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Disclosures about Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Disclosures about Fair Value of Financial Instruments DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Customers uses fair value measurements to record fair value adjustments to certain assets and liabilities and to disclose the fair value of its financial instruments. ASC 825, Financial Instruments, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For Customers, as for most financial institutions, the majority of its assets and liabilities are considered to be financial instruments. Many of these instruments lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction. For fair value disclosure purposes, Customers utilized certain fair value measurement criteria under ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) as explained below.
In accordance with ASC 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for Customers’ various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
The fair value guidance provides a consistent definition of fair value, focusing on an exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.
The fair value guidance also establishes a fair value hierarchy and describes the following three levels used to classify fair value measurements:
Level 1:Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3:Prices or valuation techniques that require adjustments to inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The following methods and assumptions were used to estimate the fair values of Customers’ financial instruments as of December 31, 2024 and 2023:
Financial Instruments Recorded at Fair Value on a Recurring Basis
Investment securities:
The fair values of equity securities with a readily determinable fair value, AFS debt securities and debt securities reported at fair value based on a fair value option election are determined by obtaining quoted market prices on nationally recognized and foreign securities exchanges (Level 1), quoted prices in markets that are not active (Level 2), matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or internally and externally developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).
When quoted market prices are not available, Customers employs an independent pricing service that utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and respective terms and conditions for debt instruments. Management maintains procedures to monitor the pricing service’s results and has an established process to challenge their valuations, or methodologies, that appear unusual or unexpected.
Customers also utilizes internally and externally developed models that use unobservable inputs due to limited or no market activity of the instrument. These models use unobservable inputs that are inherently judgmental and reflect our best estimates of the assumptions a market participant would use to calculate fair value. Certain unobservable inputs in isolation may have either a directionally consistent or opposite impact on the fair value of the instrument for a given change in that input. When multiple inputs are used within the valuation techniques, a change in one input in a certain direction may be offset by an opposite change from another input. These assets are classified as Level 1, 2 or 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Loans held for sale - Residential mortgage loans (fair value option):
Customers generally estimates the fair values of residential mortgage loans held for sale based on commitments on hand from investors within the secondary market for loans with similar characteristics. These assets are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Loans held for sale - Consumer other installment loans (fair value option):
The fair value of medical and home improvement installment loans within consumer other installment loans is the amount of cash initially advanced to fund the loan, as specified in the agreements with fintech companies, and generally held for up to 90 days prior to sale. These assets are classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Loans receivable - Mortgage finance loans (fair value option):
The fair value of mortgage finance loans is the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The loan is used by mortgage companies as short-term bridge financing between the funding of mortgage loans and the finalization of the sale of the loans to an investor. Changes in fair value are not generally expected to be recognized because at inception of the transaction the underlying mortgage loans have already been sold to an approved investor. Additionally, the interest rate is variable, and the transaction is short-term, with an average life of under 30 days from purchase to sale. These assets are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Derivatives (assets and liabilities):
The fair values of interest rate swaps, interest rate caps and credit derivatives are determined using models that incorporate readily observable market data into a market standard methodology. This methodology nets the discounted future cash receipts and the discounted expected cash payments. The discounted variable cash receipts and payments are based on expectations of future interest rates derived from observable market interest rate curves. In addition, fair value is adjusted for the effect of nonperformance risk by incorporating credit valuation adjustments for Customers and its counterparties. These assets and liabilities are classified as Level 2 fair values, based upon the lowest level of input that is significant to the fair value measurements.
Derivative assets and liabilities are presented in other assets and accrued interest payable and other liabilities on the consolidated balance sheet.
Financial Instruments Recorded at Fair Value on a Nonrecurring Basis
Collateral-dependent loans:
Collateral-dependent loans are those loans that are accounted for under ASC 326, in which the Bank has measured impairment generally based on the fair value of the loan’s collateral or DCF analysis. Fair value is generally determined based upon independent third-party appraisals of the properties that collateralize the loans, DCF based upon the expected proceeds, sales agreements or letters of intent with third parties. These assets are generally classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
The following information should not be interpreted as an estimate of Customers’ fair value in its entirety because fair value calculations are only provided for a limited portion of Customers’ assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making these estimates, comparisons between Customers’ disclosures and those of other companies may not be meaningful.
The estimated fair values of Customers’ financial instruments at December 31, 2024 and 2023 were as follows:
Carrying AmountEstimated Fair ValueFair Value Measurements at December 31, 2024
(amounts in thousands)Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents$3,785,931 $3,785,931 $3,785,931 $— $— 
Debt securities, available for sale1,985,438 1,985,438 — 1,972,202 13,236 
Debt securities, held to maturity991,937 934,677 — 461,307 473,370 
Loans held for sale204,794 204,794 — 1,836 202,958 
Total loans and leases receivable, net of allowance for credit losses on loans and leases14,311,987 14,104,884 — 1,321,128 12,783,756 
FHLB, Federal Reserve Bank, and other restricted stock96,214 96,214 — 96,214 — 
Derivatives 15,263 15,263 — 15,223 40 
Liabilities:
Deposits$18,846,461 $18,842,810 $16,138,256 $2,704,554 $— 
FHLB advances1,128,352 1,103,324 — 1,103,324 — 
Other borrowings99,068 88,000 — 88,000 — 
Subordinated debt182,509 167,601 — 167,601 — 
Derivatives22,570 22,570 — 22,570 — 

Carrying AmountEstimated Fair ValueFair Value Measurements at December 31, 2023
(amounts in thousands)Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents$3,846,346 $3,846,346 $3,846,346 $— $— 
Debt securities, available for sale2,376,860 2,376,860 — 2,341,911 34,949 
Debt securities, held to maturity1,103,170 1,046,439 — 472,311 574,128 
Loans held for sale340,317 340,317 — 1,215 339,102 
Total loans and leases receivable, net of allowance for credit losses on loans and leases12,726,456 12,513,386 — 897,912 11,615,474 
FHLB, Federal Reserve Bank, and other restricted stock109,548 109,548 — 109,548 — 
Derivatives17,931 17,931 — 17,906 25 
Liabilities:
Deposits$17,920,236 $17,922,005 $14,632,357 $3,289,648 $— 
FHLB advances1,203,207 1,188,517 — 1,188,517 — 
Other borrowings123,840 103,674 — 103,674 — 
Subordinated debt182,230 164,233 — 164,233 — 
Derivatives27,110 27,110 — 27,110 — 
For financial assets and liabilities measured at fair value on a recurring and non-recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2024 and 2023 were as follows:
December 31, 2024
Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)		Total
Measured at Fair Value on a Recurring Basis:
Assets
Available for sale securities:
Asset-backed securities$— $— $13,236 $13,236 
Agency-guaranteed residential mortgage-backed securities— 327,038 — 327,038 
Agency-guaranteed residential collateralized mortgage obligations— 226,746 — 226,746 
Agency-guaranteed commercial collateralized mortgage obligations— 93,075 — 93,075 
Collateralized loan obligations— 255,407 — 255,407 
Commercial mortgage-backed securities— 77,708 — 77,708 
Corporate notes— 516,330 — 516,330 
Private label collateralized mortgage obligations— 475,898 — 475,898 
Derivatives— 15,223 40 15,263 
Loans held for sale – fair value option— 1,836 162,055 163,891 
Loans receivable, mortgage warehouse – fair value option— 1,321,128 — 1,321,128 
Total assets – recurring fair value measurements$— $3,310,389 $175,331 $3,485,720 
Liabilities
Derivatives$— $22,570 $— $22,570 
Measured at Fair Value on a Nonrecurring Basis:
Assets
Collateral-dependent loans$— $— $18,048 $18,048 
Total assets – nonrecurring fair value measurements$— $— $18,048 $18,048 
December 31, 2023
Fair Value Measurements at the End of the Reporting Period Using
(amounts in thousands)Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)		Total
Measured at Fair Value on a Recurring Basis:
Assets
Available for sale securities:
Asset-backed securities$— $57,680 $34,949 $92,629 
Agency-guaranteed residential collateralized mortgage obligations— 116,908 — 116,908 
Collateralized loan obligations— 489,092 — 489,092 
Commercial mortgage-backed securities— 121,636 — 121,636 
Corporate notes— 583,034 — 583,034 
Private label collateralized mortgage obligations— 973,561 — 973,561 
Derivatives — 17,906 25 17,931 
Loans held for sale – fair value option— 1,215 188,062 189,277 
Loans receivable, mortgage warehouse – fair value option— 897,912 — 897,912 
Total assets - recurring fair value measurements$— $3,258,944 $223,036 $3,481,980 
Liabilities
Derivatives $— $27,110 $— $27,110 
Measured at Fair Value on a Nonrecurring Basis:
Assets
Collateral-dependent loans$— $— $2,373 $2,373 
Total assets – nonrecurring fair value measurements$— $— $2,373 $2,373 
The changes in asset-backed securities (Level 3 assets) measured at fair value on a recurring basis for the years ended December 31, 2024, 2023 and 2022 are summarized in the table below.
Asset-backed securities
For the Years Ended December 31,
(amounts in thousands)202420232022
Balance at January 1$34,949 $73,266 $142,885 
Principal payments and premium amortization(23,867)(40,041)(64,181)
Increase in allowance for credit losses(224)(1,487)(1,604)
Decrease in allowance for credit losses345 1,582 1,026 
Change in fair value recognized in OCI2,033 1,629 (4,860)
Balance at December 31$13,236 $34,949 $73,266 
The changes in other installment loans (Level 3 assets) measured at fair value on a recurring basis, based on an election made to account for the loans at fair value for the years ended December 31, 2024 and 2023 are summarized in the table below.
Other Installment Loans
For the Years Ended December 31,
(amounts in thousands)20242023
Balance at January 1$188,062 $— 
Originations924,183 218,794 
Sales
(743,682)— 
Principal payments(206,508)(30,732)
Change in fair value recognized in earnings— — 
Balance at December 31$162,055 $188,062 
There were no transfers between levels during the years ended December 31, 2024, 2023 and 2022.
The following tables summarize financial assets and financial liabilities measured at fair value as of December 31, 2024 and 2023 on a recurring and nonrecurring basis for which Customers utilized Level 3 inputs to measure fair value. The unobservable Level 3 inputs noted below contain a level of uncertainty that may differ from what is realized in an immediate settlement of the assets. Therefore, Customers may realize a value higher or lower than the current estimated fair value of the assets.
Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)Fair Value EstimateValuation TechniqueUnobservable Input
Range (Weighted
Average) (4)
December 31, 2024
Asset-backed securities$13,236 Discounted cash flowDiscount rate


Annualized loss rate


Constant prepayment rate
9% - 10%
(10%)

5% - 10%
(7%)

19% - 20%
(19%)

Quantitative Information about Level 3 Fair Value Measurements
(dollars in thousands)Fair Value EstimateValuation TechniqueUnobservable Input
Range (Weighted
Average) (4)
December 31, 2023
Asset-backed securities$34,949 Discounted cash flowDiscount rate


Annualized loss rate


Constant prepayment rate
12% - 14%
(13%)

3% - 13%
(5%)

11% - 30%
(26%)