CUBI 10-K & 10-Q changes, risk factors and insider trading

◦Risks related to changes to estimates and assumptions made by management in preparing financial statements. These changes could adversely affect our business, operating results, reported assets and liabilities, financial condition and capital levelsstatements;

Management makes various assumptions and judgments about the collectibilitycollectability of our loan and lease portfolio, including the creditworthiness of our borrowers and the probability of our borrowers making payments, as well as the value of real estate and other assets serving as collateral for the repayment of many of our loans and leases. Under the CECL model pursuant to ASC 326, Measurement of Credit Losses on Financial Instruments (“ASC 326”), we are required to present certain financial assets reported at amortized cost, such as loans held for investment and HTM debt securities, at the net amount expected to be collected. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. At December 31, 2024,2025, Customers’ ACL totaled $136.8$155.7 million, which represented 1.04%1.03% of total loans and leases held for investment.

In determining the amount of the ACL, significant factors considered include loss experience in particular loan portfolio, trends and absolute levels of classified and criticized loans and leases, trends and absolute levels in delinquent loans and leases, trends in risk ratings, trends in industry and Customers’ charge-offs by particular loan portfolio and changes in current and future economic and business conditions affecting our lending areas and the national economy. We also rely on certain third-party models and other information in preparing our assumption. If our assumptions are incorrect, our ACL may not be sufficient to cover losses inherent in our loan and lease portfolio, resultingwhich can result in our being required to make additions to the ACL.ACL or incurring credit losses.

As of December 31, 2024,2025, Customers had $1.4 billion in consumer loans outstanding, or 9.9%8.5% of the total loan and lease portfolio, which includes loans held for sale andsale, loans receivable, mortgage finance, at fair value, and loans receivable, installment, at fair value, compared to $1.7$1.4 billion, or 13.2%9.9% of the total loan and lease portfolio, as of December 31, 2023.2024.

We are also a lender to mortgage companies, where we provide financing to mortgage bankers by purchasing, subject to resale under a master repurchase agreement, the underlying residential mortgages on a short-term basis pending the ultimate sale of the mortgages to investors. We are subject to the risks associated with such lending, including, but not limited to, the risks of fraud, bankruptcy and possible default by the borrower, closing agents and the residential borrower on the underlying mortgage, any of which could result in credit losses. We have in the past experienced, and expect in the future to experience, fraud, bankruptcy and defaults by such parties in connection with our lending to mortgage companies. The risk of fraud associated with this type of lending includes, but is not limited to, settlement process risks, the risk of financing nonexistent loans or fictitious mortgage loan transactions, or the risk that collateral delivered is fraudulent or non-existent, or the risk that the value of such collateral is artificially inflated, creating a risk of loss of the full amount financed on the underlying residential mortgage loan, or in the settlement processes. Fraudulent transactions could have a material adverse effect on our financial condition and results of operations.

As of December 31, 2024,2025, we had $13.2$15.4 billion in commercial loans outstanding, approximately 90.1%91.5% of our total loan and lease portfolio, which includes loans held for sale andsale, loans receivable, mortgage finance, at fair value, and loans receivable, installment, at fair value, as compared to $11.5$13.2 billion, or 86.8%90.1% of the total loan and lease portfolio, as of December 31, 2023.2024.

Commercial real estate mortgage loans generally involve a greater degree of credit risk than residential real estate mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy, ability to raise rents and find tenants able to pay such rents, or changes in government regulations. The market value of real estate can fluctuate significantly in a relatively short period of time as a result of market conditions in the geographic area in which the real estate is located, in response to factors such as economic downturns, changes in the economic health of industries heavily concentrated in a particular area and in response to changes in market interest rates, which influence capitalization rates used to value revenue-generating commercial real estate. If the value of real estate serving as collateral for loans declines materially, a significant part of the loan portfolio could become under-collateralized and losses incurred upon borrower defaults would increase. Conditions in certain areas within the real estate industry may have an effect on the values of real estate pledged as collateral for loans. The inability of purchasers of real estate to obtain financing may weaken the financial condition of borrowers who are dependent on the sale or refinancing of property to repay their loans. Many real estate loans currently at or approaching maturity were originated during times of historically low interest rates. A borrower’s ability to make payments upon a rate reset, or to sell or refinance a property upon a loan’s maturity, may be adversely impacted if interest rates at the time of reset or maturity are significantly higher than at the time of the loan’s origination and the borrower’s cash flow is not sufficient to allow the borrower to make payments at the higher interest rate, which may increase the likelihood of borrower default. Changes in the economic health of certain industries can have a significant impact on other sectors or industries which are directly or indirectly associated with those industries and may impact the value of real estate in areas where such industries are concentrated. In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options which could impact the long-term performance of some types of office properties within our commercial real estate portfolio. Although a number of businesses are implementing or have announced that they are considering reducing or eliminating remote work, the timing and effects of such changes are uncertain at this time. Banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market. Failures in our risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on our business, results of operations and financial condition.

On June 14, 2019, the New York State legislature passed the Housing Stability and Tenant Protection Act of 2019, impacting about one million rent regulated apartment units. Among other things, the legislation: (i) curtailed rent increases from Material Capital Improvements and Individual Apartment Improvements; (ii) all but eliminated the ability for apartments to exit rent regulation; (iii) eliminated vacancy decontrol and high-income deregulation; and (iv) repealed the 20% vacancy bonus. In total, it generally limits a landlord’s ability to increase rents on rent regulated apartments and makes it more difficult to convert rent regulated apartments to market rate apartments. In addition, the city council and the new mayor of New York City have proposed further restrictions on rent regulated apartments, including a complete freeze on rent increases. As a result, the value of the collateral located in New York State securing our multifamily loans or the future net operating income of such properties could potentially become impaired. As of December 31, 2024,2025, our total multifamily exposure in New York State was approximately $1.1$1.2 billion, of which approximately $714.0$849.0 million, or 68%69% was provided for loans to properties with 50% or more rent-regulated units, primarily in New York City. In 2025,2026, there are $54.8$54.7 million, or 7.7%6.4% of these loans that will mature or have an interest rate reset. Many multifamily loans currently at or approaching a rate reset or maturity were originated during times of historically low interest rates. Higher rates at the time of interest rate reset or maturity and, where applicable, increased restrictions on the ability of landlords to increase rents, may increase the likelihood of borrower default.

As of December 31, 2024,2025, the fair value of our available for sale investment securities portfolio was $2.0$1.9 billion. Prior to 2020, we historically followed a conservative investment strategy, with concentrations in securities that were backed by government-sponsored enterprises. Since 2020, we have been seekingsought to increase yields through more aggressive strategies, which has included a greater percentage of corporate securities, non-agency mortgage-backed securities and other structured credit products. FactorsThough in 2025, we began to increase the percentage of securities that were backed by government-sponsored enterprises, factors beyond our control significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. We have in the past sold securities at significant losses and may again in the future, depending on these factors. These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets. Any of these factors, among others, such as a change in management’s intent to sell the securities, have in the past and could in the future cause credit losses and realized and/or unrealized losses in future periods and declines in OCI, which could have a material adverse effect on us. The process for determining whether impairment of a security exists usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

Our loan and deposit portfolios consist primarily of commercial and industrial loans, including specialized lending activities, multifamily lending, commercial real estate loans, and mortgage finance loans, and related deposits, which contain material concentrations in certain business lines or product types. Additionally, many of our largest deposit relationships are concentrated in the digital asset industry. These loan and deposit concentrations present unique risks and involve specialized underwriting and management as they often involve large loan balances to or deposit balances from a single customer or group of related customers. Consequently, an adverse development with respect to one credit relationship, industry, business line or product type may adversely affect us. Additionally, the capabilities and sophistication of artificial intelligence is rapidly developing, and its effect on certain industries, such as software, legal, healthcare, finance or manufacturing, cannot be predicted. If any industry in which our borrowers operate is adversely affected by developments in artificial intelligence, we may experience an increased rate of delinquencies in, and increased losses from, borrowers that operate in, or depend on others that operate in, that industry, which, accordingly, could have a material adverse effect on our business, results of operations and financial condition.

Additionally, certain of our deposit relationshipsrelationships, primarily in the digital asset industry, operate as ecosystems of related depositors that interact with each other on our proprietary B2B instant payments platform, cubiX. The loss of one or more key relationships in any such ecosystem could have adverse effects on our relationships with the other members of that ecosystem, and materially and adversely affect our ability to retain the low cost deposits associated with the members of that ecosystem.

We depend on our executive officers and key personnelpersonnel, and our ability to recruit key personnel, to implement our strategy and could be harmed by the loss of their services.services or our inability to recruit such persons.

We believe that the implementation of our strategy will depend in large part on the skills of our executive management team, and our ability to recruit, motivate and retain these and other key personnel. Accordingly, the loss of service of one or more of our executive officers or key personnelpersonnel, or our inability to recruit and retain key personnel, could reduce our ability to successfully implement our growth strategy and materially and adversely affect us. We experience leadership changes in our management team from time to time, and if key or significant resignations occur, we may not be able to recruit additional qualified personnel, especially during periods of low unemployment. We believe our executive management team possesses valuable knowledge about the banking industry and that their knowledge and relationships would be very difficult to replicate. Although ourExecutive CEOChairman and our President and CEO have entered into employment agreements with us, it is possible that they may not complete the term of their employment agreement or may choose not to renew it upon expiration.

Our customers also rely on us to deliver personalized financial services. Our strategic model is dependent upon relationship managers and private bankers who act as a customer’s single point of contact towith us. Many of our specialized lending verticals rely on our relationship managers’ expertise and relationships in their respective industries. The loss of the service of these individuals could undermine the confidence of our customers in our ability to provide such personalized services. We need to continue to attract and retain these individuals and to recruit other qualified individuals to ensure continued growth. In addition, competitors may recruit these individuals in light of the value of the individuals’ relationships with their customers and communities, and we may not be able to retain such relationships absent the individuals. In any case, if we are unable to attract and retain our relationship managers and private bankers and recruit individuals with appropriate skills and knowledge to support our business, our growth strategy, business, financial condition and results of operations may be adversely affected.

In addition, our ability to expand into new business lines or grow existing business lines, such as specialized lending andlending, digital bankingbanking, including our proprietary B2B instant payments platform, cubiX, and Banking-as-a-Service offerings, are highly dependent upon our ability to attractidentify, recruit and retain key personnel. We cannot assure youensure that our recruiting or retention efforts for these positions will be successful or that they will enhance our business, results of operations or financial condition. Our recruitment efforts, even if successful, may lead to operational disruption or additional costs and expenses, including from litigation, which can adversely affect our business, financial condition and results of operations.

We also face an increasingly complex regulatory environment. The loss of key senior personnel, or the inability to identify, recruit and retain qualified personnel in the future, such as those in our compliance, finance, risk and legal departments, could have a material adverse effect on us. Because many of our team members continue to work remotely on a “hybrid model”, the ability of our key personnel and other management to motivate personnel and maintain corporate culture may be adversely affected.

Commercial and consumer banking is highly competitive. Changes in market interest rates and pricing decisions by our loan and deposit competitors may adversely affect demand for our loan and deposit products and the revenue realized on the sale of loans, and ultimately reduce our net income. Our markets contain a large number of community and regional banks as well as a significant presence of the country’s largest commercial banks. We compete with other state and national financial institutions, including savings and loan associations, savings banks and credit unions, for deposits and loans. In addition, we compete with financial intermediaries, such as consumer finance companies, private credit funds, mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies, as well as major retailers and fintech companies, in providing various types of loans and other financial services. We also face emerging competition for deposits from tokenized deposits and stablecoins. Some of these competitors may have a long history of successful operations in our markets, greater ties to local businesses and more expansive banking relationships, as well as better established depositor bases. Competitors may also have greater resources and access to capital and may possess other advantages such as operating more branches and ATMs and conducting extensive promotional and advertising campaigns or operating a more developed Internetonline platform.presence. Competitors may also be subject to less restrictive regulation than we are, exhibit a greater tolerance for risk and behave more aggressively with respect to pricing in order to increase their market share.

We expect to drive organic growth by employing our single-point-of-contact strategy, which provides specific relationship managers or private bankers for all customers, and by focusing on our corporate and specialized banking verticals.verticals and our specialized product offerings, such as cubiX. Many of our competitors provide similar services, and others may replicate our model. Our competitors may have greater resources than we do and may be able to provide similar services more quickly, efficiently and extensively. To the extent others replicate our model, we could lose what we view as a competitive advantage, and our financial condition and results of operations may be adversely affected.

The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Increased competition among financial services companies due to the ongoing consolidation of certain competing financial institutions and relaxing of regulatory burden may adversely affect our ability to effectively market our products and services. Technological advances have lowered barriers to entry and made it possible for banks to compete in our market without a retail footprint by offering competitive rates, as well as non-banks to offer products and services traditionally provided by banks. Our ability to compete successfully depends on a number of factors, including, among others:

•the quality, scope, relevance and competitive pricing of products and services offered to meet customer needs and demands;

In addition, the financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services including artificial intelligence, internet services, cryptocurrencies and payment systems. In addition to improving the ability to serve customers, the effective use of technology increases efficiency and enables financial institutions to reduce long-term costs. These technological advancements also have made it possible for non-financial institutions, such as the “fintech companies” and market place lenders, to offer products and services that have traditionally been offered by financial institutions. The process of “disintermediation,” or removing banks from their traditional role as financial intermediaries, could result in loss of customer deposits and other sources of revenue, which could have a material adverse effect on our financial condition and results of operations. Further, in many cases fintech companies and similar non-bank financial service firms, unlike the Bank, are not subject to extensive regulation and supervision. The absence of significant oversight and regulatory compliance obligations may allow such companies to realize certain competitive advantages over us, which has resulted in increased competition for our customers’ business. Federal and state banking agencies continue to deliberate over the regulatory treatment of fintech companies, including whether the agencies are authorized to grant charters or licenses to such companies and whether it would be appropriate to do so in consideration of several regulatory and economic factors. The increased demand for, and availability of, alternative payment systems and currencies not only increases competition for such services, but has created a more complex operating environment that, in certain cases, may require additional or different controls to manage fraud, operational, legal and compliance risks.

Our earnings and cash flows largely depend upon the level of our net interest income, which is the difference between the interest income we earn on loans, investments and other interest earning assets, and the interest we pay on interest bearing liabilities, such as deposits and borrowings. Because different types of assets and liabilities may react differently and at different times to market interest-rate changes, changes in interest rates can increase or decrease our net interest income. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period,period (i.e., liability sensitive), an increase in interest rates would reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly,quickly (i.e., asset sensitive), and because the magnitude of repricing of interest-earning assets is often greater than interest-bearing liabilities, falling interest rates would reduce net interest income. As of December 31, 2025, Customers’ balance sheet was modestly asset sensitive from an earnings perspective.

Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets and liabilities, loan and investment securities portfolios and our overall financial results. Changes in interest rates may also have a significant impact on borrower behaviors and any future loan origination revenues. Changes in interest rates also have a significant impact on the carrying value of a significant percentage of the assets, both loans and investment securities, on our balance sheet. We have incurred debt and mayexpect to incur additional debt in the future, and that debt may also be sensitive to interest rates and any increase in interest rates could materially and adversely affect us. Interest rates are highly sensitive to many factors beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, particularly the Federal Reserve. Adverse changes in the Federal Reserve’s interest-rate policies or other changes in monetary policies and economic conditions could materially and adversely affect us.

The customers using cubiX are primarily concentrated in the digital currency industry, which experienced significant disruptions and bankruptcies of FTX and other participants in the digital currency industry in 2022. Customers Bank has noBank’s loans to any customers in the digital currency industry.industry are not significant. However, continued disruptions in the digital currency industry could have adverse effects on Customers’ business, reputation, financial condition and results of operations.

•the use of digital currencies, or the perception of such use, to facilitate illegal activity such as fraud, money laundering, tax evasionevasion, funding of terrorism and other illicit activities and ransomware or other scams by our customers;

•heightened risks to digital currency businesses, such as digital currency exchanges, of fraud, hacking, malware attacks, and other cyber-security risks, which can lead to significant losses;

•developments in digital currency trading markets, including decreasing price volatility of digital currencies, resulting in narrowing spreads for digital currency trading and diminishing arbitrage opportunities across digital currency exchanges, or increased price volatility, which could negatively impact our customers and therefore our deposits, either of which in turn may reduce the benefits of cubiXcubiX, including our generation of fee income, and negatively impact our business; and

If any of these factors, or other factors, slows development of the digital currency industry, it could adversely affect our instant B2B payments initiativecubiX and the businesses of the customers upon which it relies, and therefore have a material adverse effect on our business, financial condition and results of operations.

If conditions in digital currency markets change such that certain trading strategies currently employed by our institutional investor customers become less profitable, the benefits of cubiX may be diminished, resulting in a decrease in our deposit balances and fee income and adversely impacting our growth strategy. In addition, if a competitor or another third party were to launch an alternative to cubiX (such as Federal Reserve’s FedNow Service, a virtual real time payment system for banks launched in 2023), we could lose non-interest bearing deposits and fee income and our business, financial condition, results of operations and growth strategy could be adversely impacted. Further, we may be unable to attract and retain experienced employees, which could adversely affect our growth. The further development and acceptance of digital currencies and blockchain technology are subject to a variety of factors that are difficult to evaluate, as discussed above. The slowing or stopping of the development or acceptance of digital currency networks and blockchain technology may adversely affect our ability to continue to grow and capitalize on our strategy to service the digital assets industry.

Our future growth may be adversely impacted if we are unable to retain and grow this strong, low-to-no cost deposit base. At times we face competitive pressures to pay higher interest rates on deposits to our digital currency customers, which could increase funding costs and compress net interest margins. Further, even if we are otherwise able to grow and maintain our non-interest bearing deposit base, our deposit balances may still decrease if our digital currency customers are offered more attractive returns from our competitors. If our digital currency customers withdraw deposits, we would lose a low-cost source of funds and fee income, which would likely increase our funding costs and reduce our net interest income and net interest margin. These factors could have material effect on our business, financial condition and results of operations.

The technology underlying cubiX may not function properly, or the personnel operating cubiX may not operate it correctly, either of which may have a material impact on Customers’ operations and financial condition. This same risk exists on our other technology and processing systems, and wire transfer and automated clearing house (ACH) operations that are outsourced to third-party service providers. The importance of cubiX means that any technological or operational problems in its functionality may have a material adverse effect on Customers’ operations, business model and growth strategy.

Many of our larger competitors have substantially greater resources to invest in technological improvements. Third parties upon which we rely for the technology underlying and supporting cubiX may not be able to develop, on a cost-effective basis, systems that will enable us to keep pace with such developments. As a result, our larger competitors may be able to offer additional or superior products compared to those that we will be able to provide, which would put us at a competitive disadvantage. We may lose customers seeking new technology-driven products and services to the extent we are unable to provide such products and services. The ability to keep pace with technological change is important and the failure to do so could adversely affect our business, financial condition and results of operations.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and the effectiveness of our third-party service providers. We outsource many of our major technology and business process functions, such as data processing, loan servicing, deposit processing and money transfer systems to third-party service providers. If we do not effectively select, implement and monitor our outsourcing relationships, or if the third-party service providers do not adequately perform their services or are unable to continue to provide services to us as a result of their own operational or technological limitations or financial or other difficulties, our operations may be materially and adversely affected. While we intend to select third-party service providers carefully, we do not control their operations and at times they encounter difficulties, including disruptions in communications, failures to handle current or increased transaction volumes, cyberattacks, security breaches, regulatory or compliance failures, data corruption or similar events, during which our ability to operate effectively is adversely affected. Certain of our third-party service providers have experienced performance issues, financial difficulties (including bankruptcy) and staff shortages, and we expect that others will in the future. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on us. Certain of our agreements with third party service providers contain limitations of liability or other contractual provisions that adversely affect our ability to recover damages from the third party service provider, even in cases where the damages are caused by the third party service provider’s breach of contract or other wrongful action, and insurance policies maintained by the third party service provider or us may not be sufficient to cover any such damages. In addition, the termination of third-party software licenses or service agreements on which any of our information technology and telecommunications systems are based, or other disruption in our relationships with third-party service providers, could adversely affect our operations, and securing replacement licenses and/or engaging alternative third-party service providers and integrating the related technology and services into our systems could result in increased costs and operational difficulties.

In addition, we provide our customers with the ability to bank remotely, including online, over the Internet, through apps and over the telephone, including through application programming interfaces (APIs). The secure transmission of confidential information over the Internet and other remote channels is a critical element of remote banking. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security breaches. We spend significant capital and other resources to protect against the threat of security breaches and computer viruses or to alleviate problems caused by security breaches or viruses, and we expect these expenditures to continue in the future.future, but there can be no assurances that we will be successful in preventing such events. To the extent that our activities or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could materially and adversely affect us.

We regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, team membersmembers, third party service providers and others. This information is necessary for the conduct of our business activities, including the ongoing maintenance of deposit, loan and other account relationships for our customers, and receiving instructions and affecting transactions for those customers and other users of our products and services. In addition to confidential information regarding our customers, team membersmembers, third party service providers and others, we compile, process, transmit and store proprietary, non-public information concerning our own business, operations, plans and strategies. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf.

Information security risks have increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. A failure in or breach of our operational or information security systems or those of our third-party service providers, as a result of cyber-attacks or information security breaches or due to team member error, malfeasance or other disruptions, could adversely affect our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and/or cause losses. As a result, cybersecurity and the continued development and enhancement of the controls and processes designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain aan priorityongoing for us.risk.

The encryption software and the other technologies we use to provide security for storage, processing and transmission of confidential customer and other information are not always effective to protect against data-security breaches. The risk of unauthorized circumvention of our security measures has been heightened by advances in computer capabilities and the increasing sophistication of hackers.hackers including through the use of artificial intelligence. Companies that process and transmit cardholder information have been specifically and increasingly targeted by sophisticated criminal organizations in an effort to obtain the information and utilize it for fraudulent transactions. Similarly, companies that process payments on behalf of customers or other third parties are also being increasingly targeted for fraudulent transactions.

Unauthorized access to our computer systems or those of our third-party service providers, could result in the theft or publication of the information or the deletion or modification of sensitive records, and could cause interruptions in our operations. Any inability to prevent security breaches could damage our relationships with our customers, cause a decrease in transactions by individual cardholders,customers, expose us to liability for unauthorized purchasespurchases, payments or other transactions and subject us to network fines. These claims also could result in protracted and costly litigation. If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business practices. Further,Certain asecurity significantincidents data-securitytrigger breachregulatory couldnotice leadrequirements or other regulatory obligations, and failure to additionalcomply regulation,with whichsuch obligations could impose new and costly compliance obligations.obligations or otherwise have a material adverse effect on our reputation, business or operations. Any material increase in our costs resulting from litigation or additional regulatory burdens being imposed upon us or litigation could have a material adverse effect on our operating revenues and profitability.

In addition, our account holders disclose certain “personally identifiable” information, including contact information, identification numbers and the amount of credit balances, which they expect we will maintain in confidence. It is possible that hackers, fraudsters, customers or team members acting unlawfully or contrary to our policies or other individuals, could improperly access our or our third-party service providers’ systems and obtain or disclose data about our customers. Further, because customer data may also be collected, stored or processed by third-party service providers, it is possible that these third-party service providers could intentionally, negligently or otherwise disclose data about our clients or customers.

We rely to a large extent upon sophisticated information technology systems, databases and infrastructure, and take steps to protect them. However, due to their size, complexity, content and integration with or reliance on third-party systems, they are vulnerable to breakdown, malicious intrusion, natural disaster and random attack, all of which pose a risk of exposure of sensitive data to unauthorized persons or to the public. The likelihood or severity of these events may increase as our use of automation, artificial intelligence or other technologies, including APIs, increases.

Further, computer viruses, ransomware or malware could infiltrate our systems, thus disrupting our delivery of services and making our applications unavailable. Although we utilize several preventative and detective security controls in our network, theythere maycan be ineffectiveno assurance that they will be effective in preventing computer viruses, ransomware or malware that could damage our relationships with our merchant customers, cause a decrease in transactions by individual cardholders,customers, or cause us to be in non-compliance with applicable network rules and regulations.

In addition, our team members, systems and customers are regularly targets of fraudulent activity. A significant incident of fraud or an increase in fraud levels generally involving our products could result in reputational damage to us, which could reduce the use of our products and services. Additionally, significant fraudulent activity related to a specific product offering may lead us to limit or discontinue such product. Such incidents could also lead to a large financial loss as a result of the protection for unauthorized purchases we provide to certain customers for uncollectible account holder overdrafts and any other losses due to fraud or theft. Such incidents of fraud could also lead to regulatory or legislative complaints or intervention, which could increase our compliance costs. Compliance with the various complex laws and regulations is costly and time consuming, and failure to comply could have a material adverse effect on our business. Additionally, increased regulatory requirements on our services may increase our costs, which could materially and adversely affect our business, financial condition and results of operations. Accordingly, account data breaches and related fraudulent activity could have a material adverse effect on our future growth prospects, business, financial condition and results of operations.

Negative public opinion regarding us could adversely affect our stock price, business, results of operations, and financial condition.

Reputational harm, including as a result of our actual or alleged conduct or public opinion of the financial services industry generally, could adversely affect our stock price, business, results of operations, and financial condition. Reputation risk, or the risk to our business, earnings, liquidity, capital, stability or viability from negative public opinion, is inherent in our business and is expected to increase as our size, profile and product offerings in the financial services industry grows. Negative publicity or reputational harm can result from actual or alleged conduct in a number of areas, including legal and regulatory compliance, lending practices, corporate governance, litigation, inadequate protection of customer data, illegal or unauthorized acts taken by third parties that supply products or services to us, the behavior of our team members, the customers with whom we have chosen to do business, the industries in which we operate, corporate initiatives (such as those related to diversity, equity and inclusion or CSR) and negative publicity for other financial institutions. Damage to our reputation could adversely impact our ability to attract new, or maintain existing, loan and deposit customers, team members and business relationships, and could result in the imposition of new regulatory requirements, operational restrictions, enhanced supervision and/or civil money penalties. Further, negative public opinion can expose us to litigation and regulatory action and delay and impede our efforts to raise capital or implement our growth strategy. The proliferation and increasing influence of social media websites, as well as the personal use of social media by our team members and others, also may increase the risk that negative, inappropriate or unauthorized information may be posted or released publicly that could harm our reputation, adversely affect our stock price or the public’s perception of our stability or viability, or have other negative consequences. Although we have policies and procedures in place intended to detect and prevent conduct by team members and third-party service providers that could potentially harm customers or our reputation, there is no assurance that such policies and procedures will be fully effective in preventing such conduct. Any damage to our reputation could have a material adverse effect on our stock price, business, results of operations, and financial condition.

Increased attention to CSR matters also has caused public officials, including certain state attorneys general, treasurers, and legislators, to take various actions to impact the extent to which CSR principles are considered by private investors. For instance, certain states have enacted laws or issued directives designed to penalize financial institutions that the state believes are boycotting certain industries such as the fossil fuel and firearms industries. Other investors and public figures may seek to penalize companies that pursue CSR-related initiatives. In the second half of 2025, certain federal regulators, including the SBA and the Federal Reserve, launched inquiries into whether financial institutions had engaged in “politicized or unlawful debanking” in response to Executive Order 14331, which sought to eliminate the use of reputation risk or equivalent concepts that could result in, and impose other measures to combat, politicized or unlawful debanking activities by financial regulators and financial institutions. These developments illustrate that CSR-based investing has become a divisive political issue. Shifts in investing priorities based on CSR principles may result in adverse effects on the market price of our securities to the extent that investors that give significant weight to such principles determine that the Company has not made sufficient progress on CSR matters. Conversely, the market price of our securities may be adversely affected if a government official or agency seeks to limit the Company’s business with a certain government entity or initiates an investigation or enforcement action because of what is perceived to be the Company’s unwarranted focus on CSR matters.

We intend tomay engage in acquisitions of other businesses from time to time. These acquisitions may not produce revenue or earnings enhancements or cost savings at levels, or within time frames, originally anticipated and may result in unforeseen integration difficulties.

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, as well as several tables describing its ACL,process in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” andto 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 UncertaintiesUncertainties, Tariffs, and Military Conflicts

Significant uncertainties as to future economic conditions continue to exist, including risks of higher inflationinflation, changes in U.S. trade policies including the imposition of tariffs and sustainedretaliatory highertariffs intereston rateits environment,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. Customers’ exposure to higher risk commercial real estate such as the office sector is minimal, representing approximately 1% of the loan portfolio as of December 31, 2024. 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 $5.3$6.2 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $3.8$4.4 billion as of December 31, 2024.2025. The Bank’s estimated FDIC insured deposits represented approximately 61.0%59% of our deposits (inclusive of accrued interest) as of December 31, 2024.2025. When including collateralized and affiliate deposits as FDIC insured, this number increased to 70.0%68% of our deposits as of December 31, 2024.2025. 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 20252026 is highly uncertain.

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 modelledmodeled 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 net increase in our estimated ACL as of December 31, 20242025 as compared to December 31, 20232024 resulted primarily from an increase in commercial and industrial loan balances held for investment, partially offset by the recognition of improvements in macroeconomic forecasts and a decrease in consumer installmenthigher loan balances held for investment. The provision for credit losses on loans and leases for the year ended December 31, 20242025 was $69.8$77.3 million, for an ending ACL balance of $141.7$164.7 million ($136.8$155.7 million for loans and leases and $4.9$9.0 million for unfunded lending-related commitments) as of December 31, 2024.2025.

To determine the ACL as of December 31, 2024,2025, Customers utilized Moody’s December 20242025 Baseline forecast to generate its modelledmodeled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modelledmodeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 20242025 assumed slight improvements in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 20232024; the Federal Reserve Board lowering interest rates twicein inDecember 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 reducingbringing the policy rate to its neutral level by late2028, 2026,policymakers 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 ensureanticipating that the failuresrecent doacceleration notin weakeninflation will prove temporary, as it is largely due to a one-time price increase caused by the financialhigher system or further undermine economic growthtariffs; the military conflict between Russia and Ukraine continuing for the foreseeable future but its impactfallout on energy, agriculture and other commodity markets andis modest; a threat that the global economy has largely faded; the warturmoil in Israel not spreading to other parts of the Middle East and disrupting global energy and financial markets andhas globalabated shippingsomewhat; the CPI rising 2.3% in 2025 and 2.8%3.2% in 2026 and 2.6% in 2027; and the unemployment rate rising to 4.1%4.7% in 20252026 and 2026.2027. Customers continues to monitor the impact of the U.S. banking system weaknesses, 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, 20242025 as compared to December 31, 20232024 resulted primarily from an increase in commercial and industrial loan balances held for investment, partially offset by the recognition of improvements in macroeconomic forecasts and a decrease in consumer installmenthigher loan balances held for investment. The provision for credit losses on loans and leases for the year ended December 31, 20232024 was $70.8$69.8 million, for an ending ACL balance of $138.2$141.7 million ($135.3$136.8 million for loans and leases and $2.9$4.9 million for unfunded lending-related commitments) as of December 31, 2023.2024. To determine the ACL as of December 31, 2023,2024, Customers utilized Moody’s December 20232024 Baseline forecast to generate its modelledmodeled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modelledmodeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 20232024 assumed lowerslight growth ratesimprovements in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 20222023; the Federal Reserve Board notlowering raisinginterest rates twice in 2025 and gradually reducing the effective federal fundspolicy rate furtherto its neutral level by late 2026, as itslower hasprogress reachedin itsreducing terminalinflation rangeand additional inflationary pressures from the new administration’s fiscal, tariff and immigration plans suggest a slower pace of 5.25%normalization tothan 5.5%,previously and easing gradually beginning in mid-2024expected; thefailures federalof governmentseveral avoidingregional a shutdownbanks in the fourthfirst quarterhalf of 2023 and remaining in continuous operation through 2024; recent U.S.issues bankaround failuresother 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 thefurther U.S.undermine economyeconomic growth; the military conflict between Russia and Ukraine continuing for the foreseeable future but its falloutimpact on energy, agriculture and other commodity markets and the global economy fadinghas largely faded; the war in Israel not broadeningspreading to aother regionalparts conflictof the Middle East and disrupting global energy markets and global shipping; the CPI rising 2.3% in 2025 and 2.8% in 2024 and 2.4% in 20252026; and the unemployment rate rising to 4.0% in 2024 and 4.1% in 2025.2025 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 impactimpacts of the newcurrent administration’s tariffs and deportations on the economy being significantly worse than expected; elevatedeffective interesttariff ratesrate weakeningrising credit-sensitiveto consumerabout spending much19%, more than anticipated,the 12% in the baseline scenario, and risingremaining inflationthere causingthrough the Federalend Reserveof Board to initially raise the fed fund rate2028; military conflict between Russia and Ukraine persisting longer than expected; worries grow that the military conflict in Israel escalatingwidening; 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 20252026 and peaking in the first quarter of 2026.2027. Under this scenario, as an example, the unemployment rate is estimated at 7.3%7.4% and 8.0%8.1% in 20252026 and 2026,2027, respectively. These numbers represent a 3.2%2.7% and 3.9%3.4% higher unemployment estimate than the Baseline scenario projectionsprojection of 4.1%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 modelledmodeled results. This would result in an incremental quantitative impact to the ACL of approximately $77$101 million at December 31, 2024.2025. 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.

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 orincluding worseninga ofnear-term the U.S. banking systemrecession 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 and worsening of the U.S. banking system 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.

Net interest income decreasedincreased $33.0$96.1 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to lower interest incomeexpense on deposits and an increase in specializedinterest lending,income otherfrom higher average loan balances and purchase discount accretion on commercial and industrial loansloans, and leases and consumer installment loans and higher interest expense on deposits,partially offset in part by lower interest expense from lower average balances of borrowings. Thea decrease in interest income infrom specializedinvestment lendingsecurities wasand mostlyinterest-earning attributable to lower purchase discount accretion on the venture banking loan portfolio acquired in 2023.deposits. The average interest-earning assets decreasedincreased by $55.5$1.7 millionbillion for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The decreaseincrease in interest-earning assets was primarily driven by decreasesincreases in specialized lending, PPP loans included in other commerciallending and industrialinterest-earning loans and leases, consumer installment loans and investment securities,deposits, partially offset by ana increasedecrease in interest-earning deposits. Loan forgiveness and guarantee claims processing for the PPP program was substantially completed in early 2023. Consumer installment loans decreased as Customers continued its de-risking strategy and the build out of our held for sale strategy in 2024. Also in 2024, Customers executed investment securities portfolio repositioning to improve structural liquidity, reduce asset sensitivity and benefit margin. Customers invested the cash flows from investment securities, including proceeds from the sale of lower yielding investment securities into higher yielding loans and investment securities. NIM decreasedincreased by 1417 basis points to 3.32% for the year ended December 31, 2025, from 3.15% for the year ended December 31, 2024,2024. The lower cost of deposits from 3.29%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, 2023. The lower purchase discount accretion on the venture banking loan portfolio acquired in 2023, reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgiveness and guarantee payments and higher market interest rates on deposits contributed to the NIM decrease for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The higherfavorable shift in deposit mix and lower market interest rates on deposits drove a 3255 basis point increasedecrease in the cost of interest-bearing liabilities for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. Customers’ total cost of deposits, including interest-bearing and non-interest bearing deposits, werewas 3.34%2.74% and 3.27%3.34% for the years ended December 31, 20242025 and 2023,2024, respectively, as higher market interest rates on deposits were partially offset by a favorable shift in deposit mix.respectively. Customers’ total cost of funds, including non-interest bearing deposits and borrowings, was 3.46%2.88% and 3.45%3.46% for the years ended December 31, 20242025 and 2023,2024, respectively.

The $1.2$24.5 million decreaseincrease in the provision for credit losses included $1.0$7.5 million decreaseincrease in provision for credit losses on loans and leases for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, which resulted primarily from the recognition of improvements in macroeconomic forecasts and a decrease in consumer installment loan balances held for investment, partially offset by an increase in commercial and industrialhigher 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 1.04%1.03% of total loans and leases receivable at December 31, 2024,2025, compared to 1.13%1.04% at December 31, 2023.2024. Net charge-offs for the year ended December 31, 20242025 were $68.3$59.4 million, or 5038 basis points of average total loans and leases, compared to $69.0$68.3 million, or 4850 basis points of average total loans and leases for the year ended December 31, 2023. The net charge-offs of $69.0 million for the year ended December 31, 2023 excludes $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the venture banking loan portfolio on June 15, 2023. Subsequent recoveries and charge-offs of these PCD loans are included in the period in which they occur.2024. The decrease in net charge-offs was primarily due to decreases in non-ownerconsumer occupiedinstallment loans and commercial real estate and consumer installmentindustrial loans, partially offset by higher charge-offs for commercial and industrialmultifamily loans and subsequentnon-owner recoveriesoccupied ofcommercial PCDreal loansestate acquired from the FDIC during the year ended December 31, 2023.loans.

The $10.1$7.4 million decreaseincrease in non-interest income for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 resulted primarily from increasesdecreases of $26.4$25.4 million in net loss on sale of investment securities and $14.4$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 a decreaseincreases of $2.3$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. These decreases were offset in part by $11.4 million of unrealized gain on equity method investment with a fair value of $16.6 million purchased at discount for the year ended December 31, 2024, $5.0 million in loss on sale of capital call lines of credit for the year ended December 31, 2023, and increases of $6.9 million in loans fees, $5.5 million in other non-interest income and $4.5 million in commercial lease income for the year ended December 31, 2024 compared to the year ended December 31, 2023. 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” and “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 sales of consumer installment loans andto capitalthird-party callsponsored lines of credit.VIEs.

The $64.4$14.9 million increase in non-interest expense for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from increases of $42.6$15.4 million in professional services, $13.2 million in salaries and employee benefits, $15.2$5.8 million in othercommercial non-interestlease expense,depreciation, $6.6$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, $2.6 million in commercial lease depreciation, $1.7 million in occupancy and $1.4 million in advertising and promotion. These increases were offset in part by a legal settlement expense of $4.1 millionfees for the year ended December 31, 2023, and decreases of $1.2 million in loan servicing, $0.4 million in technology, communication and bank operations and $0.2 million in professional services for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024.

Included in the $6.6$21.7 million increasedecrease 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, 20242025 compared to the year ended December 31, 20232024 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. Included in the $0.4 million decrease in technology, communication and bank operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 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.

Customers’ effective tax rate was 19.1%22.3% for the year ended December 31, 20242025 compared to 24.4%19.1% for the year the ended December 31, 2023.2024. The decreaseincrease in the effective tax rate for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily due to ana increasedecrease in investment tax credits, including $14.9 million of investment tax credits generated from commercial clean vehicles in 2024, andnet taxof a $5.7 million benefit on the surrenderutilization of bank-ownedpurchased lifetransferable insuranceproduction policiestax of $4.1 millioncredits in 2023 that did not exist in 2024,2025, partially offset by thea 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.leases for the year ended December 31, 2024.

Preferred stock dividends and loss on redemption of preferred stock

The NIM decreasedincreased by 1417 basis points to 3.32% for the year ended December 31, 2025, from 3.15% for the year ended December 31, 2024, from 3.29% for the year ended December 31, 20232024 resulting primarily from lower purchasecost discountof accretiondeposits onfrom thea venturefavorable banking loan portfolio acquiredshift in 2023,deposit reduced recognition of net deferred loan origination fees from PPP loans driven by lower loan forgivenessmix and guarantee payments, and higherlower 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 higherfavorable shift in deposit mix and lower market interest rates on deposits drove a 3255 basis point increasedecrease in the cost of interest-bearing liabilities. Customers’ total cost of deposits, including interest-bearing and non-interest bearing deposits was 3.34%2.74% and 3.27%3.34% for the years ended December 31, 20242025 and 2023,2024, respectively, as higher market interest rates on deposits were partially offset by a favorable shift in deposit mix.respectively. Customers’ total cost of funds, including non-interest bearing deposits and borrowings was 3.46%2.88% and 3.45%3.46% for the years ended December 31, 20242025 and 2023,2024, respectively.

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 portfolioportfolio, lending-related commitments and investment securities at the balance sheet date. Customers recorded a provision for credit losses on loans and leases of $69.8$77.3 million and $70.8$69.8 million for the years ended December 31, 20242025 and 2023,2024, respectively. Customers recorded a provision for credit losses of $2.0$4.1 million and a benefit to provision for credit losses of $0.1$2.0 million offor lending-related commitments for the years ended December 31, 20242025 and 2023,2024, respectively. The $1.0$7.5 million decreaseincrease in the provision for credit losses for loans and leases for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 resulted primarily from the recognition of improvements in macroeconomic forecasts and a decrease in consumer installment loan balances held for investment, partially offset by an increase in commercial and industrial loan balances held for investment.

Net charge-offs for the year ended December 31, 20242025 were $68.3$59.4 million, or 5038 basis points of average total loans and leases, compared to $69.0$68.3 million, or 4850 basis points of average total loans and leases for the year ended December 31, 2023. The net charge-offs of $69.0 million for the year ended December 31, 2023 excludes $6.2 million of charge-offs for certain PCD loans acquired from the FDIC applied against $8.7 million of allowance for credit losses on PCD loans recognized upon acquisition of the venture banking loan portfolio on June 15, 2023. Subsequent recoveries and charge-offs of these PCD loans are included in the period in which they occur.2024. The decrease in net charge-offs was primarily related to decreases inlower charge-offs for non-ownerconsumer occupiedinstallment loans and commercial real estate and consumer installmentindustrial loans, partially offset by higher charge-offs for commercial and industrialmultifamily loans and subsequentnon-owner recoveriesoccupied ofcommercial PCDreal loansestate acquired from the FDIC during the year ended December 31, 2023.loans.

The table below presents the components of non-interest income for the years ended December 31, 20242025 and 2023.2024:

The $6.9$8.0 million increase in loan fees for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from increases in fees earned on unused lines of credit and otherincome feeson fromthe borrowers.settlement of certain stock warrants.

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 $2.3$1.8 million decreaseincrease in bank-owned life insurance income for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from a decreaseincreases in death benefits paidreceived byfrom insurance carriers under the policies and increases in the cash surrender value of the policies.

The $14.4$15.6 million increasedecrease in net loss on sale of loans and leases for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 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 personal 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, as compared to $0.2 million in net gains on sales of $78.6 million of SBA loans, $0.2 million in losses on sales of consumer installment loans and a loss of $1.2 million, inclusive of transaction costs, on sales of $556.7 million in consumer installment loans that were classified as held for sale, inclusive of $154.0 million of other installment loans transferred from held for investment to held for sale, accrued interest and unamortized deferred loan origination costs, to two third-party sponsored VIEs for the year ended December 31, 2023.2024. 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 2025,2026, given the significant uncertainty in the capital markets.

The $26.4$25.4 million increasedecrease in net loss on sale of investment securities for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 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, compared to the sales of $297.4 million in AFS debt securities for the year ended December 31, 2023.2024. 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 2025,2026, given the significant uncertainty in the capital markets and fluctuations in our funding needs, which may impact Customers’ investment strategy.

The $11.4 million increasedecrease in unrealized gain on the equity method investments for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 reflects an unrealized gain from thean equity method investments with fair value of $16.6 millioninvestment purchased at a discount during the year ended December 31, 2024.

The $5.5$11.9 million increase in other non-interest income for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from increases$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 income from equity investments, derivatives and deposit account fees.

The table below presents the components of non-interest expense for the years ended December 31, 20242025 and 2023.2024:

The $42.6$13.2 million increase in salaries and employee benefits for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from an increase in average full-time equivalent team members including the addition of new banking teams,and annual merit increases, incentives and severance.increases.

The $0.4$21.7 million decrease in technology, communication and bank operations expense for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from a decreasedecreases in deposit servicing-related expenses resulting from lower servicing fees,fees partiallyand offset by an increase of $9.0$4.4 million in fees for software andincluding processingfees fees.for software as a service.

Customers incurred $19.6$2.5 million and $29.6$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, 20242025 and 2023,2024, respectively. On March 22, 2023, Customers agreed to amend and extend an existing white label relationship with a third party and BM Technologies, whereby Customers will continue to pay deposit servicing fees to BM Technologies. On December 1, 2023, Customers had an outflow of approximately $430.0 million of student-related deposits serviced by BM Technologies to a new sponsor bank. The remaining deposits serviced by BM Technologies in connection with an existingthe white label relationship are expected to remain at Customers Bank and continue to be serviced by BM Technologies until such accounts arewere transferred to another sponsor bank onin or2025. aroundCustomers Marchhad 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.

The $0.2$15.4 million decreaseincrease in professional services for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from decreases in legal fees related to loan transactions and PPP related matters and other professional services, partially offset by increases in contractor services and consulting feesfees, including to enhance the Bank’s risk management infrastructure.infrastructure, and legal fees associated with a new banking team onboarding.

The $1.2$1.0 million decreaseincrease in loan servicing for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from lowerthe balancesgrowth in consumer installmentloan loansportfolios serviced by third parties.

The $1.7$3.8 million increase in occupancy for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily due to higher lease expense and depreciation and amortization associated with the Bank’s expansion.growth.

The $6.6$0.5 million increasedecrease in FDIC assessments, non-income taxes and regulatory fees for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from a decrease in FDIC assessments, partially offset by an increase in Pennsylvania bank shares taxes. The FDIC assessmentassessments, ratesnon-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, partially offset by a decrease of $3.0 million in FDIC special assessments2024 and a credit of $3.0 million for Pennsylvania bank shares taxes relating to periods prior to 2024.

The $1.4$2.1 million increasedecrease in advertising and promotion expense for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from higherlower spending on advertising agencies and media.agencies.

The $15.2$0.1 million increasedecrease in other non-interest expenses for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from increasesa decrease in fees paid to a fintech company related to consumer installment loansloans, originatedpartially andoffset heldby forincreases sale as a part of the Bank’s held for sale strategy and thein provision for credit losses on unfunded lending-related commitments.commitments and insurance expenses related to investments in tax credit structures with a corresponding benefit to income tax expense.

The table below presents income tax expense and the effective tax rate for the years ended December 31, 20242025 and 2023.2024:

The $37.7$21.4 million decreaseincrease in income tax expense for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from lowerhigher pre-tax income and ana increasedecrease in investment 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 thea lower increase of unrecognized tax benefits in 2024.2025 Theas incomecompared tax expense for the year ended December 31, 2023 also included $4.1 million from the surrender of bank-owned life insurance policies that did not repeat into 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.leases for the year ended December 31, 2024.

The decreaseincrease in the effective tax rate for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily resulted from ana increasedecrease in investment tax credits in 2024 and tax on the surrender of bank-owned life insurance policies in 2023 that did not repeat in 2024,2025, partially offset by thea 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

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.

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. This represented an increase of $992.0 million from total assets of $21.3 billion at December 31, 2023. The increase in total assets was primarily driven by increases of $1.2$1.9 billion in loans and leases receivable, $423.2$625.5 million in cash and cash equivalents, $291.9 million in loans receivable, mortgage finance, at fair valuevalue, and $114.6$157.0 million in other assets,assets and $102.1 million in loans receivable, installment, at fair value, partially offset by decreases of $385.9$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, $135.5 million in loans held for sale, $111.2 million in investment securities held to maturity and $60.4 million in cash and cash equivalents.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. This represented an increase of $793.7 million from $19.7 billion at December 31, 2023. The increase in total liabilities primarily resulted from an increaseincreases of $926.2$1.9 millionbillion in total deposits, partially offset by decreases of $74.9$196.7 million in FHLB advances, $33.2$98.6 million in subordinated debt and $81.1 million in accrued interest payable and other liabilities and $24.8 million in other borrowings.liabilities.

Interest-earning deposits consist of cash deposited at other banks, primarily the FRB. Interest-earning deposits were $3.7$4.3 billion and $3.8$3.7 billion at December 31, 20242025 and 2023,2024, 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 decreaseincrease in interest-earning deposits since December 31, 20232024 primarily resulted from deployinghigher excessnon-interest cashbearing intodemand loansdeposits held by the Bank and the sale of investment securities.

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 and six months ended MarchJune 31,30, 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.

The Federal Reserve kept the target range for the federal funds rate unchanged at its January,meetings Marchin and April 2026 meetings.2026. At its MarchJune 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 somewhatelevated elevated.in part reflecting supply shocks that have driven price increases in certain sectors, including energy. 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 indicatedstated that it will carefullydeliver assessprice 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.stability. Significant uncertainties exist as to the extent and timingdirection of futureinterest rate cutsrates 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 beginbegan to decline, Customers hashad 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$7.0 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $4.8$4.2 billion as of MarchJune 31,30, 2026. The Bank’s estimated FDIC insured deposits represented approximately 57%55% of our deposits (inclusive of accrued interest) as of MarchJune 31,30, 2026. When including collateralized and affiliate deposits as FDIC insured, this number increased to 66%65% of our deposits as of MarchJune 31,30, 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.

Customers’ ACL at MarchJune 31,30, 2026 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.

The net increase in our estimated ACL as of MarchJune 31,30, 2026 as compared to December 31, 2025 resulted primarily from a slight deterioration in macroeconomic forecasts and an increase in loan balances heldpartially foroffset investment.by slight improvements in the forecast of macroeconomic variables. The provision for credit losses on loans and leases was $18.6$17.7 million and $36.3 million for the three and six months ended MarchJune 31,30, 20262026, respectively, for an ending ACL balance of $170.4$174.1 million ($161.0$164.1 million for loans and leases and $9.4$10.0 million for unfunded lending-related commitments) as of MarchJune 31,30, 2026.

To determine the ACL as of MarchJune 31,30, 2026, Customers utilized Moody’sits March 2026 Baselinebaseline 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 Baselinebaseline forecast at MarchJune 2026 assumed slight deteriorationimprovements in macroeconomic forecasts from the fourthfirst quarter 20252026 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board loweringholding interest rates byunchanged a quarter point in June and September asfor the policymakersforeseeable willfuture wait on further datadue to evaluateuncertainty threatscaused to the Federal Reserves’ mandate, including the fragile U.S. labor market, higher oil prices fromby the military conflict inwith Iran and the Middlesurge East,in restrictive tariffoil and migrationother policiescommodity prices; inflation is above the economicFederal impactReserve’s oftarget due to higher tariffs and the military conflict inwith theIran Middle Eastand is not expected to bereturn short-lived,to whiletarget additionaluntil fiscalearly stimulus2028; the jobs market has stabilized, and theunemployment reboundremains fromclose to the federalestimated governmentunemployment shutdownrate boostingat growthfull employment. Key variables in the nearforecast term;show the SupremeCRE Courtprice rulingindex on the tariffs under the International Emergency Economic Powers Act not materially changing the outlook on tariffs, as prior sectoral tariffs remain unaffected and other laws will be usedrising to impose tariffs similar to those declared illegal moving forward; the CPI rising 3.1%307.8 in 2026 and 2.7%316.7 in 2027;2027, quarterly GDP growth between 1.8% and 2.0% through 2027, the unemployment rate rising to 4.5% in 2026 and 4.6% in 2027, and the BBB spread rising to 1.51% in 2026 and 1.79% in 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 economic growth is worse than expected, further meaningful provisions for credit losses could be required.

As of December 31, 2025, the ACL ending balance was $164.7 million ($155.7 million for loans and leases and $9.0 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2025, Customers utilized the Moody’sits December 2025 Baselinebaseline 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 Baselinebaseline 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 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 late 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.

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody’s.forecasts. 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’ modeling 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 the military conflict in the Middle EastEast, resultingincluding innegotiations between the StraitU.S. ofand HormuzIran beingtaking closedmuch longer than expected, and the damage to energy infrastructure worse than expected and taking longer to repair, and causing oil prices to risedecline aboveless than in the Baseline scenario; economic impacts on the economy of the current administration’s tariffs and deportations, as well as risinghigh oil prices worse than expected, causing inflation to rise in the secondthird quarter of 2026; military conflict between Russia and Ukraine persisting longer than expected; the combination of risinghigh oil prices, tariffs, rising inflation, deportations, political tensions, still-elevated interest rates and reduced credit availability causescausing the economy to fall into recession in the secondthird quarter of 2026; unemployment beginning to increase significantly in the secondthird quarter of 2026 and peaking in the secondthird quarter of 2027. Under this scenario, as an example, the unemployment rate is estimated at 6.5%7.2% and 8.3%8.4% in 2026 and 2027, respectively. These numbers represent a 2.0%2.7% and 3.8% higher unemployment estimate than the Baseline scenario projection of 4.5% and 4.6% for the same time periods, respectively. Further, the adverse scenario showed the CRE price index declining to 289.5 in 2026 and 248.3 in 2027, quarterly GDP contracting by 3-4% through Q1 of 2027 with a very modest economic recovery happening in Q2 2027, as well as the BBB spread growing to 3.15% in Q2 of 2027 before retreating to 2.39% at the end of 2027. 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 $107$105 million at MarchJune 31,30, 2026. 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.

The following table sets forth the condensed statements of income for the three and six months ended MarchJune 31,30, 2026 and 2025:

Customers reported net income available to common shareholders of $69.7$71.6 million and $141.2 million for the three and six months ended MarchJune 31,30, 2026, compared to net income available to common shareholders of $9.5$55.8 million and $65.4 million for the three and six months ended MarchJune 31,30, 2025. Factors contributing to the change in net income available to common shareholders for the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 were as follows:

Net interest income increased $23.9$16.7 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to higher average loan balances and lower interest expense on deposits.balances. Average interest-earning assets increased by $2.4$2.9 billion for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The increase in interest-earning assets was primarily driven by an increase in commercial and industrial specialized lending. NIM increaseddecreased by 9ten basis points to 3.22%3.17% for the three months ended MarchJune 31,30, 2026 from 3.13%3.27% for the three months ended MarchJune 31,30, 2025. The NIM increasedecrease was primarily attributable to lower market interest rates on commercial and industrial loans and interest earning deposits, partially offset by lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits,rates, which drove a 4852 basis point decrease in the cost of interest-bearing liabilities for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. Customers’ total cost of funds, including non-interest bearing deposits and borrowingsborrowings, was 2.61%2.64% and 2.96%2.99% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

The $4.9$2.3 million decreaseincrease in the provision for credit losses for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 included $2.9$0.7 million decrease in provision for credit losses on loans and leases for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, which primarily reflects areserve slight improvementreleases in certaincommercial macroeconomicand forecastindustrial variables.and commercial real estate non-owner occupied loans, were largely offset by a reserve build in multifamily loans driven by higher net charge-offs and increased reserves for consumer installment loans. 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 1.04%1.01% of total loans and leases receivable at MarchJune 31,30, 20262026, compared to 1.07% of total loans and leases receivable at June 30, 2025. Net charge-offs for the three months ended MarchJune 31,30, 2026 were $13.3$14.6 million, or 3234 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $17.1$13.1 million, or 4835 basis points on an annualized basis, for the three months ended MarchJune 31,30, 2025. The decreaseincrease in net charge-offs for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, was primarily due to higher charge-offs for multifamily loans, partially offset by lower charge-offs for commercial and industrial loans, multifamily loans and consumer installment loans.

The provision for credit losses for the three months ended MarchJune 31,30, 2026 and 2025 also included a provision for credit losses of $4.8$5.3 million and $6.9$2.3 million, respectively, on certain debt securities available for sale. The provision for credit losses on certain debt securities available for sale was $10.2 million and $9.2 million for the six months ended June 30, 2026 and 2025, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Non-interest income (loss)

The $58.8$4.4 million increase in non-interest income for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily resulted from $51.3 million of impairment loss on investment securities that the Bank decided to sell as of March 31, 2025 in order to further improve structural liquidity, enhance credit profile, reduce asset sensitivity and benefit margin, and increases of $4.8$4.3 million in commercial lease income, $3.3 million in loan feesincome and $1.0$1.1 million in net gain on sale of loans and leases,leases and a decrease of $2.0 million in net loss on sale of investment securities, partially offset by a decrease of $1.6$2.6 million in bank-ownedother life insurancenon-interest income for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.

The $9.2$8.3 million increase in non-interest expense for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily resulted from increases of $8.6$10.2 million in salaries and employee benefitsbenefits, and $4.2$4.0 million in commercial lease depreciation.depreciation and $2.5 million in technology, communication and bank operations. These increases were offset in part by a decreasedecreases of $3.5$7.3 million in FDIC assessments, non-income taxes and regulatory fees and $3.8 million in professional fees for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.

Income tax expense (benefit)

Customers’ effective tax rate was 22.9%20.0% for the three months ended MarchJune 31,30, 2026 compared to (8.6)%22.8% for the three months ended MarchJune 31,30, 2025. The increasedecrease in the effective tax rate primarily resulted from higher pre-taxfavorable permanent book to tax adjustments, which was partially offset by higher state and local income and lower investment tax credits.expense.

Preferred stock dividends and loss on redemption of preferred stock

There were no preferred stock dividends for the three monthsand six month ended MarchJune 31,30, 2026. Preferred stock dividends were $3.4$3.2 million and $6.6 million for the three and six months ended MarchJune 31,30, 2025.2025, 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 of $57.5 million paid in excess of the carrying value of Series E Preferred Stock of $1.9 million is included as a loss on redemption of preferred stock in the consolidated statements of income for the three and six months ended June 30, 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 three months ended March 31, 2025. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

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 three and six months ended MarchJune 31,30, 2026 and 2025. 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.

(4)Total costs of deposits (including interest bearing and non-interest-bearing) were 2.46%2.50% and 2.82%2.85% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

(5)Tax-equivalent basis, using an estimated marginal tax rate of 21% for the three months ended MarchJune 31,30, 2026 and 26% for three months ended MarchJune 31,30, 2025, presented to approximate interest income as a taxable asset.

Net interest income increased $23.9$16.7 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily due to higher average loan balances and lower interest expense on deposits.balances. Average interest-earning assets increased by $2.4$2.9 billion, primarily related to an increase in commercial and industrial specialized lending.

The NIM increaseddecreased by 9ten basis points to 3.22%3.17% for the three months ended MarchJune 31,30, 2026 from 3.13%3.27% for the three months ended MarchJune 31,30, 2025 resulting primarily from lower market interest rates on commercial and industrial loans and interest earning deposits, partially offset by lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits.rates. The cost of interest-bearing liabilities decreased 4852 basis points for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. Customers’ total cost of funds, including non-interest bearing deposits and borrowings was 2.61%2.64% and 2.96%2.99% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

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 of $18.6$17.7 million for loans and leases and $0.4$0.6 million for lending-related commitments, respectively, for the three months ended MarchJune 31,30, 2026. Customers recorded a provision for credit losses of $21.4$18.5 million for loans and leases and $1.2$1.6 million for lending-related commitments, respectively, for the three months ended MarchJune 31,30, 2025. The decrease in provision for credit losses for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 20252025, which primarily reflects areserve slight improvementreleases in certaincommercial macroeconomicand forecastindustrial variables.and commercial real estate non-owner occupied loans, were largely offset by a reserve build in multifamily loans driven by higher net charge-offs and increased reserves for consumer installment loans. Net charge-offs for the three months ended MarchJune 31,30, 2026 were $13.3$14.6 million, or 3234 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $17.1$13.1 million, or 4835 basis points of average loans and leases on an annualized basis, for the three months ended MarchJune 31,30, 2025. The decreaseincrease in net charge-offs for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, was primarily due to higher charge-offs for multifamily loans, partially offset by lower charge-offs for commercial and industrial loans, multifamily loans and consumer installment loans.

The provision for credit losses for the three months ended MarchJune 31,30, 2026 and 2025 also included a provision for credit losses of $4.8$5.3 million and $6.9$2.3 million, respectively, on certain debt securities available for sale. The provision for credit losses on certain debt securities available for sale was $10.2 million and $9.2 million for the six months ended June 30, 2026 and 2025, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

NON-INTEREST INCOME (LOSS)

The table below presents the components of non-interest income (loss) for the three and six months ended MarchJune 31,30, 2026 and 2025:

Commercial lease income represents income earned on commercial operating leases originated by Customers’ commercial equipment financing group in which Customers is the lessor. The $4.8$4.3 million increase in commercial lease income for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily resulted from the growth of Customers’ equipment finance business.

The $3.3$0.4 million increasedecrease in loan fees for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily resulted from gainsa ondecrease in unused credit line fees, partially offset by higher income from certain stock warrants.

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 $1.6 million decrease in bank-owned life insurance income for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily resulted from lower death benefits received from insurance carriers.

The $1.0$1.1 million increase in net gain on sale of loans and leases for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily resulted from salesales of SBA loans.

The $51.3 million decrease in impairment loss on debt securities for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 primarily resulted from impairment loss recorded on certain AFS debt securities that the Bank decided to sell as of MarchJune 31,30, 2025, in order to further improve structural liquidity, enhance credit profile, reduce asset sensitivity and benefit margin.

The table below presents the components of non-interest expense for the three and six months ended MarchJune 31,30, 2026 and 2025:

The $8.6$10.2 million increase in salaries and employee benefits for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 primarily resulted from an increase in average full-time equivalent team members and higher incentives.incentives associated with the Bank’s growth, annual merit increases and severance.