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Customers Bancorp, Inc.

Customers Bancorp, Inc.CUBIEarnings & Financial Report

NYSE · Financials · State Commercial Banks

U.S. Bancorp is an American multinational banking institution headquartered in Minneapolis, Minnesota and incorporated in Delaware. It is the 5th-largest bank in the United States as of 2025. As the largest bank in the Midwestern United States, it is considered systemically important by the Financial Stability Board. It is the parent company of its primary operating entity, U.S. Bank National Association, which does business as U.S. Bank. The company provides banking, investment, mortgage, tr...

What changed in Customers Bancorp, Inc.'s 10-K — 2022 vs 2023

Top changes in Customers Bancorp, Inc.'s 2023 10-K

795 paragraphs added · 840 removed · 578 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

131 edited+43 added−76 removed158 unchanged
In 2021, Customers Bank launched CBIT on the TassatPay TM blockchain-based instant B2B payments platform, which serves a growing array of B2B clients who want the benefit of instant payments, including key over-the-counter desks, exchanges, liquidity providers, market makers, funds, and other B2B verticals.
In 2021, Customers Bank launched CBIT TM on the TassatPay TM blockchain-based instant B2B payments platform, which serves a growing array of B2B clients who want the benefit of instant payments, including key over-the-counter desks, exchanges, liquidity providers, market makers, funds, and other B2B verticals.
Federal Reserve, which has substantive rule-making authority over a wide variety of consumer financial services and products, including the power to regulate unfair, deceptive or abusive acts or practices; • permitted state attorney generals and other state enforcement authorities broader power to enforce consumer protection laws against banks; • required that the amount of any interchange fee charged by a debit card issuer with respect to a debit card transaction must be reasonable and proportional to the cost incurred by the issuer.
Federal Reserve, which has substantive rule-making authority over a wide variety of consumer financial services and products, including the power to regulate unfair, deceptive or abusive acts or practices; 23 • permitted state attorney generals and other state enforcement authorities broader power to enforce consumer protection laws against banks; • required that the amount of any interchange fee charged by a debit card issuer with respect to a debit card transaction must be reasonable and proportional to the cost incurred by the issuer.
Among many other provisions, the legislation: • established the Financial Stability Oversight Council, a federal agency acting as the financial system’s systemic risk regulator with the authority to review the activities of significant bank holding companies and non-bank financial firms, to make recommendations and impose standards regarding capital, leverage, conflicts and other requirements for financial firms and to impose regulatory standards on certain financial firms deemed to pose a systemic threat to the financial health of the U.S. economy; 25 • created a new CFPB within the U.S.
Among many other provisions, the legislation: • established the Financial Stability Oversight Council, a federal agency acting as the financial system’s systemic risk regulator with the authority to review the activities of significant bank holding companies and non-bank financial firms, to make recommendations and impose standards regarding capital, leverage, conflicts and other requirements for financial firms and to impose regulatory standards on certain financial firms deemed to pose a systemic threat to the financial health of the U.S. economy; • created a new CFPB within the U.S.
Investors can obtain copies of Customers Bancorp’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, on Customers Bancorp’s website (accessible under “Investors” – “Earnings” – “SEC filings”) as soon as reasonably practicable after Customers Bancorp has filed such materials with, or furnished them to, the SEC.
Investors can obtain copies of Customers Bancorp’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, on Customers Bancorp’s website (accessible under “Investors” – “SEC filings”) as soon as reasonably practicable after Customers Bancorp has filed such materials with, or furnished them to, the SEC.
In addition, in December 2018, the U.S. federal banking agencies finalized rules that would permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years, with 25% of the day-one impact recognized on the adoption date (January 1, 2020 for Customers) and an additional 25% recognized annually on January 1 for the next three years.
In addition, in December 2018, the U.S. federal banking agencies finalized rules that permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years, with 25% of the day-one impact recognized on the adoption date (January 1, 2020 for Customers) and an additional 25% recognized annually on January 1 for the next three years.
This team has significant experience in successfully building a banking organization as well as building valuable community and business relationships in our core markets. Customers continues to hire new talent and promote from within the organization to lead its various product offering initiatives. 11 • Digital-forward super community bank. On July 1, 2021, Mr.
This team has significant experience in successfully building a banking organization as well as building valuable community and business relationships in our core markets. Customers continues to hire new talent and promote from within the organization to lead its various product offering initiatives. • Digital-forward super community bank. On July 1, 2021, Mr.
Customers believes its target market has highly attractive demographic, economic and competitive dynamics that are consistent with its objectives and favorable to executing its organic core loan and deposit growth and opportunistic acquisition strategies. Customers believes that digital delivery without geographic limitations is the future of retail banking.
Customers believes its expanded target market has highly attractive demographic, economic and competitive dynamics that are consistent with its objectives and favorable to executing its organic core loan and deposit growth and opportunistic acquisition strategies. Customers believes that digital delivery without geographic limitations is the future of retail banking.
Changes to existing law also allow the Department to assess civil money penalties of up to $25,000 per violation. 30 The law also sets a new standard of care for bank officers and directors, applying the same standard that exists for non-banking corporations in Pennsylvania.
Changes to existing law also allow the Department to assess civil money penalties of up to $25,000 per violation. The law also sets a new standard of care for bank officers and directors, applying the same standard that exists for non-banking corporations in Pennsylvania.
The CFPB, other financial regulatory agencies, including the Federal Reserve, as well as the DOJ, have, over the past several years, pursued a number of enforcement actions against depository institutions with respect to compliance with fair lending laws. UDAP and UDAAP.
The CFPB, other financial regulatory agencies, including the Federal Reserve, as well as the DOJ, have, over the past several years, pursued a number of enforcement actions against depository institutions with respect to compliance with fair lending laws. 26 UDAP and UDAAP.
With a world-class suite of sophisticated cash management products, these private bankers deliver on Customers' “high-tech, high-touch” strategy and provide real value to its mid-market commercial clients. 15 Deposit Products and Other Funding Sources Customers offers a variety of deposit products to its customers, including checking accounts, savings accounts, MMDA and other deposit accounts, including fixed-rate, fixed-maturity retail time deposits ranging in terms from 30 days to five years, individual retirement accounts, and non-retail time deposits consisting of jumbo certificates greater than or equal to $100,000.
With a world-class suite of sophisticated cash management products, these private bankers deliver on Customers’ “high-tech, high-touch” strategy and provide real value to its mid-market commercial clients. 14 Deposit Products and Other Funding Sources Customers offers a variety of deposit products to its customers, including checking accounts, savings accounts, MMDA and other deposit accounts, including fixed-rate, fixed-maturity retail time deposits ranging in terms from 30 days to five years, individual retirement accounts, and non-retail time deposits consisting of jumbo certificates greater than or equal to $100,000.
Customers Bank has a community outreach program in Philadelphia to finance homeownership in urban communities. As part of this program, Customers is offering an “Affordable Mortgage Product." This community outreach program is penetrating the underserved population, especially in low-and moderate income neighborhoods.
Customers Bank has a community outreach program in Philadelphia to finance homeownership in urban communities. As part of this program, Customers is offering an “Affordable Mortgage Product.” This community outreach program is penetrating the underserved population, especially in low-and moderate income neighborhoods.
Competition Customers competes with other financial institutions for deposit and loan business. Competitors include other commercial banks, savings banks, savings and loan associations, insurance companies, securities brokerage firms, credit unions, finance companies, fintech companies, mutual funds, money market funds and certain government agencies.
Competition Customers competes with other financial institutions for deposit and loan business. Competitors include other commercial banks, savings banks, savings and loan associations, insurance companies, securities brokerage firms, credit unions, finance companies, private credit funds, fintech companies, mutual funds, money market funds and certain government agencies.
In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” All of BankMobile’s serviced deposits and loans including the related net interest income remained with Customers Bank after the divestiture.
In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” All of BankMobile’s serviced deposits and loans including the related net interest income remained with Customers Bank after the completion of the divestiture.
The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet.
The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability on the consolidated balance sheet.
In making this determination, the Federal Reserve Board considers whether the performance of these activities by a bank holding company would offer benefits to the public that outweigh the possible adverse effects. 29 Control Acquisitions.
In making this determination, the Federal Reserve Board considers whether the performance of these activities by a bank holding company would offer benefits to the public that outweigh the possible adverse effects. Control Acquisitions.
Customers currently monitors and manages its assets and liabilities for interest-rate risk, and management believes that the interest-rate risk rules which have been implemented and proposed will not materially adversely affect its operations. 23 The Federal Reserve Board’s “leverage” ratio rules require member banks which are rated the highest in the composite areas of capital, asset quality, management, earnings and liquidity to maintain a ratio of “Tier 1” capital to “adjusted total assets” of not less than 3.0%.
Customers currently monitors and manages its assets and liabilities for interest-rate risk, and management believes that the interest-rate risk rules which have been implemented and proposed will not materially adversely affect its operations. 21 The Federal Reserve Board’s “leverage” ratio rules require member banks which are rated the highest in the composite areas of capital, asset quality, management, earnings and liquidity to maintain a ratio of “Tier 1” capital to “adjusted total assets” of not less than 3.0%.
Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness, and the organization is not taking prompt and effective measures to correct the deficiencies. 27 In addition, Section 956 of the Dodd-Frank Act required certain regulators (including the FDIC, SEC and Federal Reserve Board) to adopt requirements or guidelines prohibiting excessive compensation.
Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness, and the organization is not taking prompt and effective measures to correct the deficiencies. 25 In addition, Section 956 of the Dodd-Frank Act required certain regulators (including the FDIC, SEC and Federal Reserve Board) to adopt requirements or guidelines prohibiting excessive compensation.
The CFPB has published its first Supervision and Examination Manual that addresses compliance with and the examination of UDAAP. 28 Privacy Protection and Cybersecurity. The Bank is subject to regulations implementing the privacy protection provisions of the GLBA.
The CFPB has published its first Supervision and Examination Manual that addresses compliance with and the examination of UDAAP. Privacy Protection and Cybersecurity. The Bank is subject to regulations implementing the privacy protection provisions of the GLBA.
The commercial lending group, including commercial and industrial loans, owner occupied commercial real estate loans and specialty lending, focus on building business relationships that provide a complete offering of financial services customized to the present and future needs of each business customer. 13 The small and middle market business banking platform originates loans, including SBA loans, through the branch network sales force and a team of dedicated relationship managers.
The commercial lending group, including commercial and industrial loans, owner occupied commercial real estate loans and specialty lending, focus on building business relationships that provide a complete offering of financial services customized to the present and future needs of each business customer. 12 The small and middle market business banking platform originates loans, including SBA loans, through the branch network sales force and a team of dedicated relationship managers.
While maintaining physical branch locations remains an important component of Customers' strategy, Customers utilizes an operating model with fewer and less expensive locations, thereby lowering overhead costs and allowing for greater pricing flexibility. 16 Customers Bank's CBIT on the TassatPay blockchain-based instant B2B payments platform serves a growing array of B2B clients who want the benefit of instant payments.
While maintaining physical branch locations remains an important component of Customers’ strategy, Customers utilizes an operating model with fewer and less expensive locations, thereby lowering overhead costs and allowing for greater pricing flexibility. 15 Customers Bank’s CBIT on the TassatPay blockchain-based instant B2B payments platform serves a growing array of B2B clients who want the benefit of instant payments.
Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions will be required to meet the following increased capital level requirements in order to qualify as “well capitalized:” (i) a common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 risk-based capital ratio of 8%; (iii) a total risk-based capital ratio of 10%; and (iv) a Tier 1 leverage ratio of 5%.
Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following increased capital level requirements in order to qualify as “well capitalized:” (i) a common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 risk-based capital ratio of 8%; (iii) a total risk-based capital ratio of 10%; and (iv) a Tier 1 leverage ratio of 5%.
Prospective Markets The organic core loan and deposit growth strategy of Customers focuses on expanding market share in its existing and contiguous markets by generating deposits, loan and fee-based services through its Concierge Banking® high-tech/high-touch single-point-of-contact personalized service supported by state-of-the-art technology for its commercial, consumer, not-for-profit and specialized lending markets.
Prospective Markets The organic core loan and deposit growth strategy of Customers focuses on expanding market share in its existing and contiguous markets by generating deposits, loan and fee-based services through its high-tech/high-touch single-point-of-contact personalized service supported by state-of-the-art technology for its commercial, consumer, not-for-profit and specialized lending markets.
The “high-tech, high-touch,” model requires less staff and smaller branch locations to operate, thereby significantly reducing operating costs. 12 • Acquisition Expertise. The depth of Customers' management team and their experience successfully completing acquisitions provides unique insight in identifying and analyzing potential markets and acquisition targets.
The “high-tech, high-touch,” model requires less staff and smaller branch locations to operate, thereby significantly reducing operating costs. 11 • Acquisition expertise. The depth of Customers’ management team and their experience successfully completing acquisitions provides unique insight in identifying and analyzing potential markets and acquisition targets.
Because our securities are listed on the NYSE, we are subject to NYSE's rules for listed companies, including rules relating to corporate governance. 22 FEDERAL BANKING LAWS Interstate Branching. The Interstate Act, among other things, permits bank holding companies to acquire banks in any state. A bank may also merge with a bank in another state.
Because our securities are listed on the NYSE, we are subject to NYSE’s rules for listed companies, including rules relating to corporate governance. 20 FEDERAL BANKING LAWS Interstate Branching. The Interstate Act, among other things, permits bank holding companies to acquire banks in any state. A bank may also merge with a bank in another state.
The final rule establishes four categories of tiered presumptions of noncontrol that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of noncontrol.
The final rule establishes four categories of tiered presumptions of non-control that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of non-control.
Prior to the Dodd-Frank Act, there was little formal guidance to provide insight to the parameters for compliance with UDAP laws and regulations. However, UDAP laws and regulations have been expanded under the Dodd-Frank Act to apply to “unfair, deceptive or abusive acts or practices,” referred to as "UDAAP," which have been delegated to the CFPB for supervision.
Prior to the Dodd-Frank Act, there was little formal guidance to provide insight to the parameters for compliance with UDAP laws and regulations. However, UDAP laws and regulations have been expanded under the Dodd-Frank Act to apply to “unfair, deceptive or abusive acts or practices,” referred to as “UDAAP,” which have been delegated to the CFPB for supervision.
In addition, the final rules provide for smaller banking institutions (less than $250 billion in consolidated assets) an opportunity to make a one-time election to opt out of including most elements of accumulated other comprehensive income (loss) in regulatory capital.
In addition, the final rules provided for smaller banking institutions (less than $250 billion in consolidated assets) an opportunity to make a one-time election to opt out of including most elements of accumulated other comprehensive income (loss) in regulatory capital.
Lending Activities Customers focuses its lending efforts on the following lending areas: • Commercial Lending – Customers' primary focus is on business banking (i.e., commercial and industrial lending), including small and middle market business banking (including SBA and PPP loans), specialty lending, commercial loans to mortgage companies, multifamily and commercial real estate lending and commercial equipment financing, and • Consumer Lending – local-market mortgage and home equity lending and the origination and purchase of installment loans through arrangements with third-party fintech companies and other market place lenders.
Lending Activities Customers focuses its lending efforts on the following lending areas: • Commercial Lending – Customers’ primary focus is on business banking (i.e., commercial and industrial lending), including small and middle market business banking (including SBA loans), specialty lending, commercial loans to mortgage companies, multifamily and commercial real estate lending and commercial equipment financing, and • Consumer Lending – local-market mortgage and home equity lending and the origination and purchase of installment loans through arrangements with third-party fintech companies and other marketplace lenders.
If a competitor or another third party were to launch an alternative to CBIT (such as Federal Reserve's FedNow Service, a virtual real time payment system for banks, to be launched in mid-2023) we could lose these deposits.
If a competitor or another third party were to launch an alternative to CBIT (such as Federal Reserve’s FedNow Service, a virtual real time payment system for banks launched in 2023) we could lose these deposits.
In the event that the Department and the applicable host state regulator disagree regarding whether a particular host state law is pre-empted, the Department and the applicable host state regulator would use their reasonable best efforts to consider all points of view and to resolve the disagreement. 31
In the event that the Department and the applicable host state regulator disagree regarding whether a particular host state law is pre-empted, the Department and the applicable host state regulator would use their reasonable best efforts to consider all points of view and to resolve the disagreement. 29
Customers expects to drive organic core loan and deposit growth by employing its Concierge Banking® and single-point-of-contact strategies, which provide specific relationship managers or private bankers for all customers, delivering an appointment banking approach available 12 hours a day, seven days a week. This allows Customers to provide services in a personalized, convenient and expeditious manner.
Customers expects to drive organic core loan and deposit growth by employing its single-point-of-contact strategy, which provide specific relationship managers or private bankers for all customers, delivering an appointment banking approach available 12 hours a day, seven days a week. This allows Customers to provide services in a personalized, convenient and expeditious manner.
Customers focuses on markets that it believes are characterized by some or all of the following: • Attractive deposit bases; • Population density; • Concentration of business activity; • Significant market share held by large banks; • Advantageous competitive landscape that provides opportunity to achieve meaningful market presence; • Lack of consolidation in the banking sector and corresponding opportunities for add-on transactions; • Potential for economic growth over time; and • Management experience in the applicable markets. 10 Current Markets Customers' target market is broadly defined as extending from Washington D.C. to Boston, Massachusetts roughly following Interstate 95.
Customers focuses on markets that it believes are characterized by some or all of the following: • Attractive deposit bases; • Population density; • Concentration of business activity; • Significant market share held by large banks; • Advantageous competitive landscape that provides opportunity to achieve meaningful market presence; • Lack of consolidation in the banking sector and corresponding opportunities for add-on transactions; • Potential for economic growth over time; and • Management experience in the applicable markets. 9 Current Markets Customers’ target market has been broadly defined as extending from Washington, D.C. to Boston, Massachusetts roughly following Interstate 95.
Sam Sidhu became the President and Chief Executive Officer of Customers Bank. Under Mr. Sam Sidhu’s leadership, Customers Bank partnered with several leading fintechs to establish a technology enabled hybrid banking model, allowing Customers to outperform larger lenders' efforts to support small businesses during the COVID-19 pandemic through the SBA's PPP loans.
Sam Sidhu became the President and Chief Executive Officer of Customers Bank. Under Mr. Sam Sidhu’s leadership, Customers Bank partnered with several leading fintech companies to establish a technology enabled hybrid banking model, allowing Customers to outperform larger lenders’ efforts to support small businesses during the COVID-19 pandemic through the SBA’s PPP loans.
The law of choice for enforcement against such business practices has been Section 5 of the FTC Act, which is the primary federal law that prohibits unfair or deceptive acts or practices, referred to as "UDAP," and unfair methods of competition in or affecting commerce. “Unjustified consumer injury” is the principal focus of the FTC Act.
The law of choice for enforcement against such business practices has been Section 5 of the FTC Act, which is the primary federal law that prohibits unfair or deceptive acts or practices, referred to as “UDAP,” and unfair methods of competition in or affecting commerce. “Unjustified consumer injury” is the principal focus of the FTC Act.
The main telephone number is (610) 933-2000. The deposits of the Bank are insured by the FDIC. The Bank’s home office is located at 40 General Warren Boulevard, Malvern, Pennsylvania 19355. The main telephone number is (610) 933-2000.
The main telephone number is (610) 933-2000. The deposits of the Bank are insured by the FDIC. The Bank’s home office is located at 40 General Warren Boulevard, Malvern, PA 19355. The main telephone number is (610) 933-2000.
As Customers evaluates potential acquisition and asset purchase opportunities, it believes that there are banking institutions that continue to face credit challenges, capital constraints and liquidity issues and that lack the scale and management expertise to manage the regulatory burden. Competitive Strengths • Experienced and respected management team.
As Customers evaluates potential acquisition and asset purchase opportunities and team lift-outs, it believes that there are banking institutions that continue to face credit challenges, capital constraints and liquidity issues and that lack the scale and management expertise to manage the regulatory burden. 10 Competitive Strengths • Experienced and respected management team.
These regulations require the Bank to disclose its privacy policy, including identifying with whom it shares "nonpublic personal information," to customers at the time of establishing the customer relationship and annually thereafter. The regulations also require the Bank to provide its customers with initial and annual notices that accurately reflect its privacy policies and practices.
These regulations require the Bank to disclose its privacy policy, including identifying with whom it shares “nonpublic personal information,” to customers at the time of establishing the customer relationship and annually thereafter. The regulations also require the Bank to provide its customers with initial and annual notices that accurately reflect its privacy policies and practices.
Customers' installment loan business is a national business in which Customers originates directly or purchases installment loans through arrangements with third-party fintech companies. Customers also has digital, online savings banking product that generates core deposits nationally. Through the installment loans and digital, online savings banking product, Customers earns interest and generates core deposits.
Customers’ installment loan business is a national business in which Customers originates directly or purchases installment loans through arrangements with third-party fintech companies. Customers also has digital, online savings banking products that generate core deposits nationally. Through the installment loans and digital, online savings banking products, Customers earns interest and generates core deposits.
In addition, to the extent its sharing of such information is not covered by an exception, the Bank is required to provide its customers with the ability to "opt-out" of having the Bank share their nonpublic personal information with unaffiliated third parties. The Bank is subject to regulatory guidelines establishing standards for safeguarding customer information.
In addition, to the extent its sharing of such information is not covered by an exception, the Bank is required to provide its customers with the ability to “opt-out” of having the Bank share their nonpublic personal information with unaffiliated third parties. The Bank is subject to regulatory guidelines establishing standards for safeguarding customer information.
During the years ended December 31, 2022 and 2021, the Bank originated $7.0 billion and $2.7 billion, respectively, of commercial and industrial loans and leases, exclusive of multifamily loan originations, loans to mortgage originators via warehouse facilities and PPP loans. 14 Paycheck Protection Program On March 27, 2020, the CARES Act was signed into law.
During the years ended December 31, 2023 and 2022, the Bank originated $2.9 billion and $7.0 billion, respectively, of commercial and industrial loans and leases, exclusive of multifamily loan originations, loans to mortgage originators via warehouse facilities and PPP loans. 13 Paycheck Protection Program On March 27, 2020, the CARES Act was signed into law.
The Bank also serves specialty niche businesses nationwide, including its specialty lending, commercial loans to mortgage companies and commercial equipment financing. The Bank offers digital banking to commercial and consumer businesses nationwide, including Banking-as-a-Service to fintech companies, payments and treasury services such as CBIT TM to businesses, and consumer loans through relationships with fintech companies.
The Bank also serves specialty businesses nationwide, including its specialty lending, commercial loans to mortgage companies and commercial equipment financing. The Bank offers digital banking to commercial and consumer businesses nationwide, including Banking-as-a-Service to fintech companies, payments and treasury services to businesses, and consumer loans through relationships with fintech companies.
As of December 31, 2022 and 2021, Customers Bank held $2.3 billion and $1.9 billion of deposits from customers participating in CBIT, respectively. The CBIT instant payments platform provides a closed-system for intrabank commercial transactions and is not intended to be a trading platform for tokens or digital assets.
As of December 31, 2023 and 2022, Customers Bank held $2.8 billion and $2.3 billion of deposits from customers participating in CBIT, respectively. The CBIT instant payments platform provides a closed-system for intrabank commercial transactions and is not intended to be a trading platform for tokens or digital assets.
Customers also focuses on niche businesses as a source of lower-cost core deposits, including property management and mortgage banking businesses, title and escrow funds, health savings accounts, and Section 1031 of the IRS exchange deposits. Using its "high-tech, high-touch" model, Customers has experienced strong growth in core deposits.
Customers also focuses on specialty businesses as a source of lower-cost core deposits, including property management and mortgage banking businesses, title and escrow funds, health savings accounts, and Section 1031 of the IRS exchange deposits. Using its “high-tech, high-touch” model, Customers has experienced strong growth in core deposits.
Customers also strives to provide maximum convenience of access to services by employing innovative delivery vehicles such as internet and digital banking, and the convenience of Concierge Banking® and our single-point-of-contact business model. Customers' current market is primarily served by large national and regional banks, with a few larger institutions capturing more than 50% of the deposit market share.
Customers also strives to provide maximum convenience of access to services by employing innovative delivery vehicles such as internet and digital banking, and the convenience of our single-point-of-contact business model. Customers’ current market is primarily served by large national and regional banks, with a few larger institutions capturing a significant portion of deposit market share.
Fueled by a digital-forward, super community bank hybrid business model, and the Bank's recent successes, Customers Bank launched other new commercial financial product lines and opened additional offices in key metro markets around the country, with a focus on the Southeast region. • Unique Asset and Deposit Generation Strategies.
Fueled by a digital-forward, super community bank hybrid business model, and the Bank’s recent successes, Customers Bank launched other new commercial financial product lines and opened additional offices in key metro markets around the country. • Unique asset and deposit generation strategies.
Effective January 1, 2015, the new minimum capital level requirements applicable to the Bancorp and Customers Bank under the final rules were: (i) a common equity Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8% and (iv) a Tier 1 leverage ratio of 4% for all institutions.
The new minimum capital level requirements applicable to the Bancorp and Customers Bank under the final rules are: (i) a common equity Tier 1 risk-based capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8% and (iv) a Tier 1 leverage ratio of 4% for all institutions.
Item 1. Business Customers Bancorp is a bank holding company engaged in banking activities through its wholly owned subsidiary, Customers Bank, collectively referred to as "Customers" herein. The Bank is a digital-forward financial institution that provides commercial and consumer customers the stability and trust inherent in working with an established and regulated financial institution.
Item 1. Business Customers Bancorp is a bank holding company engaged in banking activities through its wholly owned subsidiary, Customers Bank, collectively referred to as “Customers” herein. Customers is a forward-thinking bank with strong risk management that provides commercial and consumer customers the stability and trust inherent in working with an established and regulated financial institution.
Customers also originates and purchases installment loans to be held for investment or to be held for sale through arrangements with third-party fintech companies.
Consumer Lending Customers originates and purchases installment loans to be held for investment or to be held for sale through arrangements with third-party fintech companies.
The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of December 31, 2022, our regulatory capital ratios reflected 75%, or $46.2 million, benefit associated with the CECL transition provisions.
The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of December 31, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions.
As of December 31, 2022 and 2021, Customers Bank and the Bancorp met all capital adequacy requirements to which they were subject. For additional information on Customers' regulatory capital ratios, refer to "NOTE 19 – REGULATORY CAPITAL" to Customers' audited financial statements. Dodd-Frank Act.
As of December 31, 2023 and 2022, Customers Bank and the Bancorp met all capital adequacy requirements to which they were subject. For additional information on Customers’ regulatory capital ratios, refer to “NOTE 19 – REGULATORY CAPITAL” to Customers’ audited consolidated financial statements. Dodd-Frank Act.
As of December 31, 2022 and 2021, Customers Bank had $13.5 billion and $12.4 billion, respectively, in commercial loans outstanding, composing approximately 85.8% and 85.3%, respectively, of its total loan portfolio, which includes loans held for sale, loans receivable, mortgage warehouse, at fair value and loans receivable, PPP.
As of December 31, 2023 and 2022, Customers Bank had $11.5 billion and $13.5 billion, respectively, in commercial loans outstanding, composing approximately 86.8% and 85.8%, respectively, of its total loan portfolio, which includes loans held for sale, loans receivable, mortgage warehouse, at fair value and loans receivable, PPP.
The final rule requires Customers to adopt a clawback policy within 60 days after such listing standard becomes effective. Consumer Financial Protection Laws and Enforcement . The CFPB and the federal banking agencies continue to focus attention on consumer protection laws and regulations.
The final rule required Customers to adopt a clawback policy within 60 days after such listing standard becomes effective, which Customers did on November 15, 2023. Consumer Financial Protection Laws and Enforcement . The CFPB and the federal banking agencies continue to focus attention on consumer protection laws and regulations.
In addition, in March 2022, the SEC proposed rules that would require disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance. Privacy and data security areas are expected to receive increased attention at the federal level.
In addition, in December 2023, the SEC imposed rules that require disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance. Privacy and data security areas are expected to receive increased attention at the federal level.
As of December 31, 2022, Customers had bank branches or LPOs serving businesses and consumers in the following locations: Market Offices Type Berks County, PA 2 Branch/LPO Boston, MA 1 LPO Chicago, IL 1 LPO Dallas, TX 1 LPO Mercer County, NJ 1 Branch/LPO New York, NY 1 LPO Jacksonville, FL 1 LPO Philadelphia-Southeastern, PA 4 Branch/LPO Portsmouth, NH 1 LPO Providence, RI 1 LPO Suffolk County, NY 1 LPO Westchester County, NY 1 Branch/LPO Wilmington, NC 1 LPO In addition to the above locations, Customers had 16 other locations with executive and administrative offices and LPOs serving mortgage companies and small businesses throughout the United States as of December 31, 2022.
As of December 31, 2023, Customers had bank branches or LPOs serving businesses and consumers in the following locations: Market Offices Type Berks County, PA 2 Branch/LPO Boston, MA 1 LPO Chicago, IL 1 LPO Dallas, TX 1 LPO Hamilton, NJ 1 Branch/LPO New York, NY 1 LPO Philadelphia-Southeastern, PA 4 Branch/LPO Portsmouth, NH 1 LPO Providence, RI 1 LPO Suffolk County, NY 1 LPO Westchester County, NY 1 Branch/LPO Wilmington, NC 1 LPO In addition to the above locations, Customers had 41 other locations with executive and administrative offices and LPOs serving mortgage companies and small businesses in the Northeast and Mid-Atlantic regions, as well as the expanded markets throughout the United States as of December 31, 2023.
We believe that being intentional about applying the principles and practices of DEIB is essential to achieving the level of CQ necessary to move us forward.
We believe that being intentional about applying the principles and practices of diversity, equity, inclusion and belonging (DEIB) is essential to achieving the level of Cultural Intelligence (CQ) necessary to move us forward.
We continue to provide free of charge access to our health advocacy vendor, which can assist with services ranging from health care and insurance-related issues to providing one-on-one support for improving health and well-being. In addition to providing access to registered nurses, medical directors and benefits and claims specialists, team members also have access to an Employee Assistance Program ("EAP").
Our health advocacy vendor continues to assist with services ranging from health care and insurance-related issues to providing one-on-one support for improving health and well-being. In addition to providing access to registered nurses, medical directors and benefits and claims specialists, team members also have access to an Employee Assistance Program (“EAP”).
The Bank selected the opt-out election in its March 31, 2015 Call Report. 24 The final rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels begin to show signs of weakness. These revisions took effect on January 1, 2015.
The Bank selected the opt-out election in its March 31, 2015 Call Report. 22 The final rules also set forth the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels begin to show signs of weakness.
We offer a variety of programs to help team members learn new skills, establish and meet personalized development goals, take on new roles and become better leaders. Our performance management program is an interactive practice that engages team members through performance reviews, goal setting and on-going feedback from managers to their team members.
Team members are empowered to learn new skills, establish and meet personalized development goals, take on new roles and become better leaders. Customers’ performance management program is an interactive practice that engages team members through performance reviews, goal setting and on-going feedback from managers to their team members.
A division approach focuses on industries that offer high asset quality and are deposit rich to drive profitability. Customers' SBA Lending includes digital small balance 7(a) lending. Customers' Corporate and Specialty Banking includes lending to mortgage banking businesses, commercial equipment finance, healthcare lending, real estate specialty finance, fund finance, technology and venture and financial institutions group.
The division approach focuses on industries that offer high asset quality and are deposit rich to drive profitability. Customers’ specialty banking includes commercial equipment finance, healthcare lending, real estate specialty finance, fund finance, technology and venture capital banking and financial institutions group.
Such legislation could change banking statutes and the operating environment of Customers in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions.
If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions.
These workshops included topics such as Medicare, when to start collecting Social Security, budgeting for and in retirement, and education on 401(k) withdrawals in retirement. Diversity We are deeply committed to establishing a workplace culture which is built upon a foundation of dignity, mutual trust, integrity, and transparency.
Topics covered include Medicare, when to start collecting Social Security, budgeting for and in retirement, and education on 401(k) withdrawals in retirement. Diversity, Equity, Inclusion & Belonging At Customers, we are committed to establishing a workplace culture which is built upon a foundation of dignity, mutual trust, integrity, and transparency.
As of December 31, 2022 and 2021, Customers had $197.3 million and $117.4 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $52.6 million and $40.7 million, respectively.
As of December 31, 2023 and 2022, Customers had $205.7 million and $157.4 million, respectively, of equipment finance leases outstanding. As of December 31, 2023 and 2022, Customers had $205.7 million and $197.3 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $77.7 million and $52.6 million, respectively.
As of December 31, 2022 and 2021, Customers had $2.2 billion and $2.1 billion, respectively, in consumer loans outstanding (including consumer loans held for investment and held for sale), comprising 14.2% and 14.7%, respectively, of Customers' total loan portfolio. During the years ended December 31, 2022 and 2021, Customers purchased $481.0 million and $371.0 million of consumer loans, respectively.
As of December 31, 2023 and 2022, Customers had $1.7 billion and $2.2 billion, respectively, in consumer loans outstanding (including consumer loans held for investment and held for sale), comprising 13.2% and 14.2%, respectively, of Customers’ total loan portfolio.
We recognize that the promise of freedom is vitally linked to the power of, and access to, quality education. The Customers Bank Freedom Scholarship Program is our way of providing financial support to dependents of eligible team members towards their educational pursuits. In 2022, a total of $100,000 was distributed among 12 of our team members’ children.
We recognize that the promise of freedom is vitally linked to the power of, and access to, quality education. The Customers Bank Freedom Scholarship Program is our way of providing financial support to dependents of eligible team members towards their educational endeavors.
Sam Sidhu’s leadership, Customers Bank partnered with several leading fintechs to establish a technology enabled hybrid banking model, allowing Customers to outperform larger lenders' efforts to support small businesses during the COVID-19 pandemic through the SBA's PPP loans.
LLC, Mr. Sam Sidhu worked at Providence Equity Partners and at Goldman Sachs. Under Mr. Sam Sidhu’s leadership, Customers Bank partnered with several leading fintech companies to establish a technology enabled hybrid banking model, allowing Customers to outperform larger lenders’ efforts to support small businesses during the COVID-19 pandemic through the SBA’s PPP loans.
While Customers has not acquired any banks since 2011, its bank acquisition strategy is focused on opportunistic acquisitions that further Customers' objectives and meet its critical success factors. Customers will also consider opportunistically other acquisitions that will contribute to its banking business.
While Customers has not acquired any banks since 2011, its bank acquisition strategy is focused on opportunistic acquisitions and team lift-outs that further Customers’ objectives and meet its critical success factors.
The law also permits banks to disclose formal enforcement actions initiated by the Department, clarifies that the Department has examination and enforcement authority over subsidiaries as well as affiliates of regulated banks and bolsters the Department’s enforcement authority over its regulated institutions by clarifying its ability to remove directors, officers and employees from institutions for violations of laws or orders or for any unsafe or unsound practice or breach of fiduciary duty.
The intended goal of the law, which applies to the Bank, is to modernize Pennsylvania’s banking laws and to reduce regulatory burden at the state level where possible, given the increased regulatory demands at the federal level as described below. 28 The law also permits banks to disclose formal enforcement actions initiated by the Department, clarifies that the Department has examination and enforcement authority over subsidiaries as well as affiliates of regulated banks and bolsters the Department’s enforcement authority over its regulated institutions by clarifying its ability to remove directors, officers and employees from institutions for violations of laws or orders or for any unsafe or unsound practice or breach of fiduciary duty.
The Bank has a diversified lending business consisting of geographically in-market community banking offerings such as commercial and industrial loans, commercial real estate loans, multifamily loans and residential mortgage loans.
The Bank has a diversified lending business consisting of geographically in-market community banking offerings such as commercial and industrial loans, commercial real estate loans, multifamily loans and residential mortgage loans. In addition, on a national level, the Bank also provides financing to specialty banking businesses such as specialty lending, commercial loans to mortgage companies, commercial equipment financing and SBA lending.
Additionally, in support of our team members’ educational goals, we provide tuition assistance to team members pursuing higher education. • New Digital Learning Platform was launched offering online training and access to a digital library of over 16,000 courses and a broad range of learning solutions.
Additionally, in support of our team members’ educational goals, tuition assistance is available to those interested in pursuing higher education opportunities or professional certifications. • Digital Learning Platform – We continue to offer online training and access to a digital library of over 16,000 courses and a broad range of learning solutions.
A bank holding company is prohibited from engaging in or acquiring direct or indirect control of more than five percent (5%) of the voting shares of any company engaged in non-banking activities unless the Federal Reserve Board, by order or regulation, has found such activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
In addition, bank holding companies are required to act as a source of financial strength to each of their banking subsidiaries pursuant to which such holding company may be required to commit financial resources to support such subsidiaries in circumstances when, absent such requirements, they might not do so. 27 A bank holding company is prohibited from engaging in or acquiring direct or indirect control of more than five percent (5%) of the voting shares of any company engaged in non-banking activities unless the Federal Reserve Board, by order or regulation, has found such activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
Customers also utilizes wholesale deposit products, money market accounts and certificates of deposits obtained through listing services and borrowings from the FRB and FHLB as a source of funding. These funding sources offer attractive funding costs in comparison to traditional sources of funding given the current interest-rate environment.
Customers also utilizes wholesale deposit products, money market accounts and certificates of deposits obtained through listing services and borrowings from the FRB and FHLB as a source of funding.
The program offers our interns hands on experience in their role, including, collaboration on team projects, assisting on streamlining tasks and processes, and participating in a “Fundamentals of Banking” speaker series with senior leaders from all areas of the organization.
Internship Program – Investing in Early Careers Our Internship Program provides interns with a hands-on experience tailored to their roles, including collaborating on team projects, assisting with streamlining tasks and processes, and participating in a “Fundamentals of Banking” speaker series featuring Senior Leaders from within the organization.
With this session being the first cohort since pre-pandemic programs, we created a competitive selection process focusing on interns from universities within our markets that are currently majoring in programs that are aligned with the areas of the Bank in which they are stationed.
The 2023 session marks the second cohort since pre-pandemic programs, during which Customers implemented a competitive selection process focusing on interns from universities within our markets that are currently majoring in programs aligned with the Bank’s areas of operation.
In 2022, Customers completed the consolidation of five branches into other existing locations in Southern Pennsylvania, as well as the relocation of a branch in Berks County, Pennsylvania into the Bancorp headquarters and the relocation of the Bank headquarters that were previously announced in 2021.
In 2021, Customers expanded its target market to include Texas, Florida, North Carolina and other geographies. In 2022, Customers completed the consolidation of five branches into other existing locations in Southern Pennsylvania, as well as the relocation of a branch in Berks County, Pennsylvania into the Bancorp headquarters and the relocation of the Bank headquarters.
Customers has sought to maintain high asset quality and moderate credit risk by using conservative underwriting standards, maintaining a diversified loan portfolio, and being selective with its consumer installment loans by focusing on prime borrowers (defined as borrowers with a FICO score of 660 or above at origination) combined with a risk-adjusted pricing model and early identification of potential problem assets.
Customers is selective with its consumer installment loan portfolios by focusing on prime borrowers (defined as borrowers with a FICO score of 660 or above at origination) combined with a risk-adjusted pricing model and early identification of potential problem assets.
Customers does not originate or purchase installment loans to be held for investment or to be held for sale that are considered sub-prime at the time of origination, which Customers considers to be those with FICO scores below 660.
As part of its due-diligence process, Customers reviews loan level data, historical performance of the asset and distribution of credit and loss information. Customers does not originate or purchase installment loans to be held for investment that are considered sub-prime at the time of origination, which Customers considers to be those with FICO scores below 660.
We offer a 401(k) plan whereby eligible team members may contribute an amount (percentage) of their salary (less applicable tax and benefit deductions) and we provide a matching contribution equal to 50% of the first 6% of pay.
Customers offers a 401(k) plan whereby eligible team members may contribute an amount (percentage) of their salary (less applicable tax and benefit deductions) and the Company will provide a matching contribution. 95% of team members actively participate in the 401(k) plan.
The CAA provided small businesses who received an initial PPP loan and experienced a 25% reduction in gross receipts to request a second PPP loan of up to $2.0 million. On January 11, 2021, the SBA reopened the PPP program to small business and non-profit organizations that did not receive a loan through the initial PPP phase.
The CAA provided small businesses who received an initial PPP loan and experienced a 25% reduction in gross receipts to request a second PPP loan of up to $2.0 million.
As an independent bureau funded by the Federal Reserve Board, the CFPB may impose requirements that are more stringent than those of the other bank regulatory agencies. As an insured depository institution with total assets of more than $10 billion, the Bank is subject to the CFPB’s supervisory and enforcement authorities.
As an independent bureau funded by the Federal Reserve Board, the CFPB may impose requirements that are more stringent than those of the other bank regulatory agencies.
The process used to identify successors includes an assessment based on a series of leadership competencies aimed at continuously deepening our leadership bench of talent to ensure the best possible results are achieved and a plan is established for any management change.
The process is used to identify successors of key management positions and is aimed at continuously deepening our leadership bench of talent to ensure that strategic goals and priorities are achieved, and a plan is established for key management change.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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These risks are discussed in more detail following this summary and should be read together with this summary and considered along with other information contained in this report before investing in our securities. • Risks related to the Bancorp's banking operations: ◦ Risks associated with our lending activities and effective management of credit risks in our loan and lease portfolio; ◦ Risks related to maintaining an appropriate level of ACL; ◦ Risks associated with our investment securities portfolio including market and credit risks and the uncertainties surrounding macroeconomic conditions; ◦ Risks related to inflation, interest rates, and securities market and monetary fluctuations; ◦ Risks related to changes in the composition of our loan portfolio including our current emphasis on commercial and industrial, commercial real estate, consumer, and mortgage warehouse lending; ◦ Risks associated with maintaining sufficient liquidity including our ability to gather, grow and retain our lower cost deposits; ◦ Risks and uncertainties associated with the effectiveness of our business strategies, operations, and technology in managing growth and maintaining profitability; ◦ Risks related to changes to estimates and assumptions made by management in preparing financial statements.
These risks are discussed in more detail following this summary and should be read together with this summary and considered along with other information contained in this report before investing in our securities. • Risks related to the Bancorp’s banking operations: ◦ Risks associated with our lending activities and effective management of credit risks in our loan and lease portfolio; ◦ Risks related to maintaining an appropriate level of ACL; ◦ Risks associated with our investment securities portfolio including market and credit risks and the uncertainties surrounding macroeconomic conditions; ◦ Risks related to inflation, interest rates, and securities market and monetary fluctuations; ◦ Risks related to changes in the composition of our loan portfolio including our current emphasis on commercial and industrial, commercial real estate, consumer, and mortgage warehouse lending; ◦ Risks related to the commercial real estate market; ◦ Risks associated with maintaining sufficient liquidity including our ability to gather, grow and retain our lower cost deposits; ◦ Risks and uncertainties associated with the effectiveness of our business strategies, operations, and technology in managing growth and maintaining profitability; ◦ Risks related to changes to estimates and assumptions made by management in preparing financial statements.
Federal and state banking agencies continue to deliberate over the regulatory treatment of fintech companies, including whether the agencies are authorized to grant charters or licenses to such companies and whether it would be appropriate to do so in consideration of several regulatory and economic factors.
Federal and state banking agencies continue to deliberate over the regulatory treatment of fintech companies, including whether the agencies are authorized to grant charters or licenses to such companies and whether it would be appropriate to do so in consideration of several regulatory and economic factors.
Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which, depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends.
Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which, depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends.
Various federal and state statutes, regulations and rules limit, directly or indirectly, the amount of dividends that our banking and other subsidiaries may pay to us without regulatory approval. In particular, dividend and other distributions from Customers Bank to us would require notice to or approval of the applicable regulatory authority.
Various federal and state statutes, regulations and rules limit, directly or indirectly, the amount of dividends that our banking and other subsidiaries may pay to us without regulatory approval. In particular, dividend and other distributions from Customers Bank to us would require notice to or approval of the applicable regulatory authority.
Other factors affecting the further development and acceptance of the digital currency and tokenized payment industry, such as CBIT, include, but are not limited to: • the adoption and use of digital currencies, including adoption and use as a substitute for fiat currency or for other uses, which may be adversely impacted by continued price volatility; • the use of digital currencies, or the perception of such use, to facilitate illegal activity such as fraud, money laundering, tax evasion and ransomware scams by our customers; • heightened risks to digital currency businesses, such as digital currency exchanges, of hacking, malware attacks, and other cyber-security risks, which can lead to significant losses; 40 • developments in digital currency trading markets, including decreasing price volatility of digital currencies, resulting in narrowing spreads for digital currency trading and diminishing arbitrage opportunities across digital currency exchanges, or increased price volatility, which could negatively impact our customers and therefore our deposits, either of which in turn may reduce the benefits of CBIT and negatively impact our business; and • the maintenance and development of the software protocol of the digital currency networks.
Other factors affecting the further development and acceptance of the digital currency and tokenized payment industry, such as CBIT, include, but are not limited to: • the adoption and use of digital currencies, including adoption and use as a substitute for fiat currency or for other uses, which may be adversely impacted by continued price volatility; • the use of digital currencies, or the perception of such use, to facilitate illegal activity such as fraud, money laundering, tax evasion and ransomware or other scams by our customers; • heightened risks to digital currency businesses, such as digital currency exchanges, of hacking, malware attacks, and other cyber-security risks, which can lead to significant losses; • developments in digital currency trading markets, including decreasing price volatility of digital currencies, resulting in narrowing spreads for digital currency trading and diminishing arbitrage opportunities across digital currency exchanges, or increased price volatility, which could negatively impact our customers and therefore our deposits, either of which in turn may reduce the benefits of CBIT and negatively impact our business; and • the maintenance and development of the software protocol of the digital currency networks.
Whether through additional acquisitions or organic growth, our current plan to expand our business is dependent upon our ability to: • continue to implement and improve our operational, credit underwriting and administration, financial, accounting, enterprise risk management and other internal and disclosure controls and procedures and our reporting systems and processes in order to manage a growing number of client relationships; • comply with changes in, and an increasing number of, laws, rules and regulations, including those of any national securities exchange on which any of our securities become listed; • scale our technology and other systems’ platforms; • maintain and attract appropriate staffing; 46 • operate profitably or raise capital; and • support our asset growth with adequate deposits, funding and liquidity while expanding our net interest margin and meeting our customers’ and regulators’ liquidity requirements.
Whether through additional acquisitions or organic growth, our current plan to expand our business is dependent upon our ability to: • continue to implement and improve our operational, credit underwriting and administration, financial, accounting, enterprise risk management and other internal and disclosure controls and procedures and our reporting systems and processes in order to manage a growing number of client relationships; • comply with changes in, and an increasing number of, laws, rules and regulations, including those of any national securities exchange on which any of our securities become listed; • scale our technology and other systems’ platforms; • maintain and attract appropriate staffing; • operate profitably or raise capital; and • support our asset growth with adequate deposits, funding and liquidity while expanding our net interest margin and meeting our customers’ and regulators’ liquidity requirements.
In acting on applications, federal banking regulators consider, among other factors: • the effect of the acquisition on competition; • the financial condition, liquidity, results of operations, capital levels and future prospects of the applicant and the bank(s) involved; • the quantity and complexity of previously consummated acquisitions; • the managerial resources of the applicant and the bank(s) involved; • the convenience and needs of the community, including the record of performance under CRA; • the effectiveness of the applicant in combating money laundering activities; and • the extent to which the acquisition would result in greater or more concentrated risks to the stability of the United States banking or financial system.
In acting on applications, federal banking regulators consider, among other factors: • the effect of the acquisition on competition; • the financial condition, liquidity, results of operations, capital levels and future prospects of the applicant and the bank(s) involved; • the quantity and complexity of previously consummated acquisitions; • the managerial resources of the applicant and the bank(s) involved; • the convenience and needs of the community, including the record of performance under CRA; • the effectiveness of the applicant in combating money laundering activities; and 45 • the extent to which the acquisition would result in greater or more concentrated risks to the stability of the United States banking or financial system.
Mishandling, misuse or loss of this confidential or proprietary information could occur, for example, if the confidential or proprietary information were erroneously provided to parties who were not permitted to have the information, either by fault of the systems or our team members or the systems or employees of third parties which have collected, compiled, processed, transmitted or stored the information on our behalf, where the information is intercepted or otherwise inappropriately taken by third parties or where there is a failure or breach of the network, communications or information systems which are used to collect, compile, process, transmit or store the information.
Mishandling, misuse or loss of this confidential or proprietary information could occur, for example, if the confidential or proprietary information were intentionally or erroneously provided to parties who were not permitted to have the information, either by fault of the systems or our team members or the systems or employees of third parties which have collected, compiled, processed, transmitted or stored the information on our behalf, where the information is intercepted or otherwise inappropriately taken by third parties or where there is a failure or breach of the network, communications or information systems which are used to collect, compile, process, transmit or store the information.
In addition, if a competitor or another third party were to launch an alternative to CBIT (such as Federal Reserve's FedNow Service, a virtual real time payment system for banks, to be launched in mid-2023), we could lose non-interest bearing deposits and our business, financial condition, results of operations and growth strategy could be adversely impacted.
In addition, if a competitor or another third party were to launch an alternative to CBIT (such as Federal Reserve’s FedNow Service, a virtual real time payment system for banks launched in 2023), we could lose non-interest bearing deposits and our business, financial condition, results of operations and growth strategy could be adversely impacted.
Further, because customer data may also be collected, stored or processed by third-party service providers, it is possible that these third-party service providers could intentionally, negligently or otherwise disclose data about our clients or customers. 43 We rely to a large extent upon sophisticated information technology systems, databases and infrastructure, and take reasonable steps to protect them.
Further, because customer data may also be collected, stored or processed by third-party service providers, it is possible that these third-party service providers could intentionally, negligently or otherwise disclose data about our clients or customers. We rely to a large extent upon sophisticated information technology systems, databases and infrastructure, and take reasonable steps to protect them.
Investors owning 80% or more of two or more banks or savings associations would be required to pledge their proportionate interests in each institution to cross-guarantee the FDIC against losses to the DIF. Under the policy statement, the FDIC also could prohibit investment through ownership structures involving multiple investment vehicles that are owned or controlled by the same parent company.
Investors owning 80% or more of two or more banks or savings associations would be required to pledge their proportionate interests in each institution to cross-guarantee the FDIC against losses to the DIF. 59 Under the policy statement, the FDIC also could prohibit investment through ownership structures involving multiple investment vehicles that are owned or controlled by the same parent company.
We require our team members to agree to keep all such information confidential, and we monitor compliance. Failure to comply with confidentiality requirements could result in material liability and adversely affect our business, financial condition, results of operations and future prospects. Bank holding companies and financial institutions are extensively regulated and currently face an uncertain regulatory environment.
We require our team members to agree to keep all such information confidential, and we monitor compliance. Failure to comply with confidentiality requirements could result in material liability and adversely affect our business, financial condition, results of operations and future prospects. 52 Bank holding companies and financial institutions are extensively regulated and currently face an uncertain regulatory environment.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. 55 Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
We expect our loan and deposit activities to continue expanding beyond the Northeast and Mid-Atlantic regions to service customers across the nation. Additionally, we have made a significant investment in commercial real estate loans. Often in a commercial real estate transaction, repayment of the loan is dependent on the property generating sufficient rental income to service the loan.
We expect our loan and deposit activities to continue expanding beyond the Northeast and Mid-Atlantic regions to service customers across the nation. 34 Additionally, we have made a significant investment in commercial real estate loans. Often in a commercial real estate transaction, repayment of the loan is dependent on the property generating sufficient rental income to service the loan.
Any change to or termination of our borrowings from the FHLB or correspondent banks could have an adverse effect on our profitability and financial condition, including liquidity. We may not be able to develop and retain a strong core deposit base and other low-cost, stable funding sources.
Any change to or termination of our borrowings from the FHLB or correspondent banks could have an adverse effect on our profitability and financial condition, including liquidity. 47 We may not be able to develop and retain a strong core deposit base and other low-cost, stable funding sources.
Failure to perform in any of these areas could significantly weaken our competitive position, which could materially and adversely affect us. In addition, the financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services including internet services, cryptocurrencies and payment systems.
Failure to perform in any of these areas could significantly weaken our competitive position, which could materially and adversely affect us. 36 In addition, the financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services including internet services, cryptocurrencies and payment systems.
Although our CEO, CFO, and President have entered into employment agreements with us, it is possible that they may not complete the term of their employment agreement or may choose not to renew it upon expiration. 36 Our customers also rely on us to deliver personalized financial services.
Although our CEO, CFO, and President have entered into employment agreements with us, it is possible that they may not complete the term of their employment agreement or may choose not to renew it upon expiration. Our customers also rely on us to deliver personalized financial services.
If we do so, we may not be able to influence the activities of companies in which we invest and may suffer losses due to these activities. Risks related to the divestiture of BMT We continue to face the risks and challenges associated with BM Technologies following the merger of BMT with Megalith Financial Acquisition Corp.
If we do so, we may not be able to influence the activities of companies in which we invest and may suffer losses due to these activities. 48 Risks related to the divestiture of BMT We continue to face the risks and challenges associated with BM Technologies following the merger of BMT with Megalith Financial Acquisition Corp.
Any future additional assessments, increases or required prepayments in FDIC insurance premiums may materially and adversely affect us, including reducing our profitability or limiting our ability to pursue certain business opportunities. 54 The Federal Reserve may require us to commit capital resources to support our subsidiary bank.
Any future additional assessments, increases or required prepayments in FDIC insurance premiums may materially and adversely affect us, including reducing our profitability or limiting our ability to pursue certain business opportunities. The Federal Reserve may require us to commit capital resources to support our subsidiary bank.
The extent to which COVID-19 and its variants impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including: • The duration, extent, and severity of COVID-19 and its variants.
The extent to which COVID-19 and its variants impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including: 50 • The duration, extent, and severity of COVID-19 and its variants.
The loss of these key personnel could negatively impact our banking operations. The loss of key senior personnel, or the inability to recruit and retain qualified personnel in the future, such as those in our compliance, risk and legal departments, could have a material adverse effect on us.
The loss of these key personnel could negatively impact our banking operations. The loss of key senior personnel, or the inability to recruit and retain qualified personnel in the future, such as those in our compliance, finance, risk and legal departments, could have a material adverse effect on us.
Taxes Reviews performed by the Internal Revenue Service and state taxing authorities for the fiscal years that remain open for investigation may result in a change to income taxes recorded in our consolidated financial statements and adversely affect our results of operations.
Taxes Reviews performed by the Internal Revenue Service and state and local taxing authorities for the fiscal years that remain open for investigation may result in a change to income taxes recorded in our consolidated financial statements and adversely affect our results of operations.
As a result, the difference between bid and ask prices in any secondary market could be substantial. The Series E and Series F Preferred Stock may be junior or equal in rights and preferences to preferred stock we may issue in the future. Our Series E and Series F Preferred Stock rank equally.
As a result, the difference between bid and ask prices in any secondary market could be substantial. 61 The Series E and Series F Preferred Stock may be junior or equal in rights and preferences to preferred stock we may issue in the future. Our Series E and Series F Preferred Stock rank equally.
With respect to restructured loans, we grant concessions to certain borrowers experiencing financial difficulties in order to facilitate repayment of the loan by a reduction of the stated interest rate for the remaining life of the loan to lower than the current market rate for new loans with similar risk or an extension of the maturity date. 33 Management makes various assumptions and judgments about the collectibility of our loan and lease portfolio, including the creditworthiness of our borrowers and the probability of our borrowers making payments, as well as the value of real estate and other assets serving as collateral for the repayment of many of our loans and leases.
With respect to restructured loans, we grant concessions to certain borrowers experiencing financial difficulties in order to facilitate repayment of the loan by a reduction of the stated interest rate for the remaining life of the loan to lower than the current market rate for new loans with similar risk or an extension of the maturity date. 31 Management makes various assumptions and judgments about the collectibility of our loan and lease portfolio, including the creditworthiness of our borrowers and the probability of our borrowers making payments, as well as the value of real estate and other assets serving as collateral for the repayment of many of our loans and leases.
However, in addition to causing economic and financial market disruptions, the downgrade, and any future downgrades and/or failures to raise the U.S. debt limit if necessary in the future, could, among other things, materially adversely affect the market value of the U.S. and other government and governmental agency securities owned by us, the availability of those securities as collateral for borrowing and our ability to access capital markets on favorable terms, as well as have other material adverse effects on the operation of our business and our financial results and condition.
However, in addition to causing economic and financial market disruptions, the downgrade, and any future downgrades and/or failures to raise the U.S. debt limit if necessary in the future, could, among other things, materially adversely affect the market value of the U.S. and other government and governmental agency securities owned by us, the availability of those securities to be used as collateral for borrowing and our ability to access capital markets on favorable terms, as well as have other material adverse effects on the operation of our business and our financial results and condition.
We believe that the circumstances of its relationship with Higher One and the student customers are different than the relationship between us and Higher One and the student customers. 44 In December 2015, Higher One entered into consent orders with both the Federal Reserve Board and the FDIC.
We believe that the circumstances of its relationship with Higher One and the student customers are different than the relationship between us and Higher One and the student customers. In December 2015, Higher One entered into consent orders with both the Federal Reserve Board and the FDIC.
Any further action could have a material adverse effect on our business, financial conditions and/or results of operations or our reputation. We intend to engage in acquisitions of other businesses from time to time.
Any further action could have a material adverse effect on our business, financial conditions and/or results of operations or our reputation. 44 We intend to engage in acquisitions of other businesses from time to time.
The Senior Notes will rank equal in right of payment with all of our secured and unsecured senior indebtedness and will rank senior in right of payment to all of our subordinated indebtedness. Although the Senior Notes are “senior notes,” they will be effectively subordinated to all liabilities of our subsidiaries.
The Senior Notes will rank equal in right of payment with all of our secured and unsecured senior indebtedness and will rank senior in right of payment to all of our subordinated indebtedness. 62 Although the Senior Notes are “senior notes,” they will be effectively subordinated to all liabilities of our subsidiaries.
The ability to keep pace with technological change is important and the failure to do so could adversely affect our business, financial condition and results of operations. 41 We are dependent on our information technology and telecommunications systems and third-party service providers, and systems failures, interruptions or breaches of security, or the failure of our third-party service providers to adequately perform their services, could have a material adverse effect on us.
The ability to keep pace with technological change is important and the failure to do so could adversely affect our business, financial condition and results of operations. 39 We are dependent on our information technology and telecommunications systems and third-party service providers, and systems failures, interruptions or breaches of security, or the failure of our third-party service providers to adequately perform their services, could have a material adverse effect on us.
Many of these regulations are intended to protect depositors, customers, the public, the banking system as a whole, or the FDIC insurance funds, not stockholders. Regulatory requirements and discretion affect our lending practices, capital structure, investment practices, dividend policy and many other aspects of our business. There are laws and regulations which restrict transactions between us and our subsidiaries.
Many of these regulations are intended to protect depositors, customers, the public, the banking system as a whole, or the FDIC insurance funds, not shareholders. Regulatory requirements and discretion affect our lending practices, capital structure, investment practices, dividend policy and many other aspects of our business. There are laws and regulations which restrict transactions between us and our subsidiaries.
Holders of Series E and Series F Preferred Stock have no voting rights with respect to matters that generally require the approval of voting shareholders.
Holders of Series E and Series F Preferred stock have limited voting rights. Holders of Series E and Series F Preferred Stock have no voting rights with respect to matters that generally require the approval of voting shareholders.
However, continued disruptions in the digital currency industry could have adverse effects on Customers' business, financial condition and results of operations. The CBIT instant payments platform provides a closed-system for intrabank commercial transactions and is not intended to be a trading platform for tokens or digital assets.
However, continued disruptions in the digital currency industry could have adverse effects on Customers’ business, reputation, financial condition and results of operations. 37 The CBIT instant payments platform provides a closed-system for intrabank commercial transactions and is not intended to be a trading platform for tokens or digital assets.
Further, the possibility of future changes in the authority of the CFPB by Congress or the current administration is uncertain, and we cannot predict the impact, if any, changes to the CFPB may have on our business. With respect to deposit-taking activities, banks with assets in excess of $10 billion are subject to two changes.
Further, the possibility of future changes in the authority of the CFPB by Congress or the current administration is uncertain, and we cannot predict the impact, if any, changes to the CFPB may have on our business. With respect to deposit-taking activities, banks with assets in excess of $10 billion are subject to two material rules.
Our ability to compete successfully depends on a number of factors, including, among others: • the ability to develop, maintain and build upon long-term customer relationships based on high quality, personal service, effective and efficient products and services, high ethical standards and safe and sound assets; • the scope, relevance and competitive pricing of products and services offered to meet customer needs and demands; • the ability to provide customers with maximum convenience of access to services and availability of banking representatives; • the ability to attract and retain highly qualified team members to operate our business; • the ability to expand our market position in current and new markets; • customer access to our decision makers and customer satisfaction with our level of service; and 37 • the ability to operate our business effectively and efficiently.
Our ability to compete successfully depends on a number of factors, including, among others: • the ability to develop, maintain and build upon long-term customer relationships based on high quality, personal service, effective and efficient products and services, high ethical standards and safe and sound assets; • the scope, relevance and competitive pricing of products and services offered to meet customer needs and demands; • the ability to provide customers with maximum convenience of access to services and availability of banking representatives; • the ability to attract and retain highly qualified team members to operate our business; • the ability to expand our market position in current and new markets; • customer access to our decision makers and customer satisfaction with our level of service; • the ability to effectively manage our enterprise risk; and • the ability to operate our business effectively and efficiently.
Some of our competitors may have greater resources to invest in technology and may be better equipped to market new technology-driven products and services. This may result in limiting, reducing or otherwise adversely affecting our growth strategy in this area and our access to deposits through mobile banking.
Some of our competitors may have greater resources to invest in technology, including AI, and may be better equipped to market new technology-driven products and services. This may result in limiting, reducing or otherwise adversely affecting our growth strategy in this area and our access to deposits through mobile banking.
In addition, a number of the changes to the Code were introduced through the CARES Act and the CAA, and some of the provisions are set to expire in future years. There is substantial uncertainty concerning whether those expiring provisions will be extended, or whether future legislation will further revise the Code.
A number of changes to the Code were introduced through the Tax Act, the CARES Act and the CAA, and some of the provisions are set to expire in future years. There is substantial uncertainty concerning whether those expiring provisions will be extended, or whether future legislation will further revise the Code.
We may achieve these changes through originations or purchases of loan portfolios from third party originators or fintech companies. Our focus will change, based on our evaluation of current and predicted market conditions and opportunities.
We may achieve these changes through originations or purchases or sales of loan portfolios from or to third party originators or fintech companies. Our focus will change, based on our evaluation of current and predicted market conditions and opportunities.
Changes in interest rates may also have a significant impact on any future loan origination revenues. Changes in interest rates also have a significant impact on the carrying value of a significant percentage of the assets, both loans and investment securities, on our balance sheet.
Changes in interest rates may also have a significant impact on borrower behaviors and any future loan origination revenues. Changes in interest rates also have a significant impact on the carrying value of a significant percentage of the assets, both loans and investment securities, on our balance sheet.
Although we made profit for the years 2011 through 2022, there can be no assurance that we will be able to remain profitable in future periods, or, if profitable, that our overall earnings will remain consistent or increase in the future.
Although we made profit for the years 2011 through 2023, there can be no assurance that we will be able to remain profitable in future periods, or, if profitable, that our overall earnings will remain consistent or increase in the future.
This information is necessary for the conduct of our business activities, including the ongoing maintenance of deposit, loan, investment management and other account relationships for our customers, and receiving instructions and affecting transactions for those customers and other users of our products and services.
This information is necessary for the conduct of our business activities, including the ongoing maintenance of deposit, loan and other account relationships for our customers, and receiving instructions and affecting transactions for those customers and other users of our products and services.
We make and consider making additional minority investments in other financial institutions or technology companies in the financial services business, or other unrelated businesses, including for strategic reasons or to see technological improvements or advantages.
We make and will continue to consider making additional minority investments in other financial institutions or technology companies in the financial services business, or other unrelated businesses, including for strategic reasons or to see technological improvements or advantages.
The end of various governmental support may have negative impacts on our customers including increased risk of delinquencies, defaults, foreclosures and losses on our loans. • The effect on our customers, counterparties, employees, and third-party service providers. COVID-19 and its associated consequences and uncertainties have affecting individuals, households, and businesses differently and unevenly.
The end of various governmental support may have negative impacts on our customers including increased risk of delinquencies, defaults, foreclosures and losses on our loans. • The effect on our customers, counterparties, team members, and third-party service providers. COVID-19 and its associated consequences and uncertainties have affecting individuals, households, and businesses differently and unevenly.
Any inability to prevent security breaches could damage our relationships with our higher education institution customers, cause a decrease in transactions by individual cardholders, expose us to liability for unauthorized purchases and subject us to network fines. These claims also could result in protracted and costly litigation.
Any inability to prevent security breaches could damage our relationships with our customers, cause a decrease in transactions by individual cardholders, expose us to liability for unauthorized purchases and subject us to network fines. These claims also could result in protracted and costly litigation.
We face competitive pressures to pay higher interest rates on deposits to our digital currency customers, which could increase funding costs and compress net interest margins.
At times we face competitive pressures to pay higher interest rates on deposits to our digital currency customers, which could increase funding costs and compress net interest margins.
The process of "disintermediation," or removing banks from their traditional role as financial intermediaries, could result in loss of customer deposits and other sources of revenue, which could have a material adverse effect on our financial condition and results of operations.
The process of “disintermediation,” or removing banks from their traditional role as financial intermediaries, could result in loss of customer deposits and other sources of revenue, which could have a material adverse effect on our financial condition and results of operations.
In addition to improving the ability to serve customers, the effective use of technology increases efficiency and enables financial institutions to reduce long-term costs. These technological advancements also have made it possible for non-financial institutions, such as the "fintech companies" and market place lenders, to offer products and services that have traditionally been offered by financial institutions.
In addition to improving the ability to serve customers, the effective use of technology increases efficiency and enables financial institutions to reduce long-term costs. These technological advancements also have made it possible for non-financial institutions, such as the “fintech companies” and market place lenders, to offer products and services that have traditionally been offered by financial institutions.
Our acquisition activities could involve a number of additional risks, including the risks of: • incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating the terms of potential transactions, resulting in our attention being diverted from the operation of our existing business; • using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets; • being potentially exposed to unknown or contingent liabilities of banks and businesses we acquire; • being required to expend time and expense to integrate the operations and personnel of the combined businesses; • experiencing higher operating expenses relative to operating income from the new operations; • creating an adverse effect on our results of operations; • losing key team members and customers as a result of an acquisition that is poorly received; and • incurring significant problems relating to the conversion of the financial and customer data of the entity being acquired into our financial and customer product systems. 45 Additionally, in evaluating potential acquisition opportunities, we may seek to acquire failed banks through FDIC-assisted acquisitions.
Our acquisition activities could involve a number of additional risks, including the risks of: • incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating the terms of potential transactions, resulting in our attention being diverted from the operation of our existing business; • using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets; • being potentially exposed to unknown or contingent liabilities of banks and businesses we acquire; • being required to expend time and expense to integrate the operations and personnel of the combined businesses; • experiencing higher operating expenses relative to operating income from the new operations; • creating an adverse effect on our results of operations; • losing key team members and customers as a result of an acquisition that is poorly received; and • incurring significant problems relating to the conversion of the financial and customer data of the entity being acquired into our financial and customer product systems.
Our earnings also may be reduced by increased expenses associated with increased assets, such as additional team member compensation expense, and increased interest expense on any liabilities incurred or deposits solicited to fund increases in assets. If earnings do not grow proportionately with our assets or equity, our overall profitability may be adversely affected. Item 1B. Unresolved Staff Comments None.
Our earnings also may be reduced by increased expenses associated with increased assets, such as additional team member compensation expense, and increased interest expense on any liabilities incurred or deposits solicited to fund increases in assets. If earnings do not grow proportionately with our assets or equity, our overall profitability may be adversely affected. Item 1B.
These changes could adversely affect our business, operating results, reported assets and liabilities, financial condition and capital levels; ◦ Risks related to changes in accounting standards and policies which can be difficult to predict and can materially impact how we record and report our financial results; ◦ Risks related to our geographic concentration in the Northeast and Mid-Atlantic regions; ◦ Risks related to our dependency on our executive officers and key personnel to implement our strategy and our ability to retain their services; ◦ Risks related to significant competition from other financial institutions and financial services providers; ◦ Risks related to the uncertainty about reference rate reform; ◦ Risks related to CBIT, our blockchain-based instant B2B payments platform; ◦ Risks associated with our dependency on our information technology and telecommunications systems and third-party service providers including exposures to systems failures, interruptions or breaches of security; ◦ Risks associated with the loss of, or failure to adequately safeguard, confidential or proprietary information; • Risks related to the divestiture of BMT: ◦ Risks associated with BM Technologies through our various service agreements with BM Technologies; • Risks related to macroeconomic conditions, COVID-19, climate change and geopolitical conflict: ◦ Risks related to worsening general business and economic conditions which could materially and adversely affect us; ◦ Risks associated with COVID-19 and its variants including their scope, duration and severity and actions taken by governmental authorities in response to COVID-19 and its variants; ◦ Risks related to the SBA’s PPP program and PPP loans remaining on our balance sheet; ◦ Risks related to climate change and related legislative and regulatory initiatives on our business; 32 • Risks related to the regulation of our industry: ◦ Risks associated with the highly regulated environment in which we operate, including the effects of heightened regulatory and supervisory requirements applicable to banks with assets in excess of $10 billion; ◦ Risks related to maintaining adequate regulatory capital to support our business strategies including the long-term impact of the new regulatory capital standards and the capital rules on U.S. banks; ◦ Risks related to our use of third-party service providers and our other ongoing third-party business relationships, which are subject to increasing regulatory requirements and attention; ◦ Risks associated to us being subject to numerous laws and governmental regulations and to regular examinations by our regulators of our business and compliance with laws and regulations.
These changes could adversely affect our business, operating results, reported assets and liabilities, financial condition and capital levels; ◦ Risks related to changes in accounting standards and policies which can be difficult to predict and can materially impact how we record and report our financial results; ◦ Risks related to our geographic concentration in the Northeast and Mid-Atlantic regions; ◦ Risks related to our concentration in certain business lines or product types; ◦ Risks related to our dependency on our executive officers and key personnel to implement our strategy and our ability to retain their services; ◦ Risks related to significant competition from other financial institutions and financial services providers; ◦ Risks related to CBIT, our blockchain-based instant B2B payments platform; ◦ Risks associated with our dependency on our information technology and telecommunications systems and third-party service providers including exposures to systems failures, interruptions or breaches of security; ◦ Risks associated with the loss of, or failure to adequately safeguard, confidential or proprietary information; ◦ Risks associated with negative public opinion regarding us; • Risks related to the divestiture of BMT: ◦ Risks associated with BM Technologies through our various service agreements with BM Technologies; • Risks related to macroeconomic conditions, COVID-19, climate change and geopolitical conflicts: ◦ Risks related to worsening general business and economic conditions which could materially and adversely affect us; ◦ Risks associated with COVID-19 and its variants including their scope, duration and severity and actions taken by governmental authorities in response to COVID-19 and its variants; ◦ Risks related to the SBA’s PPP program and PPP loans remaining on our balance sheet; ◦ Risks related to climate change and related legislative and regulatory initiatives on our business; 30 • Risks related to the regulation of our industry: ◦ Risks associated with the highly regulated environment in which we operate, including the effects of heightened regulatory and supervisory requirements applicable to banks with assets in excess of $10 billion; ◦ Risks related to maintaining adequate regulatory capital to support our business strategies including the long-term impact of the new regulatory capital standards and the capital rules on U.S. banks; ◦ Risks related to our use of third-party service providers and our other ongoing third-party business relationships, which are subject to increasing regulatory requirements and attention; ◦ Risks associated to us being subject to numerous laws and governmental regulations and to regular examinations by our regulators of our business and compliance with laws and regulations.
We expect to drive organic growth by employing our Concierge Banking® and single-point-of-contact strategies, which provide specific relationship managers or private bankers for all customers, and by focusing on our corporate and specialty banking verticals. Many of our competitors provide similar services, and others may replicate our model.
We expect to drive organic growth by employing our single-point-of-contact strategy, which provides specific relationship managers or private bankers for all customers, and by focusing on our corporate and specialty banking verticals. Many of our competitors provide similar services, and others may replicate our model.
In December 2017, the Basel Committee on Banking Supervision published standards that it described as the finalization of the Basel III regulatory framework (commonly referred to as Basel IV). Among other things, these standards revise the Basel Committee’s standardized approach for credit risk and provide a new standardized approach for operational risk capital.
In December 2017, the Basel Committee on Banking Supervision published standards that it described as the finalization of the Basel III regulatory framework. Among other things, these standards revise the Basel Committee’s standardized approach for credit risk and provide a new standardized approach for operational risk capital.
CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the TassatPay instant B2B payments platform. CBIT is not listed or traded on any digital currency exchange. As of December 31, 2022 and 2021, Customers Bank held $2.3 billion and $1.9 billion of deposits from customers participating in CBIT, respectively.
CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the TassatPay instant B2B payments platform. CBIT is not listed or traded on any digital currency exchange. As of December 31, 2023 and 2022, Customers Bank held $2.8 billion and $2.3 billion of deposits from customers participating in CBIT, respectively.
In addition, we compete with financial intermediaries, such as consumer finance companies, mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies, as well as major retailers and fintechs, in providing various types of loans and other financial services.
In addition, we compete with financial intermediaries, such as consumer finance companies, private credit funds, mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies, as well as major retailers and fintech companies, in providing various types of loans and other financial services.
Loans that we make through certain federal programs are dependent on the Federal Government’s continuation and support of these programs and on our compliance with their requirements . We participate in various U.S. Government agency guarantee programs, including PPP and other programs operated by the SBA. We are responsible for following all applicable U.S.
Loans that we make through certain federal programs are dependent on the Federal Government’s continuation and support of these programs and on our compliance with their requirements . We participate in various U.S. government agency guarantee programs, including PPP and other programs operated by the SBA.
In addition, a director of Customers Bank who is not a director or executive officer of Customers Bancorp owns an additional 13,000 shares of common stock, which if combined with the directors and executive officers of Customers Bancorp, potentially gives them, as a group, the ability to control approximately 8.19% of the outstanding common stock.
In addition, a director of Customers Bank who is not a director or executive officer of Customers Bancorp owns an additional 1,000 shares of common stock, which if combined with the directors and executive officers of Customers Bancorp, potentially gives them, as a group, the ability to control approximately 9.48% of the outstanding common stock.
Because many of our team members continue to work remotely on a “hybrid model”, the ability of our key personnel and other management to motivate personnel and maintain corporate culture may be adversely affected. We face significant competition from other financial institutions and financial services providers, which may materially and adversely affect us. Commercial and consumer banking is highly competitive.
Because many of our team members continue to work remotely on a “hybrid model”, the ability of our key personnel and other management to motivate personnel and maintain corporate culture may be adversely affected. 35 We face significant competition from other financial institutions and financial services providers, which may materially and adversely affect us.
Because many of our employees continue to work remotely on a “hybrid model”, the risk of cybersecurity breaches is increased.
Because many of our team members continue to work remotely on a “hybrid model”, the risk of cybersecurity breaches is increased.
The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of December 31, 2022, our regulatory capital ratios reflected 75%, or $46.2 million, benefit associated with the CECL transition provisions.
The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of December 31, 2023, our regulatory capital ratios reflected 50%, or $30.8 million, benefit associated with the CECL transition provisions.
If we or any third-party service providers we have engaged to assist us with such programs fail to follow any applicable regulations, guidelines or policies associated with a particular guarantee program, any loans we originate as part of that program may lose the associated guarantee, exposing us to credit risk to which we would not otherwise have been exposed or underwritten as part of our origination process for U.S.
If we or any third-party service providers we have engaged to assist us with such programs fail to follow any applicable regulations, guidelines or policies associated with a particular guarantee program, any loans we originate as part of that program may lose the associated guarantee, exposing us to credit risk to which we would not otherwise have been exposed or underwritten as part of our origination process for U.S. government agency guaranteed loans, or result in our inability to continue originating loans under such programs.
As of December 31, 2022, we had $13.5 billion in commercial loans outstanding, approximately 85.8% of our total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage warehouse at fair value and loans receivable, PPP, as compared to $12.4 billion, or 85.3% of the total loan and lease portfolio, as of December 31, 2021.
As of December 31, 2023, we had $11.5 billion in commercial loans outstanding, approximately 86.8% of our total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage warehouse at fair value and loans receivable, PPP, as compared to $13.5 billion, or 85.8% of the total loan and lease portfolio, as of December 31, 2022.
There can be no assurances that we would receive such approval. 62 In addition, our right to participate in any distribution of assets of any of our subsidiaries upon the subsidiary’s liquidation or otherwise, and, as a result, the ability of a holder of the 2.875% Senior Notes and 4.5% Senior Notes to benefit indirectly from such distribution will be subject to the prior claims of preferred equity holders and creditors of that subsidiary, except to the extent that any of our claims as a creditor of such subsidiary may be recognized.
In addition, our right to participate in any distribution of assets of any of our subsidiaries upon the subsidiary’s liquidation or otherwise, and, as a result, the ability of a holder of the 2.875% Senior Notes and 4.5% Senior Notes to benefit indirectly from such distribution will be subject to the prior claims of preferred equity holders and creditors of that subsidiary, except to the extent that any of our claims as a creditor of such subsidiary may be recognized.
Fraudulent transactions could have a material adverse effect on our financial condition and results of operations. Our lending to commercial mortgage companies is a significant part of our assets and earnings. This business is subject to seasonality of the mortgage lending business, and volumes have been declining as interest rates increased.
Fraudulent transactions could have a material adverse effect on our financial condition and results of operations. This business is subject to seasonality of the mortgage lending business, and volumes have been declining as interest rates increased.
On March 11, 2021, the American Rescue Plan Act of 2021 was enacted expanding eligibility for first and second round of PPP loans and revising the exclusions from payroll costs for purposes of loan forgiveness. The PPP ended on May 31, 2021. As of December 31, 2022, we had PPP loans with outstanding balances of $1.0 billion.
On March 11, 2021, the American Rescue Plan Act of 2021 was enacted expanding eligibility for first and second round of PPP loans and revising the exclusions from payroll costs for purposes of loan forgiveness. The PPP ended on May 31, 2021. As of December 31, 2023, we had PPP loans with outstanding balances of $74.7 million.
We have been subjected to regulatory audits and investigations related to our PPP program and could be subject to additional litigation and further investigation and scrutiny by our regulators, Congress, the SBA, the U.S. Treasury Department and other government agencies related to our PPP participation.
We have been subjected to regulatory audits and investigations related to our PPP program and could be subject to additional litigation and further investigation and scrutiny by our regulators, Congress, the SBA, the U.S.
In particular, upon our determination in good faith that an event has occurred that would constitute a “regulatory capital treatment event,” with respect to a particular series of the preferred stock, we may redeem that particular series of securities in whole, but not in part, upon the prior approval of the Federal Reserve. 60 Holders of Series E and Series F Preferred stock have limited voting rights.
In particular, upon our determination in good faith that an event has occurred that would constitute a “regulatory capital treatment event,” with respect to a particular series of the preferred stock, we may redeem that particular series of securities in whole, but not in part, upon the prior approval of the Federal Reserve.
Changes in the composition of our loan portfolio could have a significant adverse effect on our overall credit profile, which could result in a higher percentage of non-accrual loans, increased provision for loan losses, and an increased level of net charge-offs, all of which could have a material and adverse effect on our financial condition and results of operations.
Changes in the composition of our loan portfolio could have a significant adverse effect on our overall credit profile, which could result in a higher percentage of non-accrual loans, increased provision for loan losses, loss of future income on loans sold, sales of loans at a discount below book value and an increased level of net charge-offs, all of which could have a material and adverse effect on our financial condition and results of operations.
Because the sector is relatively new, additional risks may emerge which are not yet known or quantifiable. Digital currencies and tokenized payment platforms, including those utilizing proprietary, non-public tokens such as CBIT, have only recently become selectively accepted as a form of payment by business.
Adverse events or publicity in the digital currency industry creates reputational risk for us. Because the sector is relatively new, additional risks may emerge which are not yet known or quantifiable. Digital currencies and tokenized payment platforms, including those utilizing proprietary, non-public tokens such as CBIT, have only recently become selectively accepted as a form of payment by business.
As of December 31, 2022, $3.4 billion, or 79.8%, of our total time deposits, are scheduled to mature through December 31, 2023. We are working to transition certain of our customers to lower-cost traditional bank deposits as higher-cost funding, such as time deposits, mature and to grow our customer deposits.
As of December 31, 2023, $2.5 billion, or 75.3%, of our total time deposits, are scheduled to mature through December 31, 2024. We are working to transition certain of our customers to lower-cost traditional bank deposits as higher-cost funding, such as time deposits, mature and to grow our customer deposits.
On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023.
On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies’ successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023.
On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022. On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies' successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023.
On November 7, 2022, Customers agreed to extend the deposit servicing agreement to the earlier of BM Technologies’ successful completion of the transfer of the serviced deposits to a new sponsor bank or June 30, 2023.
Such inadvertent disclosures have occurred and are likely to occur in the future. Such disclosures subject us to liability for damages, including expenses of credit monitoring for those effected, and reputational damage.
Such inadvertent disclosures have occurred and are likely to occur in the future. Any disclosures of confidential or proprietary information, whether intentional or unintentional, subject us to liability for damages, including expenses of credit monitoring for those effected, and reputational damage.
We need to continue to attract and retain these individuals and to recruit other qualified individuals to ensure continued growth. In addition, competitors may recruit these individuals in light of the value of the individuals’ relationships with their customers and communities, and we may not be able to retain such relationships absent the individuals.
In addition, competitors may recruit these individuals in light of the value of the individuals’ relationships with their customers and communities, and we may not be able to retain such relationships absent the individuals.
Treasury obligations and expectations about future interest rates; • actual or anticipated changes in our financial condition or results, including our levels of indebtedness; • general economic conditions and expectations regarding the effects of national policies; • investors’ views of securities issued by both holding companies and similar financial service firms; and • the market for similar securities. 63 General Risk Factors Downgrades in U.S. government and federal agency securities could adversely affect us.
Treasury obligations and expectations about future interest rates; • actual or anticipated changes in our financial condition or results, including our levels of indebtedness; • general economic conditions and expectations regarding the effects of national policies; • investors’ views of securities issued by both holding companies and similar financial service firms; and • the market for similar securities.
There are various legal restrictions on the extent to which the Company may borrow or otherwise engage in certain types of transactions with the Bank or their respective affiliates and related parties.
Failure to comply with such regulations could materially and adversely affect us. There are various legal restrictions on the extent to which the Company may borrow or otherwise engage in certain types of transactions with the Bank or their respective affiliates and related parties.
In connection with the divestiture, we have entered into various agreements with BM Technologies, including a transition services agreement, software license agreement, deposit servicing agreement, non-competition agreement and loan agreement for periods ranging from one to ten years. The deposit service agreement was scheduled to expire on December 31, 2022.
In connection with the divestiture, we have entered into various agreements with BM Technologies, including a transition services agreement, software license agreement, deposit servicing agreement, non-competition agreement and loan agreement for periods ranging from one to ten years. The loan agreement with BM Technologies was terminated early in November 2021.
We do not expect to pay cash dividends on our common stock in the foreseeable future, and our ability to pay dividends is subject to regulatory limitations. We have not historically declared nor paid cash dividends on our common stock, and we do not expect to do so in the near future.
We have not historically declared nor paid cash dividends on our common stock, and we do not expect to do so in the near future.
Applicable laws, regulations, interpretations, enforcement policies and accounting principles have been subject to significant changes in recent years and may be subject to significant future changes. Future changes may have a material adverse effect on our business, financial condition and results of operations.
Applicable laws, regulations, interpretations, enforcement policies and accounting principles have been subject to significant changes in recent years and may be subject to significant future changes. The recent turmoil in the banking industry has increased the likelihood of additional regulation and heightened supervision. Future changes may have a material adverse effect on our business, financial condition and results of operations.
Other litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.
If we become subject to such regulatory actions, we could be materially and adversely affected. 54 Other litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.
If we are forced to liquidate our assets to pay our creditors, we may not have sufficient funds to pay amounts due on any or all of the Series E and Series F Preferred Stock then outstanding. 59 We may not pay dividends on the shares of Series E and Series F Preferred Stock.
During the year ended December 31, 2021, we redeemed all of the outstanding shares of Series C and Series D Preferred Stock. If we are forced to liquidate our assets to pay our creditors, we may not have sufficient funds to pay amounts due on any or all of the Series E and Series F Preferred Stock then outstanding.
Holders of Series E and Series F Preferred Stock should not expect us to redeem their shares when they first become redeemable at our option or on any particular date thereafter, and our ability to redeem the shares will be subject to the prior approval of the Federal Reserve.
As a result, shares of the Series E and Series F Preferred Stock are effectively subordinated to all existing and future liabilities and any outstanding preferred equity of our subsidiaries. 60 Holders of Series E and Series F Preferred Stock should not expect us to redeem their shares when they first become redeemable at our option or on any particular date thereafter, and our ability to redeem the shares will be subject to the prior approval of the Federal Reserve.

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Item 2. Properties

Properties — owned and leased real estate

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Legal Proceedings For information on Customers' legal proceedings, refer to "NOTE 22 – LOSS CONTINGENCIES" to Customers' audited financial statements. Item 4. Mine Safety Disclosures Not Applicable. 64 PART II
Legal Proceedings For information on Customers’ legal proceedings, refer to “NOTE 22 – LOSS CONTINGENCIES” to Customers’ audited consolidated financial statements. Item 4. Mine Safety Disclosures Not Applicable. 65 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Customers Bancorp obtained the information contained in the performance graph from SNL Financial. 66 The graph below is furnished under this Part II, Item 5 of this Annual Report on Form 10-K and shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.
Customers Bancorp obtained the information contained in the performance graph from SNL Financial. 67 The graph below is furnished under this Part II, Item 5 of this Annual Report on Form 10-K and shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.
Certain team members of BMT also received 1,348,748 shares of BM Technologies' common stock as severance. 65 Issuer Purchases of Equity Securities On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company's common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021).
Certain team members of BMT also received 1,348,748 shares of BM Technologies’ common stock as severance. 66 Issuer Purchases of Equity Securities On August 25, 2021, the Board of Directors of Customers Bancorp authorized the Share Repurchase Program to repurchase up to 3,235,326 shares of the Company’s common stock (representing 10% of the Company’s outstanding shares of common stock on June 30, 2021).
Common Stock On January 4, 2021, Customers Bancorp completed the previously announced divestiture of BankMobile Technologies, Inc., a wholly owned subsidiary of Customers Bank, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC, pursuant to an Agreement and Plan of Merger, dated August 6, 2020, as amended, by and among MFAC, MFAC Merger Sub Inc., BMT, Customers Bank and Customers Bancorp.
Common Stock On January 4, 2021, Customers Bancorp completed the divestiture of BankMobile Technologies, Inc., a wholly owned subsidiary of Customers Bank, to MFAC Merger Sub Inc., an indirect wholly-owned subsidiary of MFAC, pursuant to an Agreement and Plan of Merger, dated August 6, 2020, as amended, by and among MFAC, MFAC Merger Sub Inc., BMT, Customers Bank and Customers Bancorp.
In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” and began trading on the NYSE under the ticker symbol "BMTX". Customers received cash consideration of $23.1 million upon closing of the divestiture, and $3.7 million of additional cash consideration in May 2021.
In connection with the closing of the divestiture, MFAC changed its name to “BM Technologies, Inc.” and began trading on the NYSE under the ticker symbol “BMTX”. Customers received cash consideration of $23.1 million upon closing of the divestiture, and $3.7 million of additional cash consideration in May 2021.
Bank Index, SNL U.S. Bank NASDAQ Index, SNL U.S. Bank NYSE Index, and SNL Mid Cap U.S. Bank index, assuming an investment of $100 on December 31, 2017 for the SNL indices when calculating total annual shareholder return, reinvestment of dividends, if any, is assumed.
Bank Index, SNL U.S. Bank NASDAQ Index, SNL U.S. Bank NYSE Index, and SNL Mid Cap U.S. Bank index, assuming an investment of $100 on December 31, 2018 for the SNL indices when calculating total annual shareholder return, reinvestment of dividends, if any, is assumed.
See "Item 1, Business - Federal Banking Laws" for more information relating to restrictions on the Bank's ability to pay dividends to the Bancorp and the Bancorp's payment of dividends. Special Dividends of BM Technologies, Inc.
See “Item 1, Business - Federal Banking Laws” for more information relating to restrictions on the Bank’s ability to pay dividends to the Bancorp and the Bancorp’s payment of dividends. Special Dividends of BM Technologies, Inc.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Trading Market for Common Stock Our common stock is traded on the NYSE under the symbol “CUBI.” As of February 24, 2023, there were approximately 309 registered shareholders of Customers Bancorp's common stock.
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Trading Market for Common Stock Our common stock is traded on the NYSE under the symbol “CUBI.” As of February 26, 2024, there were approximately 294 registered shareholders of Customers Bancorp’s common stock.
The term of the Share Repurchase Program was extended for one additional year to September 27, 2023, unless earlier terminated. Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise.
Purchases of shares under the Share Repurchase Program may be executed through open market purchases, privately negotiated transactions, through the use of Rule 10b5-1 plans, or otherwise.
The exact number of shares, timing for such purchases, and the price and terms at and on which such purchases are to be made will be at the discretion of the Company and will comply with all applicable regulatory limitations.
The exact number of shares, timing for such purchases, and the price and terms at and on which such purchases are to be made were at the discretion of the Company and complied with all applicable regulatory limitations. The term of the Share Repurchase Program was extended to September 27, 2023, unless earlier terminated.
The common shares purchased during the year ended December 31, 2022 pursuant to the Share Repurchase Program were as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares purchased as part of publicly announced plans or programs Maximum Number of Shares that may yet be purchased under the plans or programs January 1 - January 31, 2022 66,255 $ 56.11 66,255 2,641,282 February 1 - February 28, 2022 — — — 2,641,282 March 1 - March 31, 2022 49,069 52.85 49,069 2,592,213 April 1 - April 30, 2022 — — — 2,592,213 May 1 - May 31, 2022 548,821 39.19 548,821 2,043,392 June1 - June 30, 2022 — — — 2,043,392 July 1 - July 31, 2022 — — — 2,043,392 August 1 - August 31, 2022 — — — 2,043,392 September 1 - September 30, 2022 — — — 2,043,392 October 1 - October 31, 2022 — — — 2,043,392 November 1 - November 30, 2022 166,000 32.18 166,000 1,877,392 December 1 - December 31, 2022 — — — 1,877,392 Total 830,145 $ 39.95 830,145 1,877,392 Common Stock Performance Graph The following graph compares the performance of our common stock over the period from December 31, 2017 to December 31, 2022, to that of the total return index for the SNL Mid-Atlantic U.S.
The common shares repurchased during the year ended December 31, 2023 pursuant to the Share Repurchase Program were as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares purchased as part of publicly announced plans or programs Maximum Number of Shares that may yet be purchased under the plans or programs January 1 - January 31, 2023 — $ — — 1,877,392 February 1 - February 28, 2023 1,013,283 31.48 1,013,283 864,109 March 1 - March 31, 2023 366,600 20.57 366,600 497,509 April 1 - April 30, 2023 — — — 497,509 May 1 - May 31, 2023 — — — 497,509 June1 - June 30, 2023 — — — 497,509 July 1 - July 31, 2023 — — — 497,509 August 1 - August 31, 2023 — — — 497,509 September 1 - September 30, 2023 — — — — October 1 - October 31, 2023 — — — — November 1 - November 30, 2023 — — — — December 1 - December 31, 2023 — — — — Total 1,379,883 $ 28.58 1,379,883 — Common Stock Performance Graph The following graph compares the performance of our common stock over the period from December 31, 2018 to December 31, 2023, to that of the total return index for the SNL Mid-Atlantic U.S.
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On September 27, 2023, the Share Repurchase Program expired.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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To determine the ACL as of December 31, 2022, Customers utilized the Moody's December 2022 Baseline forecast to generate its modelled expected losses and considered Moody's other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management's reasonable expectations of current and future economic conditions.
To determine the ACL as of December 31, 2022, Customers utilized Moody’s December 2022 Baseline forecast to generate its modelled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions.
Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due. Customers’ asset quality table contains non-GAAP financial measures which exclude loans receivable, PPP from its calculations. Management uses these non-GAAP measures to compare the current period presentation to historical periods in prior filings.
Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due. 94 Customers’ asset quality table contains non-GAAP financial measures which exclude loans receivable, PPP from its calculations. Management uses these non-GAAP measures to compare the current period presentation to historical periods in prior filings.
CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. CBIT is not listed or traded on any digital currency exchange.
CBIT may only be created or minted by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank. CBIT is not listed or traded on any digital currency exchange.
For financial reporting purposes, AFS debt securities are carried at fair value. Unrealized gains and losses on AFS debt securities, other than credit losses, are included in other comprehensive income (loss) and reported as a separate component of shareholders’ equity, net of the related tax effect.
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.
The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet.
The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability on the consolidated balance sheet.
The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability in the consolidated balance sheet.
The number of CBIT outstanding in the CBIT instant payments platform is always equal to the U.S. dollars held in the omnibus deposit account at Customers Bank and is reported as a deposit liability on the consolidated balance sheet.
The ACL on lending-related commitments is recorded in accrued interest payable and other liabilities in the consolidated balance sheet and the credit loss expense is recorded as a provision for credit losses within other non-interest expense in the consolidated statement of income.
The ACL on unfunded lending-related commitments is recorded in accrued interest payable and other liabilities in the consolidated balance sheet and the credit loss expense is recorded as a provision for credit losses within other non-interest expense in the consolidated statement of income.
Cash flows provided by (used in) continuing investing activities Cash used in continuing investing activities of $1.3 billion for the year ended December 31, 2022 primarily resulted from a net increase in loans and leases, excluding mortgage warehouse loans, of $1.9 billion, purchases of investment securities available for sale of $1.4 billion, purchases of loans of $484.0 million and purchases of leased assets under lessor operating leases of $109.3 million, partially offset by proceeds from sales of investment securities available for sale of $983.6 million, proceeds from net repayments of mortgage warehouse loans of $929.2 million, proceeds from maturities, calls and principal repayments on investment securities available for sale of $464.1 million and held to maturity of $59.5 million, and proceeds from sales of loans of $136.9 million, which included the cash proceeds of the sale of $521.8 million of consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE.
Cash used in investing activities of $1.3 billion for the year ended December 31, 2022 primarily resulted from a net increase in loans and leases, excluding mortgage warehouse loans of $1.9 billion, purchases of investment securities available for sale of $1.4 billion, purchases of loans of $484.0 million and purchases of leased assets under lessor operating leases of $109.3 million, partially offset by proceeds from sales of investment securities available for sale of $983.6 million, proceeds from net repayments of mortgage warehouse loans of $929.2 million, proceeds from maturities, calls and principal repayments on investment securities available for sale of $464.1 million and held to maturity of $59.5 million, proceeds from sales of loans of $136.9 million, which included the cash proceeds from the sale of $521.8 million of consumer installment loans, inclusive of accrued interest and unamortized deferred loan origination costs, to a third-party sponsored VIE.
The deposit service agreement was scheduled to expire on December 31, 2022. On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022.
The deposit servicing agreement was scheduled to expire on December 31, 2022. On June 30, 2022, Customers provided a written notice to BM Technologies to terminate the deposit servicing agreement effective December 31, 2022.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for both the years ended December 31, 2022 and 2021, presented to approximate interest income as a taxable asset and excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets.
(5) Non-GAAP tax-equivalent basis, using an estimated marginal tax rate of 26% for both the years ended December 31, 2023 and 2022, presented to approximate interest income as a taxable asset and excluding net interest income from PPP loans and related borrowings, along with the related PPP loan balances and PPP fees receivable from interest-earning assets.
A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. As of December 31, 2022, the Bank and the Bancorp were in compliance with the Basel III requirements.
A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. As of December 31, 2023, the Bank and the Bancorp were in compliance with the Basel III requirements.
Customers and BM Technologies also agreed to remove Customers' obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remain in effect through the new termination date.
Customers and BM Technologies also agreed to remove Customers’ obligation under the deposit servicing agreement to pay BM Technologies the interchange maintenance fee which is the difference between the Durbin-exempt and Durbin-recalculated interchange revenues. The other terms of the deposit servicing agreement remained in effect through the new termination date.
As of December 31, 2022, 212 installment loans totaling $2.2 million, 15 manufactured housing loans totaling $491 thousand and two residential real estate loans for $201 thousand that were modified in TDRs within the past twelve months defaulted on payments.
As of December 31, 2022, 212 installment loans totaling $2.2 million, 15 manufactured housing loans totaling $491 thousand and two residential real estate loans for $201 thousand that were modified in TDRs within the past twelve months defaulted on payments. Loans modified in TDRs were evaluated for impairment.
Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At December 31, 2022, all of Customers' commercial mortgage warehouse loans were current in terms of payment.
Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At December 31, 2023, all of Customers’ commercial mortgage warehouse loans were current in terms of payment.
There can be no assurance that Customers will realize gains on the sale of investment securities in 2023, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.
There can be no assurance that Customers will realize gains on the sale 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.
This critical accounting policy and material estimate, along with the related disclosures, are reviewed by Customers' Audit Committee of the Board of Directors. Allowance for Credit Losses Customers' ACL at December 31, 2022 represents Customers' current estimate of the lifetime credit losses expected from its loan and lease portfolio and its unfunded lending-related commitments that are not unconditionally cancellable.
This critical accounting policy and material estimate, along with the related disclosures, are reviewed by Customers’ Audit Committee of the Board of Directors. 70 Allowance for Credit Losses Customers’ ACL at December 31, 2023 represents Customers’ current estimate of the lifetime credit losses expected from its loan and lease portfolio and its unfunded lending-related commitments that are not unconditionally cancellable.
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 years ended December 31, 2022 and 2021.
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 years ended December 31, 2023 and 2022.
No ACL is recognized if Customers have the unconditional right to cancel the obligation. Off-balance-sheet credit commitments primarily consist of amounts available under outstanding lines of credit and letters of credit disclosed above.
No ACL is recognized if Customers has the unconditional right to cancel the obligation. Off-balance sheet credit commitments primarily consist of amounts available under outstanding lines of credit and letters of credit disclosed above.
These lending activities primarily target the refinancing of loans with other banks using conservative underwriting standards and provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the multifamily property, plus an assignment of all leases related to such property.
These lending activities use conservative underwriting standards and primarily target the refinancing of loans with other banks or provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the multifamily property, plus an assignment of all leases related to such property.
Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans and leases' expected remaining term.
Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans’ and leases’ expected remaining term.
Under this scenario, as an example, the unemployment rate is estimated at 6.8% and 7.4% in 2023 and 2024, respectively. These numbers represent a 2.8% and 3.3% higher unemployment estimate than Baseline scenario projections of 4.0% and 4.1%, respectively, for the same time periods.
Under this scenario, as an example, the unemployment rate is estimated at 6.7% and 7.4% in 2024 and 2025, respectively. These numbers represent a 2.7% and 3.3% higher unemployment estimate than Baseline scenario projections of 4.0% and 4.1% for the same time periods, respectively.
The ACL Committee, which includes the Bank's Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Chief Lending Officer, and Chief Credit Officer, among others, reviews the adequacy of the ACL each quarter, together with Customers' risk management team. The ACL policy, significant judgments and the related disclosures are reviewed by Customers' Audit Committee of the Board of Directors.
The ACL Committee, which includes the President, Chief Financial Officer, Chief Accounting Officer, Chief Lending Officer, and Chief Credit Officer, among others, reviews the adequacy of the ACL each quarter, together with Customers’ risk management team. The ACL policy, significant judgments and the related disclosures are reviewed by Customers’ Audit Committee of the Board of Directors.
The increases in common stock and additional paid in capital primarily resulted from the issuance of common stock under share-based compensation arrangements for the year ended December 31, 2022.
The increases in common stock and additional paid in capital primarily resulted from the issuance of common stock under share-based compensation arrangements for the year ended December 31, 2023.
A reconciliation of total loans and leases portfolio, excluding loans receivable, PPP and other related amounts, at December 31, 2022, is set forth below.
A reconciliation of total loans and leases portfolio, excluding loans receivable, PPP and other related amounts, at December 31, 2023, is set forth below.
For more information, refer to "NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' audited financial statements. Results of Operations The following discussion of Customers Bancorp’s consolidated results of operations should be read in conjunction with its consolidated financial statements, including the accompanying notes.
For more information, refer to “NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ audited consolidated financial statements. 72 Results of Operations The following discussion of Customers Bancorp’s consolidated results of operations should be read in conjunction with its consolidated financial statements, including the accompanying notes.
Cash and due from banks consists mainly of vault cash and cash items in the process of collection. Cash and due from banks were $58.0 million and $35.2 million at December 31, 2022 and 2021, respectively. Cash and cash due from banks balances vary from day to day, primarily due to variations in customers’ deposit activities with the Bank.
Cash and due from banks consists mainly of vault cash and cash items in the process of collection. Cash and due from banks were $45.2 million and $58.0 million at December 31, 2023 and 2022, respectively. Cash and cash due from banks balances vary from day to day, primarily due to variations in customers’ deposit activities with the Bank.
(2) Includes owner occupied commercial real estate loans. (3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees. (4) Total costs of deposits (including interest bearing and non-interest-bearing) were 1.31% and 0.44% for the years ended December 31, 2022 and 2021, respectively.
(2) Includes owner occupied commercial real estate loans. (3) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees. (4) Total costs of deposits (including interest bearing and non-interest-bearing) were 3.27% and 1.31% for the years ended December 31, 2023 and 2022, respectively.
Customers Bank capital growth for the past few years has been achieved primarily by retained earnings and capital contributions from Customers Bancorp from proceeds received from issuances of senior and subordinated notes. For more information relating to preferred and common stock, refer to "NOTE 13 – SHAREHOLDERS' EQUITY" to Customers' audited financial statements.
Customers Bank capital growth for the past few years has been achieved primarily by retained earnings and capital contributions from Customers Bancorp from proceeds received from issuances of senior and subordinated notes. For more information relating to preferred and common stock, refer to “NOTE 13 – SHAREHOLDERS' EQUITY” to Customers’ audited consolidated financial statements.
New Accounting Pronouncements For information about the impact that recently adopted or issued accounting guidance will have on us, refer to "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' audited financial statements. Critical Accounting Policies and Estimates Customers has adopted various accounting policies that govern the application of U.S.
New Accounting Pronouncements For information about the impact that recently adopted or issued accounting guidance will have on us, refer to “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements. Critical Accounting Policies and Estimates Customers has adopted various accounting policies that govern the application of U.S.
Customers' borrowings include short-term and long-term advances from the FHLB, FRB, federal funds purchased, senior unsecured notes and subordinated debt. Subordinated debt is also considered as Tier 2 capital for certain regulatory calculations. Refer to "NOTE 12 – BORROWINGS" to Customers' audited financial statements for additional information on Customers' borrowings.
Customers’ borrowings include short-term and long-term advances from the FHLB, FRB, federal funds purchased, senior unsecured notes and subordinated debt. Subordinated debt is also considered as Tier 2 capital for certain regulatory calculations. Refer to “NOTE 12 – BORROWINGS” to Customers’ audited consolidated financial statements for additional information.
If not addressed, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan and lease and Customers' financial position. At December 31, 2022 and 2021, special mention loans and leases were $138.8 million and $230.1 million, respectively, and are considered performing loans and are therefore not included in the tables above.
If not addressed, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan and lease and Customers’ financial position. At December 31, 2023 and 2022, special mention loans and leases were $196.2 million and $138.8 million, respectively, and are considered performing loans and are therefore not included in the tables above.
Generally, Customers requires sustained performance for nine months before returning a TDR to accrual status. Modification of PCD loans that are accounted for within loan pools in accordance with the accounting standards for PCD loans does not result in the removal of these loans from the pool even if the modification would otherwise be considered a TDR.
Generally, Customers required sustained performance for nine months before returning a TDR to accrual status. Modification of PCD loans that were accounted for within loan pools in accordance with the accounting standards for PCD loans did not result in the removal of these loans from the pool even if the modification would otherwise be considered a TDR.
The purchase price was 99.1%, 100.8% and 100.3% of the loans' unpaid principal balance during the years ended December 31, 2022, 2021 and 2020, respectively. (2) Installment loan purchases for the years ended December 31, 2022, 2021 and 2020 consist of third-party originated unsecured consumer loans.
The purchase price was 87.9%, 99.1% and 100.8% of the loans’ unpaid principal balance during the years ended December 31, 2023, 2022 and 2021, respectively. (2) Installment loan purchases for the years ended December 31, 2023, 2022 and 2021 consist of third-party originated unsecured consumer loans.
Accordingly, as each pool is accounted for as a single asset with a single composite interest rate and an expectation of cash flows, modifications of loans within such pools are not reported as TDRs.
Accordingly, as each pool was accounted for as a single asset with a single composite interest rate and an expectation of cash flows, modifications of loans within such pools were not reported as TDRs.
Refer to "NOTE 18 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK" to Customers' audited financial statements for additional information. 103 As described in "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" to Customers' audited financial statements, ACL on lending related commitments is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which Customers is exposed to credit risk resulting from a contractual obligation to extend credit.
Refer to “NOTE 18 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK” to Customers’ audited consolidated financial statements for additional information. 102 As described in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements, ACL on lending related commitments is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which Customers is exposed to credit risk resulting from a contractual obligation to extend credit.
Customers has included a detailed discussion of this process, as well as several tables describing its ACL, in "NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION" and "NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES" to Customers' audited financial statements.
Customers has included a detailed discussion of this process, as well as several tables describing its ACL, in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” and “NOTE 8 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ audited consolidated financial statements.
For the comparison of the years ended December 31, 2021 and 2020, refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for our fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022.
For the comparison of the years ended December 31, 2022 and 2021, refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for our fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023.
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 $42.2 million at December 31, 2022.
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 $56.8 million at December 31, 2023.
As of December 31, 2022, Customers had $13.5 billion in commercial loans outstanding, totaling approximately 85.8% of its total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage warehouse, at fair value and PPP loans, compared to commercial loans outstanding of $12.4 billion, comprising approximately 85.3% of its total loan and lease portfolio, at December 31, 2021.
As of December 31, 2023, Customers had $11.5 billion in commercial loans outstanding, totaling approximately 86.8% of its total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage warehouse, at fair value and PPP loans, compared to commercial loans outstanding of $13.5 billion, comprising approximately 85.8% of its total loan and lease portfolio, at December 31, 2022.
Cash dividends declared by the Bank and paid to Customers Bancorp during 2022 and 2021, include the following: • $30.0 million declared on June 23, 2021, and paid on June 24, 2021; • $55.0 million declared on September 22, 2021, and paid on September 23, 2021; • $55.0 million declared and paid on December 21, 2021; • $20.0 million declared on March 23, 2022, and paid on March 24, 2022; • $5.0 million declared on June 22, 2022, and paid on June 23, 2022; • $25.0 million declared on September 28, 2022, and paid on September 29, 2022; and • $2.0 million declared on December 20, 2022, and paid on December 22, 2022.
Cash dividends declared by the Bank and paid to Customers Bancorp during 2023 and 2022, include the following: • $20.0 million declared on March 23, 2022, and paid on March 24, 2022; • $5.0 million declared on June 22, 2022, and paid on June 23, 2022; • $25.0 million declared on September 28, 2022, and paid on September 29, 2022; • $2.0 million declared on December 20, 2022, and paid on December 22, 2022; • $30.0 million declared on February 22, 2023, and paid on February 22, 2023; • $20.0 million declared on June 28, 2023, and paid on June 28, 2023; • $10.0 million declared on September 27, 2023, and paid on September 27, 2023; and • $30.0 million declared on December 20, 2023, and paid on December 21, 2023.
Legal settlement gain The $7.5 million increase in legal settlement gain for the year ended December 31, 2022 compared to the year ended December 31, 2021 reflects the gain from the court-approved settlement with a third party PPP service provider.
Legal settlement gain The $7.5 million decrease in legal settlement gain for the year ended December 31, 2023 compared to the year ended December 31, 2022 reflects the gain from the court-approved settlement with a third party PPP service provider during the year ended December 31, 2022.
Customers' contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, federal funds purchased, short-term and long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of December 31, 2022.
Customers’ contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of December 31, 2023.
On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%. On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%.
On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%.
On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%. On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%.
On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%.
TDRs are reported as impaired loans in the period of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent years, a TDR may be returned to accrual status if the borrower satisfies a minimum six-month performance requirement; however, it will remain classified as impaired.
TDRs were reported as impaired loans in the period of their restructuring and were evaluated to determine whether they should be placed on non-accrual status. In subsequent years, a TDR might be returned to accrual status if the borrower satisfied a minimum six-month performance requirement; however, it would remain classified as impaired.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion and Analysis should be read in conjunction with "Business - Summary" and the Bancorp’s consolidated financial statements and related notes for the year ended December 31, 2022.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis should be read in conjunction with “Business - Summary” and the Bancorp’s consolidated financial statements and related notes for the year ended December 31, 2023.
On March 27, 2020, the CARES Act was signed into law. It contained substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act included the SBA's PPP, a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks.
It contained substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act included the SBA’s PPP, a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks.
Ensuring adequate liquidity is an objective of the asset/liability management process. Customers coordinates its management of liquidity with its interest-rate sensitivity and capital position, and strives to maintain a strong liquidity position that is sufficient to meet Customers' short-term and long-term needs, commitments and contractual obligations. Customers is involved with financial instruments and other commitments with off-balance sheet risks.
Customers coordinates its management of liquidity with its interest-rate sensitivity and capital position, and strives to maintain a strong liquidity position that is sufficient to meet Customers’ short-term and long-term needs, commitments and contractual obligations. Customers is involved with financial instruments and other commitments with off-balance sheet risks.
Inflation remains elevated in 2022, reflecting supply and demand imbalances related to COVID-19 and its variants, higher food and energy prices from the military conflict between Russia and Ukraine, and broader price pressures.
Inflation remained elevated in 2022 and 2023, reflecting supply and demand imbalances related to COVID-19 and its variants, higher food and energy prices from the military conflicts between Russia and Ukraine and in Israel, and broader price pressures.
As of December 31, 2022, Customers had an outstanding loan balance with the borrower of $6.0 million in an unsecured working capital loan that was fully guaranteed by an affiliate of the primary shareholder of the borrower.
As of December 31, 2023, Customers had an outstanding loan balance with the borrower of $6.0 million in a cash secured working capital loan that was fully guaranteed by an affiliate of the primary shareholder of the borrower.
Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were $397.8 million and $482.8 million at December 31, 2022 and 2021, respectively.
Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were $3.8 billion and $397.8 million at December 31, 2023 and 2022, respectively.
As of December 31, 2022, Customers' borrowing capacity with the FHLB was $3.2 billion, of which $800.0 million was utilized in borrowings and $175.6 million of available capacity was utilized to collateralize state and municipal deposits.
As of December 31, 2022, Customers’ borrowing capacity with the FHLB was $3.2 billion, of which $800.0 million was utilized in borrowings and $175.6 million of available capacity was utilized to collateralize deposits. As of December 31, 2023 and 2022, Customers’ borrowing capacity with the FRB was $3.4 billion and $2.5 billion, respectively.
To determine the ACL as of December 31, 2021, Customers utilized the Moody's December 2021 Baseline forecast to generate its modelled expected losses by loan portfolio in order to reflect management's reasonable expectations of current and future economic conditions.
To determine the ACL as of December 31, 2023, Customers utilized 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.
Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' audited financial statements for additional information on the sale of consumer installment loans during the year ended December 31, 2022.
Refer to “NOTE 6 – INVESTMENT SECURITIES” to Customers’ audited consolidated financial statements for additional information on the sale of the consumer installment loans held for investment during the year ended December 31, 2022.
The $6.6 million increase in commercial lease income for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily resulted from the continued growth of Customers' equipment finance business.
The $8.5 million increase in commercial lease income for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily resulted from the growth of Customers’ equipment finance business.
As of December 31, 2022, 2021 and 2020, there were no commitments to lend additional funds to debtors whose loans have been modified in TDRs.
As of December 31, 2022, there were no commitments to lend additional funds to debtors whose loans had been modified in TDRs.
Senior Notes and Subordinated Debt Long-term senior notes and subordinated debt at December 31, 2022 and 2021 were as follows: December 31, (dollars in thousands) 2022 2021 Issued by Ranking Carrying Amount Carrying Amount Rate Issued Amount Date Issued Maturity Price Customers Bancorp Senior (1) $ 98,788 $ 98,642 2.875 % $ 100,000 August 2021 August 2031 100.000 % Customers Bancorp Senior 24,792 24,672 4.500 % 25,000 September 2019 September 2024 100.000 % Customers Bancorp Senior — 99,772 3.950 % 100,000 June 2017 June 2022 99.775 % Total other borrowings $ 123,580 $ 223,086 Customers Bancorp Subordinated (2)(3) $ 72,585 $ 72,403 5.375 % $ 74,750 December 2019 December 2034 100.000 % Customers Bank Subordinated (2)(4) 109,367 109,270 6.125 % 110,000 June 2014 June 2029 100.000 % Total subordinated debt $ 181,952 $ 181,673 (1) The senior notes will bear an annual fixed rate of 2.875% until August 15, 2026.
Senior Notes and Subordinated Debt Long-term senior notes and subordinated debt at December 31, 2023 and 2022 were as follows: December 31, (dollars in thousands) 2023 2022 Issued by Ranking Carrying Amount Carrying Amount Rate Issued Amount Date Issued Maturity Price Customers Bancorp Senior (1) $ 98,928 $ 98,788 2.875 % $ 100,000 August 2021 August 2031 100.000 % Customers Bancorp Senior 24,912 24,792 4.500 % 25,000 September 2019 September 2024 100.000 % Total other borrowings $ 123,840 $ 123,580 Customers Bancorp Subordinated (2)(3) $ 72,766 $ 72,585 5.375 % $ 74,750 December 2019 December 2034 100.000 % Customers Bank Subordinated (2)(4) 109,464 109,367 6.125 % 110,000 June 2014 June 2029 100.000 % Total subordinated debt $ 182,230 $ 181,952 (1) The senior notes will bear an annual fixed rate of 2.875% until August 15, 2026.
The provision for credit losses for the year ended December 31, 2022 also included a provision for credit losses of $0.6 million on certain asset-backed securities included in our investment securities available for sale.
The provision for credit losses for the year ended December 31, 2023 and 2022 also included a provision for credit losses of $3.8 million on certain asset-backed securities and corporate notes and $0.6 million on certain asset-backed securities, respectively, included in our investment securities available for sale.
December 31, 2022 Within one year After one but within five years After five but within ten years No specific maturity Total Asset-backed securities — % — % — % 5.50 % 5.50 % Agency-guaranteed residential mortgage-backed securities — — — 1.08 1.08 Agency-guaranteed commercial mortgage-backed securities — — — 1.77 1.77 Agency-guaranteed residential collateralized mortgage obligations — — — 1.89 1.89 Agency-guaranteed commercial collateralized mortgage obligations — — — 2.15 2.15 Private label collateralized mortgage obligations — — — 2.36 2.36 Weighted-average yield — % — % — % 3.48 % 3.48 % The agency-guaranteed mortgage-backed securities and collateralized mortgage obligations in the portfolio were issued by Fannie Mae, Freddie Mac and Ginnie Mae, and contain guarantees for the collection of principal and interest on the underlying mortgages.
December 31, 2023 Within one year After one but within five years After five but within ten years No specific maturity Total Asset-backed securities — % — % — % 5.84 % 5.84 % Agency-guaranteed residential mortgage-backed securities — — — 1.80 1.80 Agency-guaranteed commercial mortgage-backed securities — — — 1.77 1.77 Agency-guaranteed residential collateralized mortgage obligations — — — 1.45 1.45 Agency-guaranteed commercial collateralized mortgage obligations — — — 2.33 2.33 Private label collateralized mortgage obligations — — — 4.46 4.46 Weighted-average yield — % — % — % 4.33 % 4.33 % The agency-guaranteed mortgage-backed securities and collateralized mortgage obligations in the portfolio were issued by Fannie Mae, Freddie Mac and Ginnie Mae, and contain guarantees for the collection of principal and interest on the underlying mortgages.
Loans and leases receivable Loans and leases receivable (excluding loans held for sale, loans receivable, mortgage warehouse, at fair value, and loans receivable, PPP), net of the ACL, increased by $4.1 billion to $13.0 billion at December 31, 2022, from $8.9 billion at December 31, 2021.
Loans and leases receivable Loans and leases receivable (excluding loans held for sale, loans receivable, mortgage warehouse, at fair value, and loans receivable, PPP), net of the ACL, decreased by $1.3 billion to $11.8 billion at December 31, 2023, from $13.0 billion at December 31, 2022.
Income tax expense Customers' effective tax rate was 21.7% for the year ended December 31, 2022 compared to 19.7% for the year the ended December 31, 2021.
Income tax expense Customers’ effective tax rate was 24.4% for the year ended December 31, 2023 compared to 21.7% for the year the ended December 31, 2022.
The nature and extent of impairment of TDRs, including those that have experienced a subsequent default, is considered in the determination of an appropriate level of ACL. ACCRUED INTEREST RECEIVABLE At December 31, 2022, accrued interest receivable totaled $123.4 million compared to $92.2 million at December 31, 2021.
The nature and extent of impairment of TDRs, including those that had experienced a subsequent default, was considered in the determination of an appropriate level of ACL. ACCRUED INTEREST RECEIVABLE At December 31, 2023, accrued interest receivable totaled $114.8 million compared to $123.4 million at December 31, 2022.
LOANS AND LEASES Existing lending relationships are primarily with small and middle market businesses and individual consumers primarily in Southeastern Pennsylvania (Bucks, Berks, Chester, Philadelphia and Delaware Counties); Harrisburg, Pennsylvania (Dauphin County); Rye Brook, New York (Westchester County); Hamilton, New Jersey (Mercer County); Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire (Rockingham County); Manhattan and Melville, New York; Washington, D.C.; Chicago, Illinois; Dallas, Texas; Orlando and Jacksonville, Florida; Wilmington, North Carolina; and nationally for certain loan and deposit products.
LOANS AND LEASES Existing lending relationships are primarily with small and middle market businesses and individual consumers primarily in Berks County and Southeastern Pennsylvania (Bucks, Chester and Philadelphia Counties); New York (Westchester and Suffolk Counties, and Manhattan); Hamilton, New Jersey; Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire; Chicago, Illinois; Dallas, Texas; Wilmington, North Carolina; and nationally for certain loan and deposit products.
Time deposits greater than the FDIC limit of $250,000 totaled $85.5 million and $259.0 million at December 31, 2022, and 2021, respectively.
Time deposits greater than the FDIC limit of $250,000 totaled $186.3 million and $85.5 million at December 31, 2023, and 2022, respectively.
Cash flows provided by (used in) continuing financing activities Cash provided by continuing financing activities of $1.3 billion for the year ended December 31, 2022 primarily resulted from a net increase of $1.4 billion in deposits and proceeds from long-term borrowed funds from the FHLB of $500.0 million, partially offset by a net decrease in short-term borrowed funds from the FHLB of $400.0 million, repayments of other borrowings of $100.0 million upon maturity of the Customers Bancorp 3.950% senior notes, a net decrease in federal funds purchased of $75.0 million and purchases of treasury stock of $33.2 million.
For additional information on purchases of treasury stock, refer to “NOTE 13 – SHAREHOLDERS’ EQUITY” to Customers’ audited consolidated financial statements. 104 Cash provided by financing activities of $1.3 billion for the year ended December 31, 2022 primarily resulted from a net increase of $1.4 billion in deposits and proceeds from long-term borrowed funds from the FHLB of $500.0 million, partially offset by a net decrease in short-term borrowed funds from the FHLB of $400.0 million, repayments of other borrowings of $100.0 million upon maturity of the Customers Bancorp 3.950% senior notes, a net decrease in federal funds purchased of $75.0 million and purchases of treasury stock of $33.2 million.
Net charge-offs for the year ended December 31, 2022 were $66.4 million, or 45 basis points of average total loans and leases, compared to $33.8 million, or 22 basis points of average total loans and leases for the year ended December 31, 2021.
Net charge-offs for the year ended December 31, 2023 were $69.0 million, or 48 basis points of average total loans and leases, compared to $66.4 million, or 45 basis points of average total loans and leases for the year ended December 31, 2022.
Net charge-offs for the year ended December 31, 2022 were $66.4 million, or 45 basis points of average total loans and leases, compared to $33.8 million, or 22 basis points of average total loans and leases for the year ended December 31, 2021.
Net charge-offs for the year ended December 31, 2023 were $69.0 million, or 48 basis points of average total loans and leases, compared to $66.4 million, or 45 basis points of average total loans and leases for the year ended December 31, 2022.
Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' audited financial statements for additional information. 78 NON-INTEREST INCOME The table below presents the components of non-interest income for the years ended December 31, 2022 and 2021.
Refer to “NOTE 6 – INVESTMENT SECURITIES” to Customers’ audited consolidated financial statements for additional information. NON-INTEREST INCOME The table below presents the components of non-interest income for the years ended December 31, 2023 and 2022.
(2) Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(21.5) million and $(52.0) million at December 31, 2022 and 2021, respectively.
(2) Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(22.7) million and $(21.5) million at December 31, 2023 and 2022, respectively.
The provision for credit losses on loans and leases was $59.5 million and $27.4 million for the years ended December 31, 2022 and 2021, respectively.
The provision for credit losses on loans and leases was $70.8 million and $59.5 million for the years ended December 31, 2023 and 2022, respectively.
Customers Bank provides blockchain-based digital payments via CBIT, which allows clients to make instant payments in U.S. dollars. CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank.
CBIT may only be created by, transferred to and redeemed by commercial customers of Customers Bank on the instant B2B payments platform by maintaining U.S. dollars in deposit accounts at Customers Bank.
Technology, communication and bank operations The $1.5 million increase in technology, communication and bank operations expense for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily resulted from increases of $4.4 million in software licenses and fees paid for software as a service, partially offset by decreases in deposit servicing fees from lower deposits and interchange maintenance fees from lower debit card spend, that were paid to BM Technologies, the successor entity to BMT that was divested on January 4, 2021.
Technology, communication and bank operations The $19.4 million decrease in technology, communication and bank operations expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily resulted from decreases in deposit servicing-related expenses resulting from lower servicing fees and the discontinuation of the interchange maintenance fees paid to BM Technologies, the successor entity to BMT that was divested on January 4, 2021, partially offset by increases in processing and software expenses including a $6.5 million increase in fees paid for software as a service.
Commercial lease depreciation The $5.2 million increase in commercial lease depreciation for the year ended December 31, 2022 compared to the year ended December 31, 2021 resulted from the continued growth of the operating lease arrangements originated by Customers' Equipment Finance Group in which Customers is the lessor.
Commercial lease depreciation The $6.9 million increase in commercial lease depreciation for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily resulted from the growth of the operating lease arrangements originated by Customers’ commercial equipment financing group in which Customers is the lessor.
Included in the $13.5 billion and $12.4 billion in commercial loans outstanding as of December 31, 2022 and 2021, respectively, were $1.0 billion and $3.3 billion of PPP loans, respectively. The PPP loans are fully guaranteed by the SBA, provided that the SBA's eligibility criteria are met and earn a fixed interest rate of 1.00%.
Included in the $11.5 billion and $13.5 billion in commercial loans outstanding as of December 31, 2023 and 2022, respectively, were $74.7 million and $998.2 million of PPP loans, respectively. The PPP loans are fully guaranteed by the SBA, provided that the SBA’s eligibility criteria are met and earn a fixed interest rate of 1.00%.
Generally, to comply with the regulatory definition of adequately capitalized, or well capitalized, respectively, or to comply with the Basel III capital requirements, an institution must at least maintain the common equity Tier 1, Tier 1 and total risk-based capital ratios and the Tier 1 leverage ratio in excess of the related minimum ratios set forth in the following table.
At December 31, 2023 and 2022, the Bank and the Bancorp met all capital adequacy requirements to which they were subject. 105 Generally, to comply with the regulatory definition of adequately capitalized, or well capitalized, respectively, or to comply with the Basel III capital requirements, an institution must at least maintain the common equity Tier 1, Tier 1 and total risk-based capital ratios and the Tier 1 leverage ratio in excess of the related minimum ratios set forth in the following table.
CAPITAL ADEQUACY The Bank and the Bancorp are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can result in certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on Customers' financial statements.
Failure to meet the minimum capital requirements can result in certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on Customers’ financial statements.
Customers recognized a provision for credit losses of $0.9 million during the year ended December 31, 2022 resulting in an ACL of $3.0 million as of December 31, 2022. Customers recognized a benefit to credit losses of $0.2 million during the year ended December 31, 2021 resulting in an ACL of $2.1 million as of December 31, 2021.
Customers recognized a benefit to provision for credit losses on unfunded lending-related commitments of $0.1 million during the year ended December 31, 2023 resulting in an ACL of $2.9 million as of December 31, 2023.
Refer to "NOTE 6 – INVESTMENT SECURITIES" to Customers' audited financial statements for additional information on the sale of consumer installment loans during the year ended December 31, 2022.
Refer to “NOTE 6 – INVESTMENT SECURITIES” to Customers’ audited consolidated financial statements for more information on the sale of consumer installment loans held for investment during the year ended December 31, 2022.
The extent to which the geopolitical instability, risks of rising inflation and COVID-19 and its variants have and will continue to negatively impact Customers' businesses, financial condition, liquidity and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time.
The extent to which the geopolitical instability, risks of rising inflation and worsening of the U.S. banking system turmoil and federal government shutdown have and will continue to negatively impact Customers’ businesses, financial condition, liquidity and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time.
December 31, (amounts in thousands) 2022 2021 Commercial and industrial, including specialty lending $ 1,761 $ 6,096 Multifamily 1,143 22,654 Commercial real estate owner occupied 2,768 2,475 Commercial real estate non-owner occupied — 2,815 Residential real estate 6,922 7,727 Manufactured housing 2,410 3,563 Installment 9,527 3,783 Total non-performing loans $ 24,531 $ 49,113 Asset quality assurance activities include careful monitoring of borrower payment status and the periodic review of borrower current financial information to ensure ongoing financial strength and borrower cash flow viability.
December 31, (amounts in thousands) 2023 2022 Commercial and industrial, including specialty lending $ 4,436 $ 1,761 Multifamily — 1,143 Commercial real estate owner occupied 5,869 2,768 Residential real estate 6,802 6,922 Manufactured housing 2,331 2,410 Installment 7,211 9,527 Total non-performing loans $ 26,649 $ 24,531 Asset quality assurance activities include careful monitoring of borrower payment status and the periodic review of borrower current financial information to ensure ongoing financial strength and borrower cash flow viability.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Sensitivity The largest component of Customers' net income is net interest income, and the majority of its financial instruments are interest rate sensitive assets and liabilities with various term structures and maturities.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Sensitivity The largest part of Customers’ net income is net interest income, and the majority of its financial instruments are interest rate sensitive assets and liabilities with various term structures and maturities.
One of the primary objectives of management is to optimize net interest income while minimizing interest rate risk. Interest rate risk is derived from timing differences in the repricing of assets and liabilities, loan prepayments, deposit withdrawals and differences in lending and funding rates.
One of the primary goals of management is to optimize net interest income while minimizing interest rate risk. Interest rate risk is derived from timing differences in the repricing of assets and liabilities, loan prepayments, deposit withdrawals and differences in lending and funding rates.
Through the use of income scenario modeling, Customers has estimated the net interest income for the year ending December 31, 2023 and 2022, based upon the assets, liabilities and off-balance sheet financial instruments in existence at December 31, 2022 and 2021.
Through the use of income scenario modeling, Customers has estimated the net interest income for the twelve months ending December 31, 2024 and 2023, based upon the assets, liabilities and off-balance sheet financial instruments including derivatives in existence at December 31, 2023 and 2022.
The combination of these two methods provides a reasonably comprehensive summary of the levels of interest rate risk of Customers' exposure to time factors and changes in interest rate environments. 108 Income scenario modeling is used to measure interest rate sensitivity and manage interest rate risk.
The combination of these two methods supplies a reasonably comprehensive summary of the levels of interest rate risk of Customers’ exposure to time factors and changes in interest rate environments. 107 Income scenario modeling is used to measure interest rate sensitivity and manage interest rate risk over a near term horizon.
Net change in net interest income % Change December 31, Rate Shocks 2022 2021 Up 3% 0.4% 16.0% Up 2% 0.4% 10.8% Up 1% 0.3% 5.7% Down 1% (0.9)% N/A Down 2% (2.0)% N/A Down 3% (4.8)% N/A EVE estimates the discounted present value of asset and liability cash flows.
Net change in net interest income % Change December 31, Rate Shocks 2023 2022 Up 3% 9.9% 0.4% Up 2% 6.6% 0.4% Up 1% 3.6% 0.3% Down 1% (3.5)% (0.9)% Down 2% (7.2)% (2.0)% Down 3% (11.2)% (4.8)% EVE considers a longer-term horizon and estimates the hypothetical discounted net present value of asset and liability cash flows.
From Base December 31, Rate Shocks 2022 2021 Up 3% (27.8)% 100.7% Up 2% (16.9)% 79.8% Up 1% (6.6)% 51.5% Down 1% 0.0% N/A Down 2% (31.3)% N/A Down 3% (57.2)% N/A Management believes that the assumptions and combination of methods utilized in evaluating estimated net interest income are reasonable.
From Base December 31, Rate Shocks 2023 2022 Up 3% (6.2)% (27.8)% Up 2% (3.0)% (16.9)% Up 1% 0.3% (6.6)% Down 1% (5.4)% 0.0% Down 2% (13.2)% (31.3)% Down 3% (23.1)% (57.2)% Management believes that the assumptions and combination of methods used in evaluating interest rate risk are reasonable.
However, the interest rate sensitivity of our assets, liabilities and off-balance sheet financial instruments, as well as the estimated effect of changes in interest rates on estimated net interest income, could vary substantially if different assumptions are used or actual experience differs from the assumptions used in the model.
However, the interest rate sensitivity of our assets, liabilities and off-balance sheet financial instruments, as well as the estimated effect of changes in interest rates on estimated net interest income, could vary substantially if different assumptions are used or actual experience differs from the assumptions used in the model. 108 LIBOR Transition Customers has variable rate loans, investment securities, fixed-to-floating rate senior and subordinated debt, preferred stocks and derivatives that reference LIBOR.
Discount rates are based upon market prices for comparable assets and liabilities. Upward and downward rate shocks are used to measure volatility of EVE in relation to a constant rate environment. For upward rate shocks modeling a rising rate environment at December 31, 2022, current market interest rates were increased immediately by 100, 200 and 300 basis points.
Discount rates are based upon market prices for comparable assets and liabilities. Upward and downward rate shocks are used to measure volatility of EVE in relation to a constant rate environment.
For downward rate shocks modeling a falling rate environment, current market rates at December 31, 2022 were decreased immediately by 100, 200 and 300 basis points. The following table reflects the estimated percentage change in estimated net interest income for the year ending December 31, 2023 and 2022, resulting from changes in interest rates.
For downward rate shocks modeling a falling rate environment at December 31, 2023 and 2022, current market rates were shocked by a parallel and sustained shift in interest rates, in which the base market interest rate forecast was immediately decreased by 100, 200 and 300 basis points.
Progress on the LIBOR transition effort is monitored by executive management as well as the asset/liability committee of Customers' Board of Directors. 109 At December 31, 2022, Customers had LIBOR-based commercial loans and leases, commercial real estate loans and residential mortgages of $2.1 billion, which either mature before June 30, 2023 or have been amended to include appropriate alternative language to be effective upon cessation of LIBOR publication.
Progress on the LIBOR transition effort is monitored by executive management as well as the asset/liability committee and Customers’ Board of Directors. At December 31, 2023, all of Customers’ LIBOR-based commercial loans and leases, commercial real estate loans and residential mortgages have been transitioned to SOFR.
Customers has also estimated changes to that estimated net interest income based upon interest rates rising or falling immediately ("rate shocks"). For upward rate shocks modeling a rising rate environment at December 31, 2022, current market interest rates were increased immediately by 100, 200 and 300 basis points.
For upward rate shocks modeling a rising rate environment at December 31, 2023 and 2022, current market interest rates were shocked by a parallel and sustained shift in interest rates, in which the base market interest rate forecast was immediately increased by 100, 200 and 300 basis points.
Customers' asset/liability committee actively seeks to monitor and control the mix of interest rate sensitive assets and interest rate sensitive liabilities. Customers uses two complementary methods to analyze and measure interest rate sensitivity as part of the overall management of interest rate risk; they are income scenario modeling and estimates of EVE.
Customers’ asset/liability committee actively looks to monitor and control the economic impact of changes in interest rates on the mix of interest rate sensitive assets and interest rate sensitive liabilities. Customers uses two complementary methods to effectively measure and manage interest rate risk.
For downward rate shocks modeling a falling rate environment, current market rates at December 31, 2022 were decreased immediately by 100, 200 and 300 basis points. This method of measurement primarily evaluates the longer-term repricing risks and options in Customers Bank’s balance sheet.
For downward rate shocks modeling a falling rate environment at December 31, 2023 and 2022, Customers used a parallel and sustained shift in interest rates, in which the base market interest rate forecast was immediately decreased by 100, 200 and 300 basis points.
With respect to Customers' cleared interest rate swap agreements that reference LIBOR, clearinghouses have adopted the same relevant SOFR benchmark alternatives of the IBOR Supplement and the IBOR Protocol. As loans mature and new originations occur a larger percentage of Customers' variable-rate loans are expected to reference SOFR.
Customers adhered to the IBOR Protocol in November 2020 and remediated its interest rate swap transactions with its end-user customers, which referenced the fallback SOFR per the IBOR Protocol. With respect to Customers’ cleared interest rate swap agreements that reference LIBOR, clearinghouses adopted the same relevant SOFR benchmark alternatives of the IBOR Supplement and the IBOR Protocol. 109
The following table reflects the estimated EVE at risk and the ratio of EVE to EVE adjusted assets at December 31, 2022 and 2021, resulting from shocks to interest rates.
This method of measurement primarily evaluates the longer-term repricing risks and embedded options in Customers Bank’s balance sheet. The following table reflects the estimated change in EVE at risk at December 31, 2023 and 2022, resulting from rate shocks to interest rates.
The IBOR Protocol enables market participants to incorporate certain revisions into their legacy non-cleared derivatives with other counterparties that also choose to adhere to the IBOR Protocol. Customers adhered to the IBOR Protocol in November 2020 and is in the process of remediating its interest rate swap transactions with its end-user customers.
Customers’ derivatives primarily reference LIBOR. In October 2020, the International Swaps and Derivatives Association, Inc. published the IBOR Fallbacks Supplement (“IBOR Supplement”) and the IBOR Fallback Protocol (“IBOR Protocol”). The IBOR Protocol enabled market participants to incorporate certain revisions into their legacy non-cleared derivatives with other counterparties that also choose to adhere to the IBOR Protocol.
In addition, $110.0 million of fixed-to-floating rate borrowings and $137.8 million of preferred equity instruments reference LIBOR. Customers' derivatives primarily reference LIBOR. In October 2020, the International Swaps and Derivatives Association, Inc. published the IBOR Fallbacks Supplement (“IBOR Supplement”) and the IBOR Fallback Protocol (“IBOR Protocol”).
In addition, $110.0 million of fixed-to-floating rate borrowings and $137.8 million of preferred equity instruments reference LIBOR, which have been or will be transitioned to SOFR.
Certain tenors of LIBOR have ceased publication and complete cessation of LIBOR publication is expected by June 30, 2023. Effective December 31, 2021, Customers has essentially discontinued entering into new LIBOR-based contracts. Customers established an enterprise-wide LIBOR transition program, which includes a LIBOR transition team with senior management level leadership.
All tenors of LIBOR have ceased on June 30, 2023. The 1-, 3- and 6-month U.S. dollar LIBOR settings will continue to be published using a synthetic methodology until September 2024. Customers established an enterprise-wide LIBOR transition program, which includes a LIBOR transition team with senior management level leadership.
Removed
LIBOR Transition Customers has variable rate loans, investment securities, fixed-to-floating rate senior and subordinated debt, preferred stocks and derivatives that reference LIBOR.
Added
The two types of simulation analysis used to determine the impact of changes in interest rates under various hypothetical interest rate scenarios are income scenario modeling and estimates of economic value (EVE).
Removed
Various regulatory bodies have encouraged banks to transition away from LIBOR as soon as practicable, generally cease entering new contracts that use LIBOR as a reference rate no later than December 31, 2021, and for new contracts to utilize a reference rate other than LIBOR or include robust language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation.
Added
Customers has also estimated changes to that projected twelve-month net interest income based upon interest rates rising or falling immediately (“rate shocks”).
Removed
At December 31, 2022, Customers had approximately $4.0 billion of outstanding loan balances that reference SOFR. Customers’ usage of interest rate swap agreements referenced to SOFR is expected to increase in response to the discontinuation of LIBOR.
Added
For upward rate shocks modeling a rising rate environment at December 31, 2023 and 2022, Customers used a parallel and sustained shift in interest rates, in which the base market interest rate forecast was immediately increased by 100, 200 and 300 basis points.
Removed
Customers continues to work with its customers and other counterparties to remediate LIBOR-based agreements which expire after June 30, 2023 by incorporating alternative language, negotiating new agreements, or other means.
Added
The following table reflects the estimated percentage change in projected twelve-month net interest income under the rate shocks versus the base projected net interest income for the years ending December 31, 2024 and 2023, resulting from changes in interest rates.
Removed
The discontinuation of LIBOR and uncertainty relating to the emergence of one or more alternative benchmark indexes to replace LIBOR could materially impact Customers’ interest rate risk profile and its management thereof. For a discussion of the risks associated with the LIBOR transition to alternative reference rates, refer to Part I, Item 1A. "Risk Factors". 110
Added
Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate, plus 5.14% and 4.762%, respectively, to calculate the dividends on Series E and F Preferred Stock, respectively, beginning with dividends declared on October 25, 2023.

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