CUBI Customers Bancorp, Inc. - 10-K

Item 1A.    Risk Factors

Summary of Risk Factors

Our business is subject to a number of risks and a summary of the significant risk factors is set forth below. These risks are discussed in more detail following this summary and should be read together with this summary and considered along with other information contained in this report before investing in our securities.

• Risks related to the Bancorp’s banking operations:

◦ Risks related to maintaining an appropriate level of ACL;

◦ Risks related to changes in the composition of our loan portfolio including our current emphasis on commercial and industrial, including specialized lending, mortgage finance, commercial real estate, multifamily and consumer loans;

◦ Risks related to the commercial real estate market;

◦ Risks related to the impacts of changes in legislation or regulation on our New York state multifamily loan portfolio;

◦ Risks associated with our investment securities portfolio including market and credit risks and the uncertainties surrounding macroeconomic conditions;

◦ Risks associated with our lending activities and effective management of credit risks in our loan and lease portfolio;

◦ Risks associated with maintaining sufficient liquidity including our ability to gather, grow and retain our lower cost deposits and our ability to maintain a favorable deposit composition;

◦ Risks and uncertainties associated with the effectiveness of our business strategies, operations, and technology in managing growth and maintaining profitability;

◦ Risks related to changes to estimates and assumptions made by management in preparing financial statements;

◦ Risks related to changes in accounting standards and policies which can be difficult to predict and can materially impact how we record and report our financial results;

◦ Risks related to our geographic concentration in the Northeast and Mid-Atlantic regions;

◦ Risks related to our concentration in certain business lines or product types;

◦ Risks related to our dependency on our executive officers and key personnel to implement our strategy and our ability to retain their services;

◦ Risks related to significant competition from other financial institutions and financial services providers;

◦ Risks related to inflation, interest rates, and securities market and monetary fluctuations;

◦ Risks related to our proprietary B2B instant payments platform, cubiX;

◦ Risks associated with our dependency on our information technology and telecommunications systems and third-party service providers including exposures to systems failures, interruptions or breaches of security;

◦ Risks associated with the evolving regulatory frameworks around the development and use of artificial intelligence;

◦ Risks associated with the loss of, or failure to adequately safeguard, confidential or proprietary information;

◦ Risks associated with negative public opinion regarding us;

◦ Risks related to increasing, complex and evolving regulatory, stakeholder, and other third party expectations on CSR matters;

◦ Risks related to our system of internal controls, including internal controls over financial reporting;

◦ Risks associated with the acquisitions of or investments in other businesses;

• Risks related to macroeconomic conditions, climate change and geopolitical conflicts:

◦ Risks related to turmoil in the financial services industry, or our ability to adequately manage our liquidity, deposits, capital levels, interest rate risk or reputation risk, in light of recent bank failures;

◦ Risks related to worsening general business and economic conditions which could materially and adversely affect us;

◦ Risks related to the SBA’s PPP program and PPP loans remaining on our balance sheet;

◦ Risks related to climate change and related legislative and regulatory initiatives on our business;

• Risks related to the regulation of our industry:

◦ Risks associated with the highly regulated environment in which we operate, including the effects of heightened regulatory and supervisory requirements, expectations and scrutiny in the U.S. leading to increased compliance, regulatory and other risks and costs and subject us to legal and regulatory examinations, investigations and enforcement actions;

◦ Risks related to maintaining adequate regulatory capital to support our business strategies including the long-term impact of the new regulatory capital standards and the capital rules on U.S. banks;

◦ Risks related to our use of third-party service providers and our other ongoing third-party business relationships, which are subject to increasing regulatory requirements and attention;

◦ Risks related to litigation and regulatory actions, including enforcement actions, which could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities;

◦ Risks related to the FDIC’s restoration plan and related increased assessment rates;

◦ Risks related to reviews performed by the IRS and state taxing authorities for the fiscal years that remain open for investigation and potential changes in U.S. federal, state or local tax laws;

• Risks related to our securities:

◦ Risks related to our voting common stock;

◦ Risks related to our senior notes and subordinated notes;

• General risk factors

◦ Risks related to downgrades in U.S. government and federal agency securities; and

◦ Risks related to our ability to maintain consistent earnings or profitability.

Risks Related to the Bancorp’s Banking Operations

Our business is highly susceptible to credit risk. If our ACL is insufficient to absorb losses in our loan and lease portfolio, our earnings could decrease.

Lending money is a substantial part of our business, and each loan and lease carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment of the full amount owed. This risk is affected by, among other things:

• the financial condition and cash flows of the borrower and/or the project being financed;

• whether a loan or lease is collateralized and, if so, the changes and uncertainties as to the future value of the collateral;

• the discount on the loan at the time of its acquisition;

• the duration of the loan or lease;

• the credit history of a particular borrower; and

• changes in current and future economic and industry conditions.

Our credit standards, policies and procedures are designed to reduce the risk of credit losses but may not prevent us from incurring substantial credit losses.

Additionally, for certain borrowers, we restructure originated or acquired loans if we believe the borrowers are experiencing problems servicing the debt pursuant to current terms, and we believe the borrower is likely to fully repay their restructured obligations. We are subject to legal or regulatory requirements for restructured loans. With respect to restructured loans, we grant concessions to certain borrowers experiencing financial difficulties in order to facilitate repayment of the loan by a reduction of the stated interest rate for the remaining life of the loan to lower than the current market rate for new loans with similar risk or an extension of the maturity date.

Management makes various assumptions and judgments about the collectability 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, 2025, Customers’ ACL totaled $155.7 million, which represented 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, which can result in our being required to make additions to the ACL or incurring credit losses.

Management reviews and re-estimates the ACL quarterly. Additions to our ACL as a result of management’s reviews and re-estimates could materially decrease net income. Our regulators, as an integral part of their examination process, periodically review our ACL and may lead us to increase our ACL by recognizing additional provisions for credit losses on loans and leases charged to expense, or to decrease our ACL by recognizing charge-offs, net of recoveries. Any such additional provisions for credit losses on loans and leases or net charge-offs could have a material adverse effect on our financial condition and results of operations and possibly risk-based capital.

Changes in the composition of our loan portfolio may expose us to increased lending risks.

From time to time, we implement changes in the composition of our loan portfolio to emphasize and deemphasize certain types of loans, such as commercial and industrial loans, including specialized lending, mortgage finance, commercial real estate, multifamily and consumer loans. We may achieve these changes through originations or purchases or sales of loan portfolios from or to third party originators or fintech companies. Our focus will change, based on our evaluation of current and predicted market conditions and opportunities. Changes in the composition of our loan portfolio effects our overall credit profile, and these effects can be significantly adverse, and could result in a higher percentage of non-accrual loans, increased provision for loan losses, loss of future income on loans sold, sales of loans at a discount below book value and an increased level of net charge-offs, all of which could have a material and adverse effect on our financial condition and results of operations. Consumer loans are particularly affected by economic conditions, including interest rates, inflation, the rate of unemployment, housing prices, the level of consumer confidence, changes in consumer spending, and the number of personal bankruptcies. A weakening in business or economic conditions, including higher unemployment levels, higher inflation, increased interest rates or declines in home prices could adversely affect borrowers’ ability to repay their loans, which could negatively impact our credit performance.

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

Our emphasis on commercial, commercial real estate and mortgage finance may expose us to increased lending risks.

We intend to continue emphasizing the origination of commercial loans including our specialized lending verticals. Commercial loans, including commercial real estate loans, expose a lender to risk of non-payment and loss because repayment of the loans often depends on the successful operation of a business or property, which could be affected by factors outside of the borrower’s control, and the borrower’s cash flows. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four-family residential mortgage loans. We have in the past and will in the future experience non-payment of commercial loans. In addition, we may need to increase our allowance for credit losses in the future to account for an increase in expected credit losses associated with such loans. Also, we expect that many of our commercial borrowers will have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four-family residential mortgage loan.

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, 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.

This business is subject to seasonality of the mortgage lending business, and volumes are lower as a result of increased interest rates. A decline in the rate of growth, volume or profitability of this business unit, or a loss of its leadership could adversely affect our results of operations and financial condition.

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

We are subject to risks arising from conditions in the commercial real estate market.

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.

Our New York State multifamily loan portfolio could be adversely impacted by changes in legislation or regulation.

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, 2025, our total multifamily exposure in New York State was approximately $1.2 billion, of which approximately $849.0 million, or 69% was provided for loans to properties with 50% or more rent-regulated units, primarily in New York City. In 2026, there are $54.7 million, or 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.

The fair value of our investment securities fluctuates due to market conditions. Adverse economic performance can lead to adverse security performance and potential impairment.

As of December 31, 2025, the fair value of our available for sale investment securities portfolio was $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 sought 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. Though 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.

Changes to estimates and assumptions made by management in preparing financial statements could adversely affect our business, operating results, reported assets and liabilities, financial condition and capital levels.

Changes to estimates and assumptions made by management in connection with the preparation of our consolidated financial statements could adversely affect the reported amounts of assets and liabilities and the reported amounts of income and expenses. The preparation of our consolidated financial statements requires management to make certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expense during the reporting periods. Changes to management’s assumptions or estimates could materially and adversely affect our business, operating results, reported assets and liabilities, financial condition and capital levels.

Changes in accounting standards and policies can be difficult to predict and can materially impact how we record and report our financial results.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, the FASB or the SEC changes the financial accounting and reporting standards or the policies that govern the preparation of our financial statements. These changes are at times difficult to predict and can materially impact how we record and report our financial condition and results of operations. We could be required to apply new or revised guidance retrospectively, which at times results in the revision of prior period financial statements by material amounts. The implementation of new or revised accounting guidance could have a material adverse effect on our financial results or net worth. Refer to “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements.

Our geographic concentration in the Northeast and Mid-Atlantic regions makes our business susceptible to downturns in the local economies and depressed banking markets, which could materially and adversely affect us.

We have experienced exponential growth over the last five years as a result of significant expansion in our national specialized lending verticals as well as participating in the SBA’s PPP. In the second quarter of 2024, Customers recruited several commercial lending teams in California and Nevada, as well as within our existing footprint in New York, building on expanded venture banking client coverage in Austin, the Bay Area, Boston, Southern California, Chicago, Denver, Raleigh/Durham, and Washington, D.C. in 2023. We intend to grow in these new markets and enter additional markets in the future. Nevertheless, as of December 31, 2025, our loan and deposit activities remained largely based in the Northeast and Mid-Atlantic regions. As a result, our financial performance depends in part upon economic conditions in these regions. These regions have experienced deteriorating local economic conditions in the past, and a downturn in the regional real estate market could harm our financial condition and results of operations because of the geographic concentration of loans within these regions, and because a large percentage of the loans are secured by real property. If there is a decline in real estate values, the collateral value for our loans will decrease, and our probability of incurring losses will increase as the ability to recover on defaulted loans by selling the underlying real estate will be lessened. We expect our loan and deposit activities to continue expanding beyond the Northeast and Mid-Atlantic regions to service customers across the nation.

Additionally, we have made a significant investment in commercial real estate loans. Often in a commercial real estate transaction, repayment of the loan is dependent on the property generating sufficient rental income to service the loan. Economic conditions may affect a tenant’s ability to make rental payments on a timely basis, and cause some tenants not to renew their leases, each of which may impact the debtor’s ability to make loan payments. Further, if expenses associated with commercial properties increase dramatically, a tenant’s ability to repay, and therefore the debtor’s ability to make timely loan payments, could be adversely affected. All of these factors could increase the amount of NPLs, increase our provision for loan losses and reduce our net income.

Our loan and deposit portfolios contain concentrations in certain business lines or product types that have unique risk characteristics and may expose us to increased risks.

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 relationships, 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 personnel, and our ability to recruit key personnel, to implement our strategy and could be harmed by the loss of their 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 personnel, 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 Executive Chairman 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 with 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, digital banking, including our proprietary B2B instant payments platform, cubiX, and Banking-as-a-Service offerings, are highly dependent upon our ability to identify, recruit and retain key personnel. We cannot ensure 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.

Our success also depends on the experience of our branch managers and lending officers and on their relationships with the customers and communities they serve. The loss of these key personnel could negatively impact our banking 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.

We face significant competition from other financial institutions and financial services providers, which may materially and adversely affect us.

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 online 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 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 ability to develop, maintain and build upon long-term customer relationships based on high quality, personal service, effective and efficient products and services, high ethical standards and safe and sound assets;

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

• the ability to provide customers with maximum convenience of access to services and availability of banking representatives;

• the ability to attract and retain highly qualified team members to operate our business;

• the ability to expand our market position in current and new markets;

• customer access to our decision makers and customer satisfaction with our level of service;

• the ability to effectively manage our regulatory, compliance, legal, reputation and enterprise risk; and

• the ability to operate our business effectively and efficiently.

Failure to perform in any of these areas could significantly weaken our competitive position, which could materially and adversely affect us.

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.

Like other financial services institutions, our asset and liability structures are monetary in nature. Such structures are affected by a variety of factors, including changes in interest rates, which can impact the value of financial instruments held by us.

Like other financial services institutions, we have asset and liability structures that are essentially monetary in nature and are directly affected by many factors, including domestic and international economic and political conditions, broad trends in business and finance, legislation and regulation affecting the national and international business and financial communities, monetary and fiscal policies, inflation, currency values, market conditions, the availability and terms (including cost) of short-term or long-term funding and capital, the credit capacity or perceived creditworthiness of customers and counterparties and the level and volatility of trading markets. Such factors can impact customers and counterparties of a financial services institution and may impact the value of financial instruments held by a financial services institution.

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 (i.e., liability sensitive), an increase in interest rates would reduce net interest income. Similarly, when interest-earning assets mature or reprice more 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 expect 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.

Acceptance and success of our proprietary B2B instant payments platform, cubiX, is subject to a variety of factors that are difficult to evaluate.

Customers Bank’s proprietary B2B instant payments platform, cubiX, serves a growing array of B2B clients who wanted the benefit of instant payments, including key over-the-counter desks, exchanges, liquidity providers, market makers, funds, title companies and other B2B verticals.

Prior to December 31, 2024, we offered a blockchain-based instant payments product, CBIT, on the TassatPay platform. CubiX does not operate on a blockchain and does not utilize tokens or other digital assets and therefore there is no omnibus account maintained in connection with cubiX.

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’s loans to customers in the digital currency industry are not significant. However, disruptions in the digital currency industry could have adverse effects on Customers’ business, reputation, financial condition and results of operations.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services including internet services, cryptocurrencies and payment systems. In addition to improving the ability to serve clients, 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 “fintech companies” and market place lenders, to offer products and services that have traditionally been offered by financial institutions. 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.

New technologies could require us to spend more to modify or adapt our products to attract and retain clients or to match products and services offered by our competitors, including fintech companies. New technologies also expose us to additional operational, financial, and regulatory risks. Because many of our competitors have substantially greater resources to invest in technological improvements than we do, or, at present, operate in a less-burdensome regulatory environment, these institutions could pose a significant competitive threat to us.

As noted above, our commercial customers utilizing cubiX are currently concentrated in the digital currency industry. The digital currency industry includes a diverse set of businesses that use digital currencies for different purposes and provide services to others who use digital currencies, including the technologies underlying digital currencies, such as blockchain, and the services associated with digital currencies and blockchain. This is a new and rapidly evolving industry, and the viability and future growth of the industry and adoption of digital currencies and the underlying technology is subject to a high degree of uncertainty, including based upon the adoption of the technology, regulation of the industry, and price volatility, among other factors. Adverse events or publicity in the digital currency industry creates reputational risk for us. Because the sector is relatively new, additional risks may emerge which are not yet known or quantifiable.

In July 2025, President Trump signed into law the GENIUS Act, which establishes a regulatory framework for “payment stablecoins” and their issuers. Consumers and businesses may view payment stablecoins as a substitute for traditional bank deposits, resulting in deposit withdrawals. Depending on consumer and business interest in payment stablecoins, and the characteristics and utility of payment stablecoins, the passage of the GENIUS Act could result in increased competition with respect to our deposit products. However, the GENIUS Act requires the U.S. Treasury Department and federal and state regulators to issue regulations on numerous topics to interpret and implement the statute, so the effect of the GENIUS Act will depend on what those regulations provide.

Other factors affecting the industries in which users of cubiX include, but are not limited to:

• the adoption and use of digital currencies, including adoption and use as a substitute for fiat currency or for other uses, which may be adversely impacted by continued price volatility;

• the use of digital currencies, or the perception of such use, to facilitate illegal activity such as fraud, money laundering, tax evasion, 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 cubiX, including our generation of fee income, and negatively impact our business; and

• the maintenance and development of the software protocol of the digital currency networks.

If any of these factors, or other factors, slows development of the digital currency industry, it could adversely affect cubiX 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.

Our computer systems and network infrastructure and those of our third-party service providers that support the functionality of cubiX could be vulnerable to hardware and cybersecurity issues. Our operations are dependent upon our and our third-party service providers’ ability to protect computer equipment upon which these technologies operate against damage from fire, power loss, telecommunications failure or a similar catastrophic event. We could also experience a breach by intentional or negligent conduct on the part of our or a third-party service provider’s team members or other internal sources. Any damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition and results of operations. We could also become the target of various cyberattacks as a result of our focus on the digital currency industry.

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 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 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.

We are dependent on our information technology and telecommunications systems and third-party service providers, and systems failures, interruptions or breaches of security, or the failure of our third-party service providers to adequately perform their services, could have a material adverse effect on us.

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.

We continue to evaluate and implement upgrades and changes to our information technology systems, some of which are significant. Upgrades involve replacing existing systems with successor systems, making changes to existing systems or acquiring new systems with new functionality. We are aware of inherent risks associated with replacing these systems, including accurately capturing data and system disruptions, and attempt to mitigate these risks through testing, training, and staging implementation, as well as through commercial contracts in place with third-party service providers supplying or supporting our information technology initiatives. However, there can be no assurances that we will successfully launch these systems as planned or that they will be implemented without disruptions to our operations. Information technology system disruptions, if not anticipated and appropriately mitigated, or failure to successfully implement new or upgraded systems, could have a material adverse effect on our results of operations. Also, we may have to make a significant investment to repair or replace these systems and could suffer loss of critical data and interruptions or delays in our operations. These risks are heightened where upgrades and changes are made to information technology systems that are integrated with third party systems.

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, 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.

Additionally, financial products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively and in a cost-efficient manner is dependent on the ability to keep pace with technological advances, including recent developments in AI, and to invest in new technology as it becomes available. Certain competitors may have greater resources to invest in technology and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so could have a material adverse impact on our business and therefore on our financial condition and results of operations.

Any actual or perceived failure to comply with evolving regulatory frameworks around the development and use of artificial intelligence could adversely affect our business, results of operations, and financial condition.

Our business increasingly relies on AI, machine learning and automated decision making to improve our services and our customers’ experience. The regulatory framework around the development and use of these emerging technologies is rapidly evolving, and many federal, state and foreign government bodies and agencies have introduced and/or are currently considering additional laws and regulations. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business.

Any of the foregoing, together with developing guidance and/or decisions in this area, may affect our use of AI and our ability to provide and improve our services, require additional compliance measures and changes to our operations and processes, and result in increased compliance costs and potential increases in civil claims against us. Any actual or perceived failure to comply with evolving regulatory frameworks around the development and use of AI, machine learning and automated decision making could adversely affect our business, results of operations, reputation and financial condition.

Loss of, or failure to adequately safeguard, confidential or proprietary information may adversely affect our operations, net income or reputation.

We regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, team members, 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 members, 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 an ongoing risk.

If this confidential or proprietary information were to be mishandled, misused or lost, we could be exposed to significant regulatory consequences, reputational damage, civil litigation and financial loss. Mishandling, misuse or loss of this confidential or proprietary information could occur, for example, if the confidential or proprietary information were intentionally or erroneously provided to parties who were not permitted to have the information, either by fault of the systems or our team members or the systems or employees of third parties which have collected, compiled, processed, transmitted or stored the information on our behalf, where the information is intercepted or otherwise inappropriately taken by third parties or where there is a failure or breach of the network, communications or information systems which are used to collect, compile, process, transmit or store the information.

Although we employ a variety of physical, procedural and technological safeguards to protect this confidential and proprietary information from mishandling, misuse or loss, these safeguards do not provide absolute assurance that mishandling, misuse or loss of the information will not occur, or that if mishandling, misuse or loss of the information did occur, those events would be promptly detected and addressed. Such disclosures have occurred and are likely to occur in the future. Any disclosures of confidential or proprietary information, whether intentional or unintentional, subject us to liability for damages, including expenses of credit monitoring for those effected, and reputational damage. Additionally, as information security risks and cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.

Breaches of security measures, computer viruses or malware, fraudulent activity and infrastructure failures could materially and adversely affect our reputation or harm our business, including the unauthorized access to or disclosure of data relating to third-party serviced deposit account holders.

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 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 customers, expose us to liability for unauthorized purchases, 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. Certain security incidents trigger regulatory notice requirements or other regulatory obligations, and failure to comply with such obligations could impose new and costly compliance 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.

Our information systems have been, and will continue to be, subject to cybersecurity breaches, which lead to fraudulent activity that can result in identity theft, losses on the part of our banking customers, additional security costs, negative publicity and damage to our reputation and brand. In addition, our customers or team members are the targets of scams that result in the release of sufficient information concerning themselves or their accounts to allow others unauthorized access to their accounts or our systems (e.g., “phishing” and “smishing”). Claims for compensatory or other damages may be brought against us as a result of a breach of our systems or fraudulent activity. If we are unsuccessful in defending against any resulting claims against us, we may be forced to pay damages, which could materially and adversely affect our financial condition and results of operations. Because many of our team members continue to work remotely on a “hybrid model”, the risk of cybersecurity breaches is increased.

Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

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, there can be no 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 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.

A disruption to our systems or infrastructure could damage our reputation, expose us to legal liability, cause us to lose customers and revenue, result in the unintentional disclosure of confidential information or require us to expend significant efforts and resources or incur significant expense to eliminate these problems and address related data and security concerns. The harm to our business could be even greater if such an event occurs during a period of disproportionately heavy demand for our products or services or traffic on our systems or networks.

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.

Increasing, complex and evolving regulatory, stakeholder, and other third party expectations on CSR matters could adversely affect our reputation, our access to capital and the market price of our securities.

Customers is subject to a variety of risks arising from CSR matters as governmental and regulatory bodies, investors, customers, team members and other stakeholders and third parties have been increasingly focused on CSR matters. CSR matters include, among other things, climate risk, hiring practices, the diversity of our work force, and racial and social justice issues involving our personnel, customers and third parties with whom we otherwise do business. Risks arising from CSR matters may adversely affect, among other things, our reputation and the market price of our securities.

Further, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with which we otherwise do business and the public’s view of the approach and performance of our customers and business partners with respect to CSR or other matters. Any such negative publicity could arise from adverse news coverage in traditional media and could also spread through the use of social media platforms. Customers’ relationships and reputation with its existing and prospective customers and third parties with which we do business could be damaged if we were to become the subject of any such negative publicity. This, in turn, could have an adverse effect on our ability to attract and retain customers and team members and could have a negative impact on the market price for our securities.

Investors have begun to consider the steps taken and resources allocated by financial institutions and other commercial organizations to address CSR matters when making investment and operational decisions. Certain investors are beginning to incorporate the business risks of climate change and the adequacy of companies’ responses to the risks posed by climate change and other CSR matters into their investment theses. Additionally, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to CSR matters. Unfavorable ratings of Customers may adversely affect investor sentiment towards the Company or the market price of our securities.

Further, as we continue to evolve our CSR practices, and as investor and other stakeholder expectations, voluntary and regulatory CSR disclosure standards and policies continue to evolve, we have expanded over the past few years our public disclosures in these areas. Such disclosures may reflect aspirational goals, targets, and other expectations and assumptions, which are necessarily uncertain and may not be realized. Failure to realize (or timely achieve progress on) such aspirational goals and targets could adversely affect our third party CSR ratings, our reputation or otherwise adversely affect us.

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 may 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.

Although we currently do not have any agreements or understandings with respect to business acquisitions, we regularly evaluate opportunities to strengthen our current market position by acquiring and investing in banks and in other complementary businesses, or opening new branches, and when appropriate opportunities arise, subject to regulatory approval, we plan to engage in acquisitions of other businesses and in opening new branches. Such transactions could, individually or in the aggregate, have a material effect on our operating results and financial condition, including short and long-term liquidity. Our acquisition activities could be material to our business. For example, we could issue additional shares of Voting Common Stock in a purchase transaction, which could dilute current shareholders’ value or ownership interest. These activities could require us to use a substantial amount of cash or other liquid assets and/or incur debt. In addition, if goodwill recorded in connection with acquisitions were determined to be impaired, then we would be required to recognize a charge against our earnings, which could materially and adversely affect our results of operations during the period in which the impairment was recognized. Our acquisition activities could involve a number of additional risks, including the risks of:

• incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating the terms of potential transactions, resulting in our attention being diverted from the operation of our existing business;

• using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets;

• being potentially exposed to unknown or contingent liabilities of banks and businesses we acquire;

• being required to expend time and expense to integrate the operations and personnel of the combined businesses;

• experiencing higher operating expenses relative to operating income from the new operations;

• creating an adverse effect on our results of operations;

• losing key team members and customers as a result of an acquisition that is poorly received; and

• incurring significant problems relating to the conversion of the financial and customer data of the entity being acquired into our financial and customer product systems.

Additionally, in evaluating potential acquisition opportunities, we may seek to acquire failed banks or assets of failed banks through FDIC-assisted acquisitions. While the FDIC may, in such acquisitions, provide assistance to mitigate certain risks, such as sharing in exposure to loan losses and providing indemnification against certain liabilities, of the failed institution, we may not be able to accurately estimate our potential exposure to loan losses and other potential liabilities, or the difficulty of integration, in acquiring such institutions.

Depending on the condition of any institutions or assets that are acquired, any acquisition may, at least in the near term, materially adversely affect our capital and earnings and, if not successfully integrated following the acquisition, may continue to have such effects. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with pending or potential acquisitions. Our inability to overcome these risks could have an adverse effect on levels of reported net income, return on equity and return on assets and the ability to achieve our business strategy and maintain market value.

Our acquisitions generally will require regulatory approvals, and failure to obtain them would restrict our growth.

Although we currently do not have any agreements or understandings with respect to business acquisitions, we may in the future seek to complement and expand our business by pursuing strategic acquisitions of community banking franchises and other businesses. Generally, any acquisition of target financial institutions, banking centers or other banking assets by us may require approval by, and cooperation from, a number of governmental regulatory agencies, possibly including the Federal Reserve Board, the OCC and the FDIC, as well as state banking regulators. In acting on applications, federal banking regulators consider, among other factors:

• the effect of the acquisition on competition;

• the financial condition, liquidity, results of operations, capital levels and future prospects of the applicant and the bank(s) involved;

• the quantity and complexity of previously consummated acquisitions;

• the managerial resources of the applicant and the bank(s) involved;

• the convenience and needs of the community, including the record of performance under CRA;

• the effectiveness of the applicant in combating money laundering activities; and

• the extent to which the acquisition would result in greater or more concentrated risks to the stability of the United States banking or financial system.

Such regulators could delay or deny our application based on the above criteria or other considerations, which could restrict our growth, or the regulatory approvals may not be granted on terms that are acceptable to us. For example, we could be required to sell banking centers as a condition to receiving regulatory approvals, and such a condition may not be acceptable to us or may reduce the benefit of any acquisition.

To the extent that we are unable to increase loans and deposits through organic growth, we may be unable to successfully implement our growth strategy, which could materially and adversely affect us.

We intend to grow our business through organic growth. While loan and deposit growth has historically been strong, and our loan and deposit balances increased in 2025, if we are unsuccessful in diversifying our loan and deposit originations, or if we do not grow the business lines, our results of operations and financial condition could be negatively impacted.

We may not be able to effectively manage our growth.

Our future operating results and financial condition depend to a large extent on our ability to successfully manage our growth. Our growth has placed, and it may continue to place, significant demands on our operations and management. Whether through additional acquisitions or organic growth, our current plan to expand our business is dependent upon our ability to:

• continue to implement and improve our operational, credit underwriting and administration, financial, accounting, legal, regulatory, compliance and enterprise risk management, internal and disclosure controls and procedures and our reporting systems and processes in order to manage a growing number of client relationships and increasingly complex product and service offerings;

• comply with changes in, and an increasing number of, laws, rules and regulations, including those of any national securities exchange on which any of our securities become listed;

• scale our technology and other systems’ platforms;

• maintain and attract appropriate staffing;

• identify, implement and offer key products and services;

• successfully integrate newly-hired teams and key personnel;

• operate profitably or raise capital; and

• support our asset growth with adequate deposits, funding and liquidity while expanding our net interest margin and meeting our customers’ and regulators’ liquidity requirements.

We may not successfully implement improvements to, or integrate, our management information and control systems, credit underwriting and administration, new products and services, internal and disclosure controls, and procedures and processes in an efficient or timely manner and may discover deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate an increase in loan volume in various markets and the infrastructure that comes with new banking centers and banks. Our growth strategy may divert management from our existing business and may require us to incur additional expenditures to expand our administrative and operational infrastructure and, if we are unable to effectively manage and grow our banking franchise, including to the satisfaction of our regulators, we could be materially and adversely affected. We have experienced compliance, operational and regulatory problems and increased expenses as a result of past growth. In the future, if we are unable to manage our current and future expansion in our operations, we may experience similar issues and have to slow our pace of growth or even stop our market and product expansion, or have to incur additional expenditures beyond current projections to support such growth, any one of which could materially and adversely affect us. If we experience difficulties with the development of new business activities or the integration process of acquired businesses or newly hired teams, the anticipated benefits of any particular new activity may not be realized fully, or at all, or may take longer to realize than expected. Additionally, we may be unable to recognize synergies, operating efficiencies, cost projections and/or expected benefits within expected time frames, or at all. We also may not be able to preserve the goodwill of an acquired financial institution. Our growth has in the past and could in the future lead to increases in our legal, audit, administrative and financial compliance costs, which could materially and adversely affect us.

If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses.

In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to material risks, such as credit, interest rate, capital, liquidity, operational, compliance legal and reputational risks. Our risk management methods may prove to be ineffective due to their design, implementation or the degree to which we adhere to them, or as a result of the lack of adequate, accurate or timely information or otherwise. If our risk management efforts are ineffective, we could suffer losses that could have a material adverse effect on our business, financial condition or results of operations. In addition, we have in the past and could be in the future subject to litigation, particularly from our customers or shareholders, and sanctions, fines or other regulatory actions from regulators. Our techniques for managing the risks we face may not fully mitigate the risk exposure in all economic or market environments, including exposure to risks that we might fail to identify or anticipate.

We are dependent upon maintaining an effective system of internal controls to provide reasonable assurance that transactions and activities are conducted in accordance with established policies and procedures and are captured and reported in the financial statements. Failure to comply with the system of internal controls may result in events or losses which could adversely affect our operations, net income, financial condition, reputation and compliance with laws and regulations.

Our system of internal controls, including internal controls over financial reporting, is an important element of our risk management framework. Management regularly reviews and seeks to improve our internal controls, including annual reviews of key policies and procedures and annual reviews and testing of key internal controls over financial reporting. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and expectations of employee conduct and can only provide reasonable, not absolute, assurance that the objectives of the internal control structure are met. Any failure or circumvention of our controls and procedures, or failure to comply with regulations related to controls and procedures, could have a material adverse effect on our operations, net income, financial condition, reputation, compliance with laws and regulations, or may result in untimely or inaccurate financial reporting.

As management continues to evaluate and work to enhance internal control over financial reporting, it at times determines that additional measures are required to address control deficiencies or strengthen internal control over financial reporting. If Customers’ remediation efforts do not operate effectively or if it is unsuccessful in implementing or following its remediation efforts, this may result in untimely or inaccurate reporting of Customers’ financial results.

We may not be able to meet the cash flow requirements of our loan funding obligations, deposit withdrawals, or other business needs and fund our asset growth unless we maintain sufficient liquidity.

We must maintain sufficient liquidity to fund our balance sheet growth in order to successfully grow our revenues, make loans, and repay deposit and other liabilities as these mature or are drawn, as well as to meet certain regulatory requirements or limits and targets set by our board of directors. This liquidity can be gathered in both wholesale and non-wholesale funding markets. Our asset growth over the past few years has been funded with various forms of deposits and wholesale funding, including brokered deposits, FHLB advances, FRB advances and Federal funds line borrowings. Total brokered deposits were 33% of total deposits at December 31, 2025. Our loan to deposit ratio was 81% at December 31, 2025. Wholesale funding can cost more than deposits generated from our traditional branch system and customer relationships and is subject to certain practical limits such as our liquidity policy limits, our available collateral for FHLB and FRB borrowing capacity and Federal funds line limits with our lenders. Additionally, regulators consider wholesale funding beyond certain points to be imprudent and might suggest or require that future asset growth be reduced or halted. Market participants may hold similar views. In the absence of appropriate levels and mix of funding, we might need to reduce interest-earning asset growth through the reduction of current production, sales of loans and/or the sale of participation interests in future and current loans. This might reduce our future growth and net income.

The amount of funds loaned to us is generally dependent on the value of the eligible collateral pledged and our financial condition. These lenders could reduce the percentages loaned against various collateral categories, eliminate certain types of collateral and otherwise modify or even terminate their loan programs, if further disruptions in the capital markets occur. Any change to or termination of our borrowings from the FHLB or correspondent banks could have an adverse effect on our profitability and financial condition, including liquidity.

We may not be able to develop and retain a strong core deposit base and other low-cost, stable funding sources.

We depend on checking, savings and money market deposit account balances and other forms of customer deposits as a primary source of funding for our lending activities. We expect that our future loan growth will largely depend on our ability to retain and grow a strong, low-cost deposit base. As of December 31, 2025, $1.7 billion, or 51.3%, of our total time deposits, are scheduled to mature through December 31, 2026. If interest rates increase, whether due to changes in inflation, monetary policy, competition or other factors, we would expect to pay higher interest rates on deposits, which would increase our funding costs and compress our net interest margin. We may not succeed in moving our deposits to lower-yielding savings and transactions products, which could materially and adversely affect us. In addition, customers, particularly those who may maintain deposits in excess of insured limits, continue to be concerned about the extent to which their deposits are insured by the FDIC. Our customers may withdraw deposits to ensure that their deposits with us are fully insured and may place excess amounts in other institutions or make investments that are perceived as being more secure and/or higher yielding. Further, even if we are able to maintain and grow our deposit base, deposit balances can decrease when customers perceive alternative investments, such as the stock market, will provide a better risk/return tradeoff. If customers move money out of bank deposits, we could lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income. As a commercial bank with relatively few branches, our depositors tend to place larger average deposits with us as compared to many of our competitors. Similarly, many of our lower cost deposits are concentrated in specific industries, such as digital asset customers. To the extent we have deposit concentration within a particular industry or a group of customers, the risk that we will be adversely affected by any customer deposit withdrawals is increased.

Certain deposit balances serviced by third parties can vary over the course of the year based on the timing of deposits made into those accounts and the interest rates being offered. Additionally, any such loss of funds could result in lower loan originations and growth, which could materially and adversely affect our results of operations and financial condition, including liquidity.

Competitors’ technology-driven products and services and improvements to such products and services may adversely affect our ability to generate core deposits through mobile banking.

Our organic growth strategy focuses on, among other things, expanding market share through our “high-tech” model, which includes remote account opening, remote deposit capture, mobile and digital banking, instant payments and customers system integrations (including APIs). These technological advances are intended to allow us to generate additional core deposits at a lower cost than generating deposits through opening and operating branch locations. Some of our competitors may have greater resources to invest in technology, including AI, and may be better equipped to implement and market new technology-driven products and services. This may result in limiting, reducing or otherwise adversely affecting our growth strategy in this area and our access to deposits through mobile banking. In addition, to the extent we fail to keep pace with technological changes or incur respectively large expenses to implement technological changes, our business, financial condition and results of operations may be adversely affected.

We may incur losses due to minority investments in other financial institutions or related companies.

We make and will continue to consider making additional minority investments in other financial institutions or technology companies in the financial services business, or other unrelated businesses, including for strategic reasons or to gain access to technological improvements or advantages. If we do so, we may not be able to influence the activities of companies in which we invest and may suffer losses due to these activities.

Risks related to Macroeconomic Conditions, Pandemics, Climate Change and Geopolitical Conflicts

Adverse developments in the financial services industry, and responsive measures to manage it, could have an adverse effect on our stock price, financial position and results of operations. In addition, if we are unable to adequately manage our liquidity, deposits, capital levels, interest rate risk or reputation risk, it could have a material adverse effect on our stock price, financial condition and results of operations.

In March 2023, several financial services institutions failed or required outside liquidity support. As a result of these events, certain of our customers chose, and customers may choose in the future, to withdraw deposit amounts in favor of keeping deposits at larger financial institutions that may be perceived to be more stable, or seek to switch their existing deposits into other higher yielding alternatives, any of which could materially adversely affect our liquidity, loan funding capacity, net interest margin, capital and results of operations. Similar events in the future may also result in customers taking these actions.

These types of events may result in potentially adverse changes to laws or regulations governing banks and bank holding companies, increased oversight by regulatory authorities and/or the imposition of restrictions on certain business activities through supervisory or enforcement activities, including higher capital or liquidity requirements, which could have a material impact on our current and planned business.

These events also have led to a greater focus by regulators and investors on liquidity of existing assets and funding sources for financial institutions, the composition of deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. The increased influence of social media and other communication channels on the public perception of financial institutions and their operations can create reputation risk, which can adversely affect our stock price or the public’s perception of our stability or viability, even where such concerns are unwarranted. Any material adverse change in our stock price can also increase the likelihood of shareholder litigation.If we are unable to adequately manage our liquidity, deposits, capital levels, interest rate risk or reputation risk, it could have a material adverse effect on our stock price, financial condition, results of operations or regulatory standing.

Adverse changes in general business and economic conditions could materially and adversely affect us.

Our business and operations are sensitive to general business and economic conditions in the United States. Weak economic conditions may be characterized by deflation or stagflation, instability in debt and equity capital markets, a lack of liquidity and/or depressed prices in the secondary market for mortgage loans, increased delinquencies on loans, residential and commercial real estate price declines and lower home sales and commercial activity and similar conditions or additional adverse changes could be detrimental to our business. Our business is also significantly affected by monetary and related policies of the U.S. federal government, its agencies and government-sponsored entities. Adverse changes in economic factors or U.S. government policies could have a negative effect on us.

In addition, over the last several years, there have been several instances where there has been uncertainty regarding the ability of Congress and the President collectively to reach agreement on federal budgetary and spending matters, and in certain instances, the failure to reach agreement has resulted in either a complete or partial government shutdown. Such shutdowns have resulted in disruptions to businesses and government functions essential to businesses and consumers, and such shutdowns, and any future shutdowns or the perception that a shutdown could occur, may have an adverse impact on the U.S. economy. Additionally, a prolonged government shutdown may inhibit our ability to evaluate borrower creditworthiness and originate and sell certain government-backed loans.

The ongoing military conflict between Russia and Ukraine, ongoing conflicts in the Middle East, uncertainty as to tariff policies and the threat of retaliatory tariffs and other restrictions on international trade have created and are expected to continue to create additional uncertainty for the U.S. and global economy and potential for market disruption. After the 2022 – 2023 period in which the Federal Reserve raised interest rates significantly to lower inflation, the subsequently lowered interest rates in response, in large part, to reductions in the inflation rate, only to then reduce its reductions or maintain existing interest rates in response to subsequent increases in inflation and concerns about unemployment. It is uncertain whether the Federal Reserve will maintain current rates or pursue one or more decreases in interest rates in 2026 or future periods. These factors, and other factors, such as real estate values, state and local municipal budget deficits, government spending and the U.S. national debt may, directly and indirectly, adversely affect the U.S. economy and our financial condition and results of operations.

We are a participating lender in SBA’s PPP program and have originated a significant number of loans under this program, which may result in some amount of PPP loans remaining on our consolidated balance sheets at a very low yield for an extended period of time.

The PPP, originally established under the CARES Act authorized financial institutions to make federally-guaranteed loans to qualifying small businesses and non-profit organizations. These loans carry an interest rate of 1% per annum and a maturity of 2 years for loans originated prior to June 5, 2020 and 5 years for loans originated on or after June 5, 2020. The PPP provides that such loans may be forgiven if the borrowers meet certain requirements with respect to maintaining employee headcount and payroll and the use of the loan proceeds after the loan is originated. The initial phase of the PPP, after being extended multiple times by Congress, expired on August 8, 2020. However, on January 11, 2021, the SBA reopened the PPP for First Draw PPP loans to small business and non-profit organizations that did not receive a loan through the initial PPP phase. Further, on January 13, 2021, the SBA reopened the PPP for Second Draw loans to small businesses and non-profit organizations that did receive a loan through the initial PPP phase. At least $25 billion had been set aside for Second Draw PPP loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low or moderate income neighborhoods. Generally, businesses with more than 300 employees and/or less than a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020 were not eligible for Second Draw loans. Further, maximum loan amounts were increased for accommodation and food service businesses. On March 11, 2021, the American Rescue Plan Act of 2021 was enacted expanding eligibility for first and second round of PPP loans and revising the exclusions from payroll costs for purposes of loan forgiveness. The PPP ended on May 31, 2021.

As of December 31, 2025, we had PPP loans with outstanding balances of $4.7 million. Our PPP participation was very significant especially compared to the participation of similarly sized and larger competitor financial institutions. Considering our immediate response to originate PPP loans, certain of loans originated under this program present potential fraud or other risks, increasing the risk that loan forgiveness may not be obtained by the borrowers and that the guaranty may not be honored and may result in increased provision expense or charge-offs. In addition, there is risk that the borrowers may not qualify for the loan forgiveness feature due to the conduct of the borrower after the loan is originated. The SBA is entitled to reconsider its prior guaranty decisions, and if a loan is determined by the SBA to not qualify for guaranty, we may be required to repay to the SBA any amounts we previously received in respect of that guaranty. Further, although the SBA has streamlined the loan forgiveness process for loans $150,000 or less, these factors may result in us having to hold a significant amount of these low-yield loans on our books for a significant period of time. We will continue to face increased operational demands and pressures as we monitor and service our PPP loan portfolio, process applications for loan forgiveness and pursue recourse under the SBA guarantees. We have been subjected to regulatory audits and investigations related to our PPP program and could be subject to additional litigation and further investigation and scrutiny by our regulators, Congress, the SBA, the U.S. Treasury Department and other government agencies related to our PPP participation.

Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business.

The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment. As a result, political and social attention to the issue of climate change has increased. In recent years, governments across the world have entered into international agreements to attempt to reduce global temperatures, in part by limiting greenhouse gas emissions. The U.S. Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change. Such initiatives are expected to continue, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systematic risk assessments, revising expectations for credit portfolio concentrations based on climate related factors, and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change. These agreements and measures may result in the imposition of taxes and fees, the required purchase of emission credits, and the implementation of significant operational changes and new reporting obligations, each of which may require Customers to expend significant capital and incur compliance, operating, maintenance and remediation costs. Given the lack of empirical data on the credit and other financial risks posed by climate change, it is impossible to predict how climate change may impact our financial condition and operations; however, as a banking organization, the physical effects of climate change may present certain unique risks to Customers. For example, weather disasters, shifts in local climates and other disruptions related to climate change may adversely affect the value of real properties securing our loans, which could diminish the value of our loan portfolio. Such events may also cause reductions in regional and local economic activity that may have an adverse effect on our customers, which could limit our ability to raise and invest capital in these areas and communities, each of which could have a material adverse effect on our financial condition and results of operations.

Severe weather, natural disasters, public health issues, acts of war or terrorism, and other external events could significantly impact our ability to conduct business.

Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, adversely impact our team member base, cause significant property damage, result in loss of revenue, and cause us to incur additional expenses. For example, in 2021, one of our locations experienced flooding and incurred property damage as a result. Although management has established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Risks Related to the Regulation of Our Industry

Our business, financial condition, results of operations and future prospects could be adversely affected by the highly regulated environment in which we operate.

As a bank holding company, we are subject to federal supervision and regulation. Federal regulation of the banking industry, along with tax and accounting laws, regulations, rules and standards, may limit our operations significantly and control the methods by which we conduct business, just as they limit those of other banking organizations. In addition, compliance with laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance costs. The Dodd-Frank Act, which imposes significant regulatory and compliance changes on financial institutions, is an example of this type of federal regulation. Many of these regulations are intended to protect depositors, customers, the public, the banking system as a whole, or the FDIC insurance funds, not shareholders. Regulatory requirements and discretion affect our lending practices, capital structure, investment practices, dividend policy and many other aspects of our business. There are laws and regulations which restrict transactions between us and our subsidiaries. These requirements may constrain our operations, and the adoption of new laws and changes to or repeal of existing laws may have a further impact on our business, financial condition, results of operations and future prospects. Also, the burden imposed by those federal and state regulations may place banks in general, including Customers Bank in particular, at a competitive disadvantage compared to their non-banking competitors. We are also subject to requirements with respect to the confidentiality of information obtained from clients concerning their identities, business and personal financial information, employment and other matters. Failure to comply with confidentiality requirements could result in material liability and adversely affect our business, financial condition, results of operations and future prospects.

Bank holding companies and financial institutions are extensively regulated and currently face an uncertain regulatory environment. Applicable laws, regulations, interpretations, enforcement policies and accounting principles have been subject to significant changes in recent years and may be subject to significant future changes. Turmoil in the banking industry during the 2023 period may increase the likelihood of additional regulation and heightened supervision. Future changes may have a material adverse effect on our business, financial condition and results of operations.

Federal and state regulatory agencies may adopt changes to their regulations or change the manner in which existing regulations are applied or interpreted. We face a variety of risks associated with uncertainties as to the policies and regulatory and legislative agendas that may be pursued by the current administration, Congress and newly-appointed regulators. We cannot predict the substance or effect of pending or future legislation or regulation or the application of laws and regulations on us. Compliance with current and potential regulation, as well as regulatory scrutiny have and could in the future significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital and limit our ability to pursue business opportunities in an efficient manner by requiring us to expend significant time, effort and resources to ensure compliance and respond to any regulatory inquiries or investigations. In addition, press coverage and other public statements that assert some form of wrongdoing by financial services companies (including press coverage and public statements that do not involve us) have and may in the future result in regulatory inquiries or investigations, which, independent of the outcome, may be time-consuming and expensive and may divert time, effort and resources from our business. Alternatively, an easing of legislative and regulatory environment may result in heightened competition from banks and non-banks for our products and services. Evolving regulations and guidance concerning executive compensation may also impose limitations on us that affect our ability to compete successfully for executive and management talent.

In addition, given the current economic and financial environment, regulators may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine the adequacy of liquidity, certain risk management or other operational practices for financial services companies in a manner that impacts our ability to implement our strategy and could affect us in substantial and unpredictable ways and could have a material adverse effect on our business, financial condition and results of operations. Furthermore, the regulatory agencies have extremely broad direction in their interpretation of the regulations and laws and their interpretation of the quality of our loan portfolio, securities portfolio and other assets. If any regulatory agency’s assessment of the quality of our assets, operations, compliance program, lending practices, investment practices, reporting practices, capital structure, deposits or other assets of our business differs from our assessment, we may be required to take additional charges or undertake or refrain from undertaking actions that would have the effect of materially reducing our earnings, capital ratios and share price.

Because our total assets exceed $10 billion, we and our bank subsidiary are subject to increased regulatory requirements. The Dodd-Frank Act and its implementing regulations impose various additional requirements on bank holding companies with $10 billion or more in total assets. In addition, banks with $10 billion or more in total assets are primarily examined by the CFPB with respect to various federal consumer financial protection laws and regulations. As an agency with evolving regulations and practices, there is some uncertainty as to how the CFPB’s examination and regulatory authority might impact our business. Further, the possibility of future changes in the authority of the CFPB by Congress or the current administration is uncertain, and we cannot predict the impact, if any, changes to the CFPB may have on our business.

With respect to deposit-taking activities, banks with assets in excess of $10 billion are subject to two material rules. First, these institutions are subject to a deposit assessment based on a new scorecard issued by the FDIC. This scorecard considers, among other things, the bank’s CAMELS rating, results of asset-related stress testing and funding-related stress, as well as our use of core deposits, among other things. Depending on the results of the bank’s performance under that scorecard, the total base assessment rate is between 2.5 to 42 basis points, and subject to qualitative adjustment at regulators discretion. We rely on a variety of funding sources, including deposits that are subject to the FDIC’s rules on brokered deposits, which have been the subject of evolving rules and interpretations in recent years. The classifications of certain of our deposits as “brokered” or “core” has changed in the past and may change in the future. Any change in the classification of our deposits has and may have adverse effects on our business, including an increase in our bank subsidiary’s deposit insurance assessments. Any increase in our bank subsidiary’s deposit insurance assessments may result in an increased expense related to our use of deposits as a funding source.

Our regulators may also consider our compliance with these regulatory requirements when examining our operations generally or considering any request for regulatory approval we may make, even requests for approvals on unrelated matters.

Significantly heightened regulatory and supervisory expectations and scrutiny in the U.S. have increased our compliance, regulatory and other risks and costs and subject us to legal and regulatory examinations, investigations and enforcement actions.

Although the current administration and banking regulators has signaled a desire to ease the regulatory burden on U.S banks, the regulatory and political environment has generally been challenging for U.S. financial institutions, which have been subject to increased regulatory scrutiny, including in the wake of the failures of several regional banks and other banking stresses in the first half of 2023. The general heightened scrutiny and expectations from regulators could lead to a more stringent regulatory posture by the regulators. Customers’ regulators have broad powers and discretion under their supervisory authority. A failure to comply with regulators’ expectations and requirements, even if inadvertent, or to resolve any identified deficiencies in a timely and sufficiently satisfactory manner to regulators, could result in increased regulatory oversight; material restrictions, including, among others, imposition of limitations on capital distributions or other business activities or operations; enforcement proceedings; penalties; and fines. As a result of these regulatory efforts and pressures, like many other financial institutions, from time to time, Customers is subject to public and non-public written agreements, cease and desist orders, consent orders, memoranda of understanding or other enforcement or supervisory actions by its regulators, which have and may in the future result in investigations and other inquiries, remediation requirements, civil litigation and substantial compliance, regulatory and other risks and costs. Responding to regulatory inquiries and proceedings and undertaking remediation efforts can be time consuming and costly and divert management attention from Customers’ other business activities. See “ Other litigation and regulatory actions, including enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities. ” below for further detail.

Our use of third-party service providers and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention.

We regularly use third-party service providers as part of our business and have other ongoing business relationships with other third parties. These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by federal banking regulators. Regulation requires us to perform enhanced due diligence, perform ongoing monitoring and control our third-party service providers and other ongoing third-party business relationships. In certain cases, we may be required to renegotiate our agreements with these third-party service providers to meet these enhanced requirements, which could increase our costs. We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third-party relationships and in the performance of the parties with which we have these relationships. As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third-party service providers or other ongoing third-party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect on our business, reputation, financial condition or results of operations.

We are subject to numerous laws and governmental regulations and to regular examinations by our regulators of our business and compliance with laws and regulations, and our failure to comply with such laws and regulations or to adequately address any matters identified during our examinations could materially and adversely affect us.

Federal banking agencies regularly conduct comprehensive examinations of our business, including our compliance with applicable laws, regulations and policies. Examination reports and ratings (which often are not publicly available) and other aspects of this supervisory framework can materially impact the conduct, organic and acquisition growth and profitability of our business. Our regulators have extensive discretion in their supervisory and enforcement activities and have imposed and may in the future impose a variety of remedial actions if, as a result of an examination, they determined that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we or our management were in violation of any law, regulation or policy. Examples of those actions could include requiring affirmative actions to correct any conditions resulting from any asserted violation of law, issuing administrative orders that can be judicially enforced, enjoining “unsafe or unsound” practices, directing increases in our capital, assessing civil monetary penalties against our officers or directors, removing officers and directors and, if a conclusion was reached that the offending conditions cannot be corrected, or there is an imminent risk of loss to depositors, terminating our deposit insurance. Other actions, formal or informal, that may be imposed could restrict our growth, including regulatory denials to expand branches, relocate, add or restructure subsidiaries and affiliates, expand into new financial activities or merge with or purchase other financial institutions. The timing of these examinations, including the timing of the resolution of any issues identified by our regulators in the examinations and the final determination by them with respect to the imposition of any remedial actions, conditions or limitations on our business operations, is generally not within our control. We also could suffer reputational harm in the event of any perceived or actual noncompliance with certain laws and regulations. If we become subject to such regulatory actions, we could be materially and adversely affected.

Other litigation and regulatory actions, including enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.

Our business is subject to increased litigation and regulatory risks as a result of a number of factors, including the highly regulated nature of the financial services industry and the focus of state and federal prosecutors on banks and the financial services industry generally. We are regularly the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our business. Legal or regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices or other requirements resulting in increased expenses, operational burdens, diminished income and damage to our reputation. Our involvement in any such matters, even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations or proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could be material to our business, results of operations, financial condition and cash flows, depending on, among other factors, the level of our earnings for that period and could have a material adverse effect on our business, financial condition or results of operations.

On August 5, 2024, we (i) entered into a written agreement with the FRB (“Written Agreement”) and (ii) agreed to the issuance of a consent order by the Commonwealth of Pennsylvania, Department of Banking and Securities, Bureau of Bank Supervision (“Consent Order”). The Written Agreement and Consent Order relate principally to aspects of compliance risk management, including risk management practices governing digital asset-related services; oversight by Customers Bancorp’s and the Bank’s boards of directors; compliance with anti-money laundering regulations under the Bank Secrecy Act; and compliance with OFAC regulations.

On December 2, 2024, a class action securities lawsuit has been filed against us in the United States District Court for the Eastern District of Pennsylvania that seeks to recover purported losses by shareholders allegedly occurring between March 1, 2024 and August 8, 2024. The lawsuit alleges that we were responsible for making materially false or misleading statements and/or failed to disclose certain matters concerning our business, operations, and prospects. The complaint alleges, among other things, that we did not properly disclose certain matters with regard to the departure of our former chief financial officer and matters relating to the Written Agreement and the Consent Order. On January 31, 2025, Chun Yao Chang filed the only application for appointment as lead plaintiff with The Rosen Law Firm, P.A. as counsel. On June 24, 2025, the court denied plaintiff’s motion for appointment as lead counsel, finding that plaintiff had not made the required prima facie showing that he will be an adequate class representative. On October 28, 2025, the plaintiff filed a notice to voluntarily dismiss his case without prejudice against all defendants.

In addition, on or about June 17, 2025, the Company’s Board of Directors received a letter demanding it to investigate and pursue causes of action, purportedly on behalf of the Company, against certain current and former directors and/or officers of the Company based on alleged deficiencies in the Company’s disclosures concerning anti-money laundering and bank secrecy compliance (the “Demand Letter”). In response to the Demand Letter, on July 23, 2025, the Board approved the formation of a Special Litigation Committee comprised entirely of independent directors to investigate the allegations raised.

The FDIC’s restoration plan and the related increased assessment rate could materially and adversely affect us.

The FDIC insures deposits at FDIC-insured depository institutions up to applicable limits. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators. In October 2022, FDIC issued a final rule to increase the initial base deposit insurance assessment rate by two basis points for all insured depository institutions beginning in 2023. In November 2023, FDIC issued a final rule to implement a special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank, at a quarterly rate of 3.36 basis points of an institution’s uninsured deposits in excess of $5 billion as of December 31, 2022, to be paid over eight quarterly assessment periods. Customers recorded $0.7 million and $3.7 million of FDIC special assessment in the consolidated statements of income for the years ended December 31, 2024 and 2023, respectively. In December 2025, based upon the first six quarterly collections of the special assessment and anticipated collections for the seventh quarterly special assessment, the FDIC issued an interim final rule to amend the collection of the special assessment to reduce the eighth quarterly assessment rate from 3.36 basis points to 2.97 basis points. Because the cumulative amount collected through the initial eight quarter special assessment period is projected to equal the FDIC’s loss estimate, the additional two quarter extend assessment period was removed. The projected number of additional quarters and the estimated rate applicable to those quarters are subject to change depending on any future adjustments to estimated losses or amendments to uninsured deposits by the FDIC. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, or any special assessment is insufficient to cover a loss to the DIF, we may be required to pay even higher FDIC premiums than the recently increased levels. Any future additional assessments, increases or required prepayments in FDIC insurance premiums may materially and adversely affect us, including reducing our profitability or limiting our ability to pursue certain business opportunities.

The Federal Reserve may require us to commit capital resources to support our subsidiary bank.

As a matter of policy, the Federal Reserve, which examines us and our subsidiaries, expects a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under this requirement, we could be required to provide financial assistance to Customers Bank or any other subsidiary banks we may own in the future should they experience financial distress.

A capital injection may be required at times when we do not have the resources to provide it, and therefore, we may be required to borrow the funds or raise additional equity capital from third parties. Any loans by a holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of the subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of its indebtedness. Any financing that must be done by the holding company in order to make the required capital injection may be difficult and expensive and may not be available on attractive terms, or at all, which likely would have a material adverse effect on us.

We may need to raise additional capital in the future and such capital may not be available when needed or at all.

We are required by regulatory agencies to maintain adequate levels of capital. We may need to raise additional capital in the future to meet regulatory or other internal requirements. As a publicly traded company, a likely source of additional funds is the capital markets, accomplished generally through the issuance of equity, both common and preferred stock, and the issuance of debt. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial performance.

We cannot provide any assurance that access to such capital will be available to us on acceptable terms or at all. Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of debt purchasers or counterparties participating in the capital markets, may materially and adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. If we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. The inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on our business, financial condition or results of operations.

We are subject to capital adequacy standards, and a failure to meet these standards could adversely affect our financial condition.

Customers Bancorp and the Bank are each subject to capital adequacy and liquidity rules and other regulatory requirements specifying the minimum amounts and types of capital that must be maintained. From time to time, the regulators implement changes to these regulatory capital adequacy and liquidity guidelines. If we fail to meet these minimum capital and liquidity guidelines and other regulatory requirements, we may be restricted in the types of activities we may conduct and may be prohibited from taking certain capital actions, such as making payments on certain capital instruments, paying executive bonuses or dividends, and repurchasing or redeeming capital securities.

We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The federal Bank Secrecy Act, the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the DOJ, Drug Enforcement Administration and IRS. There is also increased scrutiny of compliance with the rules enforced by OFAC. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions (such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans), which could materially and adversely affect us. On August 5, 2024, we entered into the Written Agreement and Consent Order, which relate principally to aspects of compliance risk management, including risk management practices governing digital asset-related services; oversight by Customers Bancorp’s and the Bank’s boards of directors; compliance with anti-money laundering regulations under the Bank Secrecy Act; and compliance with OFAC regulations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.

Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.

Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. It is our policy not to make predatory loans, but these laws create the potential for liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make.

Loans that we make through certain federal programs are dependent on the Federal Government’s continuation and support of these programs and on our compliance with their requirements .

We participate in various U.S. government agency guarantee programs, including PPP and other programs operated by the SBA. We are responsible for following all applicable U.S. government agency regulations, guidelines and policies whenever we originate loans as part of these guarantee programs. If we or any third-party service providers we have engaged to assist us with such programs fail to follow any applicable regulations, guidelines or policies associated with a particular guarantee program, any loans we originate as part of that program may lose the associated guarantee, exposing us to credit risk to which we would not otherwise have been exposed or underwritten as part of our origination process for U.S. government agency guaranteed loans, or result in our inability to continue originating loans under such programs. The loss of any guarantees for loans we have extended under U.S. government agency guarantee programs or the loss of our ability to participate in such programs could have a material adverse effect on our business, financial condition or results of operations.

We are subject to regulatory restrictions on transactions with our affiliates and related parties. Failure to comply with such regulations could materially and adversely affect us.

There are various legal restrictions on the extent to which the Company may borrow or otherwise engage in certain types of transactions with the Bank or their respective affiliates and related parties. Under the Federal Reserve Act and the Federal Reserve’s Regulation W, the Bank is subject to quantitative and qualitative limits on extensions of credit (including credit exposure arising from repurchase and reverse repurchase agreements, securities borrowing and derivative transactions), purchases of assets, and certain other transactions with the Company or its other affiliates. Additionally, transactions between the Bank, on the one hand, and the Company or its affiliates, on the other hand, are required to be on arm’s length terms. Transactions between the Bank and its affiliates must be consistent with standards of safety and soundness. The Bank has had, and may be expected to have in the future, banking and other business transactions in the ordinary course of business with affiliates of the Company and the Bank, and their respective executive officers, directors, principal shareholders, their immediate families and affiliated companies (commonly referred to as related parties). The failure of the Company or the Bank to comply with the regulatory restrictions applicable to Customers and the Bank could materially and adversely affect the Company and the Bank.

Taxes

Reviews performed by the Internal Revenue Service and state and local taxing authorities for the fiscal years that remain open for investigation may result in a change to income taxes recorded in our consolidated financial statements and adversely affect our results of operations.

We are subject to U.S. federal income tax as well as income tax of various state and local taxing authorities. Generally, Customers is no longer subject to examination by federal, state, and local taxing authorities for years prior to the year ended December 31, 2022, with the exception of California, New York State, and New York City. Income tax laws and regulations are often complex and our judgments, interpretations or applications of such tax laws and regulations could be challenged by taxing authorities. Any such challenges that are not resolved in our favor could result in increased recognition of income tax expense in our consolidated financial statements as well as possible interest and penalties.

Changes in U.S. federal, state or local tax laws may negatively impact our financial performance.

We are subject to changes in tax law that could increase Customers’ effective tax rates. These tax law changes may be retroactive to previous periods and as a result could negatively affect Customers’ current and future financial performance.

On July 4, 2025, the OBBBA was signed into law and made significant changes to the U.S. federal income tax code, including permanently extending many provisions of the Tax Act and introducing new temporary deductions and credits. Specific provisions of the OBBBA that may impact Customers include the restoration of 100% bonus depreciation and changes to research and development expensing rules. The provisions of the OBBBA do not have a material impact on Customers' effective tax rate.

Certain provisions of the OBBBA are temporary and subject to expiration or future modification. Further legislation could result in material changes to tax rates or tax deductions that could negatively affect Customers. We are unable to predict the likelihood or impact of any such future changes in tax law.

Risks Related to Our Securities

Risks Related to Our Voting Common Stock

The trading volume in our common stock may generally be less than that of other larger financial services companies.

Although the shares of our common stock are listed on the NYSE, the trading volume in our common stock may generally be less than that of many other larger financial services companies. A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of willing buyers and sellers of our common stock at any given time, which presence will be dependent upon the individual decisions of investors, over which we have no control. Illiquidity of the stock market, or in the trading of our common stock on the NYSE, could have a material adverse effect on the value of your shares, particularly if significant sales of our common stock, or the expectation of significant sales, were to occur.

We do not expect to pay cash dividends on our common stock in the near future, and our ability to pay dividends is subject to regulatory limitations.

We have not historically declared nor paid cash dividends on our common stock, and we do not expect to do so in the near future. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, the ability to service any equity or debt obligations senior to the common stock, our planned growth in assets and other factors deemed relevant by the board of directors.

In addition, as a bank holding company, we are subject to general regulatory restrictions on the payment of cash and in-kind dividends. Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which, depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends. Further, various federal and state statutory provisions limit the amount of dividends that our bank subsidiary can pay to us as its holding company without regulatory approval. See “Market Price of Common Stock and Dividends – Dividends on Common Stock” below for further detail regarding restrictions on our ability to pay dividends.

We may issue additional shares of our common stock in the future which could adversely affect the value or voting power of our outstanding common stock.

In September 2025, Customers sold 2,189,781 shares of common stock in an underwritten public offering at a price to the public of $68.50 per share. Actual or anticipated issuances or sales of substantial amounts of our common stock in the future could cause the value of our common stock to decline significantly and make it more difficult for us to sell equity or equity-related securities in the future at a time and on terms that we deem appropriate. The issuance of any shares of our common stock in the future also would, and the issuance of any equity-related securities could, dilute the percentage ownership interest held by shareholders prior to such issuance. Actual issuances of our common stock could also significantly dilute the voting power of the common stock.

We have also made and will continue to make grants of shares of common stock to our directors and grants of restricted stock units and stock options with respect to shares of our common stock to certain team members. As such shares are issued upon vesting and as such options may be exercised and the underlying shares are or become freely tradeable, the value or voting power of our common stock may be adversely affected, and our ability to sell more equity or equity-related securities could also be adversely affected.

We are not required to issue any additional equity securities to existing holders of our common stock on a preemptive basis. Therefore, additional common stock issuances, directly or through convertible or exchangeable securities, warrants or options, will generally dilute the holdings of our existing holders of common stock, and such issuances or the perception of such issuances may reduce the market price of our common stock. Because our decision to issue debt or equity securities or incur other borrowings in the future will depend on market conditions and other factors beyond our control, the amount, timing, nature or success of our future capital-raising efforts is uncertain. Thus, holders of our common stock bear the risk that our future issuances of debt or equity securities or our incurrence of other borrowings will negatively affect the value of our common stock.

Future issuances of debt securities, which would rank senior to our common stock upon our liquidation, and future issuances of equity securities, which would dilute the holdings of our existing holders of common stock and may be senior to our common stock for the purposes of making distributions, periodically or upon liquidation, may negatively affect the market price of our common stock.

In December 2025, we issued $100,000,000 aggregate principal amount of 6.875% Fixed-to-Floating Rate Subordinated Notes due 2036, and we have other senior and subordinated debt currently outstanding. In the future, we may issue additional debt or equity securities or incur other borrowings. Upon our liquidation, holders of our debt securities and other loans and preferred stock will receive a distribution of our available assets before holders of our common stock. If we incur debt in the future, our future interest costs could increase and adversely affect our liquidity, cash flows and results of operations.

Provisions in our articles of incorporation and bylaws may inhibit a takeover of us, which could discourage transactions that would otherwise be in the best interests of our shareholders and could entrench management.

Provisions of our articles of incorporation and bylaws and applicable provisions of Pennsylvania law and the federal CBCA may delay, inhibit or prevent someone from gaining control of our business through a tender offer, business combination, proxy contest or some other method even though some of our shareholders might believe a change in control is desirable. They might also increase the costs of completing a transaction in which we acquire another financial services business, merge with another financial institution or sell our business to another financial institution. These increased costs could reduce the value of the shares held by our shareholders upon completion of these types of transactions.

Shareholders may be deemed to be acting in concert or otherwise in control of us and our bank subsidiaries, which could impose prior approval requirements and result in adverse regulatory consequences for such holders.

We are a bank holding company regulated by the Federal Reserve. Any entity (including a “group” composed of natural persons) owning 25% or more of a class of our outstanding shares of voting stock, or a lesser percentage if such holder or group otherwise exercises a “controlling influence” over us, may be subject to regulation as a “bank holding company” in accordance with the BHC Act. In addition, (i) any bank holding company or foreign bank with a U.S. presence is required to obtain the approval of the Federal Reserve under the BHC Act to acquire or retain 5% or more of a class of our outstanding shares of voting stock and (ii) any person other than a bank holding company may be required to obtain prior regulatory approval under the CBCA to acquire or retain 10% or more of our outstanding shares of voting stock. Any shareholder that is deemed to “control” the company for bank regulatory purposes would become subject to prior approval requirements and ongoing regulation and supervision. Such a holder may be required to divest amounts equal to or exceeding 5% of the voting shares of investments that may be deemed incompatible with bank holding company status, such as an investment in a company engaged in non-financial activities. Regulatory determination of “control” of a depository institution or holding company is based on all of the relevant facts and circumstances. Potential investors are advised to consult with their legal counsel regarding the applicable regulations and requirements.

Our common stock owned by holders determined by a bank regulatory agency to be acting in concert would be aggregated for purposes of determining whether those holders have control of a bank or bank holding company. Each shareholder obtaining control that is a “company” would be required to register as a bank holding company. “Acting in concert” generally means knowing participation in a joint activity or parallel action towards the common goal of acquiring control of a bank or a parent company, whether or not pursuant to an express agreement. The manner in which this definition is applied in individual circumstances can vary and cannot always be predicted with certainty. Many factors can lead to a finding of acting in concert, including where: (i) the shareholders are commonly controlled or managed; (ii) the shareholders are parties to an oral or written agreement or understanding regarding the acquisition, voting or transfer of control of voting securities of a bank or bank holding company; (iii) the shareholders each own stock in a bank and are also management officials, controlling shareholders, partners or trustees of another company or (iv) both a shareholder and a controlling shareholder, partner, trustee or management official of such shareholder own equity in the bank or bank holding company.

Our directors and executive officers can influence the outcome of shareholder votes and, in some cases, shareholders may not have the opportunity to evaluate and affect the investment decision regarding potential investment, acquisition or disposition transactions.

As of December 31, 2025, our directors and executive officers, as a group, owned a total of 2,753,108 shares of common stock and exercisable options to purchase up to an additional 625,123 shares of common stock, which potentially gives them, as a group, the ability to control approximately 9.88% of the outstanding common stock. As of that date, our directors and executive officers, as a group, held RSUs that are subject to various vesting conditions representing, in that aggregate, an additional 427,016 shares of common stock, which upon vesting increases their aggregate ownership of our common stock. In addition, a director of Customers Bank who is not a director or executive officer of Customers Bancorp owns an additional 1,000 shares of common stock, which if combined with the directors and executive officers of Customers Bancorp, potentially gives them, as a group, the ability to control approximately 9.88% of the outstanding common stock. We believe ownership of stock causes directors and officers to have the same interests as shareholders, but it also gives them the ability to vote as shareholders for matters that are in their personal interest, which may be contrary to the wishes of other shareholders. Shareholders will not necessarily be provided with an opportunity to evaluate the specific merits or risks of one or more potential investment, acquisition or disposition transactions. Any decision regarding a potential investment or acquisition transaction will be made by our board of directors. Except in limited circumstances as required by applicable law, consummation of an acquisition will not require the approval of holders of common stock. Accordingly, shareholders may not have an opportunity to evaluate and affect the board of directors’ decision regarding most potential investment or acquisition transactions and/or certain disposition transactions.

The FDIC’s policy statement imposing restrictions and criteria on private investors in failed bank acquisitions will apply to us and our investors.

In August 2009, the FDIC issued a policy statement imposing restrictions and criteria on private investors in failed bank acquisitions. The policy statement is broad in scope and both complex and potentially ambiguous in its application. In most cases, it would apply to an investor with more than 5% of the total voting power of an acquired depository institution or its holding company; but in certain circumstances, it could apply to investors holding fewer voting shares. The policy statement will be applied to us if we make additional failed bank acquisitions from the FDIC or if the FDIC changes its interpretation of the policy statement or determines at some future date that it should be applied because of our circumstances.

Investors subject to the policy statement could be prohibited from selling or transferring their interests for three years. They also would be required to provide the FDIC with information about the investor and all entities in the investor’s ownership chain, including information on the size of the capital fund or funds, its diversification, its return profile, its marketing documents, and its management team and business model. Investors owning 80% or more of two or more banks or savings associations would be required to pledge their proportionate interests in each institution to cross-guarantee the FDIC against losses to the DIF.

Under the policy statement, the FDIC also could prohibit investment through ownership structures involving multiple investment vehicles that are owned or controlled by the same parent company. Investors that directly or indirectly hold 10% or more of the equity of a bank or savings association in receivership also would not be eligible to bid to become investors in the deposit liabilities of that failed institution. In addition, an investor using ownership structures with entities that are domiciled in bank-secrecy jurisdictions would not be eligible to own a direct or indirect interest in an insured depository institution unless the investor’s parent company is subject to comprehensive consolidated supervision as recognized by the Federal Reserve, and the investor enters into certain agreements with the U.S. bank regulators regarding access to information, maintenance of records and compliance with U.S. banking laws and regulations. If the policy statement applies, we (including any failed bank we acquire) could be required to maintain a ratio of Tier 1 common equity to total assets of at least 10% for a period of three years and thereafter maintain a capital level sufficient to be well capitalized under regulatory standards during the remaining period of ownership of the investors. Bank subsidiaries also may be prohibited from extending any new credit to investors that own at least 10% of our equity.

Risks Related to Our Senior Notes and Subordinated Notes

Our 2.875% Senior Notes, 6.875% Subordinated Notes, 6.125% Subordinated Notes and 5.375% Subordinated Notes contain limited covenants.

The terms of our 2.875% Senior Notes, which we refer to as the Senior Notes, and of our 6.125%, 5.375% and 6.875% Subordinated Notes, which we refer to collectively as the Subordinated Notes, generally do not prohibit us from incurring additional debt or other liabilities. If we incur additional debt or liabilities, our ability to pay our obligations on the Senior Notes and Subordinated Notes could be adversely affected. In addition, the terms of our Senior Notes and Subordinated Notes do not require us to maintain any financial ratios or specific levels of net worth, revenues, income, cash flows or liquidity and, accordingly, do not protect holders of those notes in the event that we experience material adverse changes in our financial condition or results of operations. Holders of the Senior Notes and Subordinated Notes also have limited protection in the event of a highly leveraged transaction, reorganization, default under our existing indebtedness, restructuring, merger or similar transaction. We have notified holders of our 6.125% Subordinated Notes that they will be redeemed on March 26, 2026.

Our ability to make interest and principal payments on the Senior Notes and Subordinated Notes is dependent on dividends and distributions we receive from our subsidiaries, which are subject to regulatory and other limitations.

Our principal source of cash flow is dividends from Customers Bank. We cannot assure you that Customers Bank will, in any circumstances, pay dividends to us. If Customers Bank fails to make dividend payments to us, and sufficient cash is not otherwise available, we may not be able to make interest and principal payments on the Senior Notes and Subordinated Notes. Various federal and state statutes, regulations and rules limit, directly or indirectly, the amount of dividends that our banking and other subsidiaries may pay to us without regulatory approval. In particular, dividend and other distributions from Customers Bank to us would require notice to or approval of the applicable regulatory authority. There can be no assurances that we would receive such approval.

In addition, our right to participate in any distribution of assets of any of our subsidiaries upon the subsidiary’s liquidation or otherwise, and, as a result, the ability of a holder of the 2.875% Senior Notes, 5.375% Subordinated Notes and 6.875% Subordinated Notes, to benefit indirectly from such distribution, will be subject to the prior claims of preferred equity holders and creditors of that subsidiary, except to the extent that any of our claims as a creditor of such subsidiary may be recognized. As a result, the 2.875% Senior Notes, 5.375% Subordinated Notes and 6.875% Subordinated Notes are effectively subordinated to all existing and future liabilities and any outstanding preferred equity of our subsidiaries.

We may not be able to generate sufficient cash to service our debt obligations, including our obligations under the Senior Notes and Subordinated Notes.

Our ability to make payments on and to refinance our indebtedness, including the Senior Notes and Subordinated Notes, will depend on our financial and operating performance, including dividends payable to us from Customers Bank, which are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the notes.

If our cash flows and capital resources and dividends from Customers Bank are insufficient to fund our debt service obligations, we may be unable to provide new loans, other products or to fund our obligations to existing customers and otherwise implement our business plans. As a result, we may be unable to meet our scheduled debt service obligations. In the absence of sufficient operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations or seek to restructure our indebtedness, including the notes. We may not be able to consummate these transactions, and these proceeds may not be adequate to meet our debt service obligations when due.

The Senior Notes and Subordinated Notes are our unsecured obligations. The Senior Notes will rank equal in right of payment with all of our secured and unsecured senior indebtedness and will rank senior in right of payment to all of our subordinated indebtedness. Although the Senior Notes are “senior notes,” they will be effectively subordinated to all liabilities of our subsidiaries. Because the Senior Notes are unsecured, they will be effectively subordinated to all of our future secured senior indebtedness to the extent of the value of the assets securing such indebtedness.

The 5.375% Subordinated Notes and 6.875% Subordinated Notes will rank equal in right of payment with all of our secured and unsecured subordinated indebtedness and will rank junior in right of payment to all of our senior indebtedness, including the Senior Notes. As is the case with the Senior Notes, the 5.375% Subordinated Notes and 6.875% Subordinated Notes are effectively subordinated to all liabilities of our subsidiaries. Because the 5.375% Subordinated Notes and 6.875% Subordinated Notes are unsecured, they will be effectively subordinated to all of our future secured subordinated indebtedness to the extent of the value of the assets securing such indebtedness.

The Senior Notes and Subordinated Notes may not have an active trading market.

The Senior Notes and the 6.875% Subordinated Notes and 6.125% Subordinated Notes are not listed on any securities exchange, and there is no active trading market for these notes. Although the 5.375% Subordinated Notes are listed on the NYSE, there is no guarantee that a trading market will develop or be maintained. In addition to the other factors described below, the lack of a trading market for the Senior Notes and Subordinated Notes may adversely affect the holder’s ability to sell the notes and the prices at which the notes may be sold.

The prices realizable from sales of the Senior Notes and Subordinated Notes in any secondary market also will be affected by the supply and demand of the notes, the interest rate, the ranking and a number of other factors, including:

• yields on U.S. Treasury obligations and expectations about future interest rates;

• actual or anticipated changes in our financial condition or results, including our levels of indebtedness;

• general economic conditions and expectations regarding the effects of national policies;

• investors’ views of securities issued by both holding companies and similar financial service firms; and

• the market for similar securities.

General Risk Factors

Downgrades in U.S. government and federal agency securities could adversely affect us.

The long-term impact of the downgrade of the U.S. government and federal agencies from an AAA to an AA+ credit rating is still uncertain. However, in addition to causing economic and financial market disruptions, the downgrade, and any future downgrades and/or failures to raise the U.S. debt limit if necessary in the future, could, among other things, materially adversely affect the market value of the U.S. and other government and governmental agency securities owned by us, the availability of those securities to be used as collateral for borrowing and our ability to access capital markets on favorable terms, as well as have other material adverse effects on the operation of our business and our financial results and condition. In particular, it could increase interest rates and disrupt payment systems, money markets, and long-term or short-term fixed-income markets, adversely affecting the cost and availability of funding, which could negatively affect profitability. Also, the adverse consequences as a result of the downgrade could extend to the borrowers of the loans we make and, as a result, could adversely affect our borrowers’ ability to repay their loans.

We may not be able to maintain consistent earnings or profitability.

Although we made profit for the years 2011 through 2025, there can be no assurance that we will be able to remain profitable in future periods, or, if profitable, that our overall earnings will remain consistent or increase in the future. Our earnings also may be reduced by increased expenses associated with increased assets, such as additional team member compensation expense, and increased interest expense on any liabilities incurred or deposits solicited to fund increases in assets. If earnings do not grow proportionately with our assets or equity, our overall profitability may be adversely affected.

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

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

Overview

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

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

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

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

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

New Accounting Pronouncements

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

Critical Accounting Policies and Estimates

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

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

Allowance for Credit Losses

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

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

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

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

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

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

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

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

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

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

Results of Operations

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

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

For the Years Ended December 31,

(dollars in thousands)

Change

% Change

Net interest income

Provision for credit losses

Total non-interest income

Total non-interest expense

Income before income tax expense

Income tax expense

Net income

Preferred stock dividends

Loss on redemption of preferred stock

Net income available to common shareholders

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

Net interest income

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

Provision for credit losses

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

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

Non-interest income

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

Non-interest expense

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

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

Income tax expense

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

Preferred stock dividends and loss on redemption of preferred stock

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

NET INTEREST INCOME

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

For the Years Ended December 31,

For the Years Ended December 31,

(dollars in thousands)

Average

balance

Interest

income or

expense

Average

yield or

cost

Average

balance

Interest

income or

expense

Average

yield or

cost

Due to rate

Due to volume

Total

Assets

Interest-earning deposits

Investment securities  (1)

Loans and leases:

Commercial and industrial:

Specialized lending loans and leases (2)

Other commercial and industrial loans (2)

Mortgage finance loans

Multifamily loans

Non-owner occupied commercial real estate loans

Residential mortgages

Installment loans

Total loans and leases (3)

Other interest-earning assets

Total interest-earning assets

Non-interest-earning assets

Total assets

Liabilities

Interest checking accounts

Money market deposit accounts

Other savings accounts

Certificates of deposit

Total interest-bearing deposits (4)

Borrowings

Total interest-bearing liabilities

Non-interest-bearing deposits (4)

Total deposits and borrowings

Other non-interest-bearing liabilities

Total liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest income

Tax-equivalent adjustment

Net interest earnings

Interest spread

Net interest margin

Net interest margin tax equivalent (5)

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

(2) Includes owner occupied commercial real estate loans.

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

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

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

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

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

PROVISION FOR CREDIT LOSSES

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

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

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

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

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

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

NON-INTEREST INCOME

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

For the Years Ended December 31,

Change

% Change

(dollars in thousands)

Commercial lease income

Loan fees

Bank-owned life insurance

Mortgage finance transactional fees

Net gain (loss) on sale of loans and leases

Net gain (loss) on sale of investment securities

Impairment loss on debt securities

Unrealized gain on equity method investments

Other

Total non-interest income

Commercial lease income

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

Loan fees

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

Bank-owned life insurance

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

Net gain (loss) on sale of loans and leases

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

Net gain (loss) on sale of investment securities

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

Impairment loss on debt securities

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

Unrealized gain on equity method investments

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

Other non-interest income

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

NON-INTEREST EXPENSE

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

For the Years Ended December 31,

Change

% Change

(dollars in thousands)

Salaries and employee benefits

Technology, communication and bank operations

Commercial lease depreciation

Professional services

Loan servicing

Occupancy

FDIC assessments, non-income taxes, and regulatory fees

Advertising and promotion

Other

Total non-interest expense

Salaries and employee benefits

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

Technology, communication and bank operations

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

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

Commercial lease depreciation

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

Professional services

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

Loan servicing

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

Occupancy

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

FDIC assessments, non-income taxes, and regulatory fees

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

Advertising and promotion

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

Other non-interest expenses

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

INCOME TAXES

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

For the Years Ended December 31,

(dollars in thousands)

Change

% Change

Income before income tax expense

Income tax expense

Effective tax rate

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

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

PREFERRED STOCK DIVIDENDS AND LOSS ON REDEMPTION OF PREFERRED STOCK

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

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

Financial Condition

General

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

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

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

December 31,

(dollars in thousands)

Change

% Change

Cash and cash equivalents

Investment securities, at fair value

Investment securities held to maturity

Loans held for sale

Loans and leases receivable

Loans receivable, mortgage finance, at fair value

Loans receivable, installment, at fair value

Allowance for credit losses on loans and leases

Bank-owned life insurance

Other assets

Total assets

Total deposits

FHLB advances

Other borrowings

Subordinated debt

Accrued interest payable and other liabilities

Total liabilities

Total shareholders’ equity

Total liabilities and shareholders’ equity

Cash and Cash Equivalents

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

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

Investment securities at fair value

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

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

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

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

December 31, 2025

Within one year

After one but within five years

After five but within ten years

After ten years

specific

maturity

Total

Asset-backed securities

Agency-guaranteed residential mortgage-backed securities

Agency-guaranteed residential collateralized mortgage obligations

Agency-guaranteed commercial collateralized mortgage obligations

Corporate notes

Private label collateralized mortgage obligations

Weighted-average yield

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

Investment securities held to maturity

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

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

December 31, 2025

Within one year

After one but within five years

After five but within ten years

specific

maturity

Total

Asset-backed securities

Agency-guaranteed residential mortgage-backed securities

Agency-guaranteed commercial mortgage-backed securities

Agency-guaranteed residential collateralized mortgage obligations

Agency-guaranteed commercial collateralized mortgage obligations

Private label collateralized mortgage obligations

Weighted-average yield

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

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

LOANS AND LEASES

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

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

Commercial Lending

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

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

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

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

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

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

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

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

Consumer Lending

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

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

For the Years Ended December 31,

(amounts in thousands)

Purchases (1)

Specialized lending

Other commercial and industrial

Commercial real estate owner occupied

Construction

Residential real estate

Personal installment (2)

Other installment (2)

Total

Sales (3)

Specialized lending (4)

Other commercial and industrial (5)

Multifamily

Commercial real estate owner occupied (5)

Commercial real estate non-owner occupied

Personal installment

Other installment

Total

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

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

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

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

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

Loans Held for Sale

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

December 31,

(amounts in thousands)

Residential mortgage loans, at fair value

Personal installment loans, at lower of cost or fair value

Other installment loans, at fair value

Total loans held for sale

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

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

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

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

Total Loans and Leases Receivable

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

December 31,

(amounts in thousands)

Loans and leases receivable:

Commercial:

Commercial and industrial:

Specialized lending (1)

Other commercial and industrial

Multifamily

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Construction

Total commercial loans and leases receivable

Consumer:

Residential real estate

Manufactured housing

Installment:

Personal

Other

Total consumer loans receivable

Loans and leases receivable

Loans receivable, mortgage finance, at fair value

Loans receivable, installment, at fair value

Allowance for credit losses on loans and leases

Total loans and leases receivable, net of allowance for credit losses on loans and leases (2)

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

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

Loans and leases receivable

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

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

(amounts in thousands)

Within one year

After one but within five years

After five but within fifteen years

After fifteen years

Total

Commercial loans:

Commercial and industrial, including specialized lending

Multifamily

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Construction

Total commercial loans

Consumer loans:

Residential real estate

Manufactured housing

Installment

Total consumer loans

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

(amounts in thousands)

Predetermined rates

Floating or adjustable rates

Total

Commercial loans:

Commercial and industrial, including specialized lending

Multifamily

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Construction

Total commercial loans

Consumer loans:

Residential real estate

Manufactured housing

Installment

Total consumer loans

Loans receivable, mortgage finance, at fair value

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

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

Loans receivable, installment, at fair value

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

Credit Risk

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

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

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

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

(dollars in thousands)

Commercial and industrial (1)(2)

Multifamily

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Construction

Residential real estate

Manufactured housing

Installment

Total

Ending Balance,

December 31, 2022

Allowance for credit losses on PCD loans, net of charge-offs (3)

Charge-offs (4)

Recoveries (4)

Provision (benefit) for credit losses on loans and leases

Ending Balance,

December 31, 2023

Charge-offs (4)

Recoveries (4)

Provision (benefit) for credit losses on loans and leases

Ending Balance,

December 31, 2024

Allowance for credit losses on PCD loans, net of charge-offs (5)

Charge-offs (4)

Recoveries (4)

Provision (benefit) for credit losses on loans and leases

Ending Balance,

December 31, 2025

Net Charge-offs to Average Loans and Leases

(1)    Includes specialized lending.

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

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

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

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

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

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

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

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

December 31,

(dollars in thousands)

ACL

Percent of loans in each category to loans and leases receivable

ACL

Percent of loans in each category to loans and leases receivable

Commercial and industrial, including specialized lending (1)

Multifamily

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Construction

Total commercial loans and leases

Residential real estate

Manufactured housing

Installment

Total consumer loans

Loans and leases receivable

(1)    Includes PPP loans.

Asset Quality

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

Asset Quality at December 31, 2025

(dollars in thousands)

Total Loans and Leases

Current

30-89 Days Past Due

90 Days or More Past Due and Accruing

Non-accrual/NPL (a)

OREO and Repossessed Assets (b)

NPA (2)

NPL to Loan and Lease Type (%)

NPA (2) to Loans and Leases + OREO and Repossessed Assets (%)

Loan and Lease Type

Commercial and industrial, including specialized lending (1)

Multifamily

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Construction

Total commercial loans and leases receivable

Residential

Manufactured housing

Installment

Total consumer loans receivable

Loans and leases receivable

Loans receivable, mortgage finance, at fair value

Loans receivable, installment, at fair value

Total loans held for sale

Total portfolio

Asset Quality at December 31, 2025 (continued)

(dollars in thousands)

Total Loans and Leases

Non-accrual/NPL

ACL

Reserves to Loans and Leases (%)

Reserves to NPLs (%)

Loan and Lease Type

Commercial and industrial, including specialized lending (1)

Multifamily

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Construction

Total commercial loans and leases receivable

Residential

Manufactured housing

Installment

Total consumer loans receivable

Loans and leases receivable

Loans receivable, mortgage finance, at fair value

Loans receivable, installment, at fair value

Total loans held for sale

Total portfolio

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

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

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

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

December 31,

(amounts in thousands)

Loans 90+ days delinquent still accruing

Non-accrual loans

OREO and repossessed assets

Investment securities, at fair value

Total non-performing assets

December 31,

Non-accrual loans to loans and leases receivable (1)

Non-accrual loans to total loans and leases portfolio

Non-performing assets to total assets (2)

Non-accrual loans and loans 90+ days delinquent to total assets

Allowance for credit losses on loans and leases to:

Loans and leases receivable

Non-accrual loans

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

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

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

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

December 31,

(amounts in thousands)

Commercial and industrial, including specialized lending

Multifamily

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Residential real estate

Manufactured housing

Installment

Total non-performing loans held for investment

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

Problem Loan Identification and Management

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

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

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

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

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

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

Loan Modifications for Borrowers Experiencing Financial Difficulty

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

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

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

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

For the Year Ended December 31, 2025

(dollars in thousands)

Term Extension

Payment Deferral

Debt Forgiveness

Interest Rate Reduction and Term Extension

Total

Percentage of Total by Financing Class

Commercial and industrial, including specialized lending

Personal installment

Total

For the Year Ended December 31, 2024

(dollars in thousands)

Term Extension

Payment Deferral

Debt Forgiveness

Interest Rate Reduction and Term Extension

Total

Percentage of Total by Financing Class

Commercial and industrial, including specialized lending

Multifamily

Residential real estate

Manufactured housing

Personal installment

Total

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

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

ACCRUED INTEREST RECEIVABLE

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

BANK PREMISES AND EQUIPMENT AND OTHER ASSETS

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

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

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

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

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

DEPOSITS

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

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

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

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

December 31,

(dollars in thousands)

Change

% Change

Demand, non-interest bearing

Demand, interest bearing

Savings, including MMDA

Non-time deposits

Time deposits

Total deposits

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

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

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

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

(amounts in thousands)

December 31, 2025

3 months or less

Over 3 through 6 months

Over 6 through 12 months

Over 12 months

Total

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

For the Years Ended December 31,

(dollars in thousands)

Average

Balance

Average

Rate Paid

Average

Balance

Average

Rate Paid

Demand, non-interest bearing

Demand, interest-bearing

Savings, including MMDA

Time deposits

Total

FHLB ADVANCES AND OTHER BORROWINGS

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

Short-term debt

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

December 31,

(dollars in thousands)

Amount

Rate

Amount

Rate

FHLB advances

Total short-term debt

Long-term debt

FHLB and FRB Advances

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

December 31,

(dollars in thousands)

Amount

Rate

Amount

Rate

FHLB advances (1)

Total long-term FHLB and FRB advances

(1)    Amounts reported in the above table include fixed rate long-term advances from FHLB of $750.0 million with maturities ranging from March 2026 to March 2028, and variable rate long-term advances from FHLB of $570.0 million with maturities ranging from March 2027 to December 2028 with a returnable option that can be repaid without penalty on certain predetermined dates at Customers Bank's option, at December 31, 2025.

(2)    Includes $5.1 million and $(1.6) million of unamortized basis adjustments from interest rate swaps designated as fair value hedges of long-term advances from FHLB at December 31, 2025 and 2024, respectively. Refer to “NOTE 20 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES” to Customers’ audited consolidated financial statements for additional information.

(3)    Excludes the effect of interest rate swaps designated as fair value hedges of long-term advances from FHLB.

The maximum borrowing capacity with the FHLB and FRB at December 31, 2025 and 2024 was as follows:

December 31,

(dollars in thousands)

Total maximum borrowing capacity with the FHLB

Total maximum borrowing capacity with the FRB

Qualifying loans and securities serving as collateral against FHLB and FRB

Senior Notes and Subordinated Debt

Long-term senior notes and subordinated debt at December 31, 2025 and 2024 were as follows:

Carrying Amount at December 31,

(dollars in thousands)

Issued by

Ranking

Rate

Issued Amount

Date Issued

Maturity

Price

Customers Bancorp

Senior (1)

August 2021

August 2031

Total other borrowings

Customers Bancorp

Subordinated (2)(3)

December 2025

January 2036

Customers Bancorp

Subordinated (2)(4)

December 2019

December 2034

Customers Bank

Subordinated (2)(5)

June 2014

June 2029

Total subordinated debt

(1) The senior notes will bear an annual fixed rate of 2.875% until August 15, 2026. From August 15, 2026 until maturity, the notes will bear an annual interest rate equal to a benchmark rate, which is expected to be the three-month term SOFR, plus 235 basis points. Customers Bancorp has the ability to call the senior notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after August 15, 2026.

(2) The subordinated notes qualify as Tier 2 capital for regulatory capital purposes.

(3) The subordinated notes will bear an annual fixed rate of 6.875% until January 15, 2031. From January 15, 2031 until maturity, the notes will bear an annual interest rate equal to a benchmark rate, which is expected to be the three-month term SOFR plus 342 basis points. Customers Bancorp has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after January 15, 2031.

(4) Customers Bancorp has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after December 30, 2029.

(5) The subordinated notes had an annual fixed rate of 6.125% until June 26, 2024. From June 26, 2024 until maturity, the notes bear an annual interest rate equal to the three-month LIBOR plus 344.3 basis points. 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 in order to calculate the annual interest rate after June 26, 2024. Customers Bank has the ability to call the subordinated notes, in whole, or in part, at a redemption price equal to 100% of the principal balance at certain times on or after June 26, 2024.

SHAREHOLDERS’ EQUITY

The components of shareholders’ equity were as follows at the dates indicated:

December 31,

(dollars in thousands)

Change

% Change

Preferred stock

Common stock

Additional paid in capital

Retained earnings

Accumulated other comprehensive income (loss), net

Treasury stock

Total shareholders’ equity

Shareholders’ equity increased $278.8 million, or 15.2%, to $2.1 billion at December 31, 2025 when compared to shareholders’ equity of $1.8 billion at December 31, 2024. The increase primarily resulted from increases in retained earnings of $209.2 million, additional paid in capital of $91.4 million and accumulated other comprehensive income (loss), net of $42.5 million and a net decrease in treasury stock of $73.1 million, partially offset by a decrease in preferred stock of $137.8 million.

The decrease in preferred stock resulted from redemption of all of the outstanding shares of Series E Preferred Stock and Series F Preferred Stock for the year ended December 31, 2025. Refer to “NOTE 12 – SHAREHOLDERS’ EQUITY” to Customers’ audited consolidated financial statements for additional information.

The increases in common stock and additional paid in capital resulted primarily from the issuance of common stock under share-based compensation arrangements, as well as cash proceeds, net of issuance costs, in excess of the cost of treasury stock from the reissuance of common stock in an underwritten public offering for the year ended December 31, 2025. Refer to “NOTE 12 – SHAREHOLDERS’ EQUITY” to Customers’ audited consolidated financial statements for additional information.

The increase in retained earnings resulted from net income of $224.1 million for the year ended December 31, 2025, partially offset by preferred stock dividends of $10.2 million and a loss of $4.7 million on redemption of Series E Preferred Stock and Series F Preferred Stock for the year ended December 31, 2025.

The increase in accumulated other comprehensive income (loss), net primarily resulted from reclassification of $53.0 million in losses included in net income and income tax effect of $13.9 million, partially offset by an increase of $3.7 million in unrealized losses on AFS debt securities due to changes in interest rates and credit spreads and income tax effect of $1.0 million for the year ended December 31, 2025.

The decrease in treasury stock resulted from reissuance of common stock held as treasury stock in an underwritten public offering, partially offset by repurchases of 104,206 shares of its common stock for $5.6 million under the 2024 Share Repurchase Program for the year ended December 31, 2025. On June 26, 2024, the Board of Directors of Customers Bancorp authorized a new common stock repurchase program, the 2024 Share Repurchase Program, to repurchase up to 497,509 shares of the Company’s common stock. Customers had purchased all shares authorized under the 2024 Share Repurchase Program. Refer to “NOTE 12 – SHAREHOLDERS’ EQUITY” and “NOTE 24 – SUBSEQUENT EVENTS” to Customers’ audited consolidated financial statements for additional information.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity for a financial institution is a measure of that institution’s ability to meet depositors’ needs for funds, to satisfy or fund loan and lease commitments and for other operating purposes. Ensuring adequate liquidity is an objective of the asset/liability management process. Customers coordinates its management of liquidity with its interest-rate sensitivity and capital position, and strives to maintain a strong liquidity position that is sufficient to meet Customers’ short-term and long-term needs, commitments and contractual obligations.

Customers is involved with financial instruments and other commitments with off-balance sheet risks. Financial instruments with off-balance sheet risks are incurred in the normal course of business to meet the financing needs of the Bank’s customers. These financial instruments include commitments to extend credit, including unused portions of lines of credit, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the consolidated balance sheet.

With commitments to extend credit, exposure to credit loss in the event of non-performance by the other party to the financial instrument is represented by the contractual amount of those instruments. The same credit policies are used in making commitments and conditional obligations as for on-balance-sheet instruments. Because they involve credit risk similar to extending a loan and lease, these financial instruments are subject to the Bank’s credit policy and other underwriting standards. Refer to “NOTE 17 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK” to Customers’ audited consolidated financial statements for additional information.

As described in “NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION” to Customers’ audited consolidated financial statements, ACL on lending related commitments is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which Customers is exposed to credit risk resulting from a contractual obligation to extend credit. No ACL is recognized if Customers has the unconditional right to cancel the obligation. Off-balance sheet credit commitments primarily consist of amounts available under outstanding lines of credit and letters of credit disclosed above. For the period of exposure, the estimate of expected credit losses considers both the likelihood that funding will occur and the amount expected to be funded over the estimated remaining life of the commitment or other off-balance sheet exposure. Customers estimates the expected credit losses for undrawn or unfunded commitments using a usage given default calculation. The lifetime loss rates for off-balance sheet credit exposures are calculated in the same manner as on-balance sheet credit exposures, using the same models and economic forecasts, adjusted for the estimated likelihood that funding will occur. Customers recognized a provision for credit losses on unfunded lending-related commitments of $4.1 million during the year ended December 31, 2025 resulting in an ACL of $9.0 million as of December 31, 2025. Customers recognized a provision for credit losses on unfunded lending-related commitments of $2.0 million during the year ended December 31, 2024 resulting in an ACL of $4.9 million as of December 31, 2024. The ACL on unfunded lending-related commitments is recorded in accrued interest payable and other liabilities in the consolidated balance sheet and the credit loss expense is recorded as a provision for credit losses within other non-interest expense in the consolidated statement of income.

Customers’ contractual obligations and other commitments representing required and potential cash outflows include operating leases, demand deposits, time deposits, short-term and long-term advances from FHLB, unsecured senior notes, subordinated debt, loan and other commitments as of December 31, 2025. Refer to “NOTE 8 – LEASES”, “NOTE 10 – DEPOSITS”, “NOTE 11 – BORROWINGS” and “NOTE 17 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK” to Customers’ audited consolidated financial statements for additional information.

At December 31, 2025, Customers had $4.4 billion of cash on hand and $2.7 billion of investment securities. Customers’ investment portfolio, including debt securities available for sale and held to maturity provides periodic cash flows through regular maturities and amortization and can be used as collateral to secure additional funding. We maintain a strong liquidity position, with $10.6 billion of liquidity immediately available consisting of cash on hand and available borrowing capacity from the FHLB and the FRB, which covered approximately 124% of uninsured deposits and approximately 161% of uninsured deposits less collateralized and affiliate deposits at December 31, 2025. Our loan to deposit ratio was 81% at December 31, 2025. Customers’ principal sources of funds are deposits, borrowings, principal and interest payments on loans and leases, other funds from operations, and proceeds from common and preferred stock issuances. Borrowing arrangements are maintained with the FHLB and the FRB to meet short-term liquidity needs. Longer-term borrowing arrangements are also maintained with the FHLB and FRB. As of December 31, 2025, Customers’ borrowing capacity with the FHLB was $4.6 billion, of which $1.3 billion was utilized in borrowings and $1.8 billion of available capacity was utilized to collateralize deposits. As of December 31, 2024, Customers’ borrowing capacity with the FHLB was $3.6 billion, of which $1.1 billion was utilized in borrowings and $1.5 billion of available capacity was utilized to collateralize deposits. As of December 31, 2025 and 2024, Customers’ borrowing capacity with the FRB was $4.7 billion and $4.4 billion, respectively. None of this capacity was utilized as of December 31, 2025 and 2024.

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

The principal source of the Bancorp’s liquidity is the dividends it receives from the Bank, which may be impacted by the following: bank-level capital needs, laws and regulations, corporate policies, contractual restrictions and other factors. The Bank has generated sufficient positive cash flows from operations to pay dividends to the Bancorp. However, there are statutory and regulatory limitations on the ability of the Bank to pay dividends or make other capital distributions or to extend credit to the Bancorp or its non-bank subsidiaries.

The table below summarizes Customers’ cash flows for the years indicated:

For the Years Ended December 31,

(dollars in thousands)

Change

% Change

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash flows provided by (used in) operating activities

Cash provided by operating activities of $494.8 million for the year ended December 31, 2025 resulted from proceeds from the sales and repayments of loans held for sale of $855.9 million, net income of $224.1 million, non-cash operating adjustments of $140.0 million and an increase in accrued interest payable and other liabilities of $81.4 million, partially offset by origination and purchases of loans held for sale of $780.5 million and an increase in accrued interest receivable and other assets of $26.1 million.

Cash provided by operating activities of $145.1 million for the year ended December 31, 2024 resulted from proceeds from the sales and repayments of loans held for sale of $1.3 billion, which included cash proceeds from the sales of consumer installment loans that were classified as held for sale to two third-party sponsored VIEs, net income of $181.5 million and non-cash operating adjustments of $109.1 million, partially offset by origination and purchases of loans held for sale of $1.4 billion, an increase in accrued interest receivable and other assets of $100.0 million and a decrease in accrued interest payable and other liabilities of $32.8 million. 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.

Cash flows provided by (used in) investing activities

Cash used in investing activities of $2.1 billion for the year ended December 31, 2025 primarily resulted from a net increase in loans and leases, excluding mortgage finance loans of $1.6 billion, purchases of investment securities available for sale of $940.8 million and investment securities held to maturity of $27.8 million, purchases of loans of $385.3 million, net origination of mortgage finance loans of $267.9 million and purchases of leased assets under lessor operating leases of $147.3 million, partially offset by proceeds from sales of investment securities available for sale of $594.2 million and proceeds from maturities, calls and principal repayments on investment securities available for sale of $405.6 million and held to maturity of $295.8 million.

Cash used in investing activities of $1.0 billion for the year ended December 31, 2024 primarily resulted from a net increase in loans and leases, excluding mortgage finance loans of $1.1 billion, purchases of investment securities available for sale of $845.8 million and CRA-qualified investment securities held to maturity of $15.0 million, net origination of mortgage finance loans of $426.5 million, purchases of loans of $198.4 million and purchases of leased assets under lessor operating leases of $63.7 million, partially offset by proceeds from maturities, calls and principal repayments on investment securities available for sale of $629.2 million and held to maturity of $291.5 million, proceeds from sales of investment securities available for sale of $624.9 million, proceeds from sales of loans and leases of $35.0 million, proceeds from sales of leased assets under lessor operating leases of $18.5 million and net proceeds from sales of FHLB, Federal Reserve Bank, and other restricted stock of $13.3 million.

Cash flows provided by (used in) financing activities

Cash provided by financing activities of $2.2 billion for the year ended December 31, 2025 primarily resulted from a net increase in deposits of $1.9 billion, proceeds from long-term borrowed funds from the FHLB and the FRB of $490.0 million, proceeds from issuance of common stock of $165.9 million including $163.5 million, net of issuance costs, from reissuance of common stock held as treasury stock in an underwritten public offering, and proceeds from issuance of subordinated notes of $98.4 million, net of issuance costs, partially offset by repayments of long-term borrowed funds from the FHLB and the FRB of $200.0 million, redemption of Series E Preferred Stock and Series F Preferred Stock of $142.5 million, a net decrease in short-term borrowed funds from the FHLB of $100.0 million, dividends paid on preferred stock of $10.8 million and purchases of treasury stock of $5.6 million. Refer to “NOTE 12 – SHAREHOLDERS’ EQUITY” to Customers’ audited consolidated financial statements for additional information on redemption of preferred stock, reissuance of common stock held as treasury stock in an underwritten public offering and purchases of treasury stock. Refer to “NOTE 11 – BORROWINGS” to Customers’ audited consolidated financial statements for additional information on the issuance of subordinated notes.

Customers intends to use the net proceeds from the issuance of subordinated notes for general corporate purposes, which may include, but are not limited to, the redemption of less than all of the Bank’s $110.0 million subordinated notes with maturity date of June 2029 on March 26, 2026, working capital and the funding of organic growth at the Bank, repaying indebtedness, repurchasing shares of the Company’s common stock, and funding, in whole or in part, possible future acquisitions of other financial services businesses.

Cash provided by financing activities of $800.6 million for the year ended December 31, 2024 primarily resulted from a net increase in deposits of $933.7 million, proceeds from long-term borrowed funds from the FHLB and the FRB of $155.0 million and a net increase in short-term borrowed funds from the FHLB of $100.0 million, partially offset by repayments of long-term borrowed funds from the FHLB and the FRB of $325.0 million, repayments of other long-term borrowings of $25.0 million, purchases of treasury stock of $19.2 million and dividends paid on preferred stock of $15.1 million. Refer to “NOTE 12 – SHAREHOLDERS’ EQUITY” to Customers’ audited consolidated financial statements for additional information on purchases of treasury stock.

CAPITAL ADEQUACY

The Bank and the Bancorp are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can result in certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on Customers’ financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and the Bancorp must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under the regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

In first quarter 2020, the U.S federal banking regulatory agencies permitted banking organizations to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 31, 2020, the U.S. federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allowed banking organizations to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. Customers elected to adopt the interim final rule, which is reflected in the regulatory capital data presented below. The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million was phased in at 25% per year beginning on January 1, 2022 through December 31, 2024. As of December 31, 2025, our regulatory capital ratios reflected the full effect of CECL accounting rule.

Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Bancorp to maintain minimum amounts and ratios (set forth in the following table) of common equity Tier 1, Tier 1, and total capital to risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). At December 31, 2025 and 2024, the Bank and the Bancorp met all capital adequacy requirements to which they were subject.

Generally, to comply with the regulatory definition of adequately capitalized, or well capitalized, respectively, or to comply with the Basel III capital requirements, an institution must at least maintain the common equity Tier 1, Tier 1 and total risk-based capital ratios and the Tier 1 leverage ratio in excess of the related minimum ratios set forth in the following table:

Minimum Capital Levels to be Classified as:

Actual

Adequately Capitalized

Well Capitalized

Basel III Compliant

(dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of December 31, 2025:

Common equity Tier 1 capital (to risk-weighted assets)

Customers Bancorp, Inc.

Customers Bank

Tier 1 capital (to risk-weighted assets)

Customers Bancorp, Inc.

Customers Bank

Total capital (to risk-weighted assets)

Customers Bancorp, Inc.

Customers Bank

Tier 1 capital (to average assets)

Customers Bancorp, Inc.

Customers Bank

As of December 31, 2024:

Common equity Tier 1 capital (to risk-weighted assets)

Customers Bancorp, Inc.

Customers Bank

Tier 1 capital (to risk-weighted assets)

Customers Bancorp, Inc.

Customers Bank

Total capital (to risk-weighted assets)

Customers Bancorp, Inc.

Customers Bank

Tier 1 capital (to average assets)

Customers Bancorp, Inc.

Customers Bank

The Basel III Capital Rules require that we maintain a 2.500% capital conservation buffer with respect to each of common equity Tier 1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers. As of December 31, 2025, the Bank and the Bancorp were in compliance with the Basel III requirements. Refer to “NOTE 18 – REGULATORY CAPITAL” to Customers’ audited consolidated financial statements for additional discussion regarding regulatory capital requirements.

Capital Ratios

Customers continued to build capital during 2025. In general, for the past few years, Customers Bancorp’s capital growth has been achieved by retained earnings and issuances of common stock under share-based compensation arrangements, offset in part by the repurchase of common shares. In 2023, Customers repurchased 1,379,883 shares of its common stock for $39.8 million pursuant to the Share Repurchase Program. In 2024, Customers repurchased 393,303 shares of its common stock for $19.2 million pursuant to the 2024 Share Repurchase Program. In 2025, Customers repurchased 104,206 shares of its common stock for $5.6 million pursuant to the 2024 Share Repurchase Program.

In addition, in 2025, Customers Bancorp raised $163.5 million, after deducting underwriting discounts and commissions and offering expenses, from the reissuance of common stock held as treasury stock in an underwritten public offering. Also in 2025, Customers Bancorp issued $100 million in fixed-to-floating rate subordinated notes. Customers intends to use the net proceeds from the issuance of subordinated notes for general corporate purposes, which may include, but are not limited to, the redemption of less than all of Customers Bank’s $110 million subordinated notes on March 26, 2026. During 2024 and 2023, Customers Bancorp did not issue any preferred stock or common stock other than in connection with share-based compensation agreements. In 2021, Customers Bancorp issued $100 million in fixed-to-floating rate senior notes, and utilized the proceeds to redeem all of the outstanding shares of Series C Preferred Stock and Series D Preferred Stock. In 2025, Customers redeemed all of the outstanding shares of Series E Preferred Stock and Series F Preferred Stock.

Customers Bank’s capital growth for the past few years has been achieved primarily by retained earnings and capital contributions from Customers Bancorp from proceeds received from issuances of common stock held as treasury stock, senior and subordinated notes. In 2025, Customers Bancorp made capital contributions of $80 million to Customers Bank. For more information relating to preferred and common stock and subordinated debt, refer to “NOTE 12 – SHAREHOLDERS’ EQUITY” and “NOTE 11 – BORROWINGS” to Customers’ audited consolidated financial statements.

Customers is unaware of any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on its liquidity, capital resources, or operations.

The maintenance of appropriate levels of capital is an important objective of Customers’ asset and liability management process. Through its initial capitalization and subsequent offerings, Customers believes it has continued to maintain a strong capital position. Since first quarter 2015 through first quarter 2025, Customers Bank’s board of directors has declared a quarterly cash dividend to the Bank’s sole shareholder, Customers Bancorp. Cash dividends declared by the Bank and paid to Customers Bancorp during 2025 and 2024, include the following:

• $10.0 million declared on March 27, 2024, and paid on March 28, 2024;

• $25.0 million declared on June 26, 2024, and paid on June 26, 2024;

• $45.0 million declared on July 24, 2024, and paid on July 25, 2024;

• $45.0 million declared on October 23, 2024, and paid on October 23, 2024; and

• $45.0 million declared on February 26, 2025, and paid on February 26, 2025.

Effect of Government Monetary Policies

Our earnings are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans and leases, investments, and deposits, and their use may also affect rates charged on loans and leases or paid for deposits.