Customers Bancorp, Inc. (CUBI)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This report and all attachments hereto, as well as other written or oral communications made from time to time by us, may contain forward-looking information within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to Customers Bancorp, Inc.’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations, future performance and business. Statements preceded by, followed by, or that include the words “may,” “could,” “should,” “pro forma,” “looking forward,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” or similar expressions generally indicate a forward-looking statement. These forward-looking statements involve risks and uncertainties that are subject to change based on various important factors (some of which, in whole or in part, are beyond Customers Bancorp, Inc.’s control). Numerous competitive, economic, regulatory, legal and technological events and factors, among others, could cause Customers Bancorp, Inc.’s financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in such forward-looking statements, including: a continuation of the recent turmoil in the banking industry, responsive measures taken by us and regulatory authorities to mitigate and manage related risks, regulatory actions taken that address related issues and the costs and obligations associated therewith, such as the FDIC special assessments; the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to our reputation; effects of competition on deposit rates and growth, loan rates and growth and net interest margin; failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks; public health crises and pandemics and their effects on the economic and business environments in which we operate; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and military conflicts, including the war between Russia and Ukraine and ongoing conflict in the Middle East, which could impact the economic conditions in the United States; the impact that changes in the economy have on the performance of our loan and lease portfolio, the market value of our investment securities, the demand for our products and services and the availability of sources of funding; the effects of actions by the federal government, including the Board of Governors of the Federal Reserve System and other government agencies, that affect market interest rates and the money supply; actions that we and our customers take in response to these developments and the effects such actions have on our operations, products, services and customer relationships; higher inflation and its impacts; the effects of changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs on its trading partners; and the effects of any changes in accounting standards or policies. Customers Bancorp, Inc. cautions that the foregoing factors are not exclusive, and neither such factors nor any such forward-looking statement takes into account the impact of any future events. All forward-looking statements and information set forth herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. For a more complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review Customers Bancorp, Inc.’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K for the year ended December 31, 2025, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments thereto, that update or provide information in addition to the information included in the Form 10-K and Form 10-Q filings, if any. Customers Bancorp, Inc. does not undertake to update any forward-looking statement whether written or oral, that may be made from time to time by Customers Bancorp, Inc. or by or on behalf of Customers Bank, except as may be required under applicable law.

Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the “Bancorp” or “Customers Bancorp”), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the “Bank”), collectively referred to as “Customers” herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers’ financial condition and results of operations as of and for the three months ended March 31, 2026. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers’ 2025 Form 10-K.

Overview

Like most financial institutions, Customers derives the majority of its income from interest it receives on its interest-earning assets, such as loans, leases and investments. Customers’ primary source of funds for making these loans, leases and investments are its deposits and borrowings, on which it pays interest. Consequently, one of the key measures of Customers’ success is the amount of its net interest income, or the difference between the interest income on its interest-earning assets and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. Another key measure is the difference between the interest income generated by interest earning assets and the interest expense on interest-bearing liabilities, relative to the amount of average interest earning assets, which is referred to as net interest margin.

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Table of Contents

There is credit risk inherent in loans and leases requiring Customers to maintain an ACL to absorb credit losses on existing loans and leases that may become uncollectible. Customers maintains this allowance by charging a provision for credit losses on loan and leases against its operating earnings. Customers has included a detailed discussion of this process in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements in its 2025 Form 10-K, as well as several tables describing its ACL in “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ unaudited consolidated financial statements.

Impact of Macroeconomic and Banking Industry Uncertainties, Tariffs, and Military Conflicts

The Federal Reserve kept the target range for the federal funds rate unchanged at its January, March and April 2026 meetings. At its March 2026 meeting, the Federal Reserve stated that job gains have remained low and the unemployment rate has been little changed in recent months, and that inflation remains somewhat elevated. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain. The Federal Reserve indicated it will carefully assess incoming data, the evolving outlook and the balance of risks in considering the extent and timing of additional adjustments to the target range for the federal funds rate. Significant uncertainties exist as to the extent and timing of future rate cuts and their effects on economic conditions.

Significant uncertainties as to future economic conditions continue to exist, including risks of higher inflation, changes in U.S. trade policies including the imposition of tariffs and retaliatory tariffs on its trading partners, elevated liquidity risk to the U.S. banking system and the exposure to the U.S. commercial real estate market, particularly to the regional banks, disruptions to global supply chain and labor markets and higher oil and commodity prices exacerbated by the military conflicts between Russia and Ukraine and in the Middle East. Customers has maintained higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios, and shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates during the period of high interest rates. As interest rates begin to decline, Customers has been reducing the Bank’s asset sensitivity through derivative hedging and investment securities portfolio rebalancing. Customers remains focused on growing its non-interest bearing and lower-cost interest-bearing deposits. The Bank’s debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity. The Bank had approximately $6.3 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $4.8 billion as of March 31, 2026. The Bank’s estimated FDIC insured deposits represented approximately 57% of our deposits (inclusive of accrued interest) as of March 31, 2026. When including collateralized and affiliate deposits as FDIC insured, this number increased to 66% of our deposits as of March 31, 2026. Customers continues to monitor closely the impact of uncertainties affecting the macroeconomic conditions, the U.S. banking system, particularly regional banks, the military conflicts between Russia and Ukraine and in the Middle East, as well as any effects that may result from the federal government’s responses including future rate and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, the geopolitical conflicts and developments in the U.S. banking system will impact Customers’ operations and financial results during the remainder of 2026 is highly uncertain.

New Accounting Pronouncements

For information about the impact that recently adopted or issued accounting guidance will have on us, refer to “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ unaudited consolidated financial statements.

Critical Accounting Policies and Estimates

Customers has adopted various accounting policies that govern the application of U.S. GAAP and that are consistent with general practices within the banking industry in the preparation of its consolidated financial statements. Customers’ significant accounting policies are described in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” in Customers’ audited consolidated financial statements included in its 2025 Form 10-K. Certain accounting policies involve significant judgments and assumptions by Customers that have a material impact on the carrying value of certain assets. Customers considers these accounting policies to be critical accounting policies. The judgments and assumptions used are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions management makes, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of C

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Item 7.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis should be read in conjunction with “Business - Summary” and the Bancorp’s consolidated financial statements and related notes for the year ended December 31, 2025. For the comparison of the years ended December 31, 2024 and 2023, refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for our fiscal year ended December 31, 2024, filed with the SEC on February 28, 2025.

Overview

Like most financial institutions, Customers derives the majority of its income from interest it receives on its interest-earning assets, such as loans, leases and investments. Customers’ primary source of funds for making these loans, leases and investments are its deposits and borrowings, on which it pays interest. Consequently, one of the key measures of Customers’ success is the amount of its net interest income, or the difference between the interest income on its interest-earning assets and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. Another key measure is the difference between the interest income generated by interest-earning assets and the interest expense on interest-bearing liabilities, relative to the amount of average interest-earning assets, which is referred to as net interest margin.

There is credit risk inherent in loans and leases requiring Customers to maintain an ACL to absorb credit losses on existing loans and leases that may become uncollectible. Customers maintains this allowance by charging a provision for credit losses on loans and leases against its operating earnings. Customers has included a detailed discussion of this process in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements, as well as several tables describing its ACL in “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ audited consolidated financial statements.

Impact of Macroeconomic and Banking Industry Uncertainties, Tariffs, and Military Conflicts

At its December 2025 meeting, the Federal Reserve enacted a 25 basis point reduction in the federal funds rate, and held the rate unchanged at its January 2026 meeting. Although inflation remains slightly elevated and above the Federal Reserve’s stated 2% target and is not anticipated to fall below that threshold until 2028, it cited the weakening labor market as the key consideration for adopting a less restrictive monetary position. The Federal Reserve has stated that they would assess incoming data, the evolving outlook and the balance of risks in further lowering the federal funds rate. Significant uncertainties exist as to the extent and timing of future rate cuts and their effects on the economic conditions.

Significant uncertainties as to future economic conditions continue to exist, including risks of higher inflation, changes in U.S. trade policies including the imposition of tariffs and retaliatory tariffs on its trading partners, elevated liquidity risk to the U.S. banking system and the exposure to the U.S. commercial real estate market, particularly to the regional banks, disruptions to global supply chain and labor markets, and higher oil and commodity prices exacerbated by the military conflicts between Russia and Ukraine and in the Middle East. Customers has maintained higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios, and shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates during the period of high interest rates. As the interest rates begin to decline, Customers has been reducing the Bank’s asset sensitivity through derivative hedging and investment securities portfolio rebalancing. Customers remains focused on growing its non-interest bearing and lower-cost interest-bearing deposits. The Bank’s debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity. The Bank had approximately $6.2 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $4.4 billion as of December 31, 2025. The Bank’s estimated FDIC insured deposits represented approximately 59% of our deposits (inclusive of accrued interest) as of December 31, 2025. When including collateralized and affiliate deposits as FDIC insured, this number increased to 68% of our deposits as of December 31, 2025. Customers continues to monitor closely the impact of uncertainties affecting the macroeconomic conditions, the U.S. banking system, particularly regional banks, the military conflicts between Russia and Ukraine and in the Middle East, as well as any effects that may result from the federal government’s responses including future rate and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, the geopolitical conflicts and developments in the U.S. banking system will impact Customers’ operations and financial results in 2026 is highly uncertain.

New Accounting Pronouncements

For information about the impact that recently adopted or issued accounting guidance will have on us, refer to “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements.

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Critical Accounting Policies and Estimates

Customers has adopted various accounting policies that govern the application of U.S. GAAP and that are consistent with general practices within the banking industry in the preparation of its consolidated financial statements. Customers’ significant accounting policies are described in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements. Certain accounting policies involve significant judgments and assumptions by Customers that have a material impact on the carrying value of certain assets. Customers considers these accounting policies to be critical accounting policies. The judgments and assumptions used are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions management makes, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of Customers’ assets.

The critical accounting policy that is both important to the portrayal of Customers’ financial condition and results of operations and requires complex, subjective judgments is the ACL. This critical accounting policy and material estimate, along with the related disclosures, are reviewed by Customers’ Audit Committee of the Board of Directors.

Allowance for Credit Losses

Customers’ ACL at December 31, 2025 represents Customers’ current estimate of the lifetime credit losses expected from its loan and lease portfolio and its unfunded lending-related commitments that are not unconditionally cancellable. Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans’ and leases’ expected remaining term.

Customers uses external sources in the creation of its forecasts, including current economic conditions and forecasts for macroeconomic variables over its reasonable and supportable forecast period (e.g., GDP growth rate, unemployment rate, BBB spread, commercial real estate and home price index). After the reasonable and supportable forecast period, which ranges from two to five years, the models revert the forecasted macroeconomic variables to their historical long-term trends, without specific predictions for the economy, over the expected life of the pool, while also incorporating prepayment assumptions into its lifetime loss rates. Internal factors that impact the quarterly allowance estimate include the level of outstanding balances, portfolio performance and assigned risk ratings. Significant loan/borrower attributes utilized in the models include property type, initial loan to value, assigned risk ratings, delinquency status, origination date, maturity date, initial FICO scores, and borrower industry and state.

The ACL may be affected materially by a variety of qualitative factors that Customers considers to reflect its current judgment of various events and risks that are not measured in our statistical procedures, including uncertainty related to the economic forecasts used in the modeled credit loss estimates, nature and volume of the loan and lease portfolio, credit underwriting policy exceptions, peer comparison, industry data, and model and data limitations. The qualitative allowance for economic forecast risk is further informed by multiple alternative scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to changes, sometimes materially and rapidly. Customers recognizes that this approach may not be suitable in certain economic environments such that additional analysis may be performed at management’s discretion. Due in part to its subjectivity, the qualitative evaluation may be materially impacted during periods of economic uncertainty and late breaking events that could lead to revision of reserves to reflect management’s best estimate of expected credit losses.

The ACL is established in accordance with our ACL policy. The ACL Committee, which includes the President, Chief Financial Officer, Chief Accounting Officer, Chief Banking Officer, and Chief Credit Officer, among others, reviews the adequacy of the ACL each quarter, together with Customers’ risk management team. The ACL policy, significant judgments and the related disclosures are reviewed by Customers’ Audit Committee of the Board of Directors.

The net increase in our estimated ACL as of December 31, 2025 as compared to December 31, 2024 resulted primarily from higher loan balances held for investment. The provision for credit losses on loans and leases for the year ended December 31, 2025 was $77.3 million, for an ending ACL balance of $164.7 million ($155.7 million for loans and leases and $9.0 million for unfunded lending-related commitments) as of December 31, 2025.

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To determine the ACL as of December 31, 2025, Customers utilized Moody’s December 2025 Baseline forecast to generate its modeled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2025 assumed slight improvements in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2024; the Federal Reserve Board lowering interest rates in December 2025 and three more times, a quarter point each time as prompted by a soft economy and a struggling job market, in early 2026, and gradually bringing the policy rate to its neutral level by 2028, policymakers anticipating that the recent acceleration in inflation will prove temporary, as it is largely due to a one-time price increase caused by the higher tariffs; the military conflict between Russia and Ukraine continuing but its fallout on energy, agriculture and other commodity markets is modest; a threat that the turmoil in Middle East disrupting global energy and financial markets has abated somewhat; the CPI rising 3.2% in 2026 and 2.6% in 2027; and the unemployment rate rising to 4.7% in 2026 and 2027. Customers continues to monitor the impact of the military conflicts between Russia and Ukraine and in the Middle East, high tariffs, inflation, and monetary and fiscal policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

The net increase in our estimated ACL as of December 31, 2025 as compared to December 31, 2024 resulted primarily from higher loan balances held for investment. The provision for credit losses on loans and leases for the year ended December 31, 2024 was $69.8 million, for an ending ACL balance of $141.7 million ($136.8 million for loans and leases and $4.9 million for unfunded lending-related commitments) as of December 31, 2024. To determine the ACL as of December 31, 2024, Customers utilized Moody’s December 2024 Baseline forecast to generate its modeled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2024 assumed slight improvements in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2023; the Federal Reserve Board lowering interest rates twice in 2025 and gradually reducing the policy rate to its neutral level by late 2026, as slower progress in reducing inflation and additional inflationary pressures from the new administration’s fiscal, tariff and immigration plans suggest a slower pace of normalization than previously expected; failures of several regional banks in the first half of 2023 and recent issues around other banks are not symptomatic of a broader problem in the U.S. financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or further undermine economic growth; the military conflict between Russia and Ukraine continuing for the foreseeable future but its impact on energy, agriculture and other commodity markets and the global economy has largely faded; the war in Israel not spreading to other parts of the Middle East and disrupting global energy markets and global shipping; the CPI rising 2.3% in 2025 and 2.8% in 2026; and the unemployment rate rising to 4.1% in 2025 and 2026.

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody’s. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers’ modelling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around the impacts of the current administration’s tariffs and deportations on the economy being significantly worse than expected; effective tariff rate rising to about 19%, more than the 12% in the baseline scenario, and remaining there through the end of 2028; military conflict between Russia and Ukraine persisting longer than expected; the military conflict in Israel widening; the combination of tariffs, rising inflation, deportations, political tensions, still-elevated interest rates, and reduced credit availability causes the economy to fall into recession in the first quarter of 2026; unemployment beginning to increase significantly in the first quarter of 2026 and peaking in the first quarter of 2027. Under this scenario, as an example, the unemployment rate is estimated at 7.4% and 8.1% in 2026 and 2027, respectively. These numbers represent a 2.7% and 3.4% higher unemployment estimate than the Baseline scenario projection of 4.7% for the same time periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modeled results. This would result in an incremental quantitative impact to the ACL of approximately $101 million at December 31, 2025. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

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There is no certainty that Customers’ ACL will be appropriate over time to cover losses in our portfolio as economic and market conditions may ultimately differ from our reasonable and supportable forecast. Additionally, events adversely affecting specific customers, industries, or Customers’ markets, such as geopolitical instability, or risks of rising inflation including a near-term recession could severely impact our current expectations. If the credit quality of Customers’ customer base materially deteriorates or the risk profile of a market, industry, or group of customers changes materially, Customers’ net income and capital could be materially adversely affected which, in turn could have a material adverse effect on Customers’ financial condition and results of operations. The extent to which the geopolitical instability, higher tariffs and risks of rising inflation have and will continue to negatively impact Customers’ businesses, financial condition, liquidity and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time.

For more information, refer to “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ audited consolidated financial statements.

Results of Operations

The following discussion of Customers Bancorp’s consolidated results of operations should be read in conjunction with its consolidated financial statements, including the accompanying notes. Please refer to Critical Accounting Policies and Estimates in this Management’s Discussion and Analysis and “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements for information concerning certain significant accounting policies and estimates applied in determining reported results of operations.

The following table sets forth the condensed statements of income for the years ended December 31, 2025 and 2024:

Customers reported net income available to common shareholders of $209.2 million for the year ended December 31, 2025, compared to $166.4 million for the year ended December 31, 2024. Factors contributing to the change in net income available to common shareholders for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:

Net interest income

Net interest income increased $96.1 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to lower interest expense on deposits and an increase in interest income from higher average loan balances and purchase discount accretion on commercial and industrial loans, partially offset by a decrease in interest income from investment securities and interest-earning deposits. The average interest-earning assets increased by $1.7 billion for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase in interest-earning assets was primarily driven by increases in specialized lending and interest-earning deposits, partially offset by a decrease in investment securities. NIM increased by 17 basis points to 3.32% for the year ended December 31, 2025, from 3.15% for the year ended December 31, 2024. The lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits and higher purchase discount accretion on commercial and industrial loans, partially offset by decreases in market interest rates in specialized lending and interest-earning deposits, contributed to the NIM increase for the year ended December 31, 2025 compared to the year ended December 31, 2024. The favorable shift in deposit mix and lower market interest rates on deposits drove a 55 basis point decrease in the cost of interest-bearing liabilities for the year ended December 31, 2025 compared to the year ended December 31, 2024. Customers’ total cost of deposits, including interest-bearing and non-interest bearing deposits, was 2.74% and 3.34% for the years ended December 31, 2025 and 2024, respectively. Customers’ total cost of funds, including non-interest bearing deposits and borrowings, was 2.88% and 3.46% for the years ended December 31, 2025 and 2024, respectively.

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Provision for credit losses

The $24.5 million increase in the provision for credit losses included $7.5 million increase in provision for credit losses on loans and leases for the year ended December 31, 2025 compared to the year ended December 31, 2024, which resulted primarily from higher loan balances held for investment. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment, represented 1.03% of total loans and leases receivable at December 31, 2025, compared to 1.04% at December 31, 2024. Net charge-offs for the year ended December 31, 2025 were $59.4 million, or 38 basis points of average total loans and leases, compared to $68.3 million, or 50 basis points of average total loans and leases for the year ended December 31, 2024. The decrease in net charge-offs was primarily due to decreases in consumer installment loans and commercial and industrial loans, partially offset by higher charge-offs for multifamily loans and non-owner occupied commercial real estate loans.

The provision for credit losses for the years ended December 31, 2025 and 2024 also included a provision for credit losses of $20.7 million and $3.6 million, respectively, on certain debt securities available for sale. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ audited consolidated financial statements for additional information.

Non-interest income

The $7.4 million increase in non-interest income for the year ended December 31, 2025 compared to the year ended December 31, 2024 resulted primarily from decreases of $25.4 million in net loss on sale of investment securities and $15.6 million in net loss on sale of loans and leases, which included a loss of $14.9 million on leases of commercial clean vehicles that were accounted for as sales-type leases and a loss of $0.3 million, inclusive of transaction costs, on sales of consumer installment loans to two third-party sponsored VIEs during the year ended December 31, 2024, and increases of $11.9 million in other non-interest income, $8.0 million in loans fees, $6.8 million in commercial lease income and $1.8 million in bank-owned life insurance income. The commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the year ended December 31, 2024. These increases were offset in part by $51.3 million of impairment loss on certain AFS debt securities that the Bank decided to sell in order to further improve structural liquidity, enhance credit profile, reduce asset sensitivity and benefit margin for the year ended December 31, 2025 and $11.4 million of unrealized gain on an equity method investment purchased at a discount for the year ended December 31, 2024. Refer to “NOTE 8 – LEASES” to Customers’ audited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 6 – LOANS HELD FOR SALE” to Customers’ audited consolidated financial statements for additional information on the sales of consumer installment loans to third-party sponsored VIEs.

Non-interest expense

The $14.9 million increase in non-interest expense for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from increases of $15.4 million in professional services, $13.2 million in salaries and employee benefits, $5.8 million in commercial lease depreciation, $3.8 million in occupancy and $1.0 million in loan servicing. These increases were offset in part by decreases of $21.7 million in technology, communication and bank operations, $2.1 million in advertising and promotion and $0.5 million in FDIC assessments, non-income taxes and regulatory fees for the year ended December 31, 2025 compared to the year ended December 31, 2024.

Included in the $21.7 million decrease in technology, communication and bank operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 was $7.1 million of deposit servicing-related fees related to periods prior to 2024 that were recorded in the year ended December 31, 2024. Included in the $0.5 million decrease in FDIC assessments, non-income taxes and regulatory fees for the year ended December 31, 2025 compared to the year ended December 31, 2024 was $4.2 million in FDIC premiums related to periods prior to 2024 and a credit of $3.0 million for Pennsylvania bank shares taxes related to periods prior to 2024 that were recorded in the year ended December 31, 2024.

Income tax expense

Customers’ effective tax rate was 22.3% for the year ended December 31, 2025 compared to 19.1% for the year the ended December 31, 2024. The increase in the effective tax rate for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to a decrease in tax credits, including $14.9 million of investment tax credits generated from commercial clean vehicles in 2024, net of a $5.7 million benefit on the utilization of purchased transferable production tax credits in 2025, partially offset by a lower increase of unrecognized tax benefits in 2025 as compared to 2024. The investment tax credits from commercial clean vehicle leases in 2024 were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases for the year ended December 31, 2024.

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Preferred stock dividends and loss on redemption of preferred stock

Preferred stock dividends were $10.2 million and $15.0 million for the years ended December 31, 2025 and 2024, respectively. On June 16, 2025 and December 15, 2025, Customers redeemed all of the outstanding shares of Series E Preferred Stock and Series F Preferred Stock, respectively, for an aggregate payment of $142.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series E Preferred Stock and Series F Preferred Stock of $4.7 million is included as a loss on redemption of preferred stock in the consolidated statement of income for the year ended December 31, 2025. After giving effect to the redemption, no shares of the Series E Preferred Stock and Series F Preferred Stock remained outstanding. There were no changes to the amount of preferred stock outstanding during the year ended December 31, 2024. Refer to “NOTE 12 – SHAREHOLDERS’ EQUITY” to Customers’ audited consolidated financial statements for additional information.

NET INTEREST INCOME

Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers’ earnings. The following table summarizes Customers’ net interest income, related interest spread, net interest margin and the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities for the years ended December 31, 2025 and 2024. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

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(1)For presentation in this table, average balances and the corresponding average yields for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(2)Includes owner occupied commercial real estate loans.

(3)Includes non-accrual loans, the effect of which is to reduce the yield earned on loans and leases, and deferred loan fees.

(4)Total costs of deposits (including interest bearing and non-interest-bearing) were 2.74% and 3.34% for the years ended December 31, 2025 and 2024, respectively.

(5)Tax-equivalent basis, using an estimated marginal tax rate of 26% for both the years ended December 31, 2025 and 2024, presented to approximate interest income as a taxable asset.

Net interest income increased $96.1 million for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to lower interest expense on deposits and an increase in interest income from higher average loan balances and purchase discount accretion on commercial and industrial loans, partially offset by a decrease in interest income from investment securities and interest-earning deposits. The average interest-earning assets increased by $1.7 billion, primarily related to increases in specialized lending and interest-earning deposits, partially offset by a decrease in investment securities.

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The NIM increased by 17 basis points to 3.32% for the year ended December 31, 2025, from 3.15% for the year ended December 31, 2024 resulting primarily from lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits and higher purchase discount accretion on commercial and industrial loans, partially offset by decreases in market interest rates in specialized lending and interest-earning deposits. The favorable shift in deposit mix and lower market interest rates on deposits drove a 55 basis point decrease in the cost of interest-bearing liabilities. Customers’ total cost of deposits, including interest-bearing and non-interest bearing deposits was 2.74% and 3.34% for the years ended December 31, 2025 and 2024, respectively. Customers’ total cost of funds, including non-interest bearing deposits and borrowings was 2.88% and 3.46% for the years ended December 31, 2025 and 2024, respectively.

PROVISION FOR CREDIT LOSSES

For more information about the provision and Customers’ ACL methodology and loss experience, see Critical Accounting Policies and Estimates and “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” and “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ audited consolidated financial statements.

Customers maintains an ACL to cover current expected credit losses as of the balance sheet date on loans and leases held for investment that are not reported at their fair value on a recurring basis. The ACL is increased through periodic provisions for credit losses on loans and leases that are charged as an expense on the consolidated statements of income and is reduced by charge-offs, net of recoveries. The loan and lease portfolio is reviewed quarterly to evaluate the performance of the portfolio and the adequacy of the ACL. The ACL is estimated as of the end of each quarter and compared to the balance recorded in the general ledger, net of charge-offs and recoveries. The allowance is adjusted to the estimated ACL balance with a corresponding charge (or debit) to the provision for credit losses on loans and leases.

The provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management’s assessment of expected lifetime losses in the loan and lease portfolio, lending-related commitments and investment securities at the balance sheet date. Customers recorded a provision for credit losses on loans and leases of $77.3 million and $69.8 million for the years ended December 31, 2025 and 2024, respectively. Customers recorded a provision for credit losses of $4.1 million and $2.0 million for lending-related commitments for the years ended December 31, 2025 and 2024, respectively. The $7.5 million increase in the provision for credit losses for loans and leases for the year ended December 31, 2025 compared to the year ended December 31, 2024 resulted primarily from an increase in loan balances held for investment.

Net charge-offs for the year ended December 31, 2025 were $59.4 million, or 38 basis points of average total loans and leases, compared to $68.3 million, or 50 basis points of average total loans and leases for the year ended December 31, 2024. The decrease in net charge-offs was primarily related to lower charge-offs for consumer installment loans and commercial and industrial loans, partially offset by higher charge-offs for multifamily loans and non-owner occupied commercial real estate loans.

For more information about the provision and ACL and our loss experience on loans and leases, refer to “Credit Risk” and “Asset Quality” herein.

The provision for credit losses for the years ended December 31, 2025 and 2024 also included a provision for credit losses of $20.7 million and $3.6 million, respectively, on certain debt securities available for sale. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ audited consolidated financial statements for additional information.

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NON-INTEREST INCOME

The table below presents the components of non-interest income for the years ended December 31, 2025 and 2024:

Commercial lease income

Commercial lease income represents income earned on commercial operating leases generated by Customers’ commercial equipment financing group in which Customers is the lessor. The $6.8 million increase in commercial lease income for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from the growth of Customers’ equipment finance business.

Loan fees

The $8.0 million increase in loan fees for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from increases in fees earned on unused lines of credit and income on the settlement of certain stock warrants.

Bank-owned life insurance

Bank-owned life insurance income represents income earned on life insurance policies owned by Customers including an increase in cash surrender value of the policies and any benefits paid by insurance carriers under the policies. The $1.8 million increase in bank-owned life insurance income for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from increases in death benefits received from insurance carriers under the policies and increases in the cash surrender value of the policies.

Net gain (loss) on sale of loans and leases

The $15.6 million decrease in net loss on sale of loans and leases for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from $14.9 million of loss on leases of commercial clean vehicles that were accounted for as sales-type leases, a loss of $0.3 million, inclusive of transaction costs, on sales of $202.5 million in consumer installment loans that were classified as held for sale, inclusive of $53.0 million of 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 and $0.4 million in losses, inclusive of transaction costs, on sales of commercial and industrial loans and other consumer loans for the year ended December 31, 2024. The commercial clean vehicle leases generated the same amount of investment tax credits that were included as a benefit to income tax expense for the year ended December 31, 2024. Refer to “NOTE 8 – LEASES” to Customers’ audited consolidated financial statements for additional information on the sales-type leases of commercial clean vehicles. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 6 – LOANS HELD FOR SALE” to Customers’ audited consolidated financial statements for additional information on the sale of consumer installment loans to third-party sponsored VIEs. There can be no assurance that Customers will realize gains on the sale of loans and leases in 2026, given the significant uncertainty in the capital markets.

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Net gain (loss) on sale of investment securities

The $25.4 million decrease in net loss on sale of investment securities for the year ended December 31, 2025 compared to the year ended December 31, 2024 reflects net losses realized from the sales of $594.2 million in AFS debt securities for the year ended December 31, 2025, compared to the sales of $624.9 million in AFS debt securities for the year ended December 31, 2024. In 2024, Customers executed investment securities portfolio repositioning to improve structural liquidity, reduce asset sensitivity and benefit margin. Customers invested the proceeds from the sale of lower yielding investment securities into higher yielding loans and investment securities. There can be no assurance that Customers will realize gains from sales of investment securities in 2026, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

Impairment loss on debt securities

The $51.3 million increase in impairment loss on debt securities for the December 31, 2025 compared to the December 31, 2024 primarily resulted from impairment loss recorded on certain AFS debt securities that the Bank decided to sell in order to further improve structural liquidity, enhance credit profile, reduce asset sensitivity and benefit margin during the year ended December 31, 2025.

Unrealized gain on equity method investments

The $11.4 million decrease in unrealized gain on the equity method investments for the year ended December 31, 2025 compared to the year ended December 31, 2024 reflects an unrealized gain from an equity method investment purchased at a discount during the year ended December 31, 2024.

Other non-interest income

The $11.9 million increase in other non-interest income for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from $1.8 million of fees associated with the sunsetting of a loan origination program with a fintech company, which was acquired by a bank during 2025, and an increase of $5.5 million in deposit account fees.

NON-INTEREST EXPENSE

The table below presents the components of non-interest expense for the years ended December 31, 2025 and 2024:

Salaries and employee benefits

The $13.2 million increase in salaries and employee benefits for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from an increase in average full-time equivalent team members and annual merit increases.

Technology, communication and bank operations

The $21.7 million decrease in technology, communication and bank operations expense for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from decreases in deposit servicing-related expenses resulting from lower servicing fees and $4.4 million in fees for software including fees for software as a service.

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Customers incurred $2.5 million and $19.6 million in deposit servicing fees to BM Technologies, the successor entity to BMT that was divested on January 4, 2021, under the deposit servicing agreement, as amended, included within the technology, communication and bank operations expense during the years ended December 31, 2025 and 2024, respectively. The remaining deposits serviced by BM Technologies in connection with the white label relationship were transferred to another sponsor bank in 2025. Customers had no deposits serviced by BM Technologies outstanding at December 31, 2025. The deposit servicing fees of $19.6 million incurred to BM Technologies for the year ended December 31, 2024 included $7.1 million for periods prior to 2024.

Commercial lease depreciation

The $5.8 million increase in commercial lease depreciation for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from the growth of the operating lease arrangements originated by Customers’ commercial equipment financing group in which Customers is the lessor.

Professional services

The $15.4 million increase in professional services for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from increases in contractor services and consulting fees, including to enhance the Bank’s risk management infrastructure, and legal fees associated with a new banking team onboarding.

Loan servicing

The $1.0 million increase in loan servicing for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from the growth in consumer loan portfolios serviced by third parties.

Occupancy

The $3.8 million increase in occupancy for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to higher lease expense and depreciation and amortization associated with the Bank’s growth.

FDIC assessments, non-income taxes, and regulatory fees

The $0.5 million decrease in FDIC assessments, non-income taxes and regulatory fees for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from a decrease in FDIC assessments, partially offset by an increase in Pennsylvania bank shares taxes. The FDIC assessments, non-income taxes and regulatory fees for the year ended December 31, 2024 included FDIC premiums of $4.2 million relating to periods prior to 2024 and a credit of $3.0 million for Pennsylvania bank shares taxes relating to periods prior to 2024.

Advertising and promotion

The $2.1 million decrease in advertising and promotion expense for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from lower spending on advertising agencies.

Other non-interest expenses

The $0.1 million decrease in other non-interest expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from a decrease in fees paid to a fintech company related to consumer installment loans, partially offset by increases in provision for credit losses on unfunded lending-related commitments and insurance expenses related to investments in tax credit structures with a corresponding benefit to income tax expense.

INCOME TAXES

The table below presents income tax expense and the effective tax rate for the years ended December 31, 2025 and 2024:

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The $21.4 million increase in income tax expense for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from higher pre-tax income and a decrease in tax credits, including $14.9 million of investment tax credits generated from commercial clean vehicles in 2024, net of a $5.7 million benefit on the utilization of purchased transferable energy-related tax credits in 2025, partially offset by a lower increase of unrecognized tax benefits in 2025 as compared to 2024. The investment tax credits from commercial clean vehicles in 2024 were the same amount as the loss on leases of commercial clean vehicles included within net gain (loss) on sale of loans and leases for the year ended December 31, 2024.

The increase in the effective tax rate for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily resulted from a decrease in tax credits in 2025, partially offset by a lower increase of unrecognized tax benefits in 2025 as compared to 2024. For the reconciliation of the effective tax rate and the statutory federal tax rate, refer to “NOTE 15 – INCOME TAXES” to Customers’ audited consolidated financial statements.

PREFERRED STOCK DIVIDENDS AND LOSS ON REDEMPTION OF PREFERRED STOCK

Preferred stock dividends were $10.2 million and $15.0 million for the years ended December 31, 2025 and 2024, respectively. On June 16, 2025 and December 15, 2025, Customers redeemed all of the outstanding shares of Series E Preferred Stock and Series F Preferred Stock, respectively, for an aggregate payment of $142.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series E Preferred Stock and Series F Preferred Stock of $4.7 million is included as a loss on redemption of preferred stock in the consolidated statement of income for the year ended December 31, 2025. After giving effect to the redemption, no shares of the Series E Preferred Stock and Series F Preferred Stock remained outstanding. There were no changes to the amount of preferred stock outstanding during the year ended December 31, 2024. Refer to “NOTE 12 – SHAREHOLDERS’ EQUITY” to Customers’ audited consolidated financial statements for additional information.

On June 15, 2021, the Series E Preferred Stock became floating at three-month LIBOR plus 5.14%, compared to a fixed rate of 6.45%. On December 15, 2021, the Series F Preferred Stock became floating at three-month LIBOR plus 4.762%, compared to a fixed rate of 6.00%. Pursuant to the Adjustable Interest Rate (LIBOR) Act enacted by Congress on March 15, 2022, Customers substituted three-month term SOFR plus a tenor spread adjustment of 26.161 basis points for three-month LIBOR as the benchmark reference rate on Series E Preferred Stock and F Preferred Stock, plus 5.14% and 4.762%, respectively, beginning with dividends declared on October 25, 2023.

Financial Condition

General

Customers’ total assets were $24.9 billion at December 31, 2025. This represented an increase of $2.6 billion from total assets of $22.3 billion at December 31, 2024. The increase in total assets was primarily driven by increases of $1.9 billion in loans and leases receivable, $625.5 million in cash and cash equivalents, $291.9 million in loans receivable, mortgage finance, at fair value, $157.0 million in other assets and $102.1 million in loans receivable, installment, at fair value, partially offset by decreases of $262.8 million in investment securities held to maturity, $178.7 million in loans held for sale and $82.0 million in investment securities, at fair value.

Total liabilities were $22.8 billion at December 31, 2025. This represented an increase of $2.3 billion from $20.5 billion at December 31, 2024. The increase in total liabilities primarily resulted from increases of $1.9 billion in total deposits, $196.7 million in FHLB advances, $98.6 million in subordinated debt and $81.1 million in accrued interest payable and other liabilities.

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The following table sets forth certain key condensed balance sheet data as of December 31, 2025 and 2024:

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and interest-earning deposits. Cash and due from banks consists mainly of vault cash and cash items in the process of collection. Cash and due from banks were $62.1 million and $56.8 million at December 31, 2025 and 2024, respectively. Cash and cash due from banks balances vary from day to day, primarily due to variations in customers’ deposit activities with the Bank.

Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were $4.3 billion and $3.7 billion at December 31, 2025 and 2024, respectively. The balance of interest-earning deposits varies from day to day, depending on several factors, such as fluctuations in customers’ deposits with Customers, payment of checks drawn on customers’ accounts and strategic investment decisions made to optimize Customers’ net interest income, while effectively managing interest-rate risk and liquidity. The increase in interest-earning deposits since December 31, 2024 primarily resulted from higher non-interest bearing demand deposits held by the Bank and the sale of investment securities.

Investment securities at fair value

The investment securities portfolio is an important source of interest income and liquidity. It consists primarily of mortgage-backed securities and collateralized mortgage obligations guaranteed by agencies of the United States government, asset-backed securities, private label collateralized mortgage obligations, corporate notes and certain equity securities. In addition to generating revenue, the investment portfolio is maintained to manage interest-rate risk, provide liquidity, serve as collateral for other borrowings, and diversify the credit risk of interest-earning assets. The portfolio is structured to optimize net interest income given the changes in the economic environment, liquidity position and balance sheet mix.

At December 31, 2025, investment securities at fair value totaled $1.9 billion compared to $2.0 billion at December 31, 2024. The decrease primarily resulted from the sales of $594.2 million and the maturities, calls and principal repayments totaling $405.6 million, partially offset by purchases of $940.8 million of the investment securities.

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For financial reporting purposes, AFS debt securities are reported at fair value. Unrealized gains and losses on AFS debt securities that the Bank does not intend to sell, other than credit losses, are included in other comprehensive income (loss) and reported as a separate component of shareholders’ equity, net of the related tax effect. Changes in the fair value of equity securities with a readily determinable fair value and securities reported at fair value based on a fair value option election are recorded in non-interest income in the period in which they occur. Customers recorded a provision for credit losses of $20.7 million and $3.6 million on certain debt securities available for sale during the years ended December 31, 2025 and 2024, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 19 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS” to Customers’ audited consolidated financial statements for additional information.

The following table sets forth information about the maturities and weighted-average yield of the AFS debt securities portfolio. The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security adjusted for prepayment estimates, and considers the contractual coupon, amortization of premiums and accretion of discounts. Yields exclude the impact of related hedging derivatives.

The agency-guaranteed mortgage-backed securities and collateralized mortgage obligations in the AFS portfolio were issued by Ginnie Mae and Freddie Mac, and contain guarantees for the collection of principal and interest on the underlying mortgages.

Investment securities held to maturity

At December 31, 2025, investment securities held to maturity totaled $729.1 million compared to $991.9 million at December 31, 2024. The decrease primarily resulted from the maturities, calls and principal repayments totaling $295.8 million, partially offset by purchases of $27.8 million of investment securities.

The following table sets forth information about the maturities and weighted-average yield of the investment securities held to maturity. The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security adjusted for prepayment estimates, and considers the contractual coupon, amortization of premiums, accretion of discounts and amortization of unrealized losses upon transfer from investment securities available for sale to held to maturity, along with the unrealized loss in accumulated other comprehensive income.

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The agency-guaranteed mortgage-backed securities and collateralized mortgage obligations in the HTM portfolio were issued by Fannie Mae, Freddie Mac and Ginnie Mae, and contain guarantees for the collection of principal and interest on the underlying mortgages.

Investment securities classified as HTM are those debt securities that Customers has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs, or changes in general economic conditions. For financial reporting purposes, these securities are reported at cost, adjusted for the amortization of premiums and accretion of discounts, computed by a method which approximates the interest method over the terms of the securities. Refer to “NOTE 5 – INVESTMENT SECURITIES” and “NOTE 19 – DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS” to Customers’ audited consolidated financial statements for additional information.

LOANS AND LEASES

The Bank has diversified lending activities that build overall franchise value and a high-tech, high-touch, branch-light strategy that serves its customers through a single-point-of-contact private banking strategy. The Bank serves commercial businesses, through community, SBA, and private client groups. The Bank also serves corporate businesses nationwide, including healthcare, real estate specialty finance, fund finance, technology and venture capital banking, financial institutions group, mortgage finance and commercial equipment financing, as well as commercial real estate companies in the Bank’s geographic markets and provides payments and treasury services. The Bank serves consumers through its branch network, provides residential mortgages, and personal loan and deposit products including through relationships with fintech companies and Banking-as-a-Service to fintech companies.

Existing lending relationships are primarily with small and middle market businesses and individual consumers primarily in Berks County and Southeastern Pennsylvania (Bucks, Chester and Philadelphia Counties); New York (Westchester and Suffolk Counties, and Manhattan); Hamilton, New Jersey; Boston, Massachusetts; Providence, Rhode Island; Portsmouth, New Hampshire; California (Southern California and the Bay Area); Nevada (Las Vegas and Reno); and nationally for certain loan and deposit products, such as the portfolio of specialized lending loans and leases and mortgage finance loans. The loan portfolio consists primarily of commercial and industrial loans, loans to support mortgage companies’ funding needs, multifamily and commercial real estate loans.

Commercial Lending

Customers’ commercial lending is broadly divided into the following groups: small and middle market business banking, specialized banking, multifamily and commercial real estate lending, mortgage finance, and SBA lending. This diversity is designed to allow for greater resource deployment, higher standards of risk management, strong asset quality, lower interest-rate risk and higher productivity levels.

As of December 31, 2025, Customers had $15.4 billion in commercial loans outstanding, totaling approximately 91.5% of its total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage finance, at fair value, and loans receivable, installment, at fair value, compared to commercial loans outstanding of $13.2 billion, comprising approximately 90.1% of its total loan and lease portfolio at December 31, 2024.

The small and middle market business banking platform originates loans, including SBA loans, through the branch network sales force and a team of dedicated relationship managers. The support administration of this platform is centralized, including technology, risk management, product management, marketing, performance tracking and overall strategy. Credit and sales training has been established for Customers’ sales force, ensuring that it has small business experts in place providing appropriate financial solutions to the small business owners in its communities.

Customers’ specialized lending includes commercial equipment finance, healthcare lending, real estate specialty finance, fund finance, technology and venture capital banking, a financial institutions group and municipal finance. Customers’ lender finance vertical within fund finance provides variable rate loans secured by diverse collateral pools to private debt funds. Customers’ capital call lines vertical within fund finance provides variable rate loans secured by collateral pools and limited partnership commitments from institutional investors in private equity funds and cash management services to the alternative investment industry. Customers’ technology and venture capital banking group services the venture-backed growth industry from seed-stage through late-stage.

In 2023, Customers acquired a venture banking loan portfolio. Customers has also recruited team members that originated these loans to service the industries and companies where growth needs are typically provided by venture capital. The team gives clients access to the capital to grow from innovation to maturity and leverage a customized tech platform to support their growth. The team has long-standing relationships with these clients offering them premier end-to-end financial services meeting their needs. The addition of these team members created venture banking client coverage in Austin, the Bay Area, Boston, Southern California, Chicago, Denver, Raleigh/Durham, and Washington, D.C. The technology and life sciences portfolio was combined with Customers’ existing technology and venture capital banking vertical. The portfolio of capital call loans to venture capital firms was combined with Customers’ existing capital call lines vertical within fund finance.

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Customers’ mortgage finance primarily provides financing to mortgage bankers for residential mortgage originations from loan closing until sale in the secondary market. The underlying residential loans are taken as collateral for Customers’ commercial loans to the mortgage companies. As of December 31, 2025 and 2024, mortgage finance loans totaled $1.6 billion and $1.3 billion, respectively, and are reported as loans receivable, mortgage finance, at fair value on the consolidated balance sheet.

Customers’ commercial equipment financing group goes to market through the following origination platforms: vendors, intermediaries, direct and capital markets. As of December 31, 2025 and 2024, Customers had $813.7 million and $675.4 million, respectively, of equipment finance loans outstanding. As of December 31, 2025 and 2024, Customers had $306.5 million and $262.7 million, respectively, of equipment finance leases outstanding. As of December 31, 2025 and 2024, Customers had $303.4 million and $214.9 million, respectively, of operating leases entered into under this program, net of accumulated depreciation of $105.7 million and $95.1 million, respectively.

Customers’ multifamily lending group is focused on retaining a portfolio of high-quality multifamily loans within Customers’ covered markets. These lending activities use conservative underwriting standards and primarily target the refinancing of loans with other banks or provide purchase money for new acquisitions by borrowers. The primary collateral for these loans is a first lien mortgage on the multifamily property, plus an assignment of all leases related to such property. Customers had multifamily loans of $2.5 billion outstanding, comprising approximately 14.8% of the total loan and lease portfolio at December 31, 2025, compared to $2.3 billion, or approximately 15.4% of the total loan and lease portfolio, at December 31, 2024.

Consumer Lending

Customers provides unsecured consumer installment loans, residential mortgage and home equity loans to customers nationwide primarily through relationships with fintech companies. The installment loan portfolio consists largely of originated and purchased personal, student loan refinancing, home improvement and medical loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660. Customers has been selective in the consumer loans it has been purchasing. At December 31, 2025, Customers had $1.4 billion in consumer loans outstanding (including consumer loans held for investment and held for sale), or 8.5% of the total loan and lease portfolio, compared to $1.4 billion, or 9.9% of the total loan and lease portfolio, at December 31, 2024.

Purchases and sales of loans held for investment were as follows for the years ended December 31, 2025, 2024 and 2023:

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 92.9%, 97.5% and 87.9% of the loans’ unpaid principal balance for the years ended December 31, 2025, 2024 and 2023, respectively.

(2)Installment loan purchases for the years ended December 31, 2025, 2024 and 2023 consist of third-party originated unsecured consumer loans. None of the loans held for investment are considered sub-prime at the time of origination. Customers considers sub-prime borrowers to be those with FICO scores below 660.

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(3)For the years ended December 31, 2025, 2024 and 2023, net gain (loss) on sales of loans held for investment included in net gain (loss) on sale of loans and leases in the consolidated statements of income was insignificant.

(4)Includes a loss of $5.0 million from the sale of $670.0 million of short-term syndicated capital call lines of credit ($280.7 million of loans held for investment in unpaid principal balance and $389.3 million of unfunded loan commitments) included in loss on sale of capital call lines of credit in the consolidated statement of income for the year ended December 31, 2023.

(5)Primarily sales of SBA loans for the year ended December 31, 2023.

Loans Held for Sale

The composition of loans held for sale as of December 31, 2025 and 2024 was as follows:

At December 31, 2025, loans held for sale totaled $26.1 million, or 0.2% of the total loan and lease portfolio, and $204.8 million, or 1.4% of the total loan and lease portfolio, at December 31, 2024.

Refer to “NOTE 7 – LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES” to Customers’ audited consolidated financial statements for additional information on the transfer of other consumer installment loans, at fair value, from loans held for sale to held for investment during the year ended December 31, 2025.

During the year ended December 31, 2024, Customers sold $202.5 million of personal and other installment loans that were classified as held for sale, inclusive of $53.0 million of 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. Customers provided financing to the purchasers for a portion of the sales price in the form of $160.0 million of asset-backed securities while $40.2 million of the remaining sales proceeds were paid in cash. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ audited consolidated financial statements for additional information.

Loans held for sale are reported on the consolidated balance sheet at either fair value (due to the election of the fair value option) or at the lower of cost or fair value. An ACL is not recorded on loans that are classified as held for sale.

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Total Loans and Leases Receivable

The composition of total loans and leases receivable (excluding loans held for sale) was as follows:

(1)Includes direct finance and sales-type equipment leases of $306.5 million and $262.7 million at December 31, 2025 and 2024, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(30.3) million and $(20.8) million at December 31, 2025 and 2024, respectively.

Loans and leases receivable

Loans and leases receivable (excluding loans held for sale and loans receivable, mortgage finance, at fair value and loans receivable, installment, at fair value), net of the ACL, increased by $1.9 billion to $14.9 billion at December 31, 2025, from $13.0 billion at December 31, 2024. The increase in loans and leases receivable, net of the ACL, was primarily attributable to higher balances in specialized lending, multifamily, owner-occupied and non-owner occupied commercial real estate loans, partially offset by $18.9 million increase in ACL, as further described below, from December 31, 2024. The overall loans and leases receivable fluctuations were the result of Customers selectively pursuing disciplined loan growth by focusing on holistic and strategic banking relationships that create franchise value.

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The following table presents Customers’ loans receivable (excluding loans held for sale, loans receivable, mortgage finance, at fair value and loans receivable, installment, at fair value) as of December 31, 2025 based on the remaining term to contractual maturity:

The following table presents the distribution of those loans that mature in more than one year between predetermined rates and floating or adjustable rates, excluding the effect of interest rate swaps designated as cash flow hedges of certain commercial and industrial loans, as of December 31, 2025:

Loans receivable, mortgage finance, at fair value

The mortgage finance product line primarily provides financing to mortgage companies nationwide from the time of origination of the underlying mortgage loans until the mortgage loans are sold into the secondary market. As a mortgage finance lender, Customers provides a form of financing to mortgage bankers by purchasing for resale the underlying residential mortgages on a short-term basis under a master repurchase agreement. These loans are reported as loans receivable, mortgage finance, at fair value on the consolidated balance sheets. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At December 31, 2025, all of Customers’ mortgage finance loans were current in terms of payment.

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Customers is subject to the risks associated with such lending, including, but not limited to, the risks of fraud, bankruptcy and default of the mortgage banker or of the underlying residential borrower, any of which could result in credit losses. Customers’ mortgage finance lending team members monitor these mortgage originators by obtaining financial and other relevant information to reduce these risks during the lending period. Loans receivable, mortgage finance, at fair value totaled $1.6 billion and $1.3 billion at December 31, 2025 and 2024, respectively.

Loans receivable, installment, at fair value

Customers had a lending arrangement with a fintech company, which recently was acquired by a bank, whereby Customers originated consumer installment loans and held these loans prior to sale. These consumer installment loans were designated as loans held for sale and reported at fair value based on an election made to account for the loans at fair value. The lending arrangement with this fintech company expired during the year ended December 31, 2025. Customers transferred these consumer installment loans from held for sale to held for investment during the year ended December 31, 2025, and continue to be reported at fair value based on an election made to account for the loans at fair value. Because these loans are reported at their fair value, they do not have an ACL and are therefore excluded from ACL-related disclosures. At December 31, 2025, Customers had $2.1 million of consumer installment loans, at fair value, on non-accrual status.

Credit Risk

Customers manages credit risk by maintaining diversification in its loan and lease portfolio, establishing and enforcing prudent underwriting standards and collection efforts, and continuous and periodic loan and lease classification reviews. Management also considers the effect of credit risk on financial performance by reviewing quarterly and maintaining an adequate ACL. Credit losses are charged-off when they are identified, and provisions are added for current expected credit losses, to the ACL at least quarterly. The ACL is estimated at least quarterly.

The provision for credit losses on loans and leases was $77.3 million and $69.8 million for the years ended December 31, 2025 and 2024, respectively. The ACL maintained for loans and leases receivable (excluding loans held for sale, loans receivable, mortgage finance, at fair value, and loans receivable, installment, at fair value) was $155.7 million, or 1.03% of loans and leases receivable at December 31, 2025, and $136.8 million, or 1.04% of loans and leases receivable at December 31, 2024.

The increase in the ACL from December 31, 2024 resulted primarily from an increase in loan balances held for investment. Net charge-offs were $59.4 million for the year ended December 31, 2025, a decrease of $9.0 million compared to $68.3 million for the year ended December 31, 2024. The decrease in net charge-offs was primarily due to decreases in charge-offs for consumer installment loans and commercial and industrial loans, partially offset by higher charge-offs for multifamily loans and non-owner occupied commercial real estate loans. Installment charge-offs were attributable to unsecured consumer loans originated and purchased through arrangements with fintech partners. Refer to the table of changes in Customers’ ACL for annualized net-charge offs to average loans by loan type for the periods indicated.

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The table below presents changes in Customers’ ACL for the periods indicated:

(1)    Includes specialized lending.

(2)    PPP loans include an embedded credit enhancement from the SBA, which guarantees 100% of the principal and interest owed by the borrower provided that the SBA’s eligibility criteria are met. As a result, the eligible PPP loans do not have an ACL.

(3)    Represents $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of a venture banking loan portfolio (included within specialized lending) on June 15, 2023, net of $6.2 million of charge-offs for certain of these PCD loans upon acquisition.

(4)    Charge-offs and recoveries on PCD loans that are accounted for in pools are recognized on a net basis when the pool matures.

(5)    Represents $1 million of allowance for credit losses on PCD loans recognized upon acquisition of commercial and industrial loans during the year ended December 31, 2025.

The ACL is based on a quarterly evaluation of the loan and lease portfolio held for investment and is maintained at a level that management considers adequate to absorb expected losses as of the balance sheet date. All commercial loans, with the exception of PPP loans and mortgage finance loans, which are reported at fair value, are assigned internal credit-risk ratings, based upon an assessment of the borrower, the structure of the transaction and the available collateral and/or guarantees. All loans and leases are monitored regularly by the responsible officer, and the risk ratings are adjusted when considered appropriate. The risk assessment allows management to identify problem loans and leases timely. Management considers a variety of factors and recognizes the inherent risk of loss that always exists in the lending process. Management uses a disciplined methodology to estimate an appropriate level of ACL. Refer to Critical Accounting Policies and Estimates herein and “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements for management’s methodology for estimating the ACL.

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Customers’ commercial real estate, commercial and residential construction, consumer residential and owner occupied commercial and industrial loan types have real estate as collateral (collectively, “the real estate portfolio”), primarily in the form of a first lien position. Current appraisals providing current value estimates of the property are received when Customers’ credit group determines that the facts and circumstances have significantly changed since the date of the last appraisal, including that real estate values have deteriorated. A designated credit committee and loan officers review all non-accrual loans on a periodic basis. In addition, loans where the loan officers have identified a “borrower of interest” are discussed to determine if additional analysis is necessary to apply the risk-rating criteria properly. The risk ratings for the real estate loan portfolio are determined based upon the current information available, including but not limited to discussions with the borrower, updated financial information, economic conditions within the geographic area and other factors that may affect the cash flow of the loan. If a loan is individually evaluated for impairment, the collateral value or discounted cash flow analysis is generally used to determine the estimated fair value of the underlying collateral, net of estimated selling costs, and compared to the outstanding loan balance to determine the amount of reserve necessary, if any. Appraisals used in this evaluation process are typically less than two years aged. For loans where real estate is not the primary source of collateral, updated financial information is obtained, including any relevant supplemental financial data to estimate the fair value of the loan, net of estimated selling costs, and compared to the outstanding loan balance to estimate the required reserve.

These impairment measurements are inherently subjective as they require material estimates, including, among others, estimates of property values in appraisals, the amounts and timing of expected future cash flows on individual loans, and general considerations for historical loss experience, economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios, all of which require judgment and may be susceptible to significant change over time and as a result of changing economic conditions or other factors. Pursuant to ASC 326, individually assessed loans, consisting primarily of non-accrual and restructured loans, are considered in the methodology for determining the ACL. Individually assessed loans are generally evaluated based on the expected future cash flows or the fair value of the underlying collateral if principal repayment is expected to substantially come from the operation of the collateral or fair value of the collateral less estimated costs to sell if repayment of the loan is expected to be provided from the sale of such collateral. Shortfalls in the underlying collateral value for loans or leases determined to be collateral dependent are charged off immediately. Subsequent to an appraisal or other fair value estimate, management will assess whether there was a further decline in the value of the collateral based on changes in market conditions or property use that would require additional impairment to be recorded to reflect the particular situation, thereby increasing the ACL on loans and leases held for investment.

The following table shows the ACL by various portfolios as of December 31, 2025 and 2024:

(1)    Includes PPP loans.

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Asset Quality

Customers classifies the loan and lease receivables by product or other characteristic generally defining a shared characteristic with other loans or leases in the same group. Charge-offs from originated and acquired loans and leases held for investment are absorbed by the ACL. The schedule that follows includes both loans held for sale and loans held for investment:

Asset Quality at December 31, 2025

Asset Quality at December 31, 2025 (continued)

(1)Includes PPP loans within commercial and industrial, including specialized lending, and classified as current. Claims for guarantee payments are submitted to the SBA for eligible PPP loans more than 60 days past due.

(2)Excludes non-performing investment securities, at fair value of $16.2 million with ACL of $18.8 million at December 31, 2025.

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The total loan and lease portfolio was $16.8 billion at December 31, 2025 compared to $14.7 billion at December 31, 2024 and $43.7 million, or 0.26% of loans and leases, were non-performing at December 31, 2025 compared to $43.3 million, or 0.30% of loans and leases, at December 31, 2024. The total loan and lease portfolio was supported by an ACL of $155.7 million (356.29% of NPLs and 0.93% of total loans and leases) and $136.8 million (316.06% of NPLs and 0.93% of total loans and leases), at December 31, 2025 and 2024, respectively.

The tables below set forth non-accrual loans, NPAs and asset quality ratios:

(1)    Excludes loans held for sale, loans receivable, mortgage finance, at fair value and loans receivable, installment, at fair value.

(2)    Includes non-performing investment securities, at fair value of $16.2 million with ACL of $18.8 million at December 31, 2025 and fair value of $12.5 million with ACL of $4.3 million at December 31, 2024, respectively.

The asset quality ratios related to NPAs, including non-performing investment securities, at fair value, and non-accrual loans remained low at December 31, 2025 as compared to December 31, 2024. Refer to Credit Risk above for information about the increase in ACL affecting the related asset quality ratios at December 31, 2025 as compared to December 31, 2024.

The table below sets forth loans held for investment that were non-performing at December 31, 2025 and 2024:

Asset quality assurance activities include careful monitoring of borrower payment status and the periodic review of borrower current financial information to ensure ongoing financial strength and borrower cash flow viability. Customers has established credit policies and procedures, seeks the consistent application of those policies and procedures across the organization and adjusts policies as appropriate for changes in market conditions and applicable regulations.

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Problem Loan Identification and Management

To facilitate the monitoring of credit quality within the commercial and industrial, multifamily, commercial real estate and construction portfolios and for purposes of analyzing historical loss rates used in the determination of the ACL for individually assessed loans, Customers utilizes the following categories of risk ratings: pass (there are six risk ratings for pass loans), special mention, substandard, doubtful or loss. The risk-rating categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated regularly thereafter. Pass ratings, which are assigned to those borrowers who do not have identified potential or well-defined weaknesses and for whom there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on a quarterly basis, generally during the month preceding the end of the calendar quarter. While assigning risk ratings involves judgment, the risk-rating process allows management to identify riskier credits in a timely manner and allocate the appropriate resources to manage the loans and leases. PPP loans are excluded, provided that the SBA’s eligibility criteria are met, as these loans are fully guaranteed by the SBA.

Customers assigns a special mention rating to loans and leases that have potential weaknesses that deserve management’s close attention. If not addressed, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan and lease and Customers’ financial position. At December 31, 2025 and 2024, special mention loans and leases were $216.5 million and $175.1 million, respectively, and are considered performing loans and are therefore not included in the tables above.

Risk ratings are not established for residential real estate, home equity loans and installment loans mainly because these portfolios consist of a larger number of homogeneous loans with smaller balances. Instead, these portfolios are evaluated for risk mainly based on aggregate payment history through the monitoring of delinquency levels and trends.

A regular reporting and review process is in place to provide for proper portfolio oversight and control and to monitor those loans and leases identified as problem credits by management. This process is designed to assess Customers’ progress in working toward a solution and to assist in determining an appropriate ACL. All loan work-out situations involve the active participation of management and are reported regularly to the Board of Directors. When a loan or lease becomes delinquent for 90 days or more, or earlier if considered appropriate, the loan is assigned to SAG for workout or other resolution.

Loan and lease charge-offs are determined on a case-by-case basis. Loans and leases are generally charged-off when principal is likely to be unrecoverable and after appropriate collection steps have been taken. Loan and lease charge-offs are proposed by the SAG and approved by the Board of Directors.

Loan and lease policies and procedures are reviewed internally for possible revisions and changes on a regular basis. In addition, these policies and procedures, together with the loan and lease portfolio, are reviewed on a periodic basis by various regulatory agencies and by our internal, external and loan review auditors, as part of their examination and audit procedures.

Loan Modifications for Borrowers Experiencing Financial Difficulty

A borrower is considered to be experiencing financial difficulty when there is a significant doubt about the borrower’s ability to make the required principal and interest payments on the loan or to get an equivalent financing from another creditor at a market rate for a similar loan.

When borrowers are experiencing financial difficulty, Customers may make certain loan modifications as part of loss mitigation strategies to maximize expected payment. To be classified as a modification made to a borrower experiencing financial difficulty, the modification must be in the form of an interest rate reduction, principal forgiveness, or an other-than-insignificant payment delay (payment deferral), term extension, or combinations thereof.

Customers will generally try other forms of relief before principal forgiveness. Any contractual reduction in the amount of principal due without receiving payment or assets is considered as forgiveness. For the purpose of this disclosure, Customers considers any contractual change in interest rate that results in a reduction in interest rate relative to the current stated interest rate as an interest rate reduction. Generally, Customers considers any delay in payment of greater than 90 days in the last 12 months to be significant. Term extensions extend the original contractual maturity of the loan. For the purpose of this disclosure, modification of contingent payment features or covenants that would have accelerated payment are not considered term extensions.

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The following tables present the amortized cost of loans that were modified to borrowers experiencing financial difficulty for the years ended December 31, 2025 and 2024, disaggregated by class of financing receivable and type of modification granted:

As of December 31, 2025, there were no commitments to lend additional funds to debtors experiencing financial difficulty whose loans have been modified during the year ended December 31, 2025.

The loans to borrowers experiencing financial difficulty that were modified during the years ended December 31, 2025 and 2024, respectively, that subsequently defaulted were not material. Customers’ ACL is influenced by loan level characteristics that inform the assessed propensity to default. As such, the provision for credit losses is impacted by changes in such loan level characteristics, such as payment performance. Loans made to borrowers experiencing financial difficulty can be classified as either accrual or non-accrual.

ACCRUED INTEREST RECEIVABLE

At December 31, 2025, accrued interest receivable totaled $103.6 million compared to $108.4 million at December 31, 2024. The decrease primarily resulted from a decrease in interest rates.

BANK PREMISES AND EQUIPMENT AND OTHER ASSETS

At December 31, 2025, bank premises and equipment, net of accumulated depreciation and amortization, totaled $16.7 million compared to $6.7 million at December 31, 2024. The increase primarily resulted from the Bank’s growth.

At December 31, 2025, Customers Bank’s restricted stock holdings totaled $110.4 million compared to $96.2 million at December 31, 2024. These holdings consist of stock of the FRB, the FHLB and Atlantic Community Bankers Bank and are required as part of our relationship with these banks.

At December 31, 2025, the cash surrender value of BOLI totaled $305.5 million compared to $297.6 million at December 31, 2024. Presented within BOLI on the consolidated balance sheets is the cash surrender value of the annuities funding the SERPs of $12.1 million and $9.9 million at December 31, 2025 and 2024, respectively. For additional information on the SERPs, refer to “NOTE 13 – EMPLOYEE BENEFIT PLANS” to Customers’ audited consolidated financial statements.

At December 31, 2025, the OREO totaled $12.4 million compared to no such assets at December 31, 2024. The increase primarily resulted from a deed in lieu of a commercial and industrial loan in specialized lending.

At December 31, 2025 and 2024, other assets totaled $638.4 million and $481.4 million, respectively. Other assets consist primarily of operating leases through Customers’ commercial equipment financing group (net investment in operating leases of $303.4 million at December 31, 2025 compared to $214.9 million at December 31, 2024), mark-to-market adjustments and receivable related to interest-rate swaps, investments in affordable housing projects and other tax structures, limited partnerships and limited liability companies, ROU assets and prepaid expenses and taxes.

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DEPOSITS

Customers offers a variety of deposit accounts, including checking, savings, MMDA and time deposits. Deposits are primarily obtained from Customers’ geographic service area and nationwide through our single point of contact relationship managers, our branchless digital banking products, deposit brokers, listing services and other relationships.

In 2024, Customers onboarded ten experienced commercial and business banking teams in New York, California and Nevada to accelerate the Bank’s deposit growth potential. The new teams are enhancing the Bank’s presence in New York City, where it has successfully operated for over seven years; reinforcing its dedication to Los Angeles; adding representation in Orange County, California; and bringing client coverage to the communities of Reno and Las Vegas, Nevada. All onboarded bankers are highly respected in the commercial deposits space and augment existing expertise in private banking, treasury management, and commercial and industrial lending. In 2025, Customers onboarded seven new banking teams. These included geographic commercial and business banking teams in, or adjacent to, Customers existing markets as well as national teams including sports and entertainment, title solutions and municipal finance. They are enhancing the growth of the Bank’s low-cost, relationship-focused deposit portfolio, and their addition strengthens the Bank’s commitment to its single point of contact relationship-oriented service approach.

In November 2024, Customers launched a new B2B instant payments platform, cubiX, which was developed in-house, is not based on blockchain and offers more extensive products and services compared to CBIT, our instant blockchain-based digital payments platform. The deposits from customers who participated in CBIT and transitioned to cubiX are included in the deposit liability on the consolidated balance sheet.

The components of deposits were as follows at the dates indicated:

Total deposits were $20.8 billion at December 31, 2025, an increase of $1.9 billion, or 10.3%, from $18.8 billion at December 31, 2024. The increase in total deposits was primarily due to increases in savings, including MMDA, of $1.2 billion, or 23.2%, to $6.1 billion, non-interest bearing demand deposits of $695.5 million, or 12.4%, to $6.3 billion and time deposits of $587.8 million, or 21.7%, to $3.3 billion. These increases were offset in part by a decrease in interest bearing demand deposits of $504.5 million, or 9.1%, to $5.0 billion.

Total deposits at December 31, 2024 included $221.3 million of deposits serviced by BM Technologies under a deposit servicing agreement, as amended. The remaining deposits serviced by BM Technologies in connection with a white label relationship were transferred to another sponsor bank in 2025. Customers had no deposits serviced by BM Technologies outstanding at December 31, 2025.

At December 31, 2025 and 2024, the Bank had $1.8 billion and $1.5 billion in deposits, respectively, to which it had pledged $1.8 billion and $1.5 billion, respectively, of available borrowing capacity through the FHLB to the depositors through a standby letter of credit arrangement, respectively.

The total amount of estimated uninsured deposits was $8.6 billion and $7.3 billion at December 31, 2025 and 2024, respectively. Time deposits greater than the FDIC limit of $250,000 totaled $1.2 billion and $803.1 million at December 31, 2025, and 2024, respectively. At December 31, 2025, the scheduled maturities of uninsured time deposits were as follows:

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Average deposit balances by type and the associated average rate paid are summarized below:

FHLB ADVANCES AND OTHER BORROWINGS

Borrowed funds from various sources are generally used to supplement deposit growth and meet other operating needs. Customers’ borrowings include short-term and long-term advances from the FHLB, FRB, federal funds purchased, senior unsecured notes and subordinated debt. Subordinated debt is also considered as Tier 2 capital for certain regulatory calculations. Refer to “NOTE 11 – BORROWINGS” to Customers’ audited consolidated financial statements for additional information.

Short-term debt

Short-term debt at December 31, 2025 and 2024 was as follows:

Long-term debt

FHLB and FRB Advances

Long-term FHLB and FRB advances at December 31, 2025 and 2024 were as follows: