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 nine months ended September 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 spin-off 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 37.25% for 2017 and 38% for 2016.

BankMobile, previously presented as discontinued operations in the financial statements due to Customers' stated intent to sell the business, was reclassified as held and used at September 30, 2017. As of September 30, 2017, Customers has decided to spin off BankMobile to Customers’ shareholders through a spin-off/merger transaction which is currently being negotiated. For more information on BankMobile's reclassification, see NOTE 3 - TAX-FREE SPIN-OFF AND MERGER.



	Three Months Ended September 30, 2017
	Community Business Banking		BankMobile					Consolidated
Interest income	$	95,585	$	2,700		⁽¹	⁾	$	98,285
Interest expense	30,250		16					30,266
Net interest income	65,335		2,684					68,019
Provision for loan losses	1,874		478					2,352
Non-interest income	4,190		13,836					18,026
Non-interest expense	33,990		27,050					61,040
Income (loss) before income tax expense (benefit)	33,661		(11,008		)			22,653
Income tax expense (benefit)	18,999		(4,100		)			14,899
Net income (loss)	14,662		(6,908		)			7,754
Preferred stock dividends	3,615		—					3,615
Net income (loss) available to common shareholders	$	11,047	$	(6,908	)			$	4,139



	Three Months Ended September 30, 2016
	Community Business Banking			BankMobile					Consolidated
Interest income	$	82,828		$	1,384		⁽¹	⁾	$	84,212
Interest expense	19,620			7					19,627
Net interest income	63,208			1,377					64,585
Provision for loan losses	(162		)	250					88
Non-interest income	11,121			16,365					27,486
Non-interest expense	36,864			19,354					56,218
Income (loss) before income tax expense (benefit)	37,627			(1,862		)			35,765
Income tax expense (benefit)	15,266			(708		)			14,558
Net income (loss)	22,361			(1,154		)			21,207
Preferred stock dividends	2,552			—					2,552
Net income (loss) available to common shareholders	$	19,809		$	(1,154	)			$	18,655

(1) - Amounts reported include funds transfer pricing of $2.7 million and 1.4 million for the three months ended September 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.



	Nine Months Ended September 30, 2017
	Community Business Banking		BankMobile					Consolidated
Interest income	$	265,524	$	9,708		⁽¹	⁾	$	275,232
Interest expense	76,134		55					76,189
Net interest income	189,390		9,653					199,043
Provision for loan losses	5,459		478					5,937
Non-interest income	16,587		42,583					59,170
Non-interest expense	94,704		66,114					160,818
Income before income tax expense (benefit)	105,814		(14,356		)			91,458
Income tax expense (benefit)	39,584		(5,348		)			34,236
Net income (loss)	66,230		(9,008		)			57,222
Preferred stock dividends	10,844		—					10,844
Net income (loss) available to common shareholders	$	55,386	$	(9,008	)			$	46,378

As of September 30, 2017
Goodwill and other intangibles	$	3,632	$	12,972				$	16,604
Total assets	$	10,405,452	$	66,377		⁽²	⁾	$	10,471,829
Total deposits	$	6,815,994	$	781,082				$	7,597,076



	Nine Months Ended September 30, 2016
	Community Business Banking		BankMobile					Consolidated
Interest income	$	234,513	$	4,418		⁽¹	⁾	$	238,931
Interest expense	53,539		22					53,561
Net interest income	180,974		4,396					185,370
Provision for loan losses	2,605		249					2,854
Non-interest income	22,241		18,996					41,237
Non-interest expense	101,053		27,253					128,306
Income (loss) before income tax expense (benefit)	99,557		(4,110		)			95,447
Income tax expense (benefit)	38,134		(1,562		)			36,572
Net income (loss)	61,423		(2,548		)			58,875
Preferred stock dividends	5,900		—					5,900
Net income (loss) available to common shareholders	$	55,523	$	(2,548	)			$	52,975

As of September 30, 2016
Goodwill and other intangibles	$	3,642	$	13,282				$	16,924
Total assets	$	9,532,281	$	70,329		⁽²	⁾	$	9,602,610
Total deposits	$	6,855,788	$	533,182				$	7,388,970

(1) - Amounts reported include funds transfer pricing of $9.7 million and $4.4 million for the nine months ended September 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.