Customers Bancorp, Inc.: Form 10-Q for the period ended Sep 30, 2025

Cautionary Note Regarding Forward-Looking Statements

This report and all attachments hereto, as well as other written or oral communications made from time to time by us, may contain forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, such as the FDIC special assessments; the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to our reputation; effects of competition on deposit rates and growth, loan rates and growth and net interest margin; failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks; public health crises and pandemics and their effects on the economic and business environments in which we operate; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and military conflicts, including the war between Russia and Ukraine and ongoing conflict in the Middle East, which could impact the economic conditions in the United States; the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; higher inflation and its impacts; the effects of changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs on its trading partners; and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2024, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.

Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the “Bancorp” or “Customers Bancorp”), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the “Bank”), collectively referred to as “Customers” herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers’ financial condition and results of operations as of and for the three and nine months ended September 30, 2025. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers’ 2024 Form 10-K.

Overview

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

There is credit risk inherent in loans and leases requiring Customers to maintain an ACL to absorb credit losses on existing loans and leases that may become uncollectible. Customers maintains this allowance by charging a provision for credit losses on loan and leases against its operating earnings. Customers has included a detailed discussion of this process in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements in its 2024 Form 10-K, as well as several tables describing its ACL in “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ unaudited consolidated financial statements.

Impact of Macroeconomic and Banking Industry Uncertainties and Military Conflicts

At its September 2025 meeting, the Federal Reserve enacted a 25 basis point reduction in the federal funds rate. In addition, on October 29, 2025, the Federal Reserve announced an additional rate cut of 25 basis points. Although inflation remains slightly elevated and above the Federal Reserve’s stated 2% target and is not anticipated to fall below that threshold until 2028, it cited the weakening labor market as the key consideration for adopting a less restrictive monetary position. The Federal Reserve has stated that they would assess incoming data, the evolving outlook and the balance of risks in further lowering the federal funds rate. Significant uncertainties exist as to the extent and timing of future rate cuts and their effects on the economic conditions.

Significant uncertainties as to future economic conditions continue to exist, including risks of higher inflation, changes in U.S. trade policies including the imposition of tariffs and retaliatory tariffs on its trading partners, elevated liquidity risk to the U.S. banking system and the exposure to the U.S. commercial real estate market, particularly to the regional banks, disruptions to global supply chain and labor markets and higher oil and commodity prices exacerbated by the military conflicts between Russia and Ukraine and in the Middle East. Customers has maintained higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios, and shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates during the period of high interest rates. As interest rates begin to decline, Customers has been reducing the Bank’s asset sensitivity through derivative hedging and investment securities portfolio rebalancing. Customers remains focused on growing its non-interest bearing and lower-cost interest-bearing deposits. The Bank’s debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity. The Bank had approximately $5.7 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $4.2 billion as of September 30, 2025. The Bank’s estimated FDIC insured deposits represented approximately 57% of our deposits (inclusive of accrued interest) as of September 30, 2025. When including collateralized and affiliate deposits as FDIC insured, this number increased to 67% of our deposits as of September 30, 2025. Customers continues to monitor closely the impact of uncertainties affecting the macroeconomic conditions, the U.S. banking system, particularly regional banks, the military conflicts between Russia and Ukraine and in the Middle East, as well as any effects that may result from the federal government’s responses including future rate and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, the geopolitical conflicts and developments in the U.S. banking system will impact Customers’ operations and financial results during the remainder of 2025 is highly uncertain.

New Accounting Pronouncements

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

Critical Accounting Policies and Estimates

Customers has adopted various accounting policies that govern the application of U.S. GAAP and that are consistent with general practices within the banking industry in the preparation of its consolidated financial statements. Customers’ significant accounting policies are described in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” in Customers’ audited consolidated financial statements included in its 2024 Form 10-K. Certain accounting policies involve significant judgments and assumptions by Customers that have a material impact on the carrying value of certain assets. Customers considers these accounting policies to be critical accounting policies. The judgments and assumptions used are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions management makes, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of Customers’ assets.

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

Allowance for Credit Losses

Customers’ ACL at September 30, 2025 represents Customers’ current estimate of the lifetime credit losses expected from its loan and lease portfolio and its unfunded lending-related commitments that are not unconditionally cancellable. Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans’ and leases’ expected remaining term.

Customers uses external sources in the creation of its forecasts, including current economic conditions and forecasts for macroeconomic variables over its reasonable and supportable forecast period (e.g., GDP growth rate, unemployment rate, BBB spread, commercial real estate and home price index). After the reasonable and supportable forecast period, which ranges from two to five years, the models revert the forecasted macroeconomic variables to their historical long-term trends, without specific predictions for the economy, over the expected life of the pool, while also incorporating prepayment assumptions into its lifetime loss rates. Internal factors that impact the quarterly allowance estimate include the level of outstanding balances, portfolio performance and assigned risk ratings. Significant loan/borrower attributes utilized in the models include property type, initial loan to value, assigned risk ratings, delinquency status, origination date, maturity date, initial FICO scores, and borrower industry and state.

The ACL may be affected materially by a variety of qualitative factors that Customers considers to reflect its current judgment of various events and risks that are not measured in our statistical procedures, including uncertainty related to the economic forecasts used in the modeled credit loss estimates, nature and volume of the loan and lease portfolio, credit underwriting policy exceptions, peer comparison, industry data, and model and data limitations. The qualitative allowance for economic forecast risk is further informed by multiple alternative scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to changes, sometimes materially and rapidly. Customers recognizes that this approach may not be suitable in certain economic environments such that additional analysis may be performed at management’s discretion. Due in part to its subjectivity, the qualitative evaluation may be materially impacted during periods of economic uncertainty and late breaking events that could lead to a revision of reserves to reflect management’s best estimate of expected credit losses.

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

The net increase in our estimated ACL as of September 30, 2025 as compared to December 31, 2024 resulted primarily from higher loan balances held for investment. The provision for credit losses on loans and leases was $19.8 million and $59.7 million for the three and nine months ended September 30, 2025, respectively, for an ending ACL balance of $158.7 million ($151.8 million for loans and leases and $6.9 million for unfunded lending-related commitments) as of September 30, 2025.

To determine the ACL as of September 30, 2025, Customers utilized Moody’s September 2025 Baseline forecast to generate its modeled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at September 2025 assumed slight improvement in macroeconomic forecasts from the second quarter 2025 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board lowering interest rates in September and December 2025 and gradually reducing the policy rate to its neutral level by late 2026; the effective tariff rate is expected to rise from just over 2% at the start of the year to an average of 15% through early next year, before slowly falling late in the decade; the military conflict between Russia and Ukraine continues but the impact on energy, agriculture and other commodity markets is modest; while there is always a threat that the turmoil in the Middle East disrupts energy and financial markets, that threat has abated somewhat; the CPI rising 2.8% in 2025 and 3.4% in 2026; and the unemployment rate rising to 4.2% in 2025 and 4.6% in 2026 as the outlook for the job market remains weak from the global trade war. Customers continues to monitor the impact of the military conflicts between Russia and Ukraine and in the Middle East, high tariffs, inflation, and monetary and fiscal policy measures including the federal government shutdown on the U.S. economy and, if pace of the expected economic growth is worse than expected, further meaningful provisions for credit losses could be required.

As of December 31, 2024, the ACL ending balance was $141.7 million ($136.8 million for loans and leases and $4.9 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2024, Customers utilized the Moody’s December 2024 Baseline forecast to generate its modeled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2024 assumed slight improvements in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2023; the Federal Reserve Board lowering interest rates twice in 2025 and gradually reducing the policy rate to its neutral level by late 2026, as slower progress in reducing inflation and additional inflationary pressures from the new administration’s fiscal, tariff and immigration plans suggest a slower pace of normalization than previously expected; failures of several regional banks in the first half of 2023 and recent issues around other banks are not symptomatic of a broader problem in the U.S. financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or further undermine economic growth; the military conflict between Russia and Ukraine continuing for the foreseeable future but its impact on energy, agriculture and other commodity markets and the global economy has largely faded; the war in Israel not spreading to other parts of the Middle East and disrupting global energy markets and global shipping; the CPI rising 2.3% in 2025 and 2.8% in 2026; and the unemployment rate rising to 4.1% in 2025 and 2026.

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody’s. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers’ modeling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around the impact of the current administration’s tariffs and deportations on the economy being significantly worse than expected causing inflation to rise; rising inflation causes the Federal Reserve Board to raise the Fed Funds; elevated interest rates weakening credit-sensitive spending more than anticipated and business and consumer confidence to decline; military conflict between Russia and Ukraine persisting longer than expected; the conflict in Israel widening; the combination of tariffs, rising inflation, deportations, political tensions, still-elevated interest rates and reduced credit availability causing the economy to fall into recession in the third quarter of 2025; real GDP declining cumulatively by 2.6% from the third quarter of 2025 through the second quarter of 2026; declines in European economies and retaliatory tariffs hurting U.S. exports; and unemployment beginning to increase significantly in the fourth quarter of 2025 and peaking in the fourth quarter of 2026. Under this scenario, as an example, the unemployment rate is estimated at 4.7% and 8.0% in 2025 and 2026, respectively. These numbers represent a 0.5% and 3.4% higher unemployment estimate than the Baseline scenario projection of 4.2% and 4.6% for the same time periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modeled results. This would result in an incremental quantitative impact to the ACL of approximately $88 million at September 30, 2025. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

There is no certainty that Customers’ ACL will be appropriate over time to cover losses in our portfolio as economic and market conditions may ultimately differ from our reasonable and supportable forecast. Additionally, events adversely affecting specific customers, industries, or Customers’ markets, such as geopolitical instability, or risks of rising inflation including a near-term recession could severely impact our current expectations. If the credit quality of Customers’ customer base materially deteriorates or the risk profile of a market, industry, or group of customers changes materially, Customers’ net income and capital could be materially adversely affected which, in turn could have a material adverse effect on Customers’ financial condition and results of operations. The extent to which the geopolitical instability, higher tariffs, federal government shutdown and risks of rising inflation have and will continue to negatively impact Customers’ businesses, financial condition, liquidity and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time.

For more information, refer to “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ unaudited consolidated financial statements.

Results of Operations

The following table sets forth the condensed statements of income for the three and nine months ended September 30, 2025 and 2024:

(dollars in thousands)

Customers reported net income available to common shareholders of $73.7 million and $139.1 million for the three and nine months ended September 30, 2025, respectively, compared to net income available to common shareholders of $42.9 million and $143.2 million for the three and nine months ended September 30, 2024, respectively. Factors contributing to the change in net income available to common shareholders for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 were as follows:

Net interest income

Net interest income increased $43.4 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily due to lower interest expense on deposits and an increase in interest income from higher average loan balances, interest-bearing deposits and loan purchase discount accretion. Average interest-earning assets increased by $2.5 billion for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase in interest-earning assets was primarily driven by increases in specialized lending and interest-earning deposits, partially offset by a decrease in investment securities. NIM increased by 40 basis points to 3.46% for the three months ended September 30, 2025 from 3.06% for the three months ended September 30, 2024. The NIM increase was primarily attributable to lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits, which drove a 58 basis point decrease in the cost of interest-bearing liabilities and higher loan purchase discount accretion for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Customers’ total cost of funds, including non-interest bearing deposits was 2.91% and 3.59% for the three months ended September 30, 2025 and 2024, respectively.

Net interest income increased $59.5 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily due to lower interest expense on deposits and an increase in interest income from higher average loan balances and loan purchase discount accretion, partially offset by a decrease in interest income from investment securities and interest-bearing deposits. Average interest-earning assets increased by $1.5 billion for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase in interest-earning assets was primarily driven by an increase in specialized lending and interest-earning deposits, partially offset by a decrease in investment securities. NIM increased by 14 basis points to 3.30% for the nine months ended September 30, 2025 from 3.16% for the nine months ended September 30, 2024. The NIM increase was primarily attributable to lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits, which drove a 54 basis point decrease in the cost of interest-bearing liabilities, higher loan purchase discount accretion and higher market interest rates on consumer installment loans, partially offset by decreases in market interest rates in specialized lending, investment securities and interest-earning deposits for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Customers’ total cost of funds, including non-interest bearing deposits was 2.95% and 3.55% for the nine months ended September 30, 2025 and 2024, respectively.

Provision for credit losses

The $9.5 million increase in the provision for credit losses for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 included $2.0 million increase in provision for credit losses on loans and leases for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, which primarily reflects an increase in loan balances held for investment. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment represented 1.03% of total loans and leases receivable at September 30, 2025, compared to 1.06% of total loans and leases receivable at September 30, 2024. Net charge-offs for the three months ended September 30, 2025 were $15.4 million, or 39 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $17.0 million, or 50 basis points on an annualized basis, for the three months ended September 30, 2024. The decrease in net charge-offs for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, was primarily due to lower charge-offs for commercial and industrial loans and multifamily loans, partially offset by higher charge-offs for non-owner occupied commercial real estate loans.

The $23.4 million increase in the provision for credit losses for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 included $8.1 million increase in provision for credit losses on loans and leases for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, which primarily reflects an increase in loan balances held for investment. Net charge-offs for the nine months ended September 30, 2025 were $45.6 million, or 40 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $53.7 million, or 54 basis points on an annualized basis, for the nine months ended September 30, 2024. The decrease in net charge-offs for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily due to lower charge-offs for commercial and industrial loans and consumer installment loans, partially offset by higher charge-offs for non-owner occupied commercial real estate loans.

The provision for credit losses for the three months ended September 30, 2025 and 2024 also included a provision for credit losses of $6.8 million and a benefit to provision of $0.7 million, respectively, on certain debt securities available for sale. The provision for credit losses on certain debt securities available for sale was $16.0 million and $0.7 million for the nine months ended September 30, 2025 and 2024, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Non-interest income

The $21.6 million increase in non-interest income for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from a decrease of $14.5 million in net loss on sale of loans and leases, which included a loss of $14.3 million on leases of commercial clean vehicles that were accounted for as sales-type leases during the three months ended September 30, 2024, and increases of $3.4 million in loan fees, $1.7 million in other non-interest income and $1.4 million in commercial lease income for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the three months ended September 30, 2024. Refer to “NOTE 8 – LEASES” to Customers’ unaudited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles.

The $25.5 million decrease in non-interest income for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from $51.3 million of impairment loss on certain AFS debt securities that the Bank decided to sell in order to further improve structural liquidity, reduce asset sensitivity and benefit margin during the nine months ended September 30, 2025 and $11.0 million of unrealized gain on equity method investment with a fair value of $16.0 million purchased at a discount for the nine months ended September 30, 2024, partially offset by a decrease of $14.8 million in net loss on sale of loans and leases, which included a loss of $14.3 million on leases of commercial clean vehicles that were accounted for as sales-type leases during the nine months ended September 30, 2024, and increases of $9.3 million in loan fees, $8.4 million in other non-interest income, $3.2 million in commercial lease income and $1.8 million in bank-owned life insurance income for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the nine months ended September 30, 2024. Refer to “NOTE 8 – LEASES” to Customers’ unaudited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles.

Non-interest expense

The $1.2 million increase in non-interest expense for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from increases of $3.2 million in professional services, $1.7 million in commercial lease depreciation, $1.4 million in occupancy, $1.0 million in salaries and employee benefits and $0.6 million in FDIC assessments, non-income taxes and regulatory fees. These increases were offset in part by decreases of $3.6 million in other non-interest expense and $3.2 million in technology, communication and bank operations for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

The $8.0 million increase in non-interest expense for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from increases of $16.5 million in professional services, $8.6 million in salaries and employee benefits, $3.1 million in commercial lease depreciation, $2.9 million in occupancy, $1.5 million in loan servicing and $0.6 million in FDIC assessments, non-income taxes and regulatory fees. These increases were offset in part by decreases of $19.6 million in technology, communication and bank operations and $4.3 million in other non-interest expense for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Included in the $19.6 million decrease in technology, communication and bank operations for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was $7.1 million of deposit servicing fees related to periods prior to 2024 that were recorded in the nine months ended September 30, 2024.

Included in the $0.6 million increase in FDIC assessments, non-income taxes and regulatory fees for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was $4.2 million in FDIC premiums related to periods prior to 2024 that were recorded in the nine months ended September 30, 2024. Customers also recorded a credit of $3.0 million within FDIC assessments, non-income taxes and regulatory fees for Pennsylvania bank shares taxes relating to periods prior to 2024 during the three and nine months ended September 30, 2024.

Income tax expense (benefit)

Customers’ effective tax rate was 24.5% for the three months ended September 30, 2025 compared to (1.6)% for the three months ended September 30, 2024. The increase in the effective tax rate primarily resulted from higher pre-tax income and lower estimated income tax credits for 2025 compared to 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the three months ended September 30, 2024. These investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases for the three months ended September 30, 2024.

Customers’ effective tax rate was 21.7% for the nine months ended September 30, 2025 compared to 18.0% for the nine months ended September 30, 2024. The increase in the effective tax rate primarily resulted from higher pre-tax income and lower estimated income tax credits for 2025 compared to 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the nine months ended September 30, 2024, partially offset by an increase in discrete tax benefits from share-based compensation for 2025. The investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases for the nine months ended September 30, 2024.

Preferred stock dividends and loss on redemption of preferred stock

Preferred stock dividends were $2.0 million and $3.8 million for the three months ended September 30, 2025 and 2024, respectively. Preferred stock dividends were $8.6 million and $11.4 million for the nine months ended September 30, 2025 and 2024, respectively. On June 16, 2025, Customers redeemed all of the outstanding shares of Series E Preferred Stock for an aggregate payment of $57.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series E Preferred Stock of $1.9 million is included as a loss on redemption of preferred stock in the consolidated statement of income for the nine months ended September 30, 2025. After giving effect to the redemption, no shares of the Series E Preferred Stock remained outstanding. There were no changes to the amount of preferred stock outstanding during the three and nine months ended September 30, 2024. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

NET INTEREST INCOME

Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers’ earnings. The following table summarizes Customers’ net interest income, related interest spread, net interest margin and the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities for the three and nine months ended September 30, 2025 and 2024. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

(dollars in thousands)

66

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

(2) Includes owner occupied commercial real estate loans.

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

(4) Total costs of deposits (including interest bearing and non-interest-bearing) were 2.77% and 3.46% for the three months ended September 30, 2025 and 2024, respectively.

(5) Tax-equivalent basis, using an estimated marginal tax rate of 26% for the three months ended September 30, 2025 and 2024, presented to approximate interest income as a taxable asset.

Net interest income increased $43.4 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily due to lower interest expense on deposits and an increase in interest income from higher average loan balances, interest-bearing deposits and loan purchase discount accretion. Average interest-earning assets increased by $2.5 billion, primarily related to increases in specialized lending and interest-earning deposits, partially offset by a decrease in investment securities.

The NIM increased by 40 basis points to 3.46% for the three months ended September 30, 2025 from 3.06% for the three months ended September 30, 2024 resulting primarily from lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits and higher loan purchase discount accretion. The cost of interest-bearing liabilities decreased 58 basis points for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Customers’ total cost of funds, including non-interest bearing deposits was 2.91% and 3.59% for the three months ended September 30, 2025 and 2024, respectively.

(dollars in thousands)

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

(2) Includes owner occupied commercial real estate loans.

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

(4) Total costs of deposits (including interest bearing and non-interest-bearing) were 2.82% and 3.44% for the nine months ended September 30, 2025 and 2024, respectively.

(5) Tax-equivalent basis, using an estimated marginal tax rate of 26% for the nine months ended September 30, 2025 and 2024, presented to approximate interest income as a taxable asset.

Net interest income increased $59.5 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily due to lower interest expense on deposits and an increase in interest income from higher average loan balances and loan purchase discount accretion, partially offset by a decrease in interest income from investment securities and interest-bearing deposits. Average interest-earning assets increased by $1.5 billion, primarily related to an increase in specialized lending and interest-earning deposits, partially offset by a decrease in investment securities.

The NIM increased by 14 basis points to 3.30% for the nine months ended September 30, 2025 from 3.16% for the nine months ended September 30, 2024 resulting primarily from lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits, higher loan purchase discount accretion and higher market interest rates on consumer installment loans, partially offset by decreases in market interest rates in specialized lending, investment securities and interest-earning deposits. The cost of interest-bearing liabilities decreased 54 basis points for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Customers’ total cost of funds, including non-interest bearing deposits was 2.95% and 3.55% for the nine months ended September 30, 2025 and 2024, respectively.

PROVISION FOR CREDIT LOSSES

The provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management’s assessment of expected lifetime losses in the loan and lease portfolio, lending-related commitments and investment securities at the balance sheet date. Customers recorded a provision for credit losses on loans and leases during the three months ended September 30, 2025, which resulted primarily from an increase in loan balances held for investment. Customers recorded a provision for credit losses of $19.8 million for loans and leases and a benefit to provision of $0.8 million for lending-related commitments, respectively, for the three months ended September 30, 2025. Customers recorded a provision for credit losses of $17.8 million for loans and leases and $0.6 million for lending-related commitments, respectively, for the three months ended September 30, 2024. Net charge-offs for the three months ended September 30, 2025 were $15.4 million, or 39 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $17.0 million, or 50 basis points of average loans and leases on an annualized basis, for the three months ended September 30, 2024. The decrease in net charge-offs for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, was primarily due to lower charge-offs for commercial and industrial loans and multifamily loans, partially offset by higher charge-offs for non-owner occupied commercial real estate loans.

Customers recorded a provision for credit losses of $59.7 million for loans and leases and $2.0 million for lending-related commitments, respectively, for the nine months ended September 30, 2025, which resulted primarily from an increase in loan balances held for investment. Customers recorded a provision for credit losses of $51.6 million for loans and leases and $2.7 million for lending-related commitments, respectively, for the nine months ended September 30, 2024. Net charge-offs for the nine months ended September 30, 2025 were $45.6 million or 40 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $53.7 million, or 54 basis points of average loans and leases on an annualized basis, for the nine months ended September 30, 2024. The decrease in net charge-offs for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily due to lower charge-offs for for commercial and industrial loans and consumer installment loans, partially offset by higher charge-offs for non-owner occupied commercial real estate loans.

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

The provision for credit losses for the three months ended September 30, 2025 and 2024 also included a provision for credit losses of $6.8 million and a benefit to provision of $0.7 million, respectively, on certain debt securities available for sale. The provision for credit losses on certain debt securities available for sale was $16.0 million and $0.7 million for the nine months ended September 30, 2025 and 2024, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

NON-INTEREST INCOME

The table below presents the components of non-interest income (loss) for the three and nine months ended September 30, 2025 and 2024:

(dollars in thousands)

Commercial lease income

Commercial lease income represents income earned on commercial operating leases originated by Customers’ commercial equipment financing group in which Customers is the lessor. The $1.4 million increase in commercial lease income for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from the growth of Customers’ equipment finance business.

The $3.2 million increase in commercial lease income for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from the growth of Customers’ equipment finance business.

Loan fees

The $3.4 million increase in loan fees for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from income on the settlement of certain stock warrants.

The $9.3 million increase in loan fees for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from increases in fees earned on unused lines of credit and income on the settlement of certain stock warrants.

Bank-owned life insurance

Bank-owned life insurance income represents income earned on life insurance policies owned by Customers including an increase in cash surrender value of the policies and any benefits paid by insurance carriers under the policies. The $0.1 million increase in bank-owned life insurance income for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from an increase in cash surrender value of the policies.

The $1.8 million increase in bank-owned life insurance income for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from increases in death benefits received from insurance carriers and cash surrender value of the policies.

Net gain (loss) on sale of loans and leases

The $14.5 million decrease in net loss on sale of loans and leases for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from $14.3 million of loss on leases of commercial clean vehicles that were accounted for as sales-type leases during the three months ended September 30, 2024, and a loss of $0.3 million, inclusive of transaction costs, on sales of $202.5 million in consumer installment loans, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs for the three months ended September 30, 2024. The commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the three months ended September 30, 2024. Refer to “NOTE 8 – LEASES” to Customers’ unaudited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs.

The $14.8 million decrease in net loss on sale of loans and leases for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from $14.3 million of loss on leases of commercial clean vehicles that were accounted for as sales-type leases during the nine months ended September 30, 2024, and a loss of $0.3 million, inclusive of transaction costs, on sales of $202.5 million in consumer installment loans, inclusive of $53.0 million of personal installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs for the nine months ended September 30, 2024. The commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the nine months ended September 30, 2024. Refer to “NOTE 8 – LEASES” to Customers’ unaudited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs.

Net gain (loss) on sale of investment securities

The $0.2 million increase in net gain on sale of investment securities for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 reflects net gains realized from the sales of $100.7 million in AFS debt securities for the three months ended September 30, 2025, compared to the sale of $0.1 million in AFS debt securities during the three months ended September 30, 2024. There can be no assurance that Customers will realize gains from sales of investment securities in 2025, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

The $0.9 million increase in net loss on sale of investment securities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 reflects net losses realized from the sales of $552.9 million in AFS debt securities for the nine months ended September 30, 2025, mostly those securities that the Bank decided to sell during the three months ended March 31, 2025, compared to the sales of $241.6 million in AFS debt securities during the nine months ended September 30, 2024. There can be no assurance that Customers will realize gains from sales of investment securities in 2025, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

Impairment loss on debt securities

The $51.3 million increase in impairment loss on debt securities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from impairment loss recorded on certain AFS debt securities that the Bank decided to sell in order to further improve structural liquidity, reduce asset sensitivity and benefit margin during the nine months ended September 30, 2025.

Unrealized gain on equity method investments

The $11.0 million decrease in unrealized gain on the equity method investments for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 reflects unrealized gain from the equity method investment with a fair value of $16.0 million purchased at a discount during the nine months ended September 30, 2024.

Other non-interest income

The $1.7 million increase in other non-interest income for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from an increase of $1.8 million in deposit account fees.

The $8.4 million increase in other non-interest income for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from $1.8 million of fees associated with the sunsetting of a loan origination program with a fintech company, which was recently acquired by a bank, and an increase of $5.6 million in deposit account fees.

NON-INTEREST EXPENSE

The table below presents the components of non-interest expense for the three and nine months ended September 30, 2025 and 2024:

(dollars in thousands)

Salaries and employee benefits

The $1.0 million increase in salaries and employee benefits for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from an increase in average full-time equivalent team members and annual merit increases, partially offset by lower incentives.

The $8.6 million increase in salaries and employee benefits for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from an increase in average full-time equivalent team members and annual merit increases, partially offset by lower incentives.

Technology, communication and bank operations

The $3.2 million decrease in technology, communication and bank operations expense for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from decreases in deposit servicing-related expenses from lower servicing fees and $1.0 million in software, including fees for software as a service.

The $19.6 million decrease in technology, communication and bank operations expense for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from decreases in deposit servicing-related expenses from lower servicing fees and $3.4 million in fees for software as a service.

Customers incurred expenses of $0.2 million and $3.0 million to BM Technologies under the deposit servicing agreement included within the technology, communication and bank operations expense during the three months ended September 30, 2025 and 2024, respectively. Customers incurred expenses of $2.3 million and $17.1 million to BM Technologies under the deposit servicing agreement included within the technology, communication and bank operations expense during the nine months ended September 30, 2025 and 2024, respectively. The deposit servicing fees of $17.1 million incurred to BM Technologies for the nine months ended September 30, 2024 included $7.1 million for periods prior to 2024. Customers’ deposits serviced by BM Technologies under a white label relationship decreased by approximately $187.0 million, including $166.7 million of deposits transferred to a new sponsor bank during the three and six months ended June 30, 2025.

Commercial lease depreciation

The $1.7 million increase in commercial lease depreciation for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from the growth of the operating lease arrangements originated by Customers’ commercial equipment financing group in which Customers is the lessor.

The $3.1 million increase in commercial lease depreciation for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from the growth of the operating lease arrangements originated by Customers’ commercial equipment financing group in which Customers is the lessor.

Professional services

The $3.2 million increase in professional services for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from increases in contractor services including to enhance the Bank’s risk management infrastructure.

The $16.5 million increase in professional services for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from increases in contractor services and consulting fees including to enhance the Bank’s risk management infrastructure.

Loan servicing

The $0.4 million increase in loan servicing for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from the growth in consumer loan portfolios serviced by third parties.

The $1.5 million increase in loan servicing for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from the growth in consumer loan portfolios serviced by third parties.

Occupancy

The $1.4 million increase in occupancy for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from higher depreciation and amortization associated with the Bank’s growth.

The $2.9 million increase in occupancy for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from higher lease expense and depreciation and amortization associated with the Bank’s growth.

FDIC assessments, non-income taxes and regulatory fees

The $0.6 million increase in FDIC assessments, non-income taxes and regulatory fees for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from an increase in Pennsylvania bank shares taxes, partially offset by a decrease in FDIC assessments. Customers recorded a credit of $3.0 million for Pennsylvania bank shares taxes relating to periods prior to 2024 during the three months ended September 30, 2024.

The $0.6 million increase in FDIC assessments, non-income taxes and regulatory fees for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from an increase in Pennsylvania bank shares taxes, partially offset by a decrease in FDIC assessments. Customers recorded a credit of $3.0 million for Pennsylvania bank shares taxes relating to periods prior to 2024 during the nine months ended September 30, 2024. The FDIC assessments for the nine months ended September 30, 2024 included $4.2 million for periods prior to 2024.

Other non-interest expense

The $3.6 million decrease in other non-interest expense for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily resulted from decreases in fees paid to a fintech company related to a consumer installment loan origination program and provision for credit losses on unfunded lending-related commitments.

The $4.3 million decrease in other non-interest expense for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily resulted from decreases in fees paid to a fintech company related to a consumer installment loan origination program and provision for credit losses on unfunded lending-related commitments.

INCOME TAXES

The table below presents income tax expense (benefit) and the effective tax rate for the three and nine months ended September 30, 2025 and 2024:

(dollars in thousands)

The $25.3 million increase in income tax expense for the three months ended September 30, 2025, when compared to the same period in the prior year, primarily resulted from higher pre-tax income and lower estimated income tax credits for 2025 compared to 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the three months ended September 30, 2024. These investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases for the three months ended September 30, 2024. The increase in the effective tax rate for the three months ended September 30, 2025, when compared to the same period in the prior year, primarily resulted from higher pre-tax income and lower estimated income tax credits for 2025 compared to 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the three months ended September 30, 2024.

The $7.6 million increase in income tax expense for the nine months ended September 30, 2025, when compared to the same period in the prior year, primarily resulted from higher pre-tax income and lower estimated income tax credits for 2025 compared to 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the nine months ended September 30, 2024, partially offset by an increase in discrete tax benefits from share-based compensation for 2025. The investment tax credits from commercial clean vehicle leases were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases for the nine months ended September 30, 2024. The increase in the effective tax rate for the nine months ended September 30, 2025, when compared to the same period in the prior year, primarily resulted from higher pre-tax income and lower estimated income tax credits for 2025 compared to 2024, including $14.3 million of investment tax credits generated from commercial clean vehicles during the nine months ended September 30, 2024, partially offset by an increase in discrete tax benefits from share-based compensation for 2025.

PREFERRED STOCK DIVIDENDS AND LOSS ON REDEMPTION OF PREFERRED STOCK

Preferred stock dividends were $2.0 million and $3.8 million for the three months ended September 30, 2025 and 2024, respectively. Preferred stock dividends were $8.6 million and $11.4 million for the nine months ended September 30, 2025 and 2024, respectively. On June 16, 2025, Customers redeemed all of the outstanding shares of Series E Preferred Stock for an aggregate payment of $57.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series E Preferred Stock of $1.9 million is included as a loss on redemption of preferred stock in the consolidated statement of income for the nine months ended September 30, 2025. After giving effect to the redemption, no shares of the Series E Preferred Stock remained outstanding. There were no changes to the amount of preferred stock outstanding during the three and nine months ended September 30, 2024. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

Financial Condition

General

Customers’ total assets were $24.3 billion at September 30, 2025. This represented an increase of $2.0 billion from total assets of $22.3 billion at December 31, 2024. The increase in total assets was primarily driven by increases of $1.5 billion in loans and leases receivable, $399.7 million in cash and cash equivalents, $165.9 million in loans receivable, mortgage finance, at fair value and $111.6 million in loans receivable, installment, at fair value, partially offset by decreases of $190.6 million in investment securities held to maturity, $173.9 million in loans held for sale and $8.9 million in investment securities, at fair value.

Total liabilities were $22.1 billion at September 30, 2025. This represented an increase of $1.7 billion from $20.5 billion at December 31, 2024. The increase in total liabilities primarily resulted from increases of $1.6 billion in total deposits and $67.1 million in FHLB advances.

The following table sets forth certain key condensed balance sheet data as of September 30, 2025 and December 31, 2024:

(dollars in thousands)

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and interest-earning deposits. Cash and due from banks consists mainly of vault cash and cash items in the process of collection. Cash and due from banks were $58.0 million and $56.8 million at September 30, 2025 and December 31, 2024, respectively. Cash and cash due from banks balances vary from day to day, primarily due to variations in customers’ deposit activities with the Bank.

Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were $4.1 billion and $3.7 billion at September 30, 2025 and December 31, 2024, respectively. The balance of interest-earning deposits varies from day to day, depending on several factors, such as fluctuations in customers’ deposits with Customers, payment of checks drawn on customers’ accounts and strategic investment decisions made to optimize Customers’ net interest income, while effectively managing interest-rate risk and liquidity. The increase in interest-earning deposits since December 31, 2024 primarily resulted from higher non-interest bearing demand deposits held by the Bank.

Investment securities at fair value

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

Investment securities at fair value totaled $2.0 billion at September 30, 2025 and December 31, 2024. The slight decrease primarily resulted from sales of $552.9 million and maturities, calls and principal repayments totaling $246.2 million, partially offset by purchases of $802.5 million of investment securities for the nine months ended September 30, 2025.

For financial reporting purposes, AFS debt securities are reported at fair value. Unrealized gains and losses on AFS debt securities that the Bank does not intend to sell, other than credit losses, are included in other comprehensive income (loss) and reported as a separate component of shareholders’ equity, net of the related tax effect. Changes in the fair value of equity securities with a readily determinable fair value and securities reported at fair value based on a fair value option election are recorded in non-interest income in the period in which they occur. Customers recorded a provision for credit losses of $6.8 million and $16.0 million on certain debt securities available for sale for the three and nine months ended September 30, 2025, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 15 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS” to Customers’ unaudited consolidated financial statements for additional information.

The following table sets forth information about the maturities and weighted-average yield of the AFS debt securities portfolio. The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security adjusted for prepayment estimates, and considers the contractual coupon, amortization of premiums and accretion of discounts. Yields exclude the impact of related hedging derivatives.

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

Investment securities held to maturity

At September 30, 2025, investment securities held to maturity totaled $801.3 million compared to $991.9 million at December 31, 2024. The decrease primarily resulted from the maturities, calls and principal repayments totaling $218.6 million, partially offset by purchases of $24.0 million of investment securities for the nine months ended September 30, 2025.

The following table sets forth information about the maturities and weighted-average yield of the investment securities held to maturity. The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security adjusted for prepayment estimates, and considers the contractual coupon, amortization of premiums, accretion of discounts and amortization of unrealized losses upon transfer from investment securities available for sale to held to maturity, along with the unrealized loss in accumulated other comprehensive income.

The agency-guaranteed mortgage-backed securities and collateralized mortgage obligations in the HTM portfolio were issued by Fannie Mae, Freddie Mac and Ginnie Mae, and contain guarantees for the collection of principal and interest on the underlying mortgages.

Investment securities classified as HTM are those debt securities that Customers has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs, or changes in general economic conditions. For financial reporting purposes, these securities are reported at cost, adjusted for the amortization of premiums and accretion of discounts, computed by a method which approximates the interest method over the terms of the securities. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 15 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS” to Customers’ unaudited consolidated financial statements for additional information.

LOANS AND LEASES

Existing lending relationships are primarily with small and middle market businesses and individual consumers primarily in 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; California (Southern California and the Bay Area); Nevada (Las Vegas and Reno); and nationally for certain loan and deposit products, such as the portfolio of specialized lending loans and leases and mortgage finance loans. The loan portfolio consists primarily of loans to support mortgage companies’ funding needs, multifamily, commercial real estate and commercial and industrial loans. Customers continues to focus on small and middle market business loans to grow its commercial lending efforts, particularly its commercial and industrial loan and lease portfolio and its specialized lending business. Customers also focuses its lending efforts on local-market mortgage and home equity lending and the origination and purchase of unsecured consumer loans (installment loans), including personal, student loan refinancing, home improvement and medical loans through arrangements with fintech companies and other market place lenders nationwide.

Commercial Lending

Customers’ commercial lending is broadly divided into the following groups: small and middle market business banking, specialized banking, multifamily and commercial real estate lending, mortgage finance, and SBA lending. This diversity is designed to allow for greater resource deployment, higher standards of risk management, strong asset quality, lower interest-rate risk and higher productivity levels.

As of September 30, 2025, Customers had $14.8 billion in commercial loans outstanding, totaling approximately 91.0% of its total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage finance, at fair value, and loans receivable, installment, at fair value, compared to commercial loans outstanding of $13.2 billion, comprising approximately 90.1% of its total loan and lease portfolio at December 31, 2024.

The commercial lending group focuses primarily on companies with annual revenues ranging from $1 million to $100 million, which typically have credit requirements between $0.5 million and $10 million. The small and middle market business banking platform originates loans, including SBA loans, through the branch network sales force and a team of dedicated relationship managers. The support administration of this platform is centralized, including technology, risk management, product management, marketing, performance tracking and overall strategy. Credit and sales training has been established for Customers’ sales force, ensuring that it has small business experts in place providing appropriate financial solutions to the small business owners in its communities.

Customers’ specialized banking includes commercial equipment finance, healthcare lending, real estate specialty finance, fund finance, technology and venture capital banking and a financial institutions group. Customers’ lender finance vertical within fund finance provides variable rate loans secured by diverse collateral pools to private debt funds. Customers’ capital call lines vertical within fund finance provides variable rate loans secured by collateral pools and limited partnership commitments from institutional investors in private equity funds and cash management services to the alternative investment industry. Customers’ technology and venture capital banking group services the venture-backed growth industry from seed-stage through late-stage.

Customers’ mortgage finance primarily provides financing to mortgage bankers for residential mortgage originations from loan closing until sale in the secondary market. The underlying residential loans are taken as collateral for Customers’ commercial loans to the mortgage companies. As of September 30, 2025 and December 31, 2024, mortgage finance loans totaled $1.5 billion and $1.3 billion, respectively, and are reported as loans receivable, mortgage finance, at fair value on the consolidated balance sheet.

Customers’ commercial equipment financing group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. The commercial equipment financing group is primarily focused on serving the following industries: transportation, construction (includes crane and utility), marine, franchise, general manufacturing (includes machine tool), helicopter/fixed wing, solar, packaging, plastics and food processing. As of September 30, 2025 and December 31, 2024, Customers had $753.4 million and $675.4 million, respectively, of equipment finance loans outstanding. As of September 30, 2025 and December 31, 2024, Customers had $272.1 million and $262.7 million, respectively, of equipment finance leases outstanding. As of September 30, 2025 and December 31, 2024, Customers had $259.4 million and $214.9 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $100.2 million and $95.1 million, respectively.

Customers’ multifamily lending group is focused on retaining a portfolio of high-quality multifamily loans within Customers’ covered markets. 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. Customers had multifamily loans of $2.4 billion outstanding, comprising approximately 14.5% of the total loan and lease portfolio at September 30, 2025, compared to $2.3 billion, or approximately 15.4% of the total loan and lease portfolio at December 31, 2024.

Consumer Lending

Customers provides unsecured consumer installment loans, residential mortgage and home equity loans to customers nationwide primarily through relationships with fintech companies. The installment loan portfolio consists largely of originated and purchased personal, student loan refinancing, home improvement and medical loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660. Customers has been selective in the consumer loans it has been purchasing. Home equity lending is offered to solidify customer relationships and grow relationship revenues in the long term. This lending is important in Customers’ efforts to grow total relationship revenues for its consumer households. As of September 30, 2025, Customers had $1.5 billion in consumer loans outstanding (including consumer loans held for investment and held for sale), or 9.0% of the total loan and lease portfolio, compared to $1.4 billion, or 9.9% of the total loan and lease portfolio, as of December 31, 2024.

Purchases and sales of loans held for investment were as follows for the three and nine months ended September 30, 2025 and 2024:

(amounts in thousands)

(1) Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 98.7% and 95.9% of the loans’ unpaid principal balance for the three months ended September 30, 2025 and 2024, respectively. The purchase price was 92.0% and 97.5% of the loans’ unpaid principal balance for the nine months ended September 30, 2025 and 2024, respectively.

(2) Installment loan purchases for the three and nine months ended September 30, 2025 and 2024 consist of third-party originated unsecured consumer loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

(3) The gain on sales of loans held for investment was insignificant for the three and nine months ended September 30, 2025. For the three and nine months ended September 30, 2024, sales of loans held for investment resulted in no gain or loss and net losses of $0.2 million, respectively, included in net gain (loss) on sale of loans and leases in the consolidated statements of income.

Loans Held for Sale

The composition of loans held for sale as of September 30, 2025 and December 31, 2024 was as follows:

(amounts in thousands)

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

Refer to NOTE 7 — LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES to Customers’ unaudited consolidated financial statements for additional information on the transfer of other consumer installment loans, at fair value, from loans held for sale to held for investment during the three months ended March 31, 2025.

Total Loans and Leases Receivable

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

(amounts in thousands)

(1) Includes direct finance and sales-type equipment leases of $272.1 million and $262.7 million at September 30, 2025 and December 31, 2024, respectively.

(2) Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(35.5) million and $(20.8) million at September 30, 2025 and December 31, 2024, respectively.

Loans receivable, mortgage finance, at fair value

The mortgage finance product line primarily provides financing to mortgage companies nationwide from the time of origination of the underlying mortgage loans until the mortgage loans are sold into the secondary market. As a mortgage finance lender, Customers provides a form of financing to mortgage bankers by purchasing for resale the underlying residential mortgages on a short-term basis under a master repurchase agreement. These loans are reported as loans receivable, mortgage finance, at fair value on the consolidated balance sheets. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At September 30, 2025, all of Customers’ mortgage finance loans were current in terms of payment.

Customers is subject to the risks associated with such lending, including, but not limited to, the risks of fraud, bankruptcy and default of the mortgage banker or of the underlying residential borrower, any of which could result in credit losses. Customers’ mortgage finance lending team members monitor these mortgage originators by obtaining financial and other relevant information to reduce these risks during the lending period. Loans receivable, mortgage finance, at fair value totaled $1.5 billion and $1.3 billion at September 30, 2025 and December 31, 2024, respectively.

Loans receivable, installment, at fair value

Customers had a lending arrangement with a fintech company, which recently was acquired by a bank, whereby Customers originated consumer installment loans and held these loans prior to sale. These consumer installment loans were designated as loans held for sale and reported at fair value based on an election made to account for the loans at fair value. The lending arrangement with this fintech company expired in the three months ended June 30, 2025. Customers transferred these consumer installment loans from held for sale to held for investment during the three months ended March 31, 2025, and continue to be reported at fair value based on an election made to account for the loans at fair value. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At September 30, 2025, Customers had $1.9 million of consumer installment loans, at fair value, on nonaccrual status.

Credit Risk

Customers manages credit risk by maintaining diversification in its loan and lease portfolio, establishing and enforcing prudent underwriting standards and collection efforts, and continuous and periodic loan and lease classification reviews. Management also considers the effect of credit risk on financial performance by reviewing quarterly and maintaining an adequate ACL. Credit losses are charged-off when they are identified, and provisions are added for current expected credit losses, to the ACL at least quarterly. The ACL is estimated at least quarterly.

The provision for credit losses on loans and leases was $19.8 million and $59.7 million for the three and nine months ended September 30, 2025, respectively. The provision for credit losses on loans and leases was $17.8 million and $51.6 million for the three and nine months ended September 30, 2024, respectively. The ACL maintained for loans and leases receivable (excluding loans held for sale, loans receivable, mortgage finance, at fair value, and loans receivable, installment, at fair value) was $151.8 million, or 1.03% of loans and leases receivable at September 30, 2025, and $136.8 million or 1.04% of loans and leases receivable at December 31, 2024.

The increase in the ACL from December 31, 2024 resulted primarily from an increase in loan balances held for investment. Net charge-offs were $15.4 million for the three months ended September 30, 2025, a decrease of $1.7 million compared to the same period in 2024. Net charge-offs were $45.6 million for the nine months ended September 30, 2025, a decrease of $8.1 million compared to the same period in 2024, which was primarily due to lower charge-offs for commercial and industrial loans and consumer installment loans, partially offset by higher charge-offs for non-owner occupied commercial real estate loans. Refer to the tables of changes in Customers’ ACL for annualized net-charge offs to average loans by loan type for the periods indicated.

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The tables below present changes in Customers’ ACL for the periods indicated:

(amounts in thousands)

81

(amounts in thousands)

(1) Includes specialized lending.

(2) Represents $1.0 million of allowance for credit losses on PCD loans recognized upon acquisition of commercial and industrial loans during the nine months ended September 30, 2025.

(3) Charge-offs and recoveries on PCD loans that are accounted for in pools are recognized on a net basis when the pool matures.

The ACL is based on a quarterly evaluation of the loan and lease portfolio held for investment and is maintained at a level that management considers adequate to absorb expected losses as of the balance sheet date. All commercial loans, with the exception of PPP loans and mortgage finance loans, which are reported at fair value, are assigned internal credit-risk ratings, based upon an assessment of the borrower, the structure of the transaction and the available collateral and/or guarantees. All loans and leases are monitored regularly by the responsible officer, and the risk ratings are adjusted when considered appropriate. The risk assessment allows management to identify problem loans and leases timely. Management considers a variety of factors and recognizes the inherent risk of loss that always exists in the lending process. Management uses a disciplined methodology to estimate an appropriate level of ACL. Refer to Critical Accounting Policies and Estimates herein and “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements in its 2024 Form 10-K for further discussion on management’s methodology for estimating the ACL.

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

These impairment measurements are inherently subjective as they require material estimates, including, among others, estimates of property values in appraisals, the amounts and timing of expected future cash flows on individual loans, and general considerations for historical loss experience, economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios, all of which require judgment and may be susceptible to significant change over time and as a result of changing economic conditions or other factors. Pursuant to ASC 326, individually assessed loans, consisting primarily of non-accrual and restructured loans, are considered in the methodology for determining the ACL. Individually assessed loans are generally evaluated based on the expected future cash flows or the fair value of the underlying collateral if principal repayment is expected to substantially come from the operation of the collateral or fair value of the collateral less estimated costs to sell if repayment of the loan is expected to be provided from the sale of such collateral. Shortfalls in the underlying collateral value for loans or leases determined to be collateral dependent are charged off immediately. Subsequent to an appraisal or other fair value estimate, management will assess whether there was a further decline in the value of the collateral based on changes in market conditions or property use that would require additional impairment to be recorded to reflect the particular situation, thereby increasing the ACL on loans and leases held for investment.

Asset Quality

Customers classifies the loan and lease receivables by product or other characteristic generally defining a shared characteristic with other loans or leases in the same group. Charge-offs from originated and acquired loans and leases held for investment are absorbed by the ACL. The schedule that follows includes both loans held for sale and loans held for investment:

Asset Quality at September 30, 2025

(dollars in thousands)

Asset Quality at September 30, 2025 (continued)

(dollars in thousands)

(1) Excludes non-performing investment securities, at fair value of $20.2 million with ACL of $8.5 million at September 30, 2025.

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The total loan and lease portfolio was $16.3 billion at September 30, 2025 compared to $14.7 billion at December 31, 2024, and $28.4 million, or 0.17% of loans and leases, were non-performing at September 30, 2025 compared to $43.3 million, or 0.30% of loans and leases, at December 31, 2024. The total loan and lease portfolio was supported by an ACL of $151.8 million (534.14% of NPLs and 0.93% of total loans and leases) and $136.8 million (316.06% of NPLs and 0.93% of total loans and leases), at September 30, 2025 and December 31, 2024, respectively.

The tables below set forth non-accrual loans, NPAs and asset quality ratios:

(amounts in thousands)

(1) Excludes loans held for sale, loans receivable, mortgage finance, at fair value and loans receivable, installment, at fair value.

(1) Includes non-performing investment securities, at fair value of $20.2 million with ACL of $8.5 million at September 30, 2025 and fair value of $12.5 million with ACL of $4.3 million at December 31, 2024, respectively.

The asset quality ratios related to NPAs, including non-performing investment securities, at fair value, and non-accrual loans remained low at September 30, 2025 as compared to December 31, 2024. Refer to Credit Risk above for information about the increase in ACL affecting the related asset quality ratios at September 30, 2025 as compared to December 31, 2024.

DEPOSITS

Customers offers a variety of deposit accounts, including checking, savings, MMDA, and time deposits. Deposits are primarily obtained from Customers’ geographic service area and nationwide through our single point of contact relationship managers, our branchless digital banking products, deposit brokers, listing services and other relationships.

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

(dollars in thousands)

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Total deposits were $20.4 billion at September 30, 2025, an increase of $1.6 billion, or 8.3%, from $18.8 billion at December 31, 2024. The increase in total deposits was primarily due to increases in savings, including MMDA of $917.6 million, or 18.4%, to $5.9 billion at September 30, 2025, from $5.0 billion at December 31, 2024, non-interest bearing demand deposits of $772.6 million, or 13.8%, to $6.4 billion at September 30, 2025 from $5.6 billion at December 31, 2024 and time deposits of $371.6 million, or 13.7%, to $3.1 billion at September 30, 2025, from $2.7 billion at December 31, 2024. These increases were partially offset by a decrease in interest bearing demand deposits of $503.3 million, or 9.1%, to $5.1 billion at September 30, 2025, from $5.6 billion at December 31, 2024.

At September 30, 2025 and December 31, 2024, the Bank had $1.7 billion and $1.5 billion in deposits, respectively, to which it had pledged $1.8 billion and $1.5 billion of available borrowing capacity through the FHLB to the depositors through a standby letter of credit arrangement, respectively.

The total amount of estimated uninsured deposits was $8.7 billion and $7.3 billion at September 30, 2025 and December 31, 2024, respectively. Time deposits greater than the FDIC limit of $250,000 totaled $990.3 million and $803.1 million at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025, the scheduled maturities of uninsured time deposits were as follows:

(amounts in thousands)

Average deposit balances by type and the associated average rate paid are summarized below:

(dollars in thousands)

(dollars in thousands)

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FHLB ADVANCES AND OTHER BORROWINGS

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

Short-term debt

Short-term debt at September 30, 2025 and December 31, 2024 was as follows:

(dollars in thousands)

Long-term debt

FHLB and FRB Advances

Long-term FHLB and FRB advances at September 30, 2025 and December 31, 2024 were as follows:

(dollars in thousands)

(1) Amounts reported in the above table include fixed rate long-term advances from FHLB of $750.0 million with maturities ranging from March 2026 to March 2028, and variable rate long-term advances from FHLB of $390.0 million with maturities ranging from December 2026 to December 2028 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank’s option, at September 30, 2025.

(2) Includes $5.4 million and $(1.6) million of unamortized basis adjustments from interest rate swaps designated as fair value hedges of long-term advances from FHLB at September 30, 2025 and December 31, 2024, respectively. Refer to “NOTE 16 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES” to Customers’ unaudited consolidated financial statements for additional information.

(3) Excludes the effect of interest rate swaps designated as fair value hedges of long-term advances from FHLB.

The maximum borrowing capacity with the FHLB and FRB at September 30, 2025 and December 31, 2024 was as follows:

(dollars in thousands)

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Senior Notes and Subordinated Debt

Long-term senior notes and subordinated debt at September 30, 2025 and December 31, 2024 were as follows:

(dollars in thousands)

(1) The senior notes will bear an annual fixed rate of 2.875% until August 15, 2026. From August 15, 2026 until maturity, the notes will bear an annual interest rate equal to a benchmark rate, which is expected to be the three-month term SOFR, plus 235 basis points. Customers Bancorp has the ability to call the senior notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after August 15, 2026.

(2) The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.

(3) Customers Bancorp has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after December 30, 2029.

(4) The subordinated notes had an annual fixed rate of 6.125% until June 26, 2024. From June 26, 2024 until maturity, the notes bear an annual interest rate equal to the three-month LIBOR plus 344.3 basis points. 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 in order to calculate the annual interest rate after June 26, 2024. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.

SHAREHOLDERS’ EQUITY

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

(dollars in thousands)

Shareholders’ equity increased $289.4 million, or 15.8%, to $2.1 billion at September 30, 2025 when compared to shareholders’ equity of $1.8 billion at December 31, 2024. The increase primarily resulted from increases of $139.1 million in retained earnings, $86.9 million in additional paid-in capital and $45.5 million in accumulated other comprehensive income (loss), net and a net decrease in treasury stock of $73.1 million, partially offset by a decrease of $55.6 million in preferred stock.

The decrease in preferred stock resulted from redemption of all of the outstanding shares of Series E Preferred Stock on June 16, 2025. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

The increases in common stock and additional paid in capital resulted primarily from the issuance of common stock under share-based compensation arrangements, as well as cash proceeds, net of issuance costs, in excess of the cost of treasury stock from the reissuance of common stock in an underwritten public offering for the nine months ended September 30, 2025. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

The increase in retained earnings resulted from net income of $149.6 million, partially offset by preferred stock dividends of $8.6 million and a loss of $1.9 million on redemption of Series E Preferred Stock for the nine months ended September 30, 2025.

The increase in accumulated other comprehensive income (loss), net primarily resulted from reclassification of $52.9 million in losses included in net income and income tax effect of $13.9 million and a decrease of $1.7 million in unrealized losses on AFS debt securities due to changes in market interest rates and credit spreads, and income tax effect of $0.5 million during the nine months ended September 30, 2025.

The decrease in treasury stock resulted from reissuance of common stock held as treasury stock in an underwritten public offering, partially offset by repurchases of 104,206 shares of its common stock for $5.6 million under the 2024 Share Repurchase Program during the nine months ended September 30, 2025. On June 26, 2024, the Board of Directors of Customers Bancorp authorized a new common stock repurchase program, the 2024 Share Repurchase Program, to repurchase up to 497,509 shares of the Company’s common stock. As of March 30, 2025, Customers had purchased all shares authorized under the 2024 Share Repurchase Program. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

Customers recognized a benefit to provision for credit losses on unfunded lending-related commitments of $0.8 million and a provision of $2.0 million during the three and nine months ended September 30, 2025, resulting in an ACL of $6.9 million as of September 30, 2025. Customers had an ACL on unfunded lending-related commitments of $4.9 million as of December 31, 2024.

Customers’ contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, short-term and long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of September 30, 2025. Refer to “NOTE 8 – LEASES”, “NOTE 9 – DEPOSITS”, “NOTE 10 – BORROWINGS” and “NOTE 13 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK” to Customers’ unaudited consolidated financial statements for additional information.

At September 30, 2025, Customers had $4.2 billion of cash on hand and $2.8 billion of investment securities. Customers’ investment portfolio, including debt securities available for sale and held to maturity provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional funding. We maintain a strong liquidity position, with $9.9 billion of liquidity immediately available consisting of cash on hand and available borrowing capacity from the FHLB and the FRB, which covered approximately 114% of uninsured deposits and approximately 146% of uninsured deposits less collateralized and affiliate deposits at September 30, 2025. Our loan to deposit ratio was 80% at September 30, 2025. Customers’ principal sources of funds are deposits, borrowings, principal and interest payments on loans and leases, other funds from operations, and proceeds from common and preferred stock issuances. Borrowing arrangements are maintained with the FHLB and the FRB to meet short-term liquidity needs. Longer-term borrowing arrangements are also maintained with the FHLB and the FRB. As of September 30, 2025, Customers’ borrowing capacity with the FHLB was $3.9 billion, of which $1.2 billion was utilized in borrowings and $1.8 billion of available capacity was utilized to collateralize deposits. As of December 31, 2024, Customers’ borrowing capacity with the FHLB was $3.6 billion, of which $1.1 billion was utilized in borrowings and $1.5 billion of available capacity was utilized to collateralize deposits. As of September 30, 2025 and December 31, 2024, Customers’ borrowing capacity with the FRB was $4.8 billion and $4.4 billion, respectively. None of this capacity was utilized as of September 30, 2025 and December 31, 2024.

The table below summarizes Customers’ cash flows for the nine months ended September 30, 2025 and 2024:

(dollars in thousands)

Cash flows provided by (used in) operating activities

Cash provided by operating activities of $373.2 million for the nine months ended September 30, 2025 resulted from proceeds from the sales and repayments of loans held for sale of $672.2 million, net income of $149.6 million, net non-cash operating adjustments of $114.5 million, an increase in accrued interest payable and other liabilities of $36.5 million and a decrease in accrued interest receivable and other assets of $6.5 million, partially offset by origination and purchases of loans held for sale of $606.2 million.

Cash provided by operating activities of $11.7 million for the nine months ended September 30, 2024 resulted from proceeds from the sales and repayments of loans held for sale of $952.3 million, which included cash proceeds from the sales of consumer installment loans that were classified as held for sale to third-party sponsored VIEs during the nine months ended September 30, 2024, net income of $154.6 million and net non-cash operating adjustments of $56.5 million, partially offset by origination and purchases of loans held for sale of $1.0 billion, a decrease in accrued interest payable and other liabilities of $61.3 million and an increase in accrued interest receivable and other assets of $56.4 million. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information on the sale of consumer installment loans held for sale to third-party sponsored VIEs.

Cash flows provided by (used in) investing activities

Cash used in investing activities of $1.6 billion for the nine months ended September 30, 2025 primarily resulted from net increase in loans and leases, excluding mortgage finance loans of $1.3 billion, purchases of investment securities available for sale of $802.5 million, purchases of loans of $334.9 million, net origination of mortgage finance loans of $144.6 million, purchases of leased assets under lessor operating leases of $88.8 million and purchases of investment securities held to maturity of $24.0 million, partially offset by proceeds from sales of investment securities available for sale of $551.3 million, proceeds from maturities, calls, and principal repayments of investment securities available for sale of $246.2 million and held to maturity of $218.6 million.

Cash used in investing activities of $745.0 million for the nine months ended September 30, 2024 primarily resulted from purchases of investment securities available for sale of $665.8 million and CRA-qualified investment securities held to maturity of $14.8 million, net increase in loans and leases, excluding mortgage finance loans of $538.6 million, net origination of mortgage finance loans of $353.1 million, purchases of loans of $121.2 million and purchases of leased assets under lessor operating leases of $31.3 million, partially offset by proceeds from maturities, calls, and principal repayments of investment securities available for sale of $458.0 million and held to maturity of $217.3 million, proceeds from sales of investment securities available for sale of $240.8 million, proceeds from sales of loans and leases of $34.4 million, net proceeds from sale of FHLB, Federal Reserve Bank, and other restricted stock of $15.5 million and proceeds from sales of leased assets under lessor operating leases of $14.6 million.

Cash flows provided by (used in) financing activities

Cash provided by financing activities of $1.7 billion for the nine months ended September 30, 2025 primarily resulted from net increase in deposits of $1.5 billion, proceeds from long-term borrowed funds from the FHLB and the FRB of $310.0 million and proceeds from issuance of common stock of $165.9 million including $163.5 million, net of issuance costs, from reissuance of common stock in an underwritten public offering that were held as treasury stock, partially offset by repayments of long-term borrowed funds from the FHLB and the FRB of $200.0 million, redemption of preferred stock of $57.5 million, payments of employee taxes withheld from share-based awards of $12.5 million, dividends paid on preferred stock of $8.9 million and purchases of treasury stock of $5.6 million. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information on the redemption of preferred stock and reissuance of common stock that were held as treasury stock.

Customers intends to use the net proceeds from the reissuance of common stock in an underwritten public offering for general corporate purposes to support organic growth and redeem all of the outstanding shares of Series F Preferred Stock on December 15, 2025. As of September 30, 2025, 3,400,000 shares of Series F Preferred Stock with $85 million in aggregate liquidation preference were outstanding. The redemption price of the Series F Preferred Stock is $25.00 per share, plus the per share amount of any declared and unpaid dividends.

Cash used in financing activities of $25.0 million for the nine months ended September 30, 2024 primarily resulted from repayments of long-term borrowed funds from the FHLB and the FRB of $250.0 million, repayments of other long-term borrowings of $25.0 million, purchases of treasury stock of $18.2 million and dividends paid on preferred stock of $11.5 million, partially offset by proceeds from long-term borrowed funds from the FHLB and the FRB of $155.0 million and a net increase in deposits of $128.4 million.

CAPITAL ADEQUACY

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

In first quarter 2020, the U.S federal banking regulatory agencies permitted banking organizations to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 31, 2020, the U.S. federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allowed banking organizations to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. Customers elected to adopt the interim final rule, which is reflected in the regulatory capital data presented below. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million was phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of September 30, 2025, our regulatory capital ratios reflected the full impact of the CECL transition provisions.

Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Bancorp to maintain minimum amounts and ratios (set forth in the following table) of common equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). At September 30, 2025 and December 31, 2024, the Bank and the Bancorp met all capital adequacy requirements to which they were subject.

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

(dollars in thousands)

The Basel III Capital Rules require that we maintain a 2.500% capital conservation buffer with respect to each of common equity Tier 1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. As of September 30, 2025, the Bank and the Bancorp were in compliance with the Basel III requirements.

Effect of Government Monetary Policies

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

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 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. 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. 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). 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.

In the three months ended June 30, 2025, Customers transitioned to a new balance sheet forecasting model used to determine and manage interest rate risk. The Bank made this change to enhance the modeling of sensitivity to interest rates. Principal assumptions including those of investment performance, loan prepayments and deposit modeling were enhanced resulting in differences from the previous model.

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

Through the use of income scenario modeling, Customers has estimated the net interest income for the twelve months ending September 30, 2026 and December 31, 2025, based upon the assets, liabilities and off-balance sheet financial instruments including derivatives in existence at September 30, 2025 and December 31, 2024.

Customers has also estimated changes to that projected twelve-month net interest income based upon implied forward interest rates rising or falling immediately (“rate shocks”). For upward rate shocks modeling a rising rate environment at September 30, 2025 and December 31, 2024, 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. For downward rate shocks modeling a falling rate environment at September 30, 2025 and December 31, 2024, 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. 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 twelve months ending September 30, 2026 and December 31, 2025, resulting from changes in interest rates under the new balance sheet forecasting model:

Net change in net interest income

93

EVE considers a longer-term horizon and estimates the hypothetical discounted net present value of asset and liability cash flows. Discount rates are based upon market prices for comparable assets and liabilities. Upward and downward rate shocks are used to measure sensitivity of EVE in relation to a constant rate environment using implied forward interest rates. For upward rate shocks modeling a rising rate environment at September 30, 2025 and December 31, 2024, 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. For downward rate shocks modeling a falling rate environment at September 30, 2025 and December 31, 2024, 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 decreased by 100, 200 and 300 basis points. 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 September 30, 2025 and December 31, 2024, resulting from shocks to interest rates under the new balance sheet forecasting model:

Management believes that the assumptions and combination of methods used in evaluating interest rate risk in the new balance sheet forecasting model as described above 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.

(a) Management’s Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, Customers Bancorp carried out an evaluation, under the supervision and with the participation of Customers Bancorp’s management, including Customers Bancorp’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Customers Bancorp’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Customers Bancorp’s disclosure controls and procedures were effective as of September 30, 2025.

(b) Changes in Internal Control Over Financial Reporting. During the quarter ended September 30, 2025, there have been no changes in Customers Bancorp’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Customers Bancorp’s internal control over financial reporting.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Risk Factors” included within the 2024 Form 10-K. There are no material changes from the risk factors included within the 2024 Form 10-K. The risks described within the 2024 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Refer to “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Note Regarding Forward-Looking Statements.”