BUSINESS SEGMENTS

Customers' segment financial reporting reflects the manner in which its chief operating decision makers allocate resources and assess performance. 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, commercial mortgage companies and equipment finance. 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 bank 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 described in NOTE 2 - ACQUISITION ACTIVITY.

The following tables present the operating results for Customers' reportable business segments for the years ended December 31, 2017, 2016 and 2015. 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 37.67% for year ended December 31, 2017, and 38% for the years ended December 31, 2016 and 2015, respectively.



	For the Year Ended December 31, 2017
(amounts in thousands)	Community Business Banking		BankMobile			Consolidated
Interest income ⁽¹⁾	$	359,931	$	12,919		$	372,850
Interest expense	105,438		69			105,507
Net interest income	254,493		12,850			267,343
Provision for loan losses	5,638		1,130			6,768
Non-interest income	24,788		54,122			78,910
Non-interest expense	128,604		87,002			215,606
Income (loss) before income taxes	145,039		(21,160		)	123,879
Income tax expense (benefit)	53,013		(7,971		)	45,042
Net income (loss)	92,026		(13,189		)	78,837
Preferred stock dividends	14,459		—			14,459
Net income (loss) available to common shareholders	$	77,567	$	(13,189	)	$	64,378

Goodwill and other intangibles	$	3,630	$	12,665		$	16,295
Total assets	$	9,769,996	$	69,559		$	9,839,555
Total deposits	$	6,400,310	$	399,832		$	6,800,142
Total non-deposit liabilities	$	2,106,919	$	11,530		$	2,118,449



	For the Year Ended December 31, 2016
(amounts in thousands)	Community Business Banking		BankMobile			Consolidated
Interest income ⁽¹⁾	$	315,643	$	6,896		$	322,539
Interest expense	73,004		38			73,042
Net interest income	242,639		6,858			249,497
Provision for loan losses	2,246		795			3,041
Non-interest income	23,165		33,205			56,370
Non-interest expense ⁽²⁾	130,394		47,837			178,231
Income (loss) before income taxes	133,164		(8,569		)	124,595
Income tax expense (benefit) ⁽²⁾	49,149		(3,256		)	45,893
Net income (loss)	84,015		(5,313		)	78,702
Preferred stock dividends	9,515		—			9,515
Net income (loss) available to common shareholders	$	74,500	$	(5,313	)	$	69,187

Goodwill and other intangibles	$	3,639	$	13,982		$	17,621
Total assets	$	9,303,465	$	79,271		$	9,382,736
Total deposits	$	6,846,980	$	456,795		$	7,303,775
Total non-deposit liabilities	$	1,195,087	$	28,002		$	1,223,089

(1) - Amounts reported include funds transfer pricing of $12.9 million and $6.9 million, respectively, for the years ended December 31, 2017 and 2016, credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no-cost deposits.

(2) - Includes an $0.8 million inter-segment reclassification of previously reported Community Business Banking and BankMobile segment non-interest expenses, and related income tax effects, as a result of the reallocation of certain segment expenses in 2016 to be consistent with year ended December 31, 2017, presentation.



	For the Year Ended December 31, 2015
(amounts in thousands)	Community Business Banking		BankMobile			Consolidated
Interest income ⁽¹⁾	$	243,404	$	6,446		$	249,850
Interest expense	53,536		24			53,560
Net interest income	189,868		6,422			196,290
Provision for loan losses	20,562		4			20,566
Non-interest income	27,573		144			27,717
Non-interest expense	107,569		7,377			114,946
Income (loss) before income taxes	89,310		(815		)	88,495
Income tax expense (benefit)	30,221		(309		)	29,912
Net income (loss)	59,089		(506		)	58,583
Preferred stock dividends	2,493		—			2,493
Net income (loss) available to common shareholders	$	56,596	$	(506	)	$	56,090

Goodwill and other intangibles	$	3,651	$	—		$	3,651
Total assets	$	8,395,525	$	2,680		$	8,398,205
Total deposits	$	5,662,433	$	247,068		$	5,909,501
Total non-deposit liabilities	$	1,934,731	$	71		$	1,934,802

(1) - Amounts reported include funds transfer pricing of $6.4 million for the year ended December 31, 2015, credited to BankMobile for the value provided to the Community Business Banking segment for the use of low/no-cost deposits.