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INVESTMENT SECURITIES
 6 Months Ended
Jun. 30, 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 June 30, 2024 and December 31, 2023 are summarized as follows:
 
June 30, 2024 (1)
(amounts in thousands)Amortized CostAllowance for Credit LossesGross Unrealized GainsGross Unrealized LossesFair Value
Available for sale debt securities:
Asset-backed securities$50,517 $(367)$— $(3,038)$47,112 
Agency-guaranteed residential mortgage-backed securities 198,732 — 943 (188)199,487 
Agency-guaranteed residential collateralized mortgage obligations181,750 — 19 (12,257)169,512 
Agency-guaranteed commercial collateralized mortgage obligations83,180 — 133 (1,495)81,818 
Collateralized loan obligations412,452 — — (6,419)406,033 
Commercial mortgage-backed securities100,610 — — (1,588)99,022 
Corporate notes655,759 (4,972)131 (63,173)587,745 
Private label collateralized mortgage obligations939,526 — 491 (52,988)887,029 
Available for sale debt securities$2,622,526 $(5,339)$1,717 $(141,146)2,477,758 
Equity securities (2)
33,892 
Total investment securities, at fair value$2,511,650 
 
December 31, 2023 (1)
(amounts in thousands)Amortized CostAllowance for Credit LossesGross Unrealized GainsGross Unrealized LossesFair Value
Available for sale debt securities:
Asset-backed securities$97,359 $(483)$15 $(4,262)$92,629 
Agency-guaranteed residential collateralized mortgage obligations129,589 — — (12,681)116,908 
Collateralized loan obligations500,109 — 1 (11,018)489,092 
Commercial mortgage-backed securities125,885 — — (4,249)121,636 
Corporate notes636,880 (3,469)79 (50,456)583,034 
Private label collateralized mortgage obligations1,034,841 — 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 $18.5 million and $14.7 million at June 30, 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 June 30, 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 $218.7 million and $240.7 million for the three and six months ended June 30, 2024. There were no sales of AFS debt securities for the three and six months ended June 30, 2023. 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, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
(amounts in thousands)2024202320242023
Gross realized gains$176 $— $176 $— 
Gross realized losses(895)— (925)— 
Net realized gains (losses) on sale of available for sale debt securities$(719)$— $(749)$— 
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:
 June 30, 2024
(amounts in thousands)Amortized
Cost		Fair
Value
Due in one year or less$35,523 $26,273 
Due after one year through five years532,571 482,410 
Due after five years through ten years87,665 79,062 
Asset-backed securities50,517 47,112 
Agency-guaranteed residential mortgage-backed securities198,732 199,487 
Agency-guaranteed residential collateralized mortgage obligations181,750 169,512 
Agency-guaranteed commercial collateralized mortgage obligations83,180 81,818 
Collateralized loan obligations412,452 406,033 
Commercial mortgage-backed securities100,610 99,022 
Private label collateralized mortgage obligations939,526 887,029 
Total available for sale debt securities$2,622,526 $2,477,758 
Gross unrealized losses and fair value of Customers’ AFS debt securities for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2024 and December 31, 2023 were as follows:
 June 30, 2024
 Less Than 12 Months12 Months or MoreTotal
(amounts in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Available for sale debt securities:
Asset-backed securities$— $— $42,665 $(2,771)$42,665 $(2,771)
Agency-guaranteed residential mortgage-backed securities 58,493 (188)— — 58,493 (188)
Agency-guaranteed residential collateralized mortgage obligations— — 109,465 (12,257)109,465 (12,257)
Agency-guaranteed commercial collateralized mortgage obligations64,227 (1,495)— — 64,227 (1,495)
Collateralized loan obligations57,745 (454)278,681 (5,965)336,426 (6,419)
Commercial mortgage-backed securities— — 99,022 (1,588)99,022 (1,588)
Corporate notes 65,085 (1,610)311,986 (33,972)377,071 (35,582)
Private label collateralized mortgage obligations233,432 (6,794)572,488 (46,204)805,920 (52,998)
Total$478,982 $(10,541)$1,414,307 $(102,757)$1,893,289 $(113,298)
 December 31, 2023
 Less Than 12 Months12 Months or MoreTotal
(amounts in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Available for sale debt securities:
Asset-backed securities$— $— $64,029 $(4,027)$64,029 $(4,027)
Agency-guaranteed residential collateralized mortgage obligations— — 116,908 (12,681)116,908 (12,681)
Collateralized loan obligations29,241 (392)438,551 (10,626)467,792 (11,018)
Commercial mortgage-backed securities— — 121,636 (4,249)121,636 (4,249)
Corporate notes23,243 (1,147)424,768 (33,764)448,011 (34,911)
Private label collateralized mortgage obligations303,750 (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 June 30, 2024, there were 28 AFS debt securities with unrealized losses in the less-than-twelve-months category and 93 AFS debt securities with unrealized losses in the twelve-months-or-more category. Except for one asset-backed security and 20 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 121 securities, and it is not more likely than not that Customers will be required to sell any of the 121 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 20 corporate notes where there was a change in future estimated cash flows during the three and six months ended June 30, 2024 and on four asset-backed securities and nine corporate notes during the three and six months ended June 30, 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 June 30,
20242023
(amounts in thousands)Asset-backed securitiesCorporate notesTotalAsset-backed securitiesCorporate notesTotal
Balance at April 1
$450 $4,619 $5,069 $790 $1,383 $2,173 
Credit losses on securities for which credit losses were not previously recorded— 466 466 — 233 233 
Credit losses on previously impaired securities— 242 242 773 260 1,033 
Decrease in allowance for credit losses on previously impaired securities(83)(355)(438)— — — 
Balance at June 30
$367 $4,972 $5,339 $1,563 $1,876 $3,439 
Six Months Ended June 30,
20242023
(amounts in thousands)Asset-backed securitiesCorporate notesTotalAsset-backed securitiesCorporate notesTotal
Balance at January 1$483 $3,469 $3,952 $578 $— $578 
Credit losses on securities for which credit losses were not previously recorded— 631 631 — 1,876 1,876 
Credit losses on previously impaired securities— 1,057 1,057 1,046 — 1,046 
Decrease in allowance for credit losses on previously impaired securities(116)(185)(301)(61)— (61)
Balance at June 30
$367 $4,972 $5,339 $1,563 $1,876 $3,439 
At June 30, 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 June 30, 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 June 30, 2024 and December 31, 2023 are summarized as follows:
June 30, 2024 (1)
(amounts in thousands)Amortized CostAllowance for Credit LossesNet Carrying ValueGross Unrealized GainsGross Unrealized LossesFair Value
Held to maturity debt securities:
Asset-backed securities$446,070 $— $446,070 $1,148 $(1,515)$445,703 
Agency-guaranteed residential mortgage-backed securities 6,960 — 6,960 — (849)6,111 
Agency-guaranteed commercial mortgage-backed securities 1,810 — 1,810 — (317)1,493 
Agency-guaranteed residential collateralized mortgage obligations178,761 — 178,761 — (18,037)160,724 
Agency-guaranteed commercial collateralized mortgage obligations145,173 — 145,173 — (21,899)123,274 
Private label collateralized mortgage obligations184,025 — 184,025 — (13,255)170,770 
Total held to maturity debt securities$962,799 $— $962,799 $1,148 $(55,872)$908,075 
December 31, 2023 (1)
(amounts in thousands)Amortized CostAllowance for Credit LossesNet Carrying ValueGross Unrealized GainsGross Unrealized LossesFair 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 obligations186,636 — 186,636 — (19,049)167,587 
Agency-guaranteed commercial collateralized mortgage obligations146,765 — 146,765 — (23,178)123,587 
Private label collateralized mortgage obligations184,890 — 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 $2.2 million and $2.7 million at June 30, 2024 and December 31, 2023, respectively, and is included in accrued interest receivable on the consolidated balance sheet.
During the three and six months ended June 30, 2023, Customers sold consumer installment loans that were classified as held for sale with a carrying value of $556.7 million, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs. As part of these sales, Customers recognized a loss on sale of $1.2 million, inclusive of transaction costs, in net gain (loss) on sale of loans within non-interest income in the consolidated statement of income. Customers provided financing to the purchasers for a portion of the sale price in the form of $436.8 million of asset-backed securities, presented in the tables above, collateralized by the sold loans. Customers acts as the servicer for the sold consumer installment loans to one of the VIEs, and receives a servicing fee. Customers recognized a servicing asset of $3.8 million upon sale.
At the time of the sale, and at each subsequent reporting period, Customers is required to evaluate its involvement with the VIEs to determine if it holds a variable interest in the VIEs and, if so, if Customers is the primary beneficiary of the VIEs. If Customers is both a variable interest holder and the primary beneficiary of the VIEs, it would be required to consolidate the VIEs. As of June 30, 2024 and December 31, 2023, Customers concluded that its investments in asset-backed securities as well as the servicing fees are considered variable interests in the VIEs as there is a possibility, even if remote, that would result in Customers’ interests in the asset-backed securities or the servicing fees absorbing some of the losses of the VIEs.
After concluding that Customers has one or more variable interests in the VIEs, Customers must determine if it is the primary beneficiary of the VIEs. U.S. GAAP defines the primary beneficiary as the entity that has both an economic exposure to the VIE as well as the power to direct the activities that are determined to be most significant to the economic performance of the VIE. In order to make this determination, Customers needed to first establish which activities are the most significant to the economic performance of the VIEs. Based on a review of the VIEs’ activities, Customers concluded the servicing activities, specifically those performed for significantly delinquent loans contribute most significantly to the performance of the loans and thus the VIEs. The conclusion is based upon review of the historical performance of the types of consumer installment loans sold to the VIEs, as well as consideration of which activities performed by the owner or servicer of the loans contribute most significantly to the ultimate performance of the loans. The loan servicing agreement between Customers and the VIE for a portion of the sold consumer loans provide that the VIE has substantive kick out rights to replace Customers as the servicer with or without cause. Accordingly, as a holder of the asset-backed securities and the servicer of the loans, Customers does not have the power to direct the servicing of significantly delinquent loans given the VIEs’ substantive kick-out rights. Customers is not the servicer for the sold consumer loans to one of the VIEs and therefore does not have the power to direct the activities that most significantly impact the economic performance of this VIE. As the activities which most significantly affect the performance of the VIEs are not controlled by Customers, Customers has concluded that it is therefore not the primary beneficiary and does not consolidate the VIEs. Customers accounted for its investments in the asset-backed securities as HTM debt securities 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:
 June 30, 2024
(amounts in thousands)Amortized
Cost		Fair
Value
Asset-backed securities$446,070 $445,703 
Agency-guaranteed residential mortgage-backed securities6,960 6,111 
Agency-guaranteed commercial mortgage-backed securities1,810 1,493 
Agency-guaranteed residential collateralized mortgage obligations178,761 160,724 
Agency-guaranteed commercial collateralized mortgage obligations145,173 123,274 
Private label collateralized mortgage obligations184,025 170,770 
Total held to maturity debt securities$962,799 $908,075 
Customers recorded no allowance for credit losses on investment securities classified as held to maturity at June 30, 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 that are highly rated with sufficient overcollateralization 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 June 30, 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 Indicator
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 June 30, 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:
June 30, 2024
(amounts in thousands)AAAAANot RatedTotal
Held to maturity debt securities:
Asset-backed securities$— $— $446,070 $446,070 
Agency-guaranteed residential mortgage-backed securities — — 6,960 6,960 
Agency-guaranteed commercial mortgage-backed securities — — 1,810 1,810 
Agency-guaranteed residential collateralized mortgage obligations— — 178,761 178,761 
Agency-guaranteed commercial collateralized mortgage obligations— — 145,173 145,173 
Private label collateralized mortgage obligations83,903 26,124 73,998 184,025 
Total held to maturity debt securities$83,903 $26,124 $852,772 $962,799 
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, 2024 and December 31, 2023, there were no HTM debt securities past due under the terms of their agreements or in nonaccrual status.
At June 30, 2024 and December 31, 2023, Customers Bank had pledged HTM investment securities aggregating $388.7 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.