Investment Securities

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIESThe amortized cost and fair value of investment securities as of September 30, 2021 and December 31, 2020 are summarized in the tables below:


	September 30, 2021 (1)
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale debt securities:
Asset-backed securities	$	225,182	$	400	$	(125)	$	225,457

Agency-guaranteed residential mortgage-backed securities	9,924		—		(258)		9,666
Agency-guaranteed commercial mortgage-backed securities	2,184		10		—		2,194
Agency-guaranteed residential collateralized mortgage obligations	102,110		174		(90)		102,194
Agency-guaranteed commercial collateralized mortgage obligations	143,858		56		(2,106)		141,808
Collateralized loan obligations	315,501		110		(109)		315,502
Commercial mortgage-backed securities	28,035		53		—		28,088
Corporate notes (2)	437,179		4,260		(547)		440,892
Private label collateralized mortgage obligations	588,017		601		(1,377)		587,241
State and political subdivision debt securities (3)	8,539		116		—		8,655

Available for sale debt securities	$	1,860,529	$	5,780	$	(4,612)	1,861,697

Equity securities (4)							5,000
Total investment securities, at fair value							$	1,866,697


	December 31, 2020 (1)
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available for sale debt securities:
Asset-backed securities	$	372,640	$	4,515	$	(10)	$	377,145
U.S. government agencies securities	20,000		34		—		20,034
Agency-guaranteed residential mortgage-backed securities	61,178		1,913		—		63,091

Agency-guaranteed residential collateralized mortgage obligations	139,985		916		(60)		140,841
Agency-guaranteed commercial collateralized mortgage obligations	20,965		—		(39)		20,926
Collateralized loan obligations	32,367		—		—		32,367
Corporate notes (2)	372,764		24,144		(164)		396,744
Private label collateralized mortgage obligations	136,943		423		(374)		136,992
State and political subdivision debt securities (3)	17,346		945		—		18,291
Available for sale debt securities	$	1,174,188	$	32,890	$	(647)	1,206,431

Equity securities (4)							3,854
Total investment securities, at fair value							$	1,210,285

(1)Accrued interest on AFS debt securities totaled $6.3 million and $4.2 million at September 30, 2021 and December 31, 2020, respectively, and is included in accrued interest receivable on the consolidated balance sheet.

(2)Includes corporate securities issued by domestic bank holding companies.

(3)Includes both taxable and non-taxable municipal securities.

(4)Includes perpetual preferred stock issued by a domestic bank without a readily determinable fair value at September 30, 2021 and equity securities issued by a foreign entity with readily determinable fair value at December 31, 2020. No impairments or measurement adjustments have been recorded on the perpetual preferred stock since acquisition.

In June 2021, Customers sold all of the outstanding shares in CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd., which held the equity securities issued by a foreign entity, for $3.8 million, and recognized $2.8 million in loss on sale of foreign subsidiaries within non-interest income on the consolidated statement of income. During the nine months ended September 30, 2021, Customers recognized $2.7 million of unrealized gains on these equity securities prior to the sale of the foreign subsidiaries. During the three and nine months ended September 30, 2020, Customers recognized unrealized gains of $0.2 million and unrealized losses of $0.1 million, respectively, on its equity securities. These unrealized gains and losses are reported as unrealized gain (loss) on investment securities within non-interest income on the consolidated statements of income.

Customers is involved with various entities in the normal course of its business that are deemed to be VIEs. Customers evaluates VIEs to understand the purpose and design of the entity, and its involvement in the ongoing activities of the VIE and will consolidate the VIE if it is deemed to be the primary beneficiary. Customers is deemed to be the primary beneficiary if it has (i) the power to direct the activities of the VIE that most significantly affect the VIE's economic performance and (ii) an obligation to absorb losses of the VIE, or the right to receive benefits from the VIE, that could potentially be significant to the VIE. Customers transactions with unconsolidated VIEs include sales of consumer installment loans and investments in the securities issued by the VIEs. Customers is not the primary beneficiary of the VIEs because Customers has no right to make decisions that will most significantly affect the economic performance of the VIEs. Customers' continuing involvement with the unconsolidated VIEs is not significant. Customers' continuing involvement is not considered to be significant where Customers only invests in securities issued by the VIE and was not involved in the design of the VIE or where Customers has transferred financial assets to the VIE for only cash consideration. Customers' investments in the securities issued by the VIEs are classified as AFS debt securities on the consolidated balance sheets, and represent Customers' maximum exposure to loss.

Proceeds from the sale of AFS securities were $258.4 million and $666.0 million for the three and nine months ended September 30, 2021, respectively. Proceeds from the sale of AFS securities were $268.6 million and $377.8 million during the three and nine months ended September 30, 2020. Realized gains from the sale of AFS debt securities were $6.1 million and $31.4 million for the three and nine months ended September 30, 2021, respectively. Realized gains from the sale of AFS debt securities were $11.7 million and $20.0 million for the three and nine months ended September 30, 2020, respectively. These gains (losses) were determined using the specific identification method and were reported as gain (loss) on sale of investment securities within non-interest income on the consolidated statements of income.

The following table shows debt securities by stated maturity. Debt securities backed by mortgages and other assets 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:


	September 30, 2021
(amounts in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	4,932	$	5,022
Due after one year through five years	280,813		282,050
Due after five years through ten years	156,973		159,475
Due after ten years	3,000		3,000
Asset-backed securities	225,182		225,457
Collateralized loan obligations	315,501		315,502
Commercial mortgage-backed securities	28,035		28,088
Agency-guaranteed residential mortgage-backed securities	9,924		9,666
Agency-guaranteed commercial mortgage-backed securities	2,184		2,194
Agency-guaranteed residential collateralized mortgage obligations	102,110		102,194
Agency-guaranteed commercial collateralized mortgage obligations	143,858		141,808
Private label collateralized mortgage obligations	588,017		587,241


Total debt securities	$	1,860,529	$	1,861,697

Gross unrealized losses and fair value of Customers' AFS debt securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2021 were as follows:



	September 30, 2021
	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:
Asset-backed securities	$	21,800	$	(125)	$	—	$	—	$	21,800	$	(125)
Agency-guaranteed residential mortgage-backed securities	9,666		(258)		—		—		9,666		(258)
Agency-guaranteed commercial mortgage-backed securities	—		—		—		—		—		—
Agency-guaranteed residential collateralized mortgage obligations	25,548		(90)		—		—		25,548		(90)
Agency-guaranteed commercial collateralized mortgage obligations	121,156		(2,106)		—		—		121,156		(2,106)
Collateralized loan obligations	71,508		(109)		—		—		71,508		(109)
Corporate notes	98,662		(504)		1,957		(43)		100,619		(547)
Private label collateralized mortgage obligations	138,669		(1,377)		—		—		138,669		(1,377)

Total	$	487,009	$	(4,569)	$	1,957	$	(43)	$	488,966	$	(4,612)

At September 30, 2021, there were 35 AFS debt securities with unrealized losses in the less-than-twelve-month category and one AFS debt security with unrealized loss in the twelve-month-or-more category. The unrealized losses were principally due to changes in market interest rates that resulted in a negative impact on the respective securities' fair value. All amounts related to these securities are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell any of the 36 securities, and it is not more likely than not that Customers will be required to sell any of the 36 securities before recovery of the amortized cost basis. At December 31, 2020, there were 16 AFS debt securities in an unrealized loss position.

At September 30, 2021 and December 31, 2020, Customers Bank had pledged investment securities aggregating $12.4 million and $18.8 million in fair value, respectively, as collateral primarily for an unused line of credit with another financial institution. These counterparties do not have the ability to sell or repledge these securities.

At September 30, 2021 and December 31, 2020, no securities holding of any one issuer, other than the U.S. government and its agencies, amounted to greater than 10% of shareholders' equity.