
(amounts in thousands)	March 31, 2020		December 31, 2019
Loans and leases receivable, mortgage warehouse, at fair value	$	2,518,012	$	2,245,758
Loans receivable:
Commercial:
Multi-family	1,621,633		1,907,331
Commercial and industrial ⁽¹⁾	2,072,952		1,891,152
Commercial real estate owner occupied	543,945		551,948
Commercial real estate non-owner occupied	1,252,826		1,222,772
Construction	115,448		117,617
Total commercial loans and leases receivable	5,606,804		5,690,820
Consumer:
Residential real estate	362,047		382,634
Manufactured housing	69,240		71,359
Other consumer	1,315,171		1,174,175
Total consumer loans receivable	1,746,458		1,628,168
Loans and leases receivable ⁽²⁾	7,353,262		7,318,988

Allowance for credit losses	(149,283)		(56,379)
Total loans and leases receivable, net of allowance for credit losses	$	9,721,991	$	9,508,367

Customers' total loans and leases receivable portfolio includes loans receivable which are reported at fair value based on an election made to account for these loans at fair value and loans and leases receivable which are predominately reported at their outstanding unpaid principal balance, net of charge-offs and deferred costs and fees and unamortized premiums and discounts and are evaluated for impairment. The total amount of accrued interest recorded for total loans was $36.3 million and $34.8 million at March 31, 2020 and December 31, 2019, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At March 31, 2020, there were $56.5 million of individually evaluated loans that were collateral-dependent. Substantially all individually evaluated loans are collateral-dependent and consisted primarily of commercial and industrial, commercial real estate, and residential real estate loans. Collateral-dependent commercial and industrial loans were secured by accounts receivable, inventory and equipment; collateral-dependent commercial real estate loans were secured by commercial real estate assets; and residential real estate loans were secured by residential real estate assets. There were no significant changes in collateral values during the three months ended March 31, 2020.

Subsequent to March 31, 2020, Customers decided to sell a commercial real estate loan collateralized by a Class A office building in northern New Jersey. At March 31, 2020, this collateral dependent loan has been charged down to its estimated fair value of $19.1 million.

Mortgage warehouse loans consist of commercial loans to mortgage companies. These mortgage warehouse lending transactions are subject to master repurchase agreements. As a result of the contractual provisions, for accounting purposes control of the underlying mortgage loan has not transferred and the rewards and risks of the mortgage loans are not assumed by Customers. The mortgage warehouse loans are designated as loans held for investment and reported at fair value based on an election made to account for the loans at fair value. Pursuant to the agreements, Customers funds the pipelines for these mortgage lenders by sending payments directly to the closing agents for funded mortgage loans and receives proceeds directly from third party investors when the underlying mortgage loans are sold into the secondary market. The fair value of the mortgage warehouse loans is estimated as the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The interest rates on these loans are variable, and the lending transactions are short-term, with an average life under 30 days from purchase to sale. The primary goal of these lending transactions is to provide liquidity to mortgage companies.


	March 31, 2020
(amounts in thousands)	30-59 Days past due		60-89 Days past due		90 Days or more past due		Total past due		Loans and leases not past due ⁽²⁾		Total loans and leases⁽³⁾
Multi-family	$	2,378	$	—	$	4,021	$	6,399	$	1,615,234	$	1,621,633
Commercial and industrial	1,332		659		10,182		12,173		2,060,779		2,072,952
Commercial real estate owner occupied	4,391		971		2,740		8,102		535,843		543,945
Commercial real estate non-owner occupied	30,723		—		21,470		52,193		1,200,633		1,252,826
Construction	—		—		—		—		115,448		115,448
Residential real estate	5,253		68		6,248		11,569		350,478		362,047
Manufactured housing ⁽⁵⁾	2,138		962		5,089		8,189		61,051		69,240
Other consumer	6,502		3,725		2,527		12,754		1,302,417		1,315,171
Total	$	52,717	$	6,385	$	52,277	$	111,379	$	7,241,883	$	7,353,262


	December 31, 2019
(amounts in thousands)	30-89 Days past due ⁽¹⁾		90 Days or more past due ⁽¹⁾		Total past due ⁽¹⁾		Non-accrual		Current ⁽²⁾		Purchased-credit-impaired loans ⁽⁴⁾		Total loans and leases ⁽⁵⁾
Multi-family	$	2,133	—		$	2,133	$	4,117	$	1,901,336	$	1,688	$	1,909,274
Commercial and industrial	2,395		—		2,395		4,531		1,882,700		354		1,889,980
Commercial real estate owner occupied	5,388		—		5,388		1,963		537,992		6,664		552,007
Commercial real estate non-owner occupied	8,034		—		8,034		76		1,211,892		3,527		1,223,529
Construction	—		—		—		—		118,418		—		118,418
Residential real estate	5,924		—		5,924		6,128		359,491		3,471		375,014
Manufactured housing	3,699		1,794		5,493		1,655		61,649		1,601		70,398
Other consumer	5,756		$	—	5,756		1,551		1,170,793		183		1,178,283
Total	$	33,329	$	1,794	$	35,123	$	20,021	$	7,244,271	$	17,488	$	7,316,903

(4)Purchased-credit-impaired loans aggregated into a pool are accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, and the past due status of the pools, or that of the individual loans within the pools, is not meaningful. Due to the credit impaired nature of the loans, the loans are recorded at a discount reflecting estimated future cash flows and the Bank recognizes interest income on each pool of loans reflecting the estimated yield and passage of time. Such loans are considered to be performing. Purchased-credit-impaired loans that are not in pools accrete interest when the timing and amount of their expected cash flows are reasonably estimable, and are reported as performing loans.

As of both March 31, 2020 and December 31, 2019, the Bank had $0.1 million and $0.2 million, respectively, of residential real estate held in OREO. As of both March 31, 2020 and December 31, 2019, the Bank had initiated foreclosure proceedings on $0.9 million, respectively, in loans secured by residential real estate.


	March 31, 2020 ⁽¹⁾										December 31, 2020 ⁽²⁾
(amounts in thousands)	Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans		Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans
Multi-family	$	4,020	$	—	$	4,020	$	4,117	$	—	$	4,117
Commercial and industrial	8,967		1,026		9,993		3,083		1,448		4,531
Commercial real estate owner occupied	2,371		40		2,411		1,109		854		1,963
Commercial real estate non-owner occupied	21,479		—		21,479		76		—		76
Construction	—		—		—		—		—		—
Residential real estate	4,730		1,324		6,054		4,559		1,569		6,128
Manufactured housing	—		2,558		2,558		—		1,655		1,655
Other consumer	270		2,249		2,519		140		1,411		1,551
Total	$	41,837	$	7,197	$	49,034	$	13,084	$	6,937	$	20,021


Three Months Ended March 31, 2020	Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Other consumer		Total
(amounts in thousands)
Beginning balance, at December 31, 2019	$	6,157	$	15,556	$	2,235	$	6,243	$	1,262	$	3,218	$	1,060	$	20,648	$	56,379
Cumulative effect of change in accounting principle	2,171		759		5,773		7,918		(98)		1,518		3,802		57,986		79,829

Charge-offs	—		(97)		—		(12,797)		—		—		—		(6,246)		(19,140)
Recoveries	—		54		3		—		3		29		—		340		429
Provision for credit loss expense	422		2,534		516		17,166		767		(585)		125		10,841		31,786
Total ending allowance balance	$	8,750	$	18,806	$	8,527	$	18,530	$	1,934	$	4,180	$	4,987	$	83,569	$	149,283


Three Months Ended March 31, 2019	Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Other consumer		Total
(amounts in thousands)
Ending Balance, December 31, 2018	$	11,462	$	12,145	$	3,320	$	6,093	$	624	$	3,654	$	145	$	2,529	$	39,972
Charge-offs	(541)		—		(8)		—		—		(40)		—		(755)		(1,344)

Recoveries	—		119		128		—		6		7		—		24		284
Provision for loan and lease losses	(291)		383		(15)		(78)		(46)		2,951		(28)		1,891		4,767
Ending Balance, March 31, 2019	$	10,630	$	12,647	$	3,425	$	6,015	$	584	$	6,572	$	117	$	3,689	$	43,679

At March 31, 2020, the ACL was $149.3 million, an increase of $13.1 million from the January 1, 2020 balance of $136.2 million. The increase resulted primarily from the impact of reserve build for the COVID-19 pandemic, an increase in net charge-offs, mostly attributed to the commercial real estate non-owner occupied and other consumer portfolios, and portfolio growth. Commercial real estate non-owner occupied charge-offs is attributable to one collateral dependent loan. Other consumer charge-offs is attributable to delinquencies and defaults of originated and purchased unsecured consumer loans through arrangements with fintech companies and other market place lenders.

At March 31, 2020 and December 31, 2019, there were $13.5 million and $13.3 million, respectively, in loans reported as TDRs. TDRs are reported as impaired loans in the calendar year of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent years, a TDR may be returned to accrual status if it satisfies a minimum performance requirement of six months, however, it will remain classified as impaired. Generally, the Bank requires sustained performance for nine months before returning a TDR to accrual status. Customers had no lease receivables that had been restructured as a TDR as of March 31, 2020 and December 31, 2019, respectively.

The CARES Act and certain regulatory agencies recently issued guidance stating certain loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by COVID-19 may not be required to be treated as TDRs under U.S GAAP. For COVID-19 related loan modifications which occurred in March 2020, and met the loan modification criteria under either the CARES Act or the criteria specified by the regulatory agencies, Customers elected to suspend TDR accounting for such loan modifications.


	March 31, 2020				March 31, 2019
(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment
Manufactured housing	—	$	—	5	$	137
Commercial and industrial	—	—		1	431
Commercial real estate owner occupied	1	8		—	—
Residential real estate	5	684		—	—
Total loans	6	$	692	6	$	568

Customers adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration that were previously classified as PCI and accounted for under ASC 310-30. In accordance with the standard, Customers did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $0.2 million of the allowance for credit losses on PCD loans and leases. The remaining noncredit discount of $0.3 million, based on the adjusted amortized cost basis, will be accreted into interest income at the effective interest rate as of January 1, 2020. As of March 31, 2020, the amortized cost basis of PCD assets amounted to $16.6 million.

The ACL represents management's estimate of probable losses in Customers' loans and leases receivable portfolio, excluding commercial mortgage warehouse loans reported at fair value pursuant to a fair value option election. Multi-family, commercial and industrial, owner occupied commercial real estate, non-owner occupied commercial real estate, and construction loans are rated based on an internally assigned risk rating system which is assigned at the time of loan origination and reviewed on a periodic, or on an “as needed” basis. Residential real estate loans, manufactured housing and other consumer loans are evaluated based on the payment activity of the loan.

To facilitate the monitoring of credit quality within the multi-family, commercial and industrial, owner occupied commercial real estate, non-owner occupied commercial real estate, and construction loan portfolios, and as an input in the ACL lifetime loss rate model for the C&I portfolio, the Bank utilizes the following categories of risk ratings: pass/satisfactory (includes risk rating 1 through 6), special mention, substandard, doubtful, and loss. The risk rating categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass/satisfactory ratings, which are assigned to those borrowers who do not have identified potential or well-defined weaknesses and for whom there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on a quarterly basis during the month preceding the end of the calendar quarter. While assigning risk ratings involves judgment, the risk-rating process allows management to identify riskier credits in a timely manner and allocate the appropriate resources to manage those loans and leases. The 2019 Form 10-K describes Customers Bancorp’s risk rating grades.

Risk ratings are not established for certain consumer loans, including residential real estate, home equity, manufactured housing, and installment loans, mainly because these portfolios consist of a larger number of homogeneous loans with smaller balances. Instead, these portfolios are evaluated for risk mainly based upon aggregate payment history through the monitoring of delinquency levels and trends and are classified as performing and non-performing. The following tables present the credit ratings of loans and leases receivable as of March 31, 2020 and December 31, 2019.


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
As of March 31, 2020
Multi-family:
Risk rating
Pass	$	26,646	$	23,689	$	172,088	$	445,613	$	329,586	$	569,400	$	—	$	—	$	1,567,022
Special mention	—		—		—		19,510		1,968		—		—		—		21,478
Substandard	—		—		—		12,028		13,904		7,201		—		—		33,133
Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family loans	$	26,646	$	23,689	$	172,088	$	477,151	$	345,458	$	576,601	$	—	$	—	$	1,621,633


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
As of March 31, 2020
Commercial and industrial:
Risk rating
Pass	$	323,338	$	491,492	$	183,202	$	120,795	$	55,483	$	101,805	$	718,827	$	—	$	1,994,942
Special mention	—		7,788		2,403		17,652		120		26		20,800		—		48,789
Substandard	—		5,576		276		1,760		7,774		3,318		10,517		—		29,221
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans and leases	$	323,338	$	504,856	$	185,881	$	140,207	$	63,377	$	105,149	$	750,144	$	—	$	2,072,952


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
As of March 31, 2020
Commercial real estate owner occupied:
Risk rating
Pass	$	18,672	$	184,756	$	90,261	$	82,509	$	49,074	$	102,449	$	1,672	$	—	$	529,393
Special mention	—		—		483		114		—		399		—		—		996
Substandard	—		—		—		350		2,266		10,940		—		—		13,556
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate owner occupied loans	$	18,672	$	184,756	$	90,744	$	82,973	$	51,340	$	113,788	$	1,672	$	—	$	543,945


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
As of March 31, 2020
Commercial real estate non-owner occupied:
Risk rating
Pass	$	74,905	$	118,164	$	118,424	$	249,784	$	201,214	$	412,250	$	—	$	—	$	1,174,741
Special mention	—		—		—		—		374		4,201		—		—		4,575
Substandard	—		—		30,772		—		2,080		21,608		—		—		54,460
Doubtful	—		—		—		—		19,050		—		—		—		19,050
Total commercial real estate non-owner occupied loans	$	74,905	$	118,164	$	149,196	$	249,784	$	222,718	$	438,059	$	—	$	—	$	1,252,826


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
As of March 31, 2020
Construction:
Risk rating
Pass	$	451	$	83,774	$	20,241	$	—	$	9,886	$	—	$	1,096	$	—	$	115,448
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total construction loans	$	451	$	83,774	$	20,241	$	—	$	9,886	$	—	$	1,096	$	—	$	115,448


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
As of March 31, 2020
Residential real estate:
Payment performance
Performing	$	1,527	$	15,164	$	8,103	$	14,644	$	47,557	$	86,675	$	182,652	$	—	$	356,322
Non-performing	—		—		161		160		860		4,117		427		—		5,725
Total residential real estate loans	$	1,527	$	15,164	$	8,264	$	14,804	$	48,417	$	90,792	$	183,079	$	—	$	362,047


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
As of March 31, 2020
Manufactured housing:
Payment performance
Performing	$	—	$	312	$	643	$	81	$	44	$	64,782	$	—	$	—	$	65,862
Non-performing	—		—		—		—		—		3,378		—		—		3,378
Total manufactured housing loans	$	—	$	312	$	643	$	81	$	44	$	68,160	$	—	$	—	$	69,240


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
As of March 31, 2020
Other consumer:
Payment performance
Performing	$	122,726	$	1,034,536	$	147,669	$	7,004	$	762	$	55	$	—	$	—	$	1,312,752
Non-performing	—		1,785		618		16		—		—		—		—		2,419
Total other consumer loans	$	122,726	$	1,036,321	$	148,287	$	7,020	$	762	$	55	$	—	$	—	$	1,315,171


	December 31, 2019
(amounts in thousands)	Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Other consumer		Total ⁽³⁾
Pass/Satisfactory	$	1,816,200	$	1,841,074	$	536,777	$	1,129,838	$	118,418	$	—	$	—	$	—	$	5,442,307
Special Mention	69,637		26,285		8,286		6,949		—		—		—		—		111,157
Substandard	23,437		22,621		6,944		86,742		—		—		—		—		139,744
Performing ⁽¹⁾	—		—		—		—		—		362,962		63,250		1,170,976		1,597,188
Non-performing ⁽²⁾	—		—		—		—		—		12,052		7,148		7,307		26,507
Total	$	1,909,274	$	1,889,980	$	552,007	$	1,223,529	$	118,418	$	375,014	$	70,398	$	1,178,283	$	7,316,903

(2)Other consumer loan purchases for the three months ended March 31, 2020 consist of third-party originated unsecured consumer loans. None of the loans are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.