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Investment Securities | 6 Months Ended
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Jun. 30, 2022
Investments, Debt and Equity Securities [Abstract] |
Investment Securities | INVESTMENT SECURITIES Investment securities at fair value The amortized cost, approximate fair value and allowance for credit losses of investment securities as of June 30, 2022 and December 31, 2021 are summarized as follows:
| June 30, 2022 (1)
(amounts in thousands) | Amortized Cost |  | Allowance for Credit Losses |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Available for sale debt securities: |  |  |  |  |  |  |  |  |
Asset-backed securities | $ | 223,661 |  |  | $ | (411) |  |  | $ | — |  |  | $ | (3,529) |  |  | $ | 219,721 |
Agency-guaranteed residential collateralized mortgage obligations | 156,339 |  |  | — |  |  | — |  |  | (9,219) |  |  | 147,120 |
Collateralized loan obligations | 974,213 |  |  | — |  |  | — |  |  | (23,645) |  |  | 950,568 |
Commercial mortgage-backed securities | 138,972 |  |  | — |  |  | — |  |  | (3,188) |  |  | 135,784 |
Corporate notes | 579,324 |  |  | — |  |  | 376 |  |  | (33,856) |  |  | 545,844 |
Private label collateralized mortgage obligations | 1,161,325 |  |  | — |  |  | — |  |  | (47,988) |  |  | 1,113,337 |
State and political subdivision debt securities (2) | 8,527 |  |  | — |  |  | — |  |  | (790) |  |  | 7,737 |
Available for sale debt securities | $ | 3,242,361 |  |  | $ | (411) |  |  | $ | 376 |  |  | $ | (122,215) |  |  | 3,120,111 |
Equity securities (3) |  |  |  |  |  |  |  |  | 24,771 |
Total investment securities, at fair value |  |  |  |  |  |  |  |  | $ | 3,144,882 |
| December 31, 2021 (1)
(amounts in thousands) | Amortized Cost |  |  |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Available for sale debt securities: |  |  |  |  |  |  |  |  |
Asset-backed securities | $ | 297,291 |  |  |  |  | $ | 253 |  |  | $ | (119) |  |  | $ | 297,425 |
Agency-guaranteed residential mortgage-backed securities | 9,865 |  |  |  |  | — |  |  | (312) |  |  | 9,553 |
Agency-guaranteed commercial mortgage-backed securities | 2,162 |  |  |  |  | — |  |  | (10) |  |  | 2,152 |
Agency-guaranteed residential collateralized mortgage obligations | 199,091 |  |  |  |  | 154 |  |  | (2,315) |  |  | 196,930 |
Agency-guaranteed commercial collateralized mortgage obligations | 242,668 |  |  |  |  | 53 |  |  | (3,877) |  |  | 238,844 |
Collateralized loan obligations | 1,067,770 |  |  |  |  | 247 |  |  | (1,215) |  |  | 1,066,802 |
Commercial mortgage-backed securities | 149,054 |  |  |  |  | 53 |  |  | (180) |  |  | 148,927 |
Corporate notes | 575,273 |  |  |  |  | 6,334 |  |  | (1,561) |  |  | 580,046 |
Private label collateralized mortgage obligations | 1,248,142 |  |  |  |  | 333 |  |  | (6,010) |  |  | 1,242,465 |
State and political subdivision debt securities (2) | 8,535 |  |  |  |  | — |  |  | (104) |  |  | 8,431 |
Available for sale debt securities | $ | 3,799,851 |  |  |  |  | $ | 7,427 |  |  | $ | (15,703) |  |  | 3,791,575 |
Equity securities (3) |  |  |  |  |  |  |  |  | 25,575 |
Total investment securities, at fair value |  |  |  |  |  |  |  |  | $ | 3,817,150 |
(1)Accrued interest on AFS debt securities totaled $13.0 million and $11.0 million at June 30, 2022 and December 31, 2021, respectively, and is included in accrued interest receivable on the consolidated balance sheet. (2)Includes both taxable and non-taxable municipal securities. (3)Includes perpetual preferred stock issued by domestic banks and domestic bank holding companies and equity securities issued by fintech companies, without a readily determinable fair value, and CRA-qualified mutual fund shares at June 30, 2022 and December 31, 2021. No impairments or measurement adjustments have been recorded on the equity securities without a readily determinable fair value 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 three and six months ended June 30, 2021, Customers recognized unrealized gains of $1.7 million and $2.7 million respectively, on its equity securities issued by a foreign entity that were held by CB Green Ventures Pte Ltd. and CUBI India Ventures Pte Ltd. These unrealized gains and losses were reported as unrealized gain (loss) on investment securities within non-interest income on the consolidated statements of income. 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 debt securities were $399.0 million and $555.0 million for the three and six months ended June 30, 2022, respectively. Proceeds from the sale of AFS debt securities were $53.7 million and $407.6 million for the three and six months ended June 30, 2021, respectively. The following table presents gross realized gains and realized losses from the sale of AFS debt securities for the three and six months ended June 30, 2022 and 2021:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(amounts in thousands) | 2022 |  | 2021 |  | 2022 |  | 2021
Gross realized gains | $ | 2,003 |  |  | $ | 1,812 |  |  | $ | 2,563 |  |  | $ | 25,378 |
Gross realized losses | (5,032) |  |  | — |  |  | (6,655) |  |  | — |
Net realized gains (losses) on sale of available for sale debt securities | $ | (3,029) |  |  | $ | 1,812 |  |  | $ | (4,092) |  |  | $ | 25,378 |
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 presents AFS 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:
| June 30, 2022
(amounts in thousands) | Amortized Cost |  | Fair Value
Due in one year or less | $ | — |  |  | $ | — |
Due after one year through five years | 436,185 |  |  | 411,856 |
Due after five years through ten years | 151,666 |  |  | 141,725 |
Asset-backed securities | 223,661 |  |  | 219,721 |
Collateralized loan obligations | 974,213 |  |  | 950,568 |
Commercial mortgage-backed securities | 138,972 |  |  | 135,784 |
Agency-guaranteed residential collateralized mortgage obligations | 156,339 |  |  | 147,120 |
Private label collateralized mortgage obligations | 1,161,325 |  |  | 1,113,337 |
Total available for sale debt securities | $ | 3,242,361 |  |  | $ | 3,120,111 |
Gross unrealized losses and fair value of Customers' AFS debt securities for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022 and December 31, 2021 were as follows:
| June 30, 2022
| 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 | $ | 132,895 |  |  | $ | (2,495) |  |  | $ | — |  |  | $ | — |  |  | $ | 132,895 |  |  | $ | (2,495) |
Agency-guaranteed residential collateralized mortgage obligations | 147,120 |  |  | (9,219) |  |  | — |  |  | — |  |  | 147,120 |  |  | (9,219) |
Collateralized loan obligations | 920,688 |  |  | (23,080) |  |  | 25,064 |  |  | (565) |  |  | 945,752 |  |  | (23,645) |
Commercial mortgage-backed securities | 117,536 |  |  | (3,188) |  |  | — |  |  | — |  |  | 117,536 |  |  | (3,188) |
Corporate notes | 434,262 |  |  | (32,270) |  |  | 13,413 |  |  | (1,586) |  |  | 447,675 |  |  | (33,856) |
Private label collateralized mortgage obligations | 737,880 |  |  | (47,976) |  |  | 4,000 |  |  | (12) |  |  | 741,880 |  |  | (47,988) |
State and political subdivision debt securities | 7,737 |  |  | (790) |  |  | — |  |  | — |  |  | 7,737 |  |  | (790) |
Total | $ | 2,498,118 |  |  | $ | (119,018) |  |  | $ | 42,477 |  |  | $ | (2,163) |  |  | $ | 2,540,595 |  |  | $ | (121,181) |
| December 31, 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 | $ | 54,753 |  |  | $ | (119) |  |  | $ | — |  |  | $ | — |  |  | $ | 54,753 |  |  | $ | (119) |
Agency-guaranteed residential mortgage-backed securities | 9,554 |  |  | (312) |  |  | — |  |  | — |  |  | 9,554 |  |  | (312) |
Agency-guaranteed commercial mortgage-backed securities | 2,152 |  |  | (10) |  |  | — |  |  | — |  |  | 2,152 |  |  | (10) |
Agency-guaranteed residential collateralized mortgage obligations | 173,492 |  |  | (2,315) |  |  | — |  |  | — |  |  | 173,492 |  |  | (2,315) |
Agency-guaranteed commercial collateralized mortgage obligations | 118,334 |  |  | (3,877) |  |  | — |  |  | — |  |  | 118,334 |  |  | (3,877) |
Collateralized loan obligations | 715,250 |  |  | (1,215) |  |  | — |  |  | — |  |  | 715,250 |  |  | (1,215) |
Commercial mortgage-backed securities | 122,597 |  |  | (180) |  |  | — |  |  | — |  |  | 122,597 |  |  | (180) |
Corporate notes | 188,100 |  |  | (1,561) |  |  | — |  |  | — |  |  | 188,100 |  |  | (1,561) |
Private label collateralized mortgage obligations | 632,091 |  |  | (5,874) |  |  | 6,818 |  |  | (136) |  |  | 638,909 |  |  | (6,010) |
State and political subdivision debt securities | 8,430 |  |  | (104) |  |  | — |  |  | — |  |  | 8,430 |  |  | (104) |
Total | $ | 2,024,753 |  |  | $ | (15,567) |  |  | $ | 6,818 |  |  | $ | (136) |  |  | $ | 2,031,571 |  |  | $ | (15,703) |
At June 30, 2022, there were 140 AFS debt securities with unrealized losses in the less-than-twelve-months category and seven AFS debt securities with unrealized loss in the twelve-months-or-more category. Except for the four asset-backed securities where there was a deterioration in future estimated cash flows as further discussed below, the unrealized losses were principally due to changes in market interest rates that resulted in a negative impact on the respective securities' fair value and are expected to be recovered when market prices recover or at maturity. Customers does not intend to sell any of the 147 securities, and it is not more likely than not that Customers will be required to sell any of the 147 securities before recovery of the amortized cost basis. At December 31, 2021, there were 117 AFS debt securities in an unrealized loss position. Customers recorded an allowance for credit losses on four asset-backed securities where there was a deterioration in future estimated cash flows during the three and six months ended June 30, 2022. A discounted cash flow approach is used to determine the amount of the allowance. The cash flows expected to be collected, after considering expected prepayments, are discounted at the original effective interest rate. The amount of the allowance is limited to the difference between the amortized cost basis of the security and its estimated fair value. The following tables present the activity in the allowance for credit losses on AFS debt securities, by major security type, for the periods presented:
| Asset-backed securities
(amounts in thousands) | Three Months Ended June 30, 2022
Balance at April 1 | $ | 728 |
Credit losses on securities for which credit losses were not previously recorded | 329 |
Net increase (decrease) in allowance for credit losses on previously impaired securities | (646) |
Balance at June 30 | $ | 411 |
| Asset-backed securities
(amounts in thousands) | Six Months Ended June 30, 2022
Balance at January 1 | $ | — |
Credit losses on securities for which credit losses were not previously recorded | 411 |
Balance at June 30 | $ | 411 |
At June 30, 2022 and December 31, 2021, Customers Bank had pledged investment securities aggregating $19.3 million and $11.3 million in fair value, respectively, as collateral primarily for unused lines of credit with another financial institution. The counterparty does not have the ability to sell or repledge these securities. At June 30, 2022 and December 31, 2021, no securities holding of any one issuer, other than the U.S. government and its agencies, amounted to greater than 10% of shareholders' equity. Investment securities held to maturity In June 2022, Customers transferred $500.2 million in net carrying value of certain debt securities from available for sale to held to maturity as a part of Customers' ongoing asset liability management primarily to mitigate the impact of rising interest rates on the long duration component of the investment portfolio. At the time of transfer to held to maturity, these debt securities had unrealized losses of $50.0 million, which, along with the unrealized loss in accumulated other comprehensive income, will be amortized over the remaining terms of the securities as an adjustment to yield (interest income) using the effective interest method resulting in no impact to current period earnings. The amortized cost, approximate fair value and allowance for credit losses of investment securities held to maturity as of June 30, 2022 are summarized as follows:
| June 30, 2022 (1)
(amounts in thousands) | Amortized Cost |  | Allowance for Credit Losses |  | Net Carrying Value |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Held to maturity debt securities: |  |  |  |  |  |  |  |  |  |  |
Agency-guaranteed residential mortgage-backed securities | $ | 7,820 |  |  | $ | — |  |  | $ | 7,820 |  |  | $ | — |  |  | $ | (181) |  |  | $ | 7,639 |
Agency-guaranteed commercial mortgage-backed securities | 1,966 |  |  | — |  |  | 1,966 |  |  | — |  |  | (5) |  |  | 1,961 |
Agency-guaranteed residential collateralized mortgage obligations | 215,996 |  |  | — |  |  | 215,996 |  |  | — |  |  | (4,368) |  |  | 211,628 |
Agency-guaranteed commercial collateralized mortgage obligations | 154,204 |  |  | — |  |  | 154,204 |  |  | 4 |  |  | (1,041) |  |  | 153,167 |
Private label collateralized mortgage obligations | 115,053 |  |  | — |  |  | 115,053 |  |  | — |  |  | (3,813) |  |  | 111,240 |
Total held to maturity debt securities | $ | 495,039 |  |  | $ | — |  |  | $ | 495,039 |  |  | $ | 4 |  |  | $ | (9,408) |  |  | $ | 485,635 |
(1)Accrued interest on HTM debt securities totaled $0.7 million at June 30, 2022, and is included in accrued interest receivable on the consolidated balance sheet. The following table presents HTM 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:
| June 30, 2022
(amounts in thousands) | Amortized Cost |  | Fair Value
Agency-guaranteed residential mortgage-backed securities | $ | 7,820 |  |  | $ | 7,639 |
Agency-guaranteed commercial mortgage-backed securities | 1,966 |  |  | 1,961 |
Agency-guaranteed residential collateralized mortgage obligations | 215,996 |  |  | 211,628 |
Agency-guaranteed commercial collateralized mortgage obligations | 154,204 |  |  | 153,167 |
Private label collateralized mortgage obligations | 115,053 |  |  | 111,240 |
Total held to maturity debt securities | $ | 495,039 |  |  | $ | 485,635 |
Customers recorded no allowance for credit losses on investment securities classified as held to maturity at June 30, 2022. The U.S. government agency securities represent obligations issued by a U.S. government-sponsored enterprise or other federal government agency that are explicitly or implicitly guaranteed by the U.S. federal government and therefore, assumed to have zero credit losses. The private label collateralized mortgage obligations are highly rated with sufficient overcollateralization and therefore have zero expected credit losses. The unrealized losses on HTM debt securities with no ACL were due to changes in market interest rates that resulted in a negative impact on the respective securities' fair value and are expected to be recovered when market prices recover or at maturity. Credit Quality Indicators Customers monitors the credit quality of HTM debt securities primarily through credit ratings provided by rating agencies. Investment grade debt securities are rated BBB- or higher by S&P Global Ratings, Baa3 or higher by Moody's Investors Service or equivalent ratings by other rating agencies, and are generally considered to be of low credit risk. All of the HTM debt securities held by Customers were investment grade or U.S. government agency guaranteed securities that were not rated at June 30, 2022. The following table presents the amortized cost of HTM debt securities based on their lowest credit rating available:
| June 30, 2022
(amounts in thousands) | AAA |  | AA |  | A |  |  |  |  |  |  |  |  |  | BBB |  |  |  | Not Rated |  | Total
Held to maturity debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Agency-guaranteed residential mortgage-backed securities | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  |  |  |  |  | $ | — |  |  |  |  | $ | 7,820 |  |  | $ | 7,820 |
Agency-guaranteed commercial mortgage-backed securities | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  |  |  | — |  |  |  |  | 1,966 |  |  | 1,966 |
Agency-guaranteed residential collateralized mortgage obligations | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  |  |  | — |  |  |  |  | 215,996 |  |  | 215,996 |
Agency-guaranteed commercial collateralized mortgage obligations | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  |  |  | — |  |  |  |  | 154,204 |  |  | 154,204 |
Private label collateralized mortgage obligations | 65,092 |  |  | 7,022 |  |  | 33,779 |  |  |  |  |  |  |  |  |  |  | 9,160 |  |  |  |  | — |  |  | 115,053 |
Total held to maturity debt securities | $ | 65,092 |  |  | $ | 7,022 |  |  | $ | 33,779 |  |  |  |  |  |  |  |  |  |  | $ | 9,160 |  |  |  |  | $ | 379,986 |  |  | $ | 495,039 |
Customers has elected to not estimate an ACL on accrued interest receivable on HTM debt securities, as it already has a policy in place to reverse or write-off accrued interest, through interest income, for debt securities in nonaccrual status in a timely manner. At June 30, 2022, there were no HTM debt securities past due under the terms of their agreements or in nonaccrual status.

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI https://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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