Investment Securities

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

The amortized cost and approximate fair value of investment securities as of June 30, 2019 and December 31, 2018 are summarized in the tables below:



	June 30, 2019
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale debt securities:
Agency-guaranteed residential mortgage-backed securities	$	299,370	$	2,023	$	(2	)	$	301,391
Corporate notes ⁽¹⁾	381,267		8,574		(1,403		)	388,438
Available-for-sale debt securities	$	680,637	$	10,597	$	(1,405	)	689,829
Interest-only classes of agency-guaranteed home equity conversion mortgage-backed securities ⁽²⁾								17,157
Equity securities⁽³⁾								1,373
Total investment securities, at fair value								$	708,359



	December 31, 2018
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale debt securities:
Agency-guaranteed residential mortgage-backed securities	$	311,267	$	—	$	(5,893	)	$	305,374
Corporate notes ⁽¹⁾	381,407		920		(24,407		)	357,920
Available-for-sale debt securities	$	692,674	$	920	$	(30,300	)	663,294
Equity securities ⁽³⁾								1,718
Total investment securities, at fair value								$	665,012


(1)	Includes corporate securities issued by other domestic and foreign bank holding companies.


(2)	Reported at fair value with fair value changes recorded in non-interest income based on a fair value option election.


(3)	Includes equity securities issued by a foreign entity.

On June 28, 2019, Customers obtained ownership of certain interest-only classes of Ginnie Mae guaranteed home equity conversion mortgage-backed securities ("interest-only GNMA securities") that served as the primary collateral for loans made to one commercial mortgage warehouse customer through a Uniform Commercial Code private sale transaction. In connection with the acquisition of the interest-only GNMA securities, Customers recognized a pre-tax loss of $7.5 million for the three and six months ended June 30, 2019 for the shortfall in the fair value of the interest-only GNMA securities compared to its credit exposure to this commercial mortgage warehouse customer. On June 28, 2019, Customers elected the fair value option for these interest-only GNMA securities acquired on such date. The fair value of these securities at June 30, 2019 was $17.2 million.

There were no sales of available-for-sale debt securities or equity securities for the three and six months ended June 30, 2019 and 2018.

The following table shows debt securities by stated maturity. Debt securities backed by mortgages and interest-only GNMA securities have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay and, therefore, these debt securities are classified separately with no specific maturity date:



	June 30, 2019
(amounts in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	379,267		386,316
Due after ten years	2,000		2,122
Agency-guaranteed residential mortgage-backed securities	299,370		301,391
Interest-only classes of agency-guaranteed home equity conversion mortgage-backed securities	—		17,157
Total debt securities	$	680,637	$	706,986

Gross unrealized losses and fair value of Customers' available-for-sale debt securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2019 and December 31, 2018 were as follows:



	June 30, 2019
	Less Than 12 Months				12 Months or More					Total
(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale debt securities:
Agency-guaranteed residential mortgage-backed securities	$	—	$	—	$	64,296	$	(2	)	$	64,296	$	(2	)
Corporate notes	—		—		74,492		(1,403		)	74,492		(1,403		)
Total	$	—	$	—	$	138,788	$	(1,405	)	$	138,788	$	(1,405	)



	December 31, 2018
	Less Than 12 Months					12 Months or More				Total
(amounts in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-sale debt securities:
Agency-guaranteed residential mortgage-backed securities	$	305,374	$	(5,893	)	$	—	$	—	$	305,374	$	(5,893	)
Corporate notes	310,036		(24,407		)	—		—		310,036		(24,407		)
Total	$	615,410	$	(30,300	)	$	—	$	—	$	615,410	$	(30,300	)

At June 30, 2019, there were no available-for-sale debt securities with unrealized losses in the less-than-twelve-month category and seven available-for-sale debt securities with unrealized losses in the twelve-month-or-more category. The unrealized losses on the mortgage-backed securities are guaranteed by government-sponsored entities and primarily relate to changes in market interest rates. The unrealized losses on the corporate notes relate to securities with no company specific concentration. The unrealized losses were principally due to an upward shift in interest rates since the time of purchase that resulted in a negative impact on the respective security's fair value. All amounts related to the mortgage-backed securities and the corporate notes are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell these securities and it is not more likely than not that Customers will be required to sell the securities before recovery of the amortized cost basis.

At June 30, 2019 and December 31, 2018, Customers Bank had pledged investment securities aggregating $22.6 million and $23.0 million in fair value, respectively, as collateral against its borrowings primarily with the FHLB and an unused line of credit with another financial institution. These counterparties do not have the ability to sell or repledge these securities.

At June 30, 2019 and December 31, 2018, no securities holding of any one issuer, other than the U.S. Government and its agencies, amounted to greater than 10% of shareholders' equity.