the combination of tariffs, rising inflation, deportations, political tensions, elevated interest rates and reduced credit availability causing the economy to fall into recession in the second quarter of 2025; and unemployment beginning to increase significantly in the second quarter of 2025 and peaking in the second quarter of 2026. Under this scenario, as an example, the unemployment rate is estimated at 6.2% and 8.2% in 2025 and 2026, respectively. These numbers represent a 2.1% and 3.9% higher unemployment estimate than the Baseline scenario projection of 4.1% and 4.3% 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 $80 million at March 31, 2025. 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 nine months ended September 30, 2024 and 2023:

Current wording

The following table sets forth the condensed statements of income for the three months ended March 31, 2025 and 2024:

Previous 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:

Current wording

Customers reported net income available to common shareholders of $9.5 million for the three months ended March 31, 2025, compared to net income available to common shareholders of $45.9 million for the three months ended March 31, 2024. Factors contributing to the change in net income available to common shareholders for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 were as follows:

Previous 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.

Current wording

The $11.2 million increase in the provision for credit losses included $5.5 million increase in provision for credit losses on loans and leases for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, which primarily reflects a slight deterioration in macroeconomic forecasts and an increase in 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 1.04% of total loans and leases receivable at March 31, 2025, compared to 1.12% of total loans and leases receivable at March 31, 2024. Net charge-offs for the three months ended March 31, 2025 were $17.1 million, or 48 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.0 million, or 55 basis points on an annualized basis, for the three months ended March 31, 2024. The decrease in net charge-offs for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to lower charge-offs for consumer installment loans, partially offset by higher charge-offs for multifamily loans.

Previous 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.

Current wording

The provision for credit losses for the three months ended March 31, 2025 and 2024 also included a provision for credit losses of $6.9 million and $1.1 million, respectively, on certain debt securities available for sale. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Previous 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.

Current wording

The $3.6 million increase in non-interest expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases of $6.6 million in salaries and employee benefits, $5.5 million in professional services, $1.8 million in other non-interest expense and $1.1 million in occupancy. These increases were offset in part by decreases of $10.6 million in technology, communication and bank operations and $1.7 million in FDIC assessments, non-income taxes and regulatory fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Previous 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.

Current wording

Included in the $1.7 million decrease in FDIC assessments, non-income taxes and regulatory fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was $4.2 million in FDIC premiums related to periods prior to 2024 that were recorded in the three months ended March 31, 2024.

Previous 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.

Current wording

Preferred stock dividends were $3.4 million and $3.8 million for the three months ended March 31, 2025 and 2024, respectively. There were no changes to the amount of preferred stock outstanding during the three months ended March 31, 2025 and 2024. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

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 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.

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 months ended March 31, 2025 and 2024. 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

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

Current wording

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

Previous 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.

Current wording

(4)Total costs of deposits (including interest bearing and non-interest-bearing) were 2.82% and 3.45% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

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

Current wording

(5)Tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended March 31, 2025 and 2024, presented to approximate interest income as a taxable asset.

Previous wording

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

Current wording

The NIM increased by 3 basis points to 3.13% for the three months ended March 31, 2025 from 3.10% for the three months ended March 31, 2024 resulting primarily from a favorable shift in deposit mix and lower market interest rates on deposits, which drove a 53 basis point decrease in the cost of interest-bearing liabilities for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Customers’ total cost of funds, including non-interest bearing deposits was 2.96% and 3.55% for the three months ended March 31, 2025 and 2024, respectively.

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 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.

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 March 31, 2025, which resulted primarily from slight deterioration in macroeconomic forecasts and an increase in loan balances held for investment. Customers recorded a provision for credit losses of $21.4 million for loans and leases and $1.2 million for lending-related commitments, respectively, for the three months ended March 31, 2025. Customers recorded a provision for credit losses of $16.0 million for loans and leases and $0.4 million for lending-related commitments, respectively, for the three months ended March 31, 2024. Net charge-offs for the three months ended March 31, 2025 were $17.1 million, or 48 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.0 million, or 55 basis points of average loans and leases on an annualized basis, for the three months ended March 31, 2024. The decrease in net charge-offs for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to lower charge-offs for consumer installment loans, partially offset by higher charge-offs for multifamily loans.

Previous 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.

Current wording

The provision for credit losses for the three months ended March 31, 2025 and 2024 also included a provision for credit losses of $6.9 million and $1.1 million, respectively, on certain debt securities available for sale. 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 nine months ended September 30, 2024 and 2023.

Current wording

The table below presents the components of non-interest income (loss) for the three months ended March 31, 2025 and 2024.

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 $1.2 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.

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 $1.0 million increase in commercial lease income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from the growth of Customers’ equipment finance business.

Previous 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.

Current wording

The $2.0 million increase in loan fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases in fees earned on unused lines of credit and servicing fees on consumer installment loans.

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 $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.

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 $1.4 million increase in bank-owned life insurance income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases in death benefits received from insurance carriers and cash surrender value of the policies.

Previous wording

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

Current wording

The table below presents the components of non-interest expense for the three months ended March 31, 2025 and 2024.

Previous wording

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

Current wording

The $6.6 million increase in salaries and employee benefits for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from an increase in average full-time equivalent team members, including the addition of new banking teams in April 2024, and annual merit increases.

Previous wording

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

Current wording

The $10.6 million decrease in technology, communication and bank operations expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from decreases in deposit servicing-related expenses resulting from lower servicing fees and $1.9 million in fees for software as a service.

Previous wording

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

Current wording

Customers incurred expenses of $2.1 million and $10.7 million to BM Technologies under the deposit servicing agreement included within the technology, communication and bank operations expense during the three months ended March 31, 2025 and 2024, respectively. The deposit servicing fees of $10.7 million incurred to BM Technologies for the three months ended March 31, 2024 included $7.1 million for periods prior to 2024. On April 1, 2025, Customers transferred approximately $166.7 million of deposits serviced by BM Technologies under a white label relationship to a new sponsor bank.

Previous wording

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

Current wording

The $5.5 million increase in professional services for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases in consulting fees including to enhance the Bank’s risk management infrastructure.

Previous wording

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

Current wording

The table below presents income tax expense (benefit) and the effective tax rate for the three months ended March 31, 2025 and 2024.

Previous wording

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

Current wording

The $16.7 million decrease in income tax expense for the three months ended March 31, 2025, when compared to the same period in the prior year, primarily resulted from lower pre-tax income and an increase in discrete tax benefits from share-based compensation for 2025. The decrease in the effective tax rate for the three months ended March 31, 2025, when compared to the same period in the prior year, primarily resulted from lower pre-tax income and an increase in discrete tax benefits from share-based compensation for 2025.

Previous 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.

Current wording

Preferred stock dividends were $3.4 million and $3.8 million for the three months ended March 31, 2025 and 2024, respectively. There were no changes to the amount of preferred stock outstanding during the three months ended March 31, 2025 and 2024. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

Previous wording

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

Current wording

Customers’ total assets were $22.4 billion at March 31, 2025. This represented an increase of $114.8 million from total assets of $22.3 billion at December 31, 2024. The increase in total assets was primarily driven by increases of $428.2 million in loans and leases receivable, $138.2 million in loans receivable, installment, at fair value, $45.3 million in loans receivable, mortgage finance, at fair value and $37.9 million in investment securities, at fair value, partially offset by decreases of $357.2 million in cash and cash equivalents, $167.3 million in loans held for sale and $53.8 million in investment securities held to maturity.

Previous wording

Cash and cash equivalents include cash and due from banks and interest-earning deposits. Cash and due from banks consists mainly of vault cash and cash items in the process of collection. Cash and due from banks were $39.4 million and $45.2 million at September 30, 2024 and December 31, 2023, respectively. Cash and due from banks balances vary from day to day, primarily due to variations in customers’ deposit activities with the Bank.

Current wording

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 $62.1 million and $56.8 million at March 31, 2025 and December 31, 2024, respectively. Cash and cash due from banks balances vary from day to day, primarily due to variations in customers’ deposit activities with the Bank.

Previous wording

Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were $3.0 billion and $3.8 billion at September 30, 2024 and December 31, 2023, respectively. The balance of interest-earning deposits varies from day to day, depending on several factors, such as fluctuations in customers’ deposits with Customers, payment of checks drawn on customers’ accounts and strategic investment and risk management decisions made to optimize Customers’ net interest income, while effectively managing interest-rate risk and liquidity. The decrease in interest-earning deposits from December 31, 2023 primarily resulted from deploying excess cash into loans and investment securities.

Current wording

Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were $3.4 billion and $3.7 billion at March 31, 2025 and December 31, 2024, 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 optimize Customers’ net interest income, while effectively managing interest-rate risk and liquidity. The decrease in interest-earning deposits since December 31, 2024 primarily resulted from deploying excess cash into loans.

Previous wording

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

Current wording

At March 31, 2025, investment securities at fair value totaled $2.1 billion compared to $2.0 billion at December 31, 2024. The increase primarily resulted from purchases of $156.7 million of the investment securities, partially offset by the maturities, calls and principal repayments totaling $99.5 million and a decrease in the fair value of AFS debt securities, or an increase in unrealized losses of $13.2 million primarily due to changes in market interest rates and credit spreads for the three months ended March 31, 2025.

Previous wording

For financial reporting purposes, AFS debt securities are reported at fair value. Unrealized gains and losses on AFS debt securities, other than credit losses, are included in other comprehensive income (loss) and reported as a separate component of shareholders’ equity, net of the related tax effect. Changes in the fair value of equity securities with a readily determinable fair value and securities reported at fair value based on a fair value option election are recorded in non-interest income in the period in which they occur. Customers recorded a benefit to provision for credit losses of $0.7 million and provision of $0.7 million on certain asset-backed securities and corporate notes included in our investment securities at fair value for the three and nine months ended September 30, 2024, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 13 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS” to Customers’ unaudited consolidated financial statements for additional information.

Current wording

For financial reporting purposes, AFS debt securities are reported at fair value. Unrealized gains and losses on AFS debt securities that the Bank does not intend to sell, 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 $6.9 million and $1.1 million on certain debt securities available for sale for the three months ended March 31, 2025 and 2024, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 15 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS” to Customers’ unaudited consolidated financial statements for additional information.

Previous wording

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

Current wording

At March 31, 2025, investment securities held to maturity totaled $938.2 million compared to $991.9 million at December 31, 2024. The decrease primarily resulted from the maturities, calls and principal repayments totaling $69.1 million, partially offset by purchases of $14.0 million of the investment securities for the three months ended March 31, 2025.