BUSINESS SEGMENTS

Customers has historically operated under one business segment, "Community Banking." However, beginning in third quarter 2016, Customers revised its segment financial reporting to reflect the manner in which its chief operating decision makers (our Chief Executive Officer and Board of Directors) have begun allocating resources and assessing performance subsequent to Customers' acquisition of the Disbursement business from Higher One and the combination of that business with the BankMobile technology platform late in second quarter 2016.

Management has determined that Customers' operations consist of two reportable segments - Community Business Banking and BankMobile. Each segment generates revenues, manages risk, and offers distinct products and services to targeted customers through different delivery channels. The strategy, marketing, and analysis of these segments vary considerably.

The Community Business Banking segment is delivered predominately to commercial customers in Southeastern Pennsylvania, New York, New Jersey, Massachusetts, Rhode Island and New Hampshire through a single point of contact business model and provides liquidity to residential mortgage originators nationwide through commercial loans to mortgage companies. Lending and deposit gathering activities are focused primarily on privately held businesses, high net worth families, selected commercial real estate lending, and commercial mortgage companies. Revenues are generated primarily through net interest income (the difference between interest earned on loans, investments, and other interest earning assets and interest paid on deposits and other borrowed funds) and other non-interest income, such as mortgage warehouse transactional fees and bank owned life insurance.

The BankMobile segment provides state of the art high tech digital banking and disbursement services to consumers, students, and the "under banked" nationwide. BankMobile, as a division of Customers Bank, is a full service banking platform that is accessible to customers anywhere and anytime through the customer's smartphone or other web-enabled device. Revenues are currently being generated primarily through interchange and card revenue, deposit and wire transfer fees and university fees. The majority of revenue and expenses for BankMobile are a result of the Disbursement business acquisition.

The following tables present the operating results for Customers' reportable business segments for the three and six months ended June 30, 2017 and 2016. Customers has presented the financial information and disclosures for prior periods to reflect the segment disclosures as if they had been in effect for the periods presented. The segment financial results include directly attributable revenues and expenses. Corporate overhead costs are assigned to the Community Business Banking segment as those expenses are expected to continue following the planned disposition of BankMobile. Similarly, the preferred stock dividends have been allocated in their entirety to the Community Business Banking segment. The tax benefit assigned to BankMobile was based on an estimated effective tax rate of 38%.

In third quarter 2016, Customers announced its intent to sell BankMobile. Customers anticipates a sale to close within one year. Because BankMobile met the criteria to be classified as held for sale at June 30, 2017, the assets and liabilities of BankMobile have been presented as "Assets held for sale," "Non-interest bearing deposits held for sale" and "Other liabilities held for sale" on the consolidated balance sheets at June 30, 2017 and December 31, 2016. BankMobile's operating results and associated cash flows have been presented as "Discontinued operations" within the accompanying consolidated financial statements and prior period amounts have been reclassified to conform with the current period presentation. For more information on BankMobile discontinued operations, see NOTE 3 - DISCONTINUED OPERATIONS.

The BankMobile segment results presented below differ from the amounts reported as "Discontinued operations" on the consolidated financial statements primarily because of the internal funds transfer pricing methodology used by management to allocate interest income to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.



	Three Months Ended June 30, 2017
	Community Business Banking		BankMobile					Consolidated
Interest income	$	91,107	$	2,745		⁽¹	⁾	$	93,852
Interest expense	25,228		18					25,246
Net interest income	65,879		2,727					68,606
Provision for loan losses	535		—					535
Non-interest income	6,971		11,420					18,391
Non-interest expense	30,567		19,846					50,413
Income (loss) before income tax expense (benefit)	41,748		(5,699		)			36,049
Income tax expense (benefit)	14,493		(2,166		)			12,327
Net income (loss)	27,255		(3,533		)			23,722
Preferred stock dividends	3,615		—					3,615
Net income (loss) available to common shareholders	$	23,640	$	(3,533	)			$	20,107



	Three Months Ended June 30, 2016
	Community Business Banking		BankMobile					Consolidated
Interest income	$	80,011	$	1,309		⁽¹	⁾	$	81,320
Interest expense	18,156		7					18,163
Net interest income	61,855		1,302					63,157
Provision for loan losses	786		—					786
Non-interest income	5,853		2,403					8,256
Non-interest expense	32,085		6,095					38,180
Income (loss) before income tax expense (benefit)	34,837		(2,390		)			32,447
Income tax expense (benefit)	13,872		(908		)			12,964
Net income (loss)	20,965		(1,482		)			19,483
Preferred stock dividends	2,062		—					2,062
Net income (loss) available to common shareholders	$	18,903	$	(1,482	)			$	17,421

(1) - Amounts reported include funds transfer pricing of $2.7 million and 1.3 million for the three months ended June 30, 2017 and 2016, respectively, credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.



	Six Months Ended June 30, 2017
	Community Business Banking		BankMobile					Consolidated
Interest income	$	169,938	$	7,008		⁽¹	⁾	$	176,946
Interest expense	45,883		39					45,922
Net interest income	124,055		6,969					131,024
Provision for loan losses	3,585		—					3,585
Non-interest income	12,398		28,746					41,144
Non-interest expense	60,714		39,064					99,778
Income before income tax expense (benefit)	72,154		(3,349		)			68,805
Income tax expense (benefit)	20,609		(1,273		)			19,336
Net income (loss)	51,545		(2,076		)			49,469
Preferred stock dividends	7,229		—					7,229
Net income (loss) available to common shareholders	$	44,316	$	(2,076	)			$	42,240

As of June 30, 2017
Goodwill and other intangibles	$	3,633	$	13,982				$	17,615
Total assets	$	10,815,752	$	67,796		⁽²	⁾	$	10,883,548
Total deposits	$	7,021,922	$	453,441				$	7,475,363



	Six Months Ended June 30, 2016
	Community Business Banking		BankMobile					Consolidated
Interest income	$	151,684	$	3,034		⁽¹	⁾	$	154,718
Interest expense	33,920		14					33,934
Net interest income	117,764		3,020					120,784
Provision for loan losses	2,766		—					2,766
Non-interest income	11,121		2,630					13,751
Non-interest expense	63,957		8,130					72,087
Income (loss) before income tax expense (benefit)	62,162		(2,480		)			59,682
Income tax expense (benefit)	22,957		(942		)			22,015
Net income (loss)	39,205		(1,538		)			37,667
Preferred stock dividends	3,348		—					3,348
Net income (loss) available to common shareholders	$	35,857	$	(1,538	)			$	34,319

As of June 30, 2016
Goodwill and other intangibles	$	3,645	$	13,552				$	17,197
Total assets	$	9,617,524	$	67,101		⁽²	⁾	$	9,684,625
Total deposits	$	6,511,240	$	240,020				$	6,751,260

(1) - Amounts reported include funds transfer pricing of $7.0 million and $3.0 million for the six months ended June 30, 2017 and 2016, respectively, credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no cost deposits.

(2) - Amounts reported exclude intra company receivables.