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Investment Securities | 3 Months Ended
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Mar. 31, 2024
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 at fair value as of March 31, 2024 and December 31, 2023 are summarized as follows:
| March 31, 2024 (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 | $ | 62,274 |  |  | $ | (450) |  |  | $ | — |  |  | $ | (3,590) |  |  | $ | 58,234 |
Agency-guaranteed residential mortgage-backed securities | 86,227 |  |  | — |  |  | 299 |  |  | (114) |  |  | 86,412 |
Agency-guaranteed residential collateralized mortgage obligations | 138,573 |  |  | — |  |  | — |  |  | (13,615) |  |  | 124,958 |
Agency-guaranteed commercial collateralized mortgage obligations | 34,573 |  |  | — |  |  | 73 |  |  | (872) |  |  | 33,774 |
Collateralized loan obligations | 593,236 |  |  | — |  |  | 55 |  |  | (8,796) |  |  | 584,495 |
Commercial mortgage-backed securities | 114,445 |  |  | — |  |  | — |  |  | (1,819) |  |  | 112,626 |
Corporate notes | 668,459 |  |  | (4,619) |  |  | — |  |  | (53,370) |  |  | 610,470 |
Private label collateralized mortgage obligations | 1,017,587 |  |  | — |  |  | 628 |  |  | (58,045) |  |  | 960,170 |
Available for sale debt securities | $ | 2,715,374 |  |  | $ | (5,069) |  |  | $ | 1,055 |  |  | $ | (140,221) |  |  | 2,571,139 |
Equity securities (2) |  |  |  |  |  |  |  |  | 33,729 |
Total investment securities, at fair value |  |  |  |  |  |  |  |  | $ | 2,604,868 |
| December 31, 2023 (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 | $ | 97,359 |  |  | $ | (483) |  |  | $ | 15 |  |  | $ | (4,262) |  |  | $ | 92,629 |
Agency-guaranteed residential collateralized mortgage obligations | 129,589 |  |  | — |  |  | — |  |  | (12,681) |  |  | 116,908 |
Collateralized loan obligations | 500,109 |  |  | — |  |  | 1 |  |  | (11,018) |  |  | 489,092 |
Commercial mortgage-backed securities | 125,885 |  |  | — |  |  | — |  |  | (4,249) |  |  | 121,636 |
Corporate notes | 636,880 |  |  | (3,469) |  |  | 79 |  |  | (50,456) |  |  | 583,034 |
Private label collateralized mortgage obligations | 1,034,841 |  |  | — |  |  | 1,201 |  |  | (62,481) |  |  | 973,561 |
Available for sale debt securities | $ | 2,524,663 |  |  | $ | (3,952) |  |  | $ | 1,296 |  |  | $ | (145,147) |  |  | 2,376,860 |
Equity securities (2) |  |  |  |  |  |  |  |  | 28,780 |
Total investment securities, at fair value |  |  |  |  |  |  |  |  | $ | 2,405,640 |
(1)Accrued interest on AFS debt securities totaled $19.5 million and $14.7 million at March 31, 2024 and December 31, 2023, respectively, and is included in accrued interest receivable on the consolidated balance sheet. (2)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 March 31, 2024 and December 31, 2023. No impairments or measurement adjustments have been recorded on the equity securities without a readily determinable fair value since acquisition. 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 or HTM debt securities on the consolidated balance sheets, and represent Customers' maximum exposure to loss. Proceeds from the sale of AFS debt securities were $22.0 million for the three months ended March 31, 2024. There were no sales of AFS debt securities for the three months ended March 31, 2023. The following table presents gross realized gains and realized losses from the sale of AFS debt securities for the three months ended March 31, 2024 and 2023:
| Three Months Ended March 31, |  |
(amounts in thousands) | 2024 |  | 2023 |  |  |  |
Gross realized gains | $ | — |  |  | $ | — |  |  |  |  |
Gross realized losses | (30) |  |  | — |  |  |  |  |
Net realized gains (losses) on sale of available for sale debt securities | $ | (30) |  |  | $ | — |  |  |  |  |
These gains (losses) were determined using the specific identification method and were reported as net 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:
| March 31, 2024
(amounts in thousands) | Amortized Cost |  | Fair Value
Due in one year or less | $ | 31,500 |  |  | $ | 26,852 |
Due after one year through five years | 569,353 |  |  | 525,291 |
Due after five years through ten years | 67,606 |  |  | 58,327 |
Asset-backed securities | 62,274 |  |  | 58,234 |
Agency-guaranteed residential mortgage-backed securities | 86,227 |  |  | 86,412 |
Agency-guaranteed residential collateralized mortgage obligations | 138,573 |  |  | 124,958 |
Agency-guaranteed commercial collateralized mortgage obligations | 34,573 |  |  | 33,774 |
Collateralized loan obligations | 593,236 |  |  | 584,495 |
Commercial mortgage-backed securities | 114,445 |  |  | 112,626 |
Private label collateralized mortgage obligations | 1,017,587 |  |  | 960,170 |
Total available for sale debt securities | $ | 2,715,374 |  |  | $ | 2,571,139 |
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 March 31, 2024 and December 31, 2023 were as follows:
| March 31, 2024
| 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 | $ | — |  |  | $ | — |  |  | $ | 52,676 |  |  | $ | (3,261) |  |  | $ | 52,676 |  |  | $ | (3,261) |
Agency-guaranteed residential mortgage-backed securities | 47,014 |  |  | (114) |  |  | — |  |  | — |  |  | 47,014 |  |  | (114) |
Agency-guaranteed residential collateralized mortgage obligations | 12,283 |  |  | (105) |  |  | 112,675 |  |  | (13,510) |  |  | 124,958 |  |  | (13,615) |
Agency-guaranteed commercial collateralized mortgage obligations | 26,582 |  |  | (872) |  |  | — |  |  | — |  |  | 26,582 |  |  | (872) |
Collateralized loan obligations | 114,173 |  |  | (779) |  |  | 429,799 |  |  | (8,017) |  |  | 543,972 |  |  | (8,796) |
Commercial mortgage-backed securities | — |  |  | — |  |  | 112,626 |  |  | (1,819) |  |  | 112,626 |  |  | (1,819) |
Corporate notes | 30,829 |  |  | (532) |  |  | 410,323 |  |  | (36,201) |  |  | 441,152 |  |  | (36,733) |
Private label collateralized mortgage obligations | 260,549 |  |  | (8,133) |  |  | 572,448 |  |  | (49,912) |  |  | 832,997 |  |  | (58,045) |
Total | $ | 491,430 |  |  | $ | (10,535) |  |  | $ | 1,690,547 |  |  | $ | (112,720) |  |  | $ | 2,181,977 |  |  | $ | (123,255) |
| December 31, 2023
| 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 | $ | — |  |  | $ | — |  |  | $ | 64,029 |  |  | $ | (4,027) |  |  | $ | 64,029 |  |  | $ | (4,027) |
Agency-guaranteed residential collateralized mortgage obligations | — |  |  | — |  |  | 116,908 |  |  | (12,681) |  |  | 116,908 |  |  | (12,681) |
Collateralized loan obligations | 29,241 |  |  | (392) |  |  | 438,551 |  |  | (10,626) |  |  | 467,792 |  |  | (11,018) |
Commercial mortgage-backed securities | — |  |  | — |  |  | 121,636 |  |  | (4,249) |  |  | 121,636 |  |  | (4,249) |
Corporate notes | 23,243 |  |  | (1,147) |  |  | 424,768 |  |  | (33,764) |  |  | 448,011 |  |  | (34,911) |
Private label collateralized mortgage obligations | 303,750 |  |  | (11,243) |  |  | 613,007 |  |  | (51,417) |  |  | 916,757 |  |  | (62,660) |
Total | $ | 356,234 |  |  | $ | (12,782) |  |  | $ | 1,778,899 |  |  | $ | (116,764) |  |  | $ | 2,135,133 |  |  | $ | (129,546) |
At March 31, 2024, there were 38 AFS debt securities with unrealized losses in the less-than-twelve-months category and 102 AFS debt securities with unrealized losses in the twelve-months-or-more category. Except for one asset-backed security and 19 corporate notes where there was a change in future estimated cash flows as further discussed below, the unrealized losses were principally due to changes in market interest rates and credit spreads that resulted in a negative impact on the respective securities’ fair value and expected to be recovered when market prices recover or at maturity. Customers does not intend to sell any of the 140 securities, and it is not more likely than not that Customers will be required to sell any of the 140 securities before recovery of the amortized cost basis. At December 31, 2023, there were 119 AFS debt securities in an unrealized loss position. Customers recorded an allowance for credit losses on one asset-backed security and 19 corporate notes where there was a change in future estimated cash flows during the three months ended March 31, 2024 and on four asset-backed securities and six corporate notes during the three months ended March 31, 2023. 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 table presents the activity in the allowance for credit losses on AFS debt securities, by major security type, for the periods presented:
| Three Months Ended March 31, |  |  |  |  |  |  |
| 2024 |  | 2023 |  |  |  |  |
(amounts in thousands) | Asset-backed securities |  | Corporate notes |  | Total |  | Asset-backed securities |  | Corporate notes |  | Total |  |  |  |  |  |  |
Balance at January 1 | $ | 483 |  |  | $ | 3,469 |  |  | $ | 3,952 |  |  | $ | 578 |  |  | $ | — |  |  | $ | 578 |  |  |  |  |  |  |  |
Credit losses on securities for which credit losses were not previously recorded | — |  |  | 502 |  |  | 502 |  |  | — |  |  | 1,383 |  |  | 1,383 |  |  |  |  |  |  |  |
Credit losses on previously impaired securities | — |  |  | 648 |  |  | 648 |  |  | 273 |  |  | — |  |  | 273 |  |  |  |  |  |  |  |
Decrease in allowance for credit losses on previously impaired securities | (33) |  |  | — |  |  | (33) |  |  | (61) |  |  | — |  |  | (61) |  |  |  |  |  |  |  |
Balance at March 31 | $ | 450 |  |  | $ | 4,619 |  |  | $ | 5,069 |  |  | $ | 790 |  |  | $ | 1,383 |  |  | $ | 2,173 |  |  |  |  |  |  |  |
At March 31, 2024 and December 31, 2023, no AFS investment securities holding of any one issuer, other than the U.S. government and its agencies, amounted to greater than 10% of shareholders’ equity. At March 31, 2024 and December 31, 2023, Customers Bank had pledged AFS investment securities aggregating $1.3 billion and $1.2 billion in fair value, respectively, as collateral for immediately available liquidity from the FRB. The counterparty does not have the ability to sell or repledge these securities. Investment securities held to maturity The amortized cost, approximate fair value and allowance for credit losses of investment securities held to maturity as of March 31, 2024 and December 31, 2023 are summarized as follows:
| March 31, 2024 (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: |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities | $ | 509,690 |  |  | $ | — |  |  | $ | 509,690 |  |  | $ | 345 |  |  | $ | (2,432) |  |  | $ | 507,603 |
Agency-guaranteed residential mortgage-backed securities | 7,001 |  |  | — |  |  | 7,001 |  |  | — |  |  | (1,087) |  |  | 5,914 |
Agency-guaranteed commercial mortgage-backed securities | 1,830 |  |  | — |  |  | 1,830 |  |  | — |  |  | (151) |  |  | 1,679 |
Agency-guaranteed residential collateralized mortgage obligations | 182,856 |  |  | — |  |  | 182,856 |  |  | — |  |  | (20,723) |  |  | 162,133 |
Agency-guaranteed commercial collateralized mortgage obligations | 146,001 |  |  | — |  |  | 146,001 |  |  | — |  |  | (21,535) |  |  | 124,466 |
Private label collateralized mortgage obligations | 184,659 |  |  | — |  |  | 184,659 |  |  | — |  |  | (13,826) |  |  | 170,833 |
Total held to maturity debt securities | $ | 1,032,037 |  |  | $ | — |  |  | $ | 1,032,037 |  |  | $ | 345 |  |  | $ | (59,754) |  |  | $ | 972,628 |
| December 31, 2023 (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: |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities | $ | 575,990 |  |  | $ | — |  |  | $ | 575,990 |  |  | $ | 202 |  |  | $ | (2,064) |  |  | $ | 574,128 |
Agency-guaranteed residential mortgage-backed securities | 7,039 |  |  | — |  |  | 7,039 |  |  | — |  |  | (649) |  |  | 6,390 |
Agency-guaranteed commercial mortgage-backed securities | 1,850 |  |  | — |  |  | 1,850 |  |  | — |  |  | (134) |  |  | 1,716 |
Agency-guaranteed residential collateralized mortgage obligations | 186,636 |  |  | — |  |  | 186,636 |  |  | — |  |  | (19,049) |  |  | 167,587 |
Agency-guaranteed commercial collateralized mortgage obligations | 146,765 |  |  | — |  |  | 146,765 |  |  | — |  |  | (23,178) |  |  | 123,587 |
Private label collateralized mortgage obligations | 184,890 |  |  | — |  |  | 184,890 |  |  | — |  |  | (11,859) |  |  | 173,031 |
Total held to maturity debt securities | $ | 1,103,170 |  |  | $ | — |  |  | $ | 1,103,170 |  |  | $ | 202 |  |  | $ | (56,933) |  |  | $ | 1,046,439 |
(1)Accrued interest on HTM debt securities totaled $2.6 million and $2.7 million at March 31, 2024 and December 31, 2023, respectively, and is included in accrued interest receivable on the consolidated balance sheet. The following table presents HTM debt securities by stated maturity, including debt securities backed by mortgages and other assets with expected maturities that differ from contractual maturities because borrowers have the right to call or prepay and, therefore, are classified separately with no specific maturity date:
| March 31, 2024
(amounts in thousands) | Amortized Cost |  | Fair Value
Asset-backed securities | $ | 509,690 |  |  | $ | 507,603 |
Agency-guaranteed residential mortgage-backed securities | 7,001 |  |  | 5,914 |
Agency-guaranteed commercial mortgage-backed securities | 1,830 |  |  | 1,679 |
Agency-guaranteed residential collateralized mortgage obligations | 182,856 |  |  | 162,133 |
Agency-guaranteed commercial collateralized mortgage obligations | 146,001 |  |  | 124,466 |
Private label collateralized mortgage obligations | 184,659 |  |  | 170,833 |
Total held to maturity debt securities | $ | 1,032,037 |  |  | $ | 972,628 |
Customers recorded no allowance for credit losses on investment securities classified as held to maturity at March 31, 2024 and December 31, 2023. 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, are estimated to have no expected credit losses. Customers recorded no allowance for its investments in the asset-backed securities. Customers considered the seniority of its beneficial interests, which include overcollateralization of these asset-backed securities in the estimate of the ACL at March 31, 2024 and December 31, 2023. The unrealized losses on HTM debt securities with no ACL were primarily 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. Except for the asset-backed securities and a private label collateralized mortgage obligation, all of the HTM debt securities held by Customers were investment grade or U.S. government agency guaranteed securities that were not rated at March 31, 2024 and December 31, 2023. The asset-backed securities and a private label collateralized mortgage obligation are not rated by rating agencies. Customers monitors the credit quality of these asset-backed securities and a private label collateralized mortgage obligation by evaluating the performance of the sold consumer installment loans and other underlying loans against the overcollateralization available for these securities. The following table presents the amortized cost of HTM debt securities based on their lowest credit rating available:
| March 31, 2024
(amounts in thousands) | AAA |  | AA |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Not Rated |  | Total
Held to maturity debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities | $ | — |  |  | $ | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 509,690 |  |  | $ | 509,690 |
Agency-guaranteed residential mortgage-backed securities | — |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 7,001 |  |  | 7,001 |
Agency-guaranteed commercial mortgage-backed securities | — |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,830 |  |  | 1,830 |
Agency-guaranteed residential collateralized mortgage obligations | — |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 182,856 |  |  | 182,856 |
Agency-guaranteed commercial collateralized mortgage obligations | — |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 146,001 |  |  | 146,001 |
Private label collateralized mortgage obligations | 66,371 |  |  | 44,429 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 73,859 |  |  | 184,659 |
Total held to maturity debt securities | $ | 66,371 |  |  | $ | 44,429 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 921,237 |  |  | $ | 1,032,037 |
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 March 31, 2024 and December 31, 2023, there were no HTM debt securities past due under the terms of their agreements or in nonaccrual status. At March 31, 2024 and December 31, 2023, Customers Bank had pledged HTM investment securities aggregating $391.4 million and $398.4 million in fair value, respectively, as collateral primarily for immediately available liquidity from the FRB and unused lines of credit with another financial institution. The counterparties do not have the ability to sell or repledge these securities.

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