Cubi 2013 10K

8/26/2014 Form 10-K
http://www.sec.gov/Archives/edgar/data/1488813/000119312514095432/d636246d10k.htm 1/153
10-K 1 d636246d10k.htm FORM 10-K
Table of Contents

UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
WASHINGTON,DC20549

FORM10K

ANNUALREPORTPURSUANTTOSECTION13OR15(d)
OFTHESECURITIESEXCHANGEACTOF1934
ForthefiscalyearendedDecember31,2013
00135542
(CommissionFileNumber)

(Exactnameofregistrantasspecifiedinitscharter)

Pennsylvania 272290659
(Stateorotherjurisdictionof
incorporationororganization)
(I.R.S.Employer
IdentificationNumber)
1015PennAvenue
Suite103
WyomissingPA19610
(Addressofprincipalexecutiveoffices)
(610)9332000
(Registrantstelephonenumber,includingareacode)
N/A
SecuritiesregisteredpursuanttoSection12(b)oftheAct:

TitleofEachClass NameofEachExchangeonwhichRegistered
CommonStock,parvalue$1.00pershare TheNasdaqStockMarket,LLC
6.375%SeniorNotesdue2018 TheNasdaqStockMarket,LLC
SecuritiesregisteredpursuanttoSection12(g)oftheAct:None

Indicatebycheckmarkwhethertheregistrantisawellknownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.YesNox
8/26/2014 Form 10-K
IndicatebycheckmarkwhethertheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.YesNox
Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof
1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjectto
suchfilingrequirementsforthepast90days.YesxNo
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveData
FilerequiredtobesubmittedandpostedpursuanttoRule405ofRegulationST(232.405ofthischapter)duringthepreceding12months(or
forsuchshorterperiodthattheregistrantwasrequiredtosubmitandpostsuchfiles).YesxNo
IndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationSKisnotcontainedherein,andwillnotbe
contained,tothebestofregistrantsknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthis
Form10KoranyamendmenttothisForm10K.
Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anonacceleratedfiler,orasmallerreporting
company.Seethedefinitionsoflargeacceleratedfiler,andsmallerreportingcompanyinRule12b2oftheExchangeAct.(CheckOne):

Largeacceleratedfiler Acceleratedfiler x
Nonacceleratedfiler Smallerreportingcompany
Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b2oftheAct).YesNox
Theaggregatemarketvalueofcommonstockheldbynonaffiliatesoftheregistrantwasapproximately$374,158,103asofJune28,2013,based
upontheclosingpricequotedontheNasdaqGlobalSelectMarketforsuchdate.Sharesofcommonstockheldbyeachexecutiveofficerand
directorhavebeenexcludedbecausesuchpersonsmayundercertaincircumstancesbedeemedtobeaffiliates.Thisdeterminationofexecutive
officeroraffiliatestatusisnotnecessarilyaconclusivedeterminationforotherpurposes.
OnMarch3,2014,23,264,351sharesofVotingCommonStockand1,019,755sharesofClassBNonVotingCommonStockwereissuedand
outstanding.
DOCUMENTSINCORPORATEDBYREFERENCE
PortionsoftheregistrantsdefinitiveproxystatementtobedeliveredtoshareholdersinconnectionwiththeAnnualMeetingofShareholdersto
beheldMay15,2014areincorporatedbyreferenceintoPartIIIofthisAnnualReport.

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INDEX

PAGE
PARTI
Item1. Business 4
Item1A. RiskFactors 17
Item1B. UnresolvedStaffComments 34
Item2. Properties 35
Item3. LegalProceedings 35
Item4. MineSafetyDisclosures 36
PARTII
Item5. MarketforRegistrantsCommonEquity,RelatedShareholderMattersandIssuerPurchasesofEquitySecurities 36
Item6. SelectedFinancialData 38
Item7. ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations 40
Item7A. QuantitativeandQualitativeDisclosuresaboutMarketRisk 73
Item8. FinancialStatementsandSupplementaryData 75
Item9. ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure 132
Item9A. ControlsandProcedures 132
Item9B. OtherInformation 132
PARTIII
Item10. Directors,ExecutiveOfficersandCorporateGovernance 133
Item11. ExecutiveCompensation 133
Item12. SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedShareholderMatters 133
Item13. CertainRelationshipsandRelatedTransactions,andDirectorIndependence 133
Item14. PrincipalAccountantFeesandServices 133
PARTIV
Item15. ExhibitsandFinancialStatementSchedules 134
SIGNATURES 140

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FORWARDLOOKINGSTATEMENTS
CustomersBancorp,Inc.(theBancorp),mayfromtimetotimemakewrittenororalforwardlookingstatements,includingstatements
containedintheBancorpsfilingswiththeSecuritiesandExchangeCommission(includingthisAnnualReportonForm10Kandtheexhibits
heretoandthereto),inourreportstoshareholdersandinothercommunicationsbyCustomersBancorp,whicharemadeingoodfaithby
CustomersBancorppursuanttothesafeharborprovisionsofthePrivateSecuritiesLitigationReformActof1995.
TheseforwardlookingstatementsincludestatementswithrespecttoCustomersBancorpsbeliefs,plans,objectives,goals,expectations,
anticipations,estimatesandintentions,thataresubjecttosignificantriskanduncertainties,andaresubjecttochangebasedonvariousfactors
(someofwhicharebeyondCustomersBancorpscontrol).Thewordsbelieves,expects,may,will,should,plans,intends,or
anticipatesorthenegativethereoforcomparableterminology,ordiscussionsofstrategythatinvolverisksanduncertainties,identifyforward
lookingstatementswhichgenerallyarenothistoricalinnature.Theseforwardlookingstatementsareonlypredictionsandestimatesregarding
futureeventsandcircumstancesandinvolveknownandunknownrisks,uncertaintiesandotherfactors,includingtherisksdescribedunderRisk
Factorsthatmaycauseactualresults,levelsofactivity,performanceorachievementstobemateriallydifferentfromanyfutureresults,levelsof
activity,performanceorachievementsexpressedorimpliedbysuchforwardlookingstatements.Thisinformationisbasedonvarious
assumptionsthatmaynotprovetobecorrect.
InadditiontotherisksdescribedintheRiskFactorssectionofthisForm10K,importantfactorstoconsiderandevaluateinsuchforward
lookingstatementsinclude:

Changesintheexternalcompetitivemarketfactorsthatmightimpactresultsofoperations

Changesinlawsandregulations,includingwithoutlimitationchangesincapitalrequirementsunderthefederalpromptcorrectiveaction
regulations

Changesinbusinessstrategyoraninabilitytoexecutestrategyduetotheoccurrenceofunanticipatedevents

Abilitytoidentifypotentialcandidatesfor,andconsummate,acquisitionorinvestmenttransactions

Failuretocompleteanyorallofthetransactionsdescribedhereinonthetermscurrentlycontemplated

Local,regionalandnationaleconomicconditionsandeventsandtheimpacttheymayhaveonCustomersBancorpanditscustomers

Abilitytoattractdepositsandothersourcesofliquidity

Changesinthefinancialperformanceand/orconditionofCustomersBanksborrowers

Changesinthelevelofnonperformingandclassifiedassetsandchargeoffs

Changesinestimatesoffutureloanlossreserverequirementsbasedupontheperiodicreviewthereofunderrelevantregulatoryand
accountingrequirements

Changesincapitalstructureresultingfromfuturecapitalofferingsoracquisitions

Inflation,interestrate,securitiesmarketandmonetaryfluctuations

Timelydevelopmentandacceptanceofnewbankingproductsandservicesandperceivedoverallvalueoftheseproductsandservicesby
users

Changesinconsumerspending,borrowingandsavinghabits

Technologicalchanges

Abilitytoincreasemarketshareandcontrolexpenses

Volatilityinthecreditandequitymarketsanditseffectonthegeneraleconomy

ChangesduetocapitalrequirementsunderBaselIII

Effectofchangesinaccountingpoliciesandpractices,asmaybeadoptedbytheregulatoryagencies,aswellasthePublicCompany
AccountingOversightBoard,theFinancialAccountingStandardsBoardandotheraccountingstandardsetters

Abilitytointegratecontemplatedandfutureacquisitiontargetsmaybeunsuccessful,ormaybemoredifficult,timeconsumingorcostly
thanexpectedand

Materialdifferencesintheactualfinancialresultsofmergerandacquisitionactivitiescomparedwithexpectations.
Theseforwardlookingstatementsaresubjecttosignificantuncertaintiesandcontingencies,manyofwhicharebeyondthecontrolofCustomers
Bancorp.Althoughtheexpectationsreflectedintheforwardlookingstatementsarecurrentlybelievedtobereasonable,futureresults,levelsof
activity,performanceorachievementscannotbeguaranteed.Accordingly,therecanbenoassurancethatactualresultswillmeetexpectationsor
willnotbemateriallylowerthantheresultscontemplatedinthisdocumentandtheattachmentshereto.Youarecautionednottoplaceundue
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relianceontheseforwardlookingstatements,whichspeakonlyasofthedateofthis

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documentor,inthecaseofdocumentsreferredto,thedatesofthosedocuments.NeitherCustomersBancorpnortheBankundertakesany
obligationtoreleasepubliclyorotherwiseprovideanyrevisionstotheseforwardlookingstatementstoreflecteventsorcircumstancesafterthe
dateofthisreportortoreflecttheoccurrenceofunanticipatedevents,exceptasmayberequiredunderapplicablelaw.
CUSTOMERSBANCORP,INC.ANDSUBSIDIARIES
PARTI

Item1. Business
Unlessstatedotherwiseorthecontextotherwiserequires,referencesinthisForm10KtoCustomersBancorportheBancorpreferto
CustomersBancorp,Inc.,aPennsylvaniacorporationanditsconsolidatedsubsidiariesforallperiodsonorafterSeptember17,2011and
CustomersBankforallperiodsbeforeSeptember17,2011.ReferencesinthisForm10KtoCustomersBankortheBankrefertoCustomers
Bank,aPennsylvaniastatecharteredbankandwhollyownedsubsidiaryofCustomersBancorp.Allshareandpershareinformationhasbeen
retrospectivelyrestatedtoreflecttheReorganization(asdefinedbelow),includingtheoneforthreeconsideration(i.e.,eachthreesharesof
CustomersBankwasexchangedforoneshareofCustomersBancorp)usedinthereorganization.
BusinessSummary
CustomersBancorp,throughitswhollyownedsubsidiaryCustomersBank,providesfinancialproductsandservicestosmallbusinesses,notfor
profits,andconsumersthroughitsbranchesandofficesinSoutheasternPennsylvania(Bucks,Berks,Chester,DelawareandPhiladelphia
Counties),RyeandNewYork,NewYork(WestchesterandNewYorkCounties),Hamilton,NewJersey(MercerCounty),Providence,Rhode
Island(ProvidenceCounty)andBoston,Massachusetts(SuffolkCounty).CustomersBankalsoprovidesliquiditytothemortgagemarket
nationwidethroughtheoperationofitsloanstomortgagebankingcompaniesbusiness.AtDecember31,2013,CustomersBancorphadtotal
assetsof$4.2billion,includingnetloans(includingheldforsaleloans)of$3.2billion,totaldepositsof$3.0billion,andshareholdersequityof
$0.4billion.
CustomersBancorpsstrategicplanistobecomealeadingregionalbankholdingcompanythroughorganicgrowthandvalueadded
acquisitions.CustomersBancorpdifferentiatesitselffromitscompetitorsthroughitsfocusonexceptionalcustomerservicesupportedbystateof
thearttechnology.TheprimarycustomersofCustomersBankareprivatelyheldbusinesses,consumers,professionalcustomers,andnotfor
profits.CustomersBankalsofocusesoncertainlowcost,lowriskspecialtylendingareassuchasmultifamily/commercialrealestatelending
andlendingtomortgagebankingbusinesses.TheBankslendingactivitiesarefundedbydepositsfromitsbranchmodel,whichseekshigher
depositlevelsperbranchthanatypicalbank,combinedwithlowerbranchoperatingexpenses,withoutsacrificingexceptionalcustomerservice.
CustomersBancorpalsocreatesfranchisevaluethroughitsdisciplinedapproachtoacquisitions,bothintermsofidentifyingtargetsand
structuringtransactions.SuperiorenterpriseriskmanagementisanimportantpartofthestrategiesCustomersBancorpinitiates.
ThemanagementteamofCustomersBancorpconsistsofexperiencedbankingexecutivesledbyitsChairmanandChiefExecutiveOfficer,Jay
Sidhu,whojoinedCustomersBankinJune2009.Mr.Sidhubrings39yearsofbankingexperience,including20yearsastheChiefExecutive
OfficerandChairmanofSovereignBancorp.InadditiontoMr.Sidhu,manyofthemembersofthecurrentmanagementteamhaveexperience
workingtogetheratSovereignwithMr.Sidhu.ManyotherteammembersjoiningtheCustomersmanagementteamhavesignificantexperience
helpingbuildandleadotherbankingorganizations.Combined,theCustomersmanagementteamhassignificantexperienceinbuildinga
bankingorganization,completingandintegratingmergersandacquisitions,anddevelopingvaluablecommunityandbusinessrelationshipsin
itscoremarkets.
BackgroundandHistory
CustomersBancorpwasincorporatedinPennsylvaniainApril2010tofacilitateareorganizationintoabankholdingcompanystructure
pursuanttowhichCustomersBankbecameawhollyownedsubsidiaryofCustomersBancorp(theReorganization)onSeptember17,2011.
PursuanttotheReorganization,alloftheissuedandoutstandingsharesofVotingCommonStockandClassBNonVotingCommonStockof
CustomersBankwereexchangedonaoneforthreebasisforsharesofVotingCommonStockandClassBNonVotingCommonStock,
respectively,ofCustomersBancorp.CustomersBancorpscorporateheadquartersarelocatedat1015PennAvenue,Wyomissing,Pennsylvania
19610.Themaintelephonenumberis(610)9332000.
ThedepositsofCustomersBank,whichwascharteredasNewCenturyBankin1994,areinsuredbytheFederalDepositInsuranceCorporation.
CustomersBankshomeofficeislocatedat99BridgeStreet,Phoenixville,Pennsylvania19460.Themaintelephonenumberis(610)9332000.

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ExecutiveSummary
CustomersBancorpsMarkets
MarketCriteria
CustomersBancorplookstogroworganicallyaswellasthroughselectiveacquisitionsinitscurrentandprospectivemarkets.Customers
Bancorpbelievesthatthereissignificantopportunitytobothenhanceitspresenceinitscurrentmarketsandenternewcomplementarymarkets
thatmeetitsobjectives.CustomersBancorpfocusesonmarketsthatitbelievesarecharacterizedbysomeorallofthefollowing:

Populationdensity

Concentrationofbusinessactivity

Attractivedepositbases

Largemarketshareheldbylargebanks

Advantageouscompetitivelandscapethatprovidesopportunitytoachievemeaningfulmarketpresence

Lackofconsolidationinthebankingsectorandcorrespondingopportunitiesforaddontransactions

Potentialforeconomicgrowthovertime

Managementexperienceintheapplicablemarkets.
CurrentMarkets
CustomersBancorpstargetmarketisbroadlydefinedasextendingfromthegreaterWashington,D.C.areatoBoston,Massachusettsroughly
followingInterstate95.AsofDecember31,2013,theCompanyhadbankbranchesorloanproductionoffices(LPOs)inthefollowingcities:

Market Offices Type
BerksCounty,PA,D.C. 4 Branch
Boston,Massachusetts 1 LPO
MercerCounty,NJ 1 Branch
NewYork,NY 1 LPO
PhiladelphiaCamdenWilmington,PA,NJ,DE 8 Branch/LPO
Providence,RI 1 LPO
WashingtonD.C. 1 LPO
WestchesterCounty,NY 1 Branch/LPO

CustomersBancorpbelievesitstargetmarkethashighlyattractivedemographic,economicandcompetitivedynamicsthatareconsistentwithits
objectivesandfavorabletoexecutingitsorganicgrowthandacquisitionstrategies.SubsequenttoDecember31,2013,Customersclosedits
Washington,D.C.LPO.
ProspectiveMarkets
TheorganicgrowthstrategyofCustomersBancorpfocusesonexpandingmarketshareinitsexistingandcontiguousmarketsbygenerating
deposits,loanandfeebasedservicesthroughhightouchpersonalizedservicesupportedbystateofthearttechnologyfortheBanks
commercial,consumer,notforprofit,andspecializedlendingmarkets.TheacquisitionstrategyofCustomersBancorphastraditionallyfocused
onundervaluedandtroubledcommunitybanksinPennsylvania,NewJersey,NewYork,Maryland,VirginiaandNewEngland,wheresuch
acquisitionsfurthertheBancorpsobjectivesandmeetitscriticalsuccessfactors.AsCustomersBancorpevaluatespotentialacquisition
opportunities,itbelievestherearemanybankinginstitutionsthatcontinuetofacecreditchallenges,capitalconstraintsandliquidityissuesand
thatlackthescaleandmanagementexpertisetomanagetheincreasingregulatoryburden.
CompetitiveStrengths

Experiencedandrespectedmanagementteam.AnintegralelementofthebusinessstrategyofCustomersBancorpisto
capitalizeonandleveragethepriorexperienceofitsexecutivemanagementteam.ThemanagementteamisledbyChairman
andChiefExecutiveOfficer,JaySidhu,whoistheformerChiefExecutiveOfficerandChairmanofSovereignBancorp.In
additiontoMr.Sidhu,manyofthemembersofthecurrentmanagementteamofCustomersBancorphaveexperienceworking
togetheratSovereignwithMr.Sidhu,includingRichardEhst,PresidentandChiefOperatingOfficerofCustomersBankand
WarrenTaylor,PresidentofCommunityBankingforCustomersBank.DuringtheirtenureatSovereign,theseindividuals
establishedatrackrecordofproducingstrongfinancialresults,integratingacquisitions,managingrisk,workingwith
regulatorsandachievingorganic

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growthandexpensecontrol.Inaddition,theresidentiallendinggroup,whichincludesmortgageloanstoindividualsand
commercialloans(warehousefacilities)toresidentialmortgageoriginators,isledbyGlennHedde,whobringsmorethan23
yearsofexperienceinthissector.Thisteamhassignificantexperienceinsuccessfullybuildingabankingorganizationaswell
asexistingvaluablecommunityandbusinessrelationshipsinourcoremarkets.

UniqueAssetandDepositGenerationStrategies.CustomersBancorpfocusesonlocalmarketlendingcombinedwith
relativelylowriskspecialtylendingsegments.Localmarketassetgenerationprovidesvarioustypesofbusinesslending
productsandconsumerlendingproducts,suchasmortgageloansandhomeequityloans.TheBankhasalsoestablisheda
multifamilyandcommercialrealestateproductlinethatisfocusedontheMidAtlanticregion,particularlyNewYorkCity.
Thestrategyistofocusonrefinancingexistingloanswithconservativeunderwritingandtokeepcostslow.Throughthe
multifamilyandcommercialrealestateproduct,CustomersBankearnsinterestandfeeincomeandgeneratescommercial
deposits.CustomersBankalsomaintainsaspecialtylendingbusiness,commercialloanstomortgageoriginators,whichisa
nationalbusinesswheretheBankprovidesliquiditytonondepositorymortgagecompaniestofundtheirmortgagepipelines
andmeetotherbusinessneeds.Throughtheloanstomortgagebankersbusiness,CustomersBankearnsinterestandfeeincome
andgeneratescoredeposits.

Attractiveriskprofile.CustomersBancorphassoughttomaintainhighassetqualityandmoderatecreditriskbyusing
conservativeunderwritingstandardsandearlyidentificationofpotentialproblemassets.TheBancorphasalsoformeda
specialassetsdepartmenttobothmanagethecoveredassetsportfolioandtoreviewotherclassifiedandnonperformingassets.
AsofDecember31,2013,approximately$405.0million,or12.6%,oftheBanksloans(bydollaramount)wereacquired
loans.Additionally,2.7%oftheBanksloans,29.5%ofthenonperformingloansand56.7%oftheBanksotherrealestate
owned(OREO)(eachbydollaramount),arecoveredbyalosssharingarrangementwiththeFDICinwhichtheFDICwill
reimbursetheBankfor80%ofitslossesontheseassets.
PleaserefertotheAssetQualitytablesregardinglegacyandacquiredloansappearingintheManagementsDiscussionand
Analysissection.

SuperiorCommunityBankingModel.CustomersBancorpexpectstodriveorganicgrowthbyemployingitsconcierge
bankingstrategy,whichprovidesspecificrelationshipmanagersorprivatebankersforallcustomers,deliveringan
appointmentbankingapproachavailable12hoursaday,sevendaysaweek.ThisallowstheBanktoprovideservicesina
personalized,convenientandexpeditiousmanner.Thisapproach,coupledwithsuperiortechnology,includingremote
accountopening,remotedepositcaptureandmobilebanking,resultsinacompetitiveadvantageoverlargerinstitutions,
whichmanagementbelievescontributestotheprofitabilityofitsfranchiseandallowstheBanktogeneratecoredeposits.The
hightech,hightouch,modelofCustomersBancorprequireslessstaffandsmallerbranchlocationstooperate,thereby
significantlyreducingoperatingcosts.

AcquisitionExpertise.ThedepthofCustomersBancorpsmanagementteamandtheirexperienceworkingtogetherand
successfullycompletingacquisitionsprovidesuniqueinsightinidentifyingandanalyzingpotentialmarketsandacquisition
targets.TheexperienceofCustomersBancorpsteam,whichincludestheacquisitionandintegrationofover35institutions,as
wellasnumerousbranchacquisitions,providestotheBancorpasubstantialadvantageinpursuingandconsummatingfuture
acquisitions.Additionally,managementbelievestheBancorpsstrengthsinstructuringtransactionstolimititsrisk,its
experienceinthefinancialreportingandregulatoryprocessrelatedtotroubledbankacquisitions,anditsongoingrisk
managementexpertise,particularlyinproblemloanworkouts,collectivelyenableittocapitalizeonthepotentialofthe
franchisesitacquires.WiththeBancorpsdepthofoperationalexperienceinconnectionwithcompletingmergerand
acquisitiontransactions,itexpectstobeabletointegrateandrepositionacquiredfranchisescostefficientlyandwitha
minimumdisruptiontocustomerrelationships.
CustomersBancorpbelievesitsabilitytooperateefficientlyisenhancedbyitscentralizedriskmanagementstructure,itsaccesstoattractive
laborandrealestatecostsinitsmarkets,andaninfrastructurethatisunencumberedbylegacysystems.Furthermore,CustomersBancorp
anticipatesadditionalexpensesynergiesfromtheintegrationofitsacquisitions,whichitbelieveswillenhanceitsfinancialperformance.
Acquisitions
SinceJuly2010,CustomersBancorpcompletedthreeacquisitions,twoofwhichwereFDICassistedtransactions.CustomersBancorpbelievesit
hasstructuredacquisitionsthatlimititscreditrisk,whichhaspositioneditforattractiveriskadjustedreturns.Asummaryoftheseacquisitions
appearsbelow.

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2010Acquisitions
FDICAssistedTransaction:USABankAcquisition
OnJuly9,2010,CustomersBankacquiredsubstantiallyalloftheassetsandassumedallofthenonbrokereddepositsandsubstantiallyallother
liabilitiesofUSABankfromtheFDIC,asreceiver.Thetransactionconsistedofassetswithafairvalueof$221.1million,including$124.7
millionofloans(withacorrespondingunpaidprincipalbalance(UPB),of$153.6million),a$22.7millionFDIClosssharingreceivableand
$3.4millionofforeclosedassets.Liabilitieswithafairvalueof$202.1millionwerealsoassumed,including$179.3millionofnonbrokered
deposits.CustomersBankalsoreceivedcashconsiderationfromtheFDICof$25.6million.Furthermore,CustomersBankrecognizedabargain
purchasegainbeforetaxesof$28.2million,whichrepresented12.2%ofthefairvalueofthetotalassetsacquired.
ConcurrentlywiththeacquisitionofUSABank,theFDICagreedtoabsorbaportionofthefuturecreditlossesandworkoutexpensesthrough
losssharingagreementsthatcovercertainlegacyassets,includingtheentireloanportfolioandotherrealestateowned.AtJuly9,2010,the
coveredassetsconsistedofassetswithabookvalueof$126.7million.ThetotalUPBofthecoveredassetsatJuly9,2010was$159.2million.
CustomersBankacquiredotherUSABankassetsthatwerenotcoveredbythelosssharingagreementswiththeFDICincludingcashandcertain
investmentsecuritiespurchasedatfairmarketvalue.Thelosssharingagreementsdonotapplytosubsequentlyacquired,purchased,or
originatedassets.CustomersBankenteredintothistransactiontoexpanditsfranchiseintoalucrativenewmarket,accreteitsbookvalueper
share,andaddsignificantcapital.
Pursuanttothetermsofthelosssharingagreements,theFDICreimbursesCustomersBankfor80%oflosses,calculated,ineachcase,basedon
UPBpluscertaininterestandexpenses.CustomersBankreimbursestheFDICforitsshareofrecoverieswithrespecttolossesforwhichtheFDIC
haspaidCustomersBankinreimbursementunderthelosssharingagreements.TheFDICsguaranteeforcommercialloansexpiresinJuly2015
andforresidentialmortgageloansinJuly2020.AsofDecember31,2013,CustomersremainingcoveredassetsfromtheUSABankAcquisition
totaled$46.0million,ofwhich$21.7millionwasnotpayinginaccordancewiththecontractualprovisions.
CustomersBankhasreceivedanaggregateof$22.4millionfromtheFDICinreimbursementsunderthelosssharingagreementsforclaimsfiled
forlossesincurredthroughDecember31,2013.
FDICAssistedTransaction:ISNBankAcquisition
OnSeptember17,2010,CustomersBankacquiredsubstantiallyalloftheassetsandassumedallofthenonbrokereddepositsandsubstantially
allotherliabilitiesofISNBankfromtheFDIC,asreceiver.Thetransactionconsistedofassetswithafairvalueof$83.9million,including$51.3
millionofloans(withacorrespondingUPBof$58.2million),a$5.6millionFDIClosssharingreceivableand$1.2millionofforeclosedassets.
Liabilitieswithafairvalueof$75.8millionwerealsoassumed,including$71.9millionofnonbrokereddeposits.CustomersBankreceivedcash
considerationfromtheFDICof$5.9million.Furthermore,CustomersBankrecognizedabargainpurchasegainbeforetaxesof$12.1million,
whichrepresented14.4%ofthefairvalueofthetotalassetsacquired.
ConcurrentlywiththeacquisitionofISNBank,theFDICagreedtoabsorbaportionofallfuturecreditlossesandworkoutexpensesthroughloss
sharingagreementsthatcovercertainlegacyassets,includingtheentireloanportfolioandotherrealestateowned.AtSeptember17,2010,the
coveredassetsconsistedofassetswithabookvalueof$52.6million.ThetotalUPBofthecoveredassetsatSeptember17,2010was$58.2
million.CustomersBankacquiredotherISNBankassetsthatwerenotcoveredbythelosssharingagreementswiththeFDICincludingcash,
certaininvestmentsecuritiespurchasedatfairmarketvalue,andothertangibleassets.Thelosssharingagreementsdonotapplytosubsequently
acquired,purchasedororiginatedassets.CustomersBankenteredintothistransactiontoenhancebookvaluepershare,addcapital,andenterthe
NewJerseymarketinamoreefficientmannerthandenovoexpansion.
Pursuanttothetermsofthelosssharingagreements,theFDICreimbursesCustomersBankfor80%oflosses,calculated,ineachcase,basedon
UPBpluscertaininterestandexpenses.CustomersBankreimbursestheFDICforitsshareofrecoverieswithrespecttolossesforwhichtheFDIC
haspaidCustomersBankinreimbursementunderthelosssharingagreements.TheFDICsguaranteeforcommercialloansexpiresinSeptember
2015andforresidentialmortgageloansinSeptember2020.AsofDecember31,2013,CustomersremainingcoveredassetsfromtheISNBank
Acquisitiontotaled$20.9million,ofwhich$4.7millionwasnotpayinginaccordancewiththecontractualprovisions.
CustomersBankhasreceivedanaggregateof$9.4millionfromtheFDICinreimbursementsundertheISNlosssharingagreementsforclaims
filedforlossesincurredthroughDecember31,2013.
InaccordancewiththeguidanceprovidedinSECStaffAccountingBulletinTopic1.K,FinancialStatementsofAcquiredTroubledFinancial
Institutions(SAB1:K)andarequestforreliefgrantedbytheSEC,historicalfinancialinformationofUSABankandISNBankhasbeen
omittedfromthisForm10K.Reliefisprovidedundercertaincircumstances,includingtransactionssuchasthe

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acquisitionsofUSABankandISNBankinwhichaninstitutionengagesinanacquisitionofatroubledfinancialinstitutionforwhichaudited
financialstatementsarenotreasonablyavailableandinwhichfederalassistanceisanessentialandsignificantpartofthetransaction.
2011Acquisition
BerkshireBancorpAcquisition
OnSeptember17,2011,CustomersBancorpacquiredBerkshireBancorp,Inc.anditssubsidiaryBerkshireBank.BerkshireBancorpservedBerks
County,Pennsylvaniathroughfivebranches.Ontheclosingdate,BerkshireBancorphadtotalassetsofapproximately$132.5million,including
totalloansof$98.4million,andtotalliabilitiesofapproximately$122.8million,includingtotaldepositsof$121.9million.Underthetermsof
themergeragreement,eachoutstandingshareofBerkshireBancorpcommonstockwasexchangedfor0.1534sharesofCustomersBancorps
VotingCommonStock,resultingintheissuanceof623,686sharesofCustomersBancorpsVotingCommonStock.Thetotalpurchasepricewas
approximately$11.3million,representingapricetotangiblebookvalueofBerkshireBancorpcommonstockof1.25%.Thistransactionwas
immediatelyaccretivetoearnings.
Inaddition,aspartofthetransaction,CustomersBancorpexchangedsharesofitspreferredstockforthepreferredstockthatwasissuedby
BerkshireBancorpaspartoftheU.S.TreasurysTroubledAssetReliefProgram.Thosesharesweresubsequentlyredeemed.Inaddition,warrants
topurchasesharesofBerkshireBancorpcommonstockwereconvertedintowarrantstopurchasesharesofCustomersBancorpsVotingCommon
Stock.
BerkshireBancorpsoperatingresultsareincludedinCustomersBancorpsfinancialresultsfromthedateofacquisition.
AcquisitionofManufacturedHousingLoans
Duringtheyears2010,2011,and2012,CustomersBankpurchasedmanufacturedhousingloansfromTammacHoldingCorporation
(Tammac).Thesepurchaseswereopportunisticpurchasesandmaynotbeindicativeoffuturestrategiesorpurchases.
OnAugust6,2010,CustomersBankpurchasedfromTammacHoldingCorporation(Tammac)a$105.8millionmanufacturedhousingloan
portfolioforapurchasepriceof$105.8million.Theseloansweresupportedbyacashreservebalanceof$10.5millionatthedateofpurchase
thatcoveredallestimatedlossesanddelinquentinterest,andismaintainedinademanddepositaccountattheBank.
OnSeptember30,2011,CustomersBankpurchasedfromTammac$19.3millionofmanufacturedhousingloansanda1.50%interestonlystrip
securitywithanestimatedvalueof$3millionsecuredbyapoolof$70millionofloansoriginatedbyTammacforatotalpurchasepriceof$13
million.
OnJuly24,2012,CustomersBankpaid$63.2milliontoacquiremanufacturedhousingloansfromVanderbiltMortgageandFinanceInc.atpar.
TheseloanswereoriginatedbyTammacHoldingCorporation,andsecuretheinterestonlystripsecuritythatwaspurchasedinSeptember2011.
Theloanscarryan11.3%couponrate,whereTammacearnsa2.0%servicingfeeandalsoretainstherightstoa2.0%IOStripinrelationtothis
poolofloans.ThefullrecourseforlossesontheJuly2012loanpurchaseresideswithTammac.
2013AcquisitionAgreements
CMSBancorp,Inc.Acquisition
OnDecember20,2013,CustomersBancorpannouncedithadmutuallyconsentedwithCMSBancorp,InctoterminatetheAugust10,2012
AgreementandPlanofMerger(theAgreement),asamended,betweenCustomersBancorpandCMSBancorp,Inc.CMSisaMountVernon,
NewYorkbankholdingcompanywithapproximately$250millioninassets.UndertheprovisionsoftheAgreement,noterminationfeesare
paidtoeitherpartyiftheterminationisbymutualconsent.
AcaciaFederalSavingsBankAcquisition
OnApril4,2013,CustomersBancorp,Inc.,AcaciaLifeInsuranceCompany(Acacia)andAmeritasLifeInsuranceCorp.(togetherwithAcacia,
Sellers)announcedtheirmutualdecision,duetodelaysinthereceiptofregulatoryapprovals,nottoextendthetermofthatcertainStock
PurchaseAgreement,datedasofJune20,2012,asamendedbythosecertainAmendmenttoStockPurchaseAgreement,datedasofDecember18,
2012,AmendmentNo.2toStockPurchaseAgreementdatedasofJanuary30,2013,andAmendmentNo.3toStockPurchaseAgreementdated
asofFebruary28,2013,byandamongtheCompanyandSellers(thePurchaseAgreement).Instead,onApril4,2013,thepartiesenteredintoa
TerminationandNonRenewalAgreementtoterminate

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thePurchaseAgreementandthetransactionscontemplatedthereby(theTerminationAgreement).Eachpartyrecognizeditsowncostsand
expensesinconnectionwiththeterminatedtransaction,withoutpenalties.Thepartiesmutuallyagreedthattheterminationwasineach
companysbestinterest.Costsrelatedtotheacquisitionhavebeenexpensed.
NewEnglandLoanPurchases
OnMarch28,2013,CustomersBankcompletedthepurchaseofcertaincommercialloansfromMichiganbasedFlagstarBank.Undertheterms
oftheagreement,CustomersBankacquired$182.3millionincommercialloancommitments,ofwhich$155.1millionwasdrawnatthedateof
acquisition.Also,aspartoftheagreement,CustomersBankassumedtheleasesfortwoofFlagstarscommerciallendingoffices,oneinBoston,
MAandoneinProvidence,RI.Thepurchasepricewas98.7%ofloansoutstanding.
OnJanuary15,2014,CustomersBankpurchased$277.9millionofresidentialadjustableratejumbomortgageloans(indexedtooneyear
LIBOR)fromFlagstarBank.Thepurchasepricewas100.75%ofloansoutstanding.
Segments
CustomersBancorphasonereportablesegment,CommunityBanking.AlloftheCompanysactivitiesareinterrelated,andeachactivityis
dependentandassessedbasedonhoweachoftheactivitiesoftheCompanysupportstheothers.Forexample,lendingisdependentuponthe
abilityoftheCompanytofunditselfwithdepositsandborrowingswhilemanagingtheinterestrateandcreditrisk.Accordingly,allsignificant
operatingdecisionsarebaseduponanalysisoftheBankasonesegmentorunit.
Products
CustomersBancorpoffersabroadrangeoftraditionalloananddepositbankingproductsandfinancialservicestoitscommercialandconsumer
customers.CustomersBankoffersanarrayoflendingproductstocatertoitscustomersneeds,includingsmallbusinessloans,mortgage
warehouseloans,multifamilyandcommercialrealestateloans,residentialmortgageloansandconsumerloans.CustomersBankalsooffers
traditionaldepositoryproducts,includingcommercialandconsumercheckingaccounts,noninterestbearingdemandaccounts,moneymarket
depositaccounts,savingsaccountsandtimedepositaccountsandcashmanagementservices.Depositsproductsareavailabletocustomersonly
throughbranchesofCustomersBank.
LendingActivities
CustomersBankfocusesitslendingeffortsonthefollowinglendingareas:

CommercialLendingIncludesBusinessBankingcommercialandindustrial,SmallBusiness,includingsmallbusiness
administration(SBA)loans,MultifamilyandCommercialRealEstatelending,andcommercialloanstomortgageoriginators
and

ConsumerLendingLocalmarketmortgagelendingandhomeequitylending.
CommercialLending
TheBankscommerciallendingisdividedintofourdistinctgroups:Multifamily/Commercialrealestate,BusinessBankingandSmallBusiness
Banking,andmortgagebankinglending.Thisgroupingisdesignedtoallowforgreaterresourcedeployment,higherstandardsofrisk
management,strongassetquality,lowerinterestrateriskandhigherproductivitylevels.
TheBusinessBankinglendinggroupfocusesoncompanieswithannualrevenuesrangingfrom$5.0millionto$50.0million,whichtypically
havecreditrequirementsbetween$0.5millionand$10.0million.Thisdivisionisservicedbyveryexperiencedlocalrelationshipmanagersor
privatebankerswhoaresupportedbyacentralizedcreditfunction.
TheSmallBusinessBankingplatformoriginatesloans,includingSmallBusinessAdministrationloans,throughthebranchnetworksalesforce
andateamofdedicatedSmallBusinessrelationshipmanagers.Thesupportadministrationoftheplatformforthissegmentiscentralized
includingriskmanagement,productmanagement,marketing,performancetrackingandoverallstrategy.Creditandsalestraininghasbeen
establishedforthesalesforce,ensuringthattheBankhassmallbusinessexpertsinplaceprovidingappropriatefinancialsolutionstothesmall
businessownersinitscommunities.Adivisionapproachfocusesonindustriesthatofferhighassetqualityandaredepositrichtodrive
profitability.
ThegoaloftheBanksmultifamilylendinggroupistobuildaportfolioofhighqualitymultifamilyandcommercialrealestateloanswithinits
coveredmarkets,whilecrosssellingitsotherproductsandservices.Thisbusinesslineprimarilyfocusesonrefinancingexistingloans,using
conservativeunderwriting.Theprimarycollateralfortheseloansisafirstlienmortgageonthemultifamilyproperty,plusanassignmentofall
leasesrelatedtosuchproperty.DuringtheyearendedDecember31,2013,theBankoriginatedandclosed$725.1millionofmultifamilyloan
commitments.DuringtheyearendedDecember31,2012,theBankoriginatedandclosed$291.9millionofmultifamilyloancommitments,or
$542.6millionincludingthemultifamilyloancommitmentsabove.
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Thegoaloftheresidentiallendinggroupistoprovideloanstomortgagecompanies.Theloansarepredominatelyshorttermfacilitiesusedby
mortgagecompaniestofundtheirpipelinesfromclosingofindividualmortgageloansuntiltheirsaleintothesecondarymarket.Mostofthe
loansareinsuredorguaranteedbytheU.S.governmentthroughoneoftheirprogramssuchasFHA,VA,orareconventionalloanseligiblefor
saletoFannieMaeandFreddieMac.Customersiscurrentlyexpandingitsproductofferingstomortgagebankstomeetawiderarrayofbusiness
needs.
AsofDecember31,2013,2012,and2011,theBankhad$2.2billion,$1.0billion,and$0.5billion,respectively,incommercialloans
outstanding,composingapproximately67.1%,37.0%,and35.3%,respectively,ofitstotalloanportfolio,whichincludesloansheldforsale.As
ofDecember31,2013,2012,and2011,outstandingloansinthemortgagebankinglendingportfoliototaled$0.7billion,$1.4billion,and$0.8
billion,respectively,composingapproximately23.1%,52.4%,and52.3%,respectively,oftheBankstotalloanportfolio,whichincludesloans
heldforsale.DuringtheyearsendedDecember31,2013and2012,theBankoriginatedandclosed$0.4billionand$0.3billion,respectively,of
commercialloansandcommitments.DuringtheyearsendedDecember31,2013and2012,theBankfunded$20.6billionand$19.5billionof
mortgageloans,respectively,tomortgageoriginatorsandwarehouses.
ConsumerLending
TheBankprovideshomeequityandresidentialmortgageloanstocustomers.Underwritingstandardsforhomeequitylendingareconservative
andlendingisofferedtosolidifycustomerrelationshipsandgrowrelationshiprevenuesinthelongterm.ThislendingisimportantintheBanks
effortstogrowtotalrelationshiprevenuesforitsconsumerhouseholds.TheseareasalsosupportCustomersBancorpscommitmenttolowerand
moderateincomefamiliesinitsmarketarea.TheBankplanstoexpanditsproductofferingsinrealestatesecuredconsumerlending.
CustomersBankhaslaunchedacommunityoutreachprograminPhiladelphiatoencourageahigherpercentageofhomeownershipinurban
communities.Aspartofthisprogram,theBankisofferinganAffordableMortgageProduct.Thiscommunityoutreachprogramispenetrating
theunderservedpopulation,especiallyinlowandmoderateincomeneighborhoods.Aspartofthiscommitment,aloanproductionofficeisopen
inProgressPlaza,1501NorthBroadStreet,Philadelphia,PA.Theprogramincludeshomebuyerseminarsthatpreparepotentialhomebuyersfor
homeownershipbyteachingmoneymanagementandbudgetingskills,includingthefinancialresponsibilitiesthatcomewithhavingamortgage
andowningahome.TheAffordableMortgageProductisofferedthroughoutCustomersBanksassessmentareas.
AsofDecember31,2013,2012,and2011,theBankhad$166.1million,$131.4million,and$78.1millionrespectively,inconsumerloans
outstanding,composing5.2%,4.8%,and5.1%,respectively,oftheBankstotalloanportfolio,whichincludesloansheldforsale.Duringthe
yearsendedDecember31,2013and2012,theBankoriginatedandclosed$41.6millionand$67.3millionofconsumerloans,respectively.
PrivateBanking
Beginningin2013,CustomersBankintroducedaPrivateBankingmodelforitscommercialclientsinthemajormarketswithinitsgeographical
footprint.Thisuniquemodelprovidesunparalleledservicetocustomersthroughaninmarketteamofexperiencedprivatebankers.Actingasa
singlepointofcontactforallthebankingneedsoftheBankscommercialclients,theseprivatebankerswilldeliverthewholebanknotonly
toitsclients,buttotheirfamilies,theirmanagementteams,andtheiremployees,aswell.Withaworldclasssuiteofsophisticatedcash
managementproducts,theseprivatebankerswilldeliveronCustomersBancorpshightech,hightouchstrategyandproviderealvaluetoits
midmarketCommercialclients.
CustomersBankopeneditsfirstprivatebankingrepresentativeofficeinManhattaninthesecondquarterof2013,andeventually,allofits
marketswillbeservedbyprivatebankers.
DepositProductsandOtherFundingSources
CustomersBankoffersavarietyofdepositproductstoitscustomers,includingcheckingaccounts,savingsaccounts,moneymarketdeposit
accountsandotherdepositaccounts,includingfixedrate,fixedmaturityretailtimedepositsrangingintermsfrom30daystofiveyears,
individualretirementaccounts,andnonretailtimedepositsconsistingofjumbocertificatesgreaterthanorequalto$100,000.Usingitshigh
touchsupportedbyhightechmodel,theBankhasexperiencedsignificantlyhigheraboveaveragegrowthincoredepositsinallofitsmarkets.
FinancialProductsandServices
Inadditiontotraditionalbankingactivities,CustomersBankprovidesotherfinancialservicestoitscustomers,including:mobilephone
banking,internetbanking,wiretransfers,electronicbillpayment,lockboxservices,remotedepositcaptureservices,courierservices,merchant
processingservices,cashvault,controlleddisbursements,positivepayandcashmanagementservices(includingaccountreconciliation,
collectionsandsweepaccounts).

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Competition
CustomersBankcompeteswithotherfinancialinstitutionsfordepositandloanbusiness.Competitorsincludeothercommercialbanks,savings
banks,savingsandloanassociations,insurancecompanies,securitiesbrokeragefirms,creditunions,financecompanies,mutualfunds,money
marketfunds,andcertaingovernmentagencies.Financialinstitutionscompeteprincipallyonthequalityoftheservicesrendered,interestrates
offeredondepositproducts,interestrateschargedonloans,feesandservicecharges,theconvenienceofbankingofficelocationsandhoursof
operation,andintheconsiderationoflargercommercialborrowers,lendinglimits.
ManycompetitorsaresignificantlylargerthanCustomersBank,andhavesignificantlygreaterfinancialresources,personnelandlocationsfrom
whichtoconductbusiness.Inaddition,CustomersBankissubjecttoregulation,whilecertainofitscompetitorsarenot.Nonregulated
companiesfacerelativelyfewbarrierstoentryintothefinancialservicesindustry.CustomersBankslargercompetitorsenjoygreatername
recognitionandgreaterresourcestofinancewiderangingadvertisingcampaigns.CustomersBankcompetesforbusinessprincipallyonthebasis
ofhighquality,personalservicetocustomers,customeraccesstoCustomersBanksdecisionmakers,andcompetitiveinterestandfeestructure.
CustomersBankalsostrivestoprovidemaximumconvenienceofaccesstoservicesbyemployinginnovativedeliveryvehiclessuchasinternet
banking,andtheconvenienceofconciergebanking.
CustomersBankscurrentmarketisprimarilyservedbylargenationalandregionalbanks,withafewlargerinstitutionscapturingmorethan50%
ofthedepositmarketshare.CustomersBankslargecompetitorsutilizeexpensive,branchbasedmodelstosellproductstoconsumersandsmall
businesses,whichrequiresourlargercompetitorstopricetheirproductswithwidermarginsandchargemorefeestojustifytheirhigherexpense
base.WhilemaintainingphysicalbranchlocationsremainsanimportantcomponentofCustomersBanksstrategy,CustomersBankutilizesan
operatingmodelwithfewerandlessexpensivelocations,therebyloweringoverheadcostsandallowingforgreaterpricingflexibility.
GeographicInformation
ThegeographicinformationrequiredbyItem101(d)ofRegulationSKundertheSecuritiesExchangeActof1934,asamended,isimpracticable
fortheBancorptocalculatehowever,theBancorpdoesnotbelievethatamaterialamountofrevenuesinanyofthelastthreeyearswas
attributabletocustomersoutsideoftheUnitedStates,nordoesitbelievethatamaterialamountofitslonglivedassets,inanyofthepastthree
years,waslocatedoutsideoftheUnitedStates.
Employees
AsofDecember31,2013,CustomersBancorphad375fulltimeand13parttimeemployees.
AvailableInformation
CustomersBancorpsinternetwebsiteaddressiswww.customersbank.com.InformationonCustomersBancorpswebsiteisnotpartofthis
AnnualReportonForm10K.InvestorscanobtaincopiesofCustomersBancorpsannualreportonForm10K,quarterlyreportsonForm10Q,
currentreportsonForm8K,andanyamendmentstothosereportsfiledorfurnishedpursuanttoSection13(a)or15(d)oftheSecuritiesExchange
ActonCustomersBancorpswebsite(accessibleunderAboutUsInvestorRelationsSECFilings)assoonasreasonablypracticable
afterCustomersBancorphasfiledsuchmaterialswith,orfurnishedthemto,theSecuritiesandExchangeCommission(SEC).Customers
Bancorpwillalsofurnishapapercopyofsuchfilingsfreeofchargeuponrequest.Investorscanalsoreadandcopyanymaterialsfiledby
CustomersBancorpwiththeSECattheSECsPublicReferenceRoomwhichislocatedat100FStreet,NE,Washington,DC20549.Information
abouttheoperationofthePublicReferenceRoomcanbeobtainedbycallingtheSECat1800SEC0330.CustomersBancorpsfilingscanalso
beaccessedattheSECsinternetwebsite:www.sec.gov.
SUPERVISIONANDREGULATION
GENERAL
CustomersBancorpissubjecttoextensiveregulation,examinationandsupervisionbythePennsylvaniaDepartmentofBankingandSecurities
and,asamemberoftheFederalReserveSystem,bytheFederalReserveBoard.Federalandstatebankinglawsandregulationsgovern,among
otherthings,thescopeofabanksbusiness,theinvestmentsabankmaymake,thereservesagainstdepositsabankmustmaintain,termsof
depositaccounts,loansabankmakes,theinterestratesitchargesandcollateralittakes,theactivitiesofabankwithrespecttomergersand
consolidationsandtheestablishmentofbranches.

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PENNSYLVANIABANKINGLAWS
PennsylvaniabanksthatareFederalReservemembersmayestablishnewofficesonlyafterapprovalbythePennsylvaniaDepartmentofBanking
andSecuritiesandtheBoardofGovernorsoftheFederalReserveSystem(theFederalReserveBoard).Approvalbytheseregulatorscanbe
subjecttoavarietyoffactors,includingtheconvenienceandneedsofthecommunity,whethertheinstitutionissufficientlycapitalizedandwell
managed,issuesofsafetyandsoundness,theinstitutionsrecordofmeetingthecreditneedsofitscommunity,whethertherearesignificant
supervisoryconcernswithrespecttotheinstitutionoraffiliatedorganizations,andwhetheranyfinancialorotherbusinessarrangement,director
indirect,involvingtheproposedbranchandbankinsiders(directors,officers,employeesand10%orgreatershareholders)whichinvolves
termsandconditionsmorefavorabletotheinsidersthanwouldbeavailableinacomparabletransactionwithunrelatedparties.
UnderthePennsylvaniaBankingCode,CustomersBank,ourbanksubsidiaryispermittedtobranchthroughoutPennsylvania.Pennsylvanialaw
alsoprovidesPennsylvaniastatecharteredinstitutionselectiveparitywiththepowerofnationalbanks,federalthrifts,andstatechartered
institutionsinotherstatesasauthorizedbytheFDIC,subjecttoarequirednoticetothePennsylvaniaDepartmentofBankingandSecurities.The
PennsylvaniaBankingCodealsoimposesrestrictionsonpaymentofdividends,aswellasminimumcapitalrequirements.
OnOctober24,2012,PennsylvaniaenactedthreenewlawsknownastheBankingLawModernizationPackage,allofwhichbecameeffective
onDecember24,2012.Theintendedgoalofthenewlaw,whichappliestoCustomersBank,istomodernizePennsylvaniasbankinglawsandto
reduceregulatoryburdenatthestatelevelwherepossible,giventheincreasedregulatorydemandsatthefederallevelasdescribedbelow.
ThenewlawalsopermitsbankstodiscloseformalenforcementactionsinitiatedbythePennsylvaniaDepartmentofBankingandSecurities,
clarifiesthattheDepartmenthasexaminationandenforcementauthorityoversubsidiariesaswellasaffiliatesofregulatedbanksandbolstersthe
Departmentsenforcementauthorityoveritsregulatedinstitutionsbyclarifyingitsabilitytoremovedirectors,officersandemployeesfrom
institutionsforviolationsoflawsorordersorforanyunsafeorunsoundpracticeorbreachoffiduciaryduty.Changestoexistinglawalsoallow
theDepartmenttoassesscivilmoneypenaltiesofupto$25,000perviolation.
Thenewlawalsosetsanewstandardofcareforbankofficersanddirectors,applyingthesamestandardthatexistsfornonbankingcorporations
inPennsylvania.Thestandardisoneofperformingdutiesingoodfaith,inamannerreasonablybelievedtobeinthebestinterestsofthe
institutionsandwithsuchcare,includingreasonableinquiry,skillanddiligence,asapersonofordinaryprudencewoulduseundersimilar
circumstances.Directorsmayrelyingoodfaithoninformation,opinionsandreportsprovidedbyofficers,employees,attorneys,accountants,or
committeesoftheboard,andanofficermaynotbeheldliablesimplybecauseheorsheservedasanofficeroftheinstitution.
InterstateBranching.FederallawallowstheFederalReserveandFDIC,andthePennsylvaniaBankingCodeallowsthePennsylvania
DepartmentofBankingandSecurities,toapproveanapplicationbyastatebankinginstitutiontoacquireinterstatebranches.Formore
informationonfederallaw,seethediscussionunderFederalBankingLawsInterstateBranchingthatfollows.
PennsylvaniabankinglawsauthorizebanksinPennsylvaniatoacquireexistingbranchesorbranchdenovoinotherstates,andalsopermitsout
ofstatebankstoacquireexistingbranchesorbranchdenovoinPennsylvania.
InApril2008,BankingRegulatorsintheStatesofNewJersey,NewYork,andPennsylvaniaenteredintoaMemorandumofUnderstanding(the
InterstateMOU)toclarifytheirrespectiveroles,ashomeandhoststateregulators,regardinginterstatebranchingactivityonaregionalbasis
pursuanttotheRiegleNealAmendmentsActof1997.TheInterstateMOUestablishestheregulatoryresponsibilitiesoftherespectivestate
bankingregulatorsregardingbankregulatoryexaminationsandisintendedtoreducetheregulatoryburdenonstatecharteredbanksbranching
withintheregionbyeliminatingduplicativehoststatecomplianceexams.
UndertheInterstateMOU,theactivitiesofbranchesCustomersBancorpestablishedinNewJerseyorNewYorkwouldbegovernedby
Pennsylvaniastatelawtothesameextentthatfederallawgovernstheactivitiesofthebranchofanoutofstatenationalbankinsuchhoststates.
IssuesregardingwhetheraparticularhoststatelawispreemptedaretobedeterminedinthefirstinstancebythePennsylvaniaDepartmentof
BankingandSecurities.IntheeventthatthePennsylvaniaDepartmentofBankingandSecuritiesandtheapplicablehoststateregulatordisagree
regardingwhetheraparticularhoststatelawispreempted,thePennsylvaniaDepartmentofBankingandSecuritiesandtheapplicablehoststate
regulatorwouldusetheirreasonablebesteffortstoconsiderallpointsofviewandtoresolvethedisagreement.
FEDERALBANKINGLAWS
InterstateBranching.TheRiegleNealInterstateBankingandBranchingEfficiencyActof1994(calledtheInterstateAct),amongother
things,permitsbankholdingcompaniestoacquirebanksinanystate.Abankmayalsomergewithabankinanother

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state.Interstateacquisitionsandmergersaresubject,ingeneral,tocertainconcentrationlimitsandstateentryrulesrelatingtotheageofthe
Bank.UndertheInterstateAct,theresponsiblefederalregulatoryagencyispermittedtoapprovetheacquisitionoflessthanallofthebranchesof
aninsuredbankbyanoutofstatebankorbankholdingcompanywithouttheacquisitionofanentirebank,onlyifthelawofthestateinwhich
thebranchislocatedpermits.UndertheInterstateAct,branchesofstatecharteredbanksthatoperateinotherstatesarecoveredbythelawsofthe
charteringstate,ratherthanthehoststate.TheDoddFrankWallStreetReformandConsumerProtectionAct(DoddFrankAct)createdamore
permissiveinterstatebranchingregimebypermittingbankstoestablishbranchesdenovoinanystateifabankcharteredbysuchstatewould
havebeenpermittedtoestablishthebranch.FormoreinformationoninterstatebranchingunderPennsylvanialaw,seePennsylvaniaBanking
LawsInterstateBranchingabove.
PromptCorrectiveAction.Federalbankinglawmandatescertainpromptcorrectiveactions,whichFederalbankingagenciesarerequiredto
take,andcertainactionswhichtheyhavediscretiontotake,baseduponthecapitalcategoryintowhichaFederallyregulateddepository
institutionfalls.RegulationshavebeenadoptedbytheFederalbankregulatoryagenciessettingforthdetailedproceduresandcriteriafor
implementingpromptcorrectiveactioninthecaseofanyinstitutionthatisnotadequatelycapitalized.Undertherules,aninstitutionwillbe
deemedtobeadequatelycapitalizedorbetterifitexceedstheminimumFederalregulatorycapitalrequirements.However,itwillbedeemed
undercapitalizedifitfailstomeettheminimumcapitalrequirements,significantlyundercapitalizedifithasatotalriskbasedcapitalratio
thatislessthan6.0%,aTier1riskbasedcapitalratiothatislessthan3.0%,oraleverageratiothatislessthan3.0%,andcritically
undercapitalizediftheinstitutionhasaratiooftangibleequitytototalassetsthatisequaltoorlessthan2.0%.Therulesrequirean
undercapitalizedinstitutiontofileawrittencapitalrestorationplan,alongwithaperformanceguarantybyitsholdingcompanyorathird
party.Inaddition,anundercapitalizedinstitutionbecomessubjecttocertainautomaticrestrictionsincludingaprohibitiononthepaymentof
dividends,alimitationonassetgrowthandexpansion,andincertaincases,alimitationonthepaymentofbonusesorraisestoseniorexecutive
officers,andaprohibitiononthepaymentofcertainmanagementfeestoanycontrollingperson.Institutionsthatareclassifiedas
undercapitalizedarealsosubjecttocertainadditionalsupervisoryactions,includingincreasedreportingburdensandregulatorymonitoring,a
limitationontheinstitutionsabilitytomakeacquisitions,opennewbranchoffices,orengageinnewlinesofbusiness,obligationstoraise
additionalcapital,restrictionsontransactionswithaffiliates,andrestrictionsoninterestratespaidbytheinstitutionondeposits.Incertaincases,
bankregulatoryagenciesmayrequirereplacementofseniorexecutiveofficersordirectors,orsaleoftheinstitutiontoawillingpurchaser.Ifan
institutionisdeemedtobecriticallyundercapitalizedandcontinuesinthatcategoryforfourquarters,thestatuterequires,withcertain
narrowlylimitedexceptions,thattheinstitutionbeplacedinreceivership.
SafetyandSoundnessRegulationofBankManagement.TheFederalReserveBoardpossessesthepowertoprohibitabankfromengagingin
anyactivitythatwouldbeanunsafeandunsoundbankingpracticeandinviolationofthelaw.Moreover,Federallawenactmentshave
expandedthecircumstancesunderwhichofficersordirectorsofabankmayberemovedbytheinstitutionsFederalsupervisoryagency
restrictedandfurtherregulatedlendingbyabanktoitsexecutiveofficers,directors,principalshareholdersorrelatedintereststhereofrestricted
managementpersonnelofabankfromservingasdirectorsorinothermanagementpositionswithcertaindepositoryinstitutionswhoseassets
exceedaspecifiedamountorwhichhaveanofficewithinaspecifiedgeographicareaandrestrictedmanagementpersonnelfromborrowingfrom
anotherinstitutionthathasacorrespondentrelationshipwiththebankforwhichtheywork.
CapitalRules.Federalbankingagencieshaveissuedcertainriskbasedcapitalguidelines,whichsupplementedexistingcapital
requirements.Inaddition,theFederalReserveBoardimposescertainleveragerequirementsonmemberbanks.Bankingregulatorshave
authoritytorequirehigherminimumcapitalratiosforanindividualbankorbankholdingcompanyinviewofitscircumstances.
Theriskbasedcapitalguidelinesrequireallbanksandbankholdingcompaniestomaintaincapitallevelsincompliancewithriskbased
capitalratios.Intheseratios,theonbalancesheetassetsandoffbalancesheetexposuresareassignedariskweightbasedupontheperceived
andhistoricalriskofincurringalossofprincipalfromthatexposure.Thefirstisaminimumratiooftotalcapital(Tier1andTier2capital)to
riskweightedassetsequalto8.0%thesecondisaminimumratioofTier1capitaltoriskweightedassetsequalto4.0%.Assetsareassignedto
fiveriskcategories,withhigherlevelsofcapitalbeingrequiredforthecategoriesperceivedasrepresentinggreaterrisk.Inmakingthe
calculation,certainintangibleassetsmustbedeductedfromthecapitalbase.Theriskbasedcapitalrulesaredesignedtomakeregulatorycapital
requirementsmoresensitivetodifferencesinriskprofilesamongbanksandbankholdingcompaniesandtominimizedisincentivesforholding
liquidassets.
Theriskbasedcapitalrulesalsomayconsiderinterestraterisk.Institutionswithinterestrateriskexposureaboveanormallevelwouldbe
requiredtoholdextracapitalinproportiontothatrisk.TheBankcurrentlymonitorsandmanagesitsassetsandliabilitiesforinterestraterisk,
andmanagementbelievesthattheinterestrateriskruleswhichhavebeenimplementedandproposedwillnotmateriallyadverselyaffectits
operations.
TheFederalReserveBoardsleverageratiorulesrequirememberbankswhichareratedthehighestinthecompositeareasofcapital,asset
quality,management,earningsandliquiditytomaintainaratioofTier1capitaltoadjustedtotalassetsofnotlessthan3.0%.Forbanks
whicharenotthemosthighlyrated,theminimumleverageratiowillrangefrom4.0%to5.0%,orhigheratthediscretionoftheFederal
ReserveBoard,andisrequiredtobeatalevelcommensuratewiththenatureofthelevelofriskofCustomersBancorp,Inc.sconditionand
activities.

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Forpurposesofthecapitalrequirements,Tier1orcorecapitalisdefinedtoincludecommonshareholdersequityandcertainnoncumulative
perpetualpreferredstockandrelatedsurplus.Tier2orqualifyingsupplementarycapitalisdefinedtoincludeabanksallowanceforloan
lossesupto1.25%ofriskweightedassets,pluscertaintypesofpreferredstockandrelatedsurplus,certainhybridcapitalinstrumentsand
certaintermsubordinateddebtinstruments.
AsofDecember31,2013and2012,managementbelievedthattheBankandBancorpmetallcapitaladequacyrequirementstowhichtheywere
subject.ForadditionalinformationontheCompanysregulatoryratios,refertoNOTE18REGULATORYMATTERS.
NewCapitalRules.OnJuly2,2013,theFederalReserveapprovedfinalrulesthatsubstantiallyamendtheregulatoryriskbasedcapitalrules
applicabletotheBancorpandtheBank.TheFDICandtheOCChavesubsequentlyapprovedtheserules.Thefinalruleswereadoptedfollowing
theissuanceofproposedrulesbytheFederalReserveinJune2012andimplementtheBaselIIIregulatorycapitalreformsandchanges
requiredbytheDoddFrankAct.BaselIIIreferstotwoconsultativedocumentsreleasedbytheBaselCommitteeonBankingSupervisionin
December2009,therulestextreleasedinDecember2010,andlossabsorbencyrulesissuedinJanuary2011,whichincludesignificantchanges
tobankcapital,leverageandliquidityrequirements.
Therulesincludenewriskbasedcapitalandleverageratios,whichwouldbephasedinfrom2015to2019,andwouldrefinethedefinitionof
whatconstitutescapitalforpurposesofcalculatingthoseratios.ThenewminimumcapitallevelrequirementsapplicabletotheBancorpand
theBankunderthefinalruleswouldbe:
(i)anewcommonequityTier1capitalratioof4.5%
(ii)aTier1Riskbasedcapitalratioof6%(increasedfrom4%)
(iii)aTotalRiskbasedcapitalratioof8%(unchangedfromcurrentrules)and
(iv)aTier1leverageratioof4%forallinstitutions.
Thefinalrulesalsoestablishacapitalconservationbufferabovethenewregulatoryminimumcapitalrequirements,whichmustconsist
entirelyofcommonequityTier1capital.
ThecapitalconservationbufferwillbephasedinoverfouryearsbeginningonJanuary1,2016,asfollows:themaximumbufferwillbe0.625%
ofriskweightedassetsfor2016,1.25%for2017,1.875%for2018,and2.5%for2019andthereafter.Consideringthecapitalconservation
buffer,toavoidlimitationsoncertainactionsoractivities,bankswillberequiredtomaintainthefollowingratiosbeginningin2019:
(i)acommonequityTier1capitalratioof7.0%
(ii)aTier1RiskBasedcapitalratioof8.5%and
(iii)aTotalRiskbasedcapitalratioof10.5%.
Underthefinalrules,institutionsaresubjecttolimitationsonpayingdividends,engaginginsharerepurchases,andpayingdiscretionary
bonusesifitscapitallevelfallsbelowtheminimumcapitallevelplusbufferamount.Theselimitationsestablishamaximumpercentageof
eligibleretainedincomethatcouldbeutilizedforsuchactions.
BaselIIIprovideddiscretionforregulatorstoimposeanadditionalbuffer,thecountercyclicalbuffer,ofupto2.5%ofcommonequityTier1
capitaltotakeintoaccountthemacrofinancialenvironmentandperiodsofexcessivecreditgrowth.However,thefinalrulespermitthe
countercyclicalbuffertobeappliedonlytoadvancedapproachbanks(i.e.,bankswith$250billionormoreintotalassetsor$10billionor
moreintotalforeignexposures),whichcurrentlyexcludestheBancorpandtheBank.Thefinalrulesalsoimplementrevisionsandclarifications
consistentwithBaselIIIregardingthevariouscomponentsofTier1capital,includingcommonequity,unrealizedgainsandlosses,aswellas
certaininstrumentsthatwillnolongerqualifyasTier1capital,someofwhichwillbephasedoutovertime.However,thefinalrulesprovidethat
smalldepositoryinstitutionholdingcompanieswithlessthan$15billionintotalassetsasofDecember31,2009(whichincludestheBancorp)
willbeabletopermanentlyincludenonqualifyinginstrumentsthatwereissuedandincludedinTier1orTier2capitalpriortoMay19,2010in
additionalTier1orTier2capitaluntiltheyredeemsuchinstrumentsoruntiltheinstrumentsmature.
Inaddition,thefinalrulesprovideforsmallerbankinginstitutions(lessthan$250billioninconsolidatedassets)anopportunitytomakeaone
timeelectiontooptoutofincludingmostelementsofaccumulatedothercomprehensiveincomeinregulatorycapital.Importantly,theoptout
excludesfromregulatorycapitalnotonlyunrealizedgainsandlossesonavailableforsaledebtsecurities,butalsoaccumulatednetgainsand
lossesoncashflowhedgesandamountsattributabletodefinedbenefitpostretirementplans.Theoptoutelectionmustbeelectedonthefirst
CallReportfiledafterJanuary1,2015.

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Thefinalrulesalsocontainrevisionstothepromptcorrectiveactionframework,whichisdesignedtoplacerestrictionsoninsureddepository
institutions,includingtheBank,iftheircapitallevelsbegintoshowsignsofweakness.TheserevisionstakeeffectJanuary1,2015.Underthe
promptcorrectiveactionrequirements,whicharedesignedtocomplementthecapitalconservationbuffer,insureddepositoryinstitutionswillbe
requiredtomeetthefollowingincreasedcapitallevelrequirementsinordertoqualifyaswellcapitalized:
(i)anewcommonequityTier1capitalratioof6.5%
(ii)aTier1Riskbasedcapitalratioof8%(increasedfrom6%)
(iii)aTotalRiskbasedcapitalratioof10%(unchangedfromcurrentrules)and
(iv)aTier1leverageratioof5%(increasedfrom4%).
Thefinalrulessetforthcertainchangesforthecalculationofriskweightedassets,whichwewillberequiredtoutilizebeginningJanuary1,
2015.Thestandardizedapproachfinalruleutilizesanincreasednumberofcreditriskexposurecategoriesandriskweights,andalsoaddresses:
(i)analternativestandardofcreditworthinessconsistentwithSection939AoftheDoddFrankAct
(ii)revisionstorecognitionofcreditriskmitigation
(iii)rulesforriskweightingofequityexposuresandpastdueloans
(iv)revisedcapitaltreatmentforderivativesandrepostyletransactionsand
(v)disclosurerequirementsfortoptierbankingorganizationswith$50billionormoreintotalassetsthatarenotsubjecttotheadvance
approachrulesthatapplytobankswithgreaterthan$250billioninconsolidatedassets.
DoddFrankWallStreetReformandConsumerProtectionAct.TheDoddFrankbillwasenactedbyCongressonJuly15,2010,andwassigned
intolawbyPresidentObamaonJuly21,2010.Amongmanyotherprovisions,thelegislation:

establishedtheFinancialStabilityOversightCouncil,afederalagencyactingasthefinancialsystemssystemicriskregulator
withtheauthoritytoreviewtheactivitiesofsignificantbankholdingcompaniesandnonbankfinancialfirms,tomake
recommendationsandimposestandardsregardingcapital,leverage,conflictsandotherrequirementsforfinancialfirmsandto
imposeregulatorystandardsoncertainfinancialfirmsdeemedtoposeasystemicthreattothefinancialhealthoftheU.S.
economy

createdanewConsumerFinancialProtectionBureauwithintheU.S.FederalReserve,whichhassubstantiverulemaking
authorityoverawidevarietyofconsumerfinancialservicesandproducts,includingthepowertoregulateunfair,deceptive,or
abusiveactsorpractices

permittedstateattorneysgeneralandotherstateenforcementauthoritiesbroaderpowertoenforceconsumerprotectionlaws
againstbanks

authorizedfederalregulatoryagenciestobancompensationarrangementsatfinancialinstitutionsthatgiveemployees
incentivestoengageinconductthatcouldposeriskstothenationsfinancialsystem

grantedtheU.S.governmentresolutionauthoritytoliquidateortakeemergencymeasureswithregardtotroubledfinancial
institutions,suchasbankholdingcompanies,thatfalloutsidetheexistingresolutionauthorityoftheFederalDeposit
InsuranceCorporation

gavetheFDICsubstantialnewauthorityandflexibilityinassessingdepositinsurancepremiums,whichmayresultin
increaseddepositinsurancepremiumsforusinthefuture

increasedthedepositinsurancecoveragelimitforinsurabledepositsto$250,000generally,andremovesthelimitentirelyfor
transactionaccounts

permittedbankstopayinterestonbusinessdemanddepositaccounts

extendedthenationalbanklending(orloanstooneborrower)limitstootherinstitutionslikeus

prohibitedbankssubjecttoenforcementactionsuchasamemorandumofunderstandingfromchangingtheircharterwithout
theapprovalofboththeirexistingcharterregulatorandtheirproposednewcharterregulatorand

imposednewlimitsonassetpurchaseandsaletransactionsbetweenbanksandtheirinsiders.
Manyoftheseprovisionsaresubjecttofurtherrulemakingandtothediscretionofregulatorybodies,includingCustomersBanksprimary
federalbankingregulator,theFederalReserve.Itisnotpossibletopredictatthistimetheextenttowhichregulationsauthorizedormandatedby
theDoddFrankActwillimposerequirementsorrestrictionsonCustomersBankinadditiontoordifferentfromtheprovisionssummarized
above.

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DepositInsuranceAssessments.CustomersBanksdepositsareinsuredbytheFDICuptothelimitssetforthunderapplicablelawandaresubject
todepositinsurancepremiumassessments.TheFDICimposesariskbaseddepositpremiumassessmentsystem,whichwasamendedpursuantto
theFederalDepositInsuranceReformActof2005(theAct).Underthissystem,theamountofFDICassessmentspaidbyanindividualinsured
depositoryinstitution,likeCustomersBank,isbasedonthelevelofriskincurredinitsactivities.TheFDICplacesadepositoryinstitutioninone
offourriskcategoriesdeterminedbyreferencetoitscapitallevelsandsupervisoryratings.Inaddition,inthecaseofthoseinstitutionsinthe
lowestriskcategory,theFDICfurtherdeterminesitsassessmentratesbasedoncertainspecifiedfinancialratios.
OnFebruary7,2011,theFDICadoptedafinalrulemodifyingtheriskbasedassessmentsystemandsettinginitialbaseassessmentrates
beginningApril1,2011,rangingfrom2.5to45basispointsofTierIcapital.
Inadditiontodepositinsuranceassessments,banksaresubjecttoassessmentstopaytheinterestonFinancingCorporationbonds.TheFinancing
CorporationwascreatedbyCongresstoissuebondstofinancetheresolutionoffailedthriftinstitutions.TheFDICsetstheFinancing
Corporationassessmentrateeveryquarter.
CommunityReinvestmentAct.UndertheCommunityReinvestmentActof1977(CRA),therecordofabankholdingcompanyandits
subsidiarybanksmustbeconsideredbytheappropriateFederalbankingagencies,includingtheFederalReserveBoard,inreviewingand
approvingordisapprovingavarietyofregulatoryapplicationsincludingapprovalofabranchorotherdepositfacility,officerelocation,a
mergerandcertainacquisitionsofbankshares.Federalbankingagencieshaverecentlydemonstratedanincreasedreadinesstodenyapplications
basedonunsatisfactoryCRAperformance.TheFederalReserveBoardisrequiredtoassessourrecordtodetermineifwearemeetingthecredit
needsofthecommunity(includinglowandmoderateneighborhoods)thatweserve.TheFinancialInstitutionsReform,Recovery,and
EnforcementActof1989amendedtheCRAtorequire,amongotherthings,thattheFederalReserveBoardmakepubliclyavailablean
evaluationofCustomersBanksrecordofmeetingthecreditneedsofitsentirecommunityincludinglowandmoderateincome
neighborhoods.Thisevaluationincludesadescriptiverating(outstanding,satisfactory,needstoimprove,orsubstantialnoncompliance)anda
statementdescribingthebasisfortherating.
ConsumerProtectionLaws.CustomersBancorpissubjecttoavarietyofconsumerprotectionlaws,includingtheTruthinLendingAct,the
TruthinSavingsActadoptedaspartoftheFederalDepositInsuranceCorporationImprovementActof1991(FDICIA),theEqualCredit
OpportunityAct,theHomeMortgageDisclosureAct,theElectronicFundsTransferAct,theRealEstateSettlementProceduresActandthe
regulationsadoptedthereunder.Intheaggregate,compliancewiththeseconsumerprotectionlawsandregulationsinvolvessubstantialexpense
andadministrativetimeonthepartofCustomersBancorp.
BankHoldingCompanyRegulation
Asabankholdingcompany,CustomersBancorpisalsosubjecttoadditionalregulation.
TheBankHoldingCompanyActrequiresCustomersBancorptosecurethepriorapprovaloftheFederalReserveBoardbeforeitownsor
controls,directlyorindirectly,morethanfivepercent(5%)ofthevotingsharesorsubstantiallyalloftheassetsofanybank.Italsoprohibits
acquisitionbytheCompanyofmorethanfivepercent(5%)ofthevotingsharesof,orinterestin,orallorsubstantiallyalloftheassetsof,any
banklocatedoutsideofthestateinwhichacurrentbanksubsidiaryislocatedunlesssuchacquisitionisspecificallyauthorizedbylawsofthe
stateinwhichsuchbankislocated.Abankholdingcompanyisprohibitedfromengaginginoracquiringdirectorindirectcontrolofmorethan
fivepercent(5%)ofthevotingsharesofanycompanyengagedinnonbankingactivitiesunlesstheFederalReserveBoard,byorderor
regulation,hasfoundsuchactivitiestobesocloselyrelatedtobankingormanagingorcontrollingbanksastobeaproperincidentthereto.In
makingthisdetermination,theFederalReserveBoardconsiderswhethertheperformanceoftheseactivitiesbyabankholdingcompanywould
offerbenefitstothepublicthatoutweighpossibleadverseeffects.ApplicationsundertheBankHoldingCompanyActandtheChangein
ControlActaresubjecttoreview,basedupontherecordofcomplianceoftheapplicantwiththeCRA.
CustomersBancorpisrequiredtofileanannualreportwiththeFederalReserveBoardandanyadditionalinformationthattheFederalReserve
BoardmayrequirepursuanttotheBankHoldingCompanyAct.Further,underSection106ofthe1970amendmentstotheBankHolding
CompanyActandtheFederalReserveBoardsregulations,abankholdingcompanyanditssubsidiariesareprohibitedfromengagingincertain
tieinarrangementsinconnectionwithanyextensionofcreditorprovisionofcreditorprovisionofanypropertyorservices.Thesocalledanti
tieinprovisionsstategenerallythatabankmaynotextendcredit,lease,sellpropertyorfurnishanyservicetoacustomerontheconditionthat
thecustomerprovideadditionalcreditorservicetous,toCustomersBankortoanyothersubsidiaryorontheconditionthatthecustomernot
obtainothercreditorservicefromacompetitor,CustomersBank,oranyothersubsidiary.
TheFederalReserveBoardpermitsbankholdingcompaniestoengageinnonbankingactivitiessocloselyrelatedtobankingormanagingor
controllingbanksastobeaproperincidentthereto.AnumberofactivitiesareauthorizedbyFederalReserveBoardregulation,whileother
activitiesrequirepriorFederalReserveBoardapproval.ThetypesofpermissibleactivitiesaresubjecttochangebytheFederalReserveBoard.

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Item1A. RiskFactors
RisksRelatedtotheBancorpsBankingOperations
Ifourallowanceforloanlossesisinsufficienttoabsorblossesinourloanportfolio,ourearningscoulddecrease.
Lendingmoneyisasubstantialpartofourbusiness,andeachloancarriesacertainriskthatitwillnotberepaidinaccordancewithitstermsor
thatanyunderlyingcollateralwillnotbesufficienttoassurerepayment.Thisriskisaffectedby,amongotherthings:

thefinancialconditionandcashflowsoftheborrowerand/ortheprojectbeingfinanced

thechangesanduncertaintiesastothefuturevalueofthecollateral,inthecaseofacollateralizedloan

thediscountontheloanatthetimeofitsacquisitionandcapital,whichcouldhaveregulatoryimplications

thedurationoftheloan

thecredithistoryofaparticularborrowerand

changesineconomicandindustryconditions.
AtDecember31,2013,theBancorpsallowanceforloanlossestotaled$24.0million,whichrepresents1.00%oftotalloansnotcoveredunder
theLossSharingAgreementswiththeFDIC.Managementmakesvariousassumptionsandjudgmentsaboutthecollectabilityofourloan
portfolio,includingthecreditworthinessofourborrowersandloanscoveredundertheLossSharingAgreementsthatdidnotexhibitevidenceof
deteriorationincreditqualityontheacquisitiondateandtheprobabilityofmakingpayment,aswellasthevalueofrealestateandotherassets
servingascollateralfortherepaymentofmanyofourloans.LoanscoveredundertheLossSharingAgreementstotaled$66.7millionat
December31,2013.Indeterminingtheamountoftheallowanceforloanlosses,significantfactorsconsideredincludelossexperiencein
particularsegmentsoftheportfolio,trendsandabsolutelevelsofclassifiedandcriticizedloans,trendsandabsolutelevelsindelinquentloans,
trendsinriskratings,trendsinindustrychargeoffsbyparticularsegmentsandchangesinexistinggeneraleconomicandbusinessconditions
affectingourlendingareasandthenationaleconomy.Ifourassumptionsareincorrect,ourallowanceforloanlossesmaynotbesufficientto
coverlossesinherentinourloanportfolio,resultinginadditionstotheallowance.
Managementreviewsandreestimatestheallowanceforloanlossesquarterly.Additionstoourallowanceforloanlossesasaresulton
managementsreviewandestimatecouldmateriallydecreasenetincome.Ourregulators,asanintegralpartoftheirexaminationprocess,
periodicallyreviewourallowanceforloanlossesandmayrequireustoincreaseourallowanceforloanlossesbyrecognizingadditional
provisionsforloanlosseschargedtoexpense,ortodecreaseourallowanceforloanlossesbyrecognizingloanchargeoffs,netofrecoveries.Any
suchadditionalprovisionsforloanlossesorchargeoffs,asrequiredbytheseregulatoryagencies,couldhaveamaterialadverseeffectonour
financialconditionandresultsofoperations.
Ouremphasisoncommercial,multifamily/commercialrealestateandmortgagewarehouselendingmayexposeustoincreasedlendingrisks.
Weintendtocontinueemphasizingtheoriginationofcommercialloansandspecialtyloans,includingloanstomortgagebankingbusinesses.
Commercialandmultifamily/commercialrealestateloansgenerallyexposealendertogreaterriskofnonpaymentandlossthanonetofour
familyresidentialmortgageloansbecauserepaymentoftheloansoftendependsonthesuccessfuloperationofabusinessorpropertyandthe
borrowerscashflows.Suchloanstypicallyinvolvelargerloanbalancestosingleborrowersorgroupsofrelatedborrowerscomparedtooneto
fourfamilyresidentialmortgageloans.Inaddition,sincesuchloansgenerallyentailgreatercreditriskthanonetofourfamilyresidential
mortgageloans,wemayneedtoincreaseourallowanceforloanlossesinthefuturetoaccountforanincreaseinprobablecreditlossesassociated
withsuchloans.Also,weexpectthatmanyofourcommercialborrowerswillhavemorethanoneloanoutstandingwithus.Consequently,an
adversedevelopmentwithrespecttooneloanoronecreditrelationshipcanexposeustoasignificantlygreaterriskoflosscomparedtoan
adversedevelopmentwithrespecttoaonetofourfamilyresidentialmortgageloan.
Asalendertomortgagebankingbusinesses,weprovidefinancingtomortgagebankersbypurchasing,subjecttoresaleunderamaster
repurchaseagreement,theunderlyingresidentialmortgagesonashorttermbasispendingtheultimatesaleofthemortgagestoinvestors.Weare
subjecttotherisksassociatedwithsuchlending,including,butnotlimitedto,therisksoffraud,bankruptcyandpossibledefaultbythe
borrower,closingagents,andtheresidentialborrowerontheunderlyingmortgage,anyofwhichcouldresultincreditlosses.Theriskoffraud
associatedwiththistypeoflendingincludes,butisnotlimitedto,settlementprocessrisks,theriskoffinancingnonexistentloansorfictitious
mortgageloantransactions,ortheriskthatcollateraldeliveredisfraudulentornonexistent,creatingariskoflossofthefullamountfinancedon
theunderlyingresidentialmortgageloan,orinthesettlementprocesses.AsdiscussedinNote21LOSSCONTINGENCY,inMarch2013,a
suspectedfraudwasdiscoveredintheBanksloansheldforsaleportfolio.Additionalfraudulenttransactionscouldhaveamaterialadverse
effectonourfinancialconditionandresultsofoperations.

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Ourlendingtomortgagebusinessesisasignificantpartofourassetsandearnings.Thisbusinessissubjecttocyclicalityofthemortgagelending
business,andvolumesarelikelytodeclineifinterestratesincrease,generally.Adeclineintherateofgrowth,volumeorprofitabilityofthis
businessunit,oralossofitsleadershipcouldadverselyaffectourresultsofoperationsandfinancialcondition.
Decreasedresidentialmortgageorigination,volumeandpricingdecisionsofcompetitorsmayadverselyaffectourprofitability.
TheBankcurrentlyoperatesaresidentialmortgagebankingbusinessbutplanstoexpandourorigination,sale,andservicingofresidential
mortgageloansinthefuture.Changesinmarketinterestratesandpricingdecisionsbyourloancompetitorsmayadverselyaffectdemandforour
residentialmortgageloanproducts,therevenuerealizedonthesaleofloansandrevenuesreceivedfromservicingsuchloansforothers,and
ultimatelyreduceournetincome.Newregulations,increasedregulatoryreviews,and/orchangesinthestructureofthesecondarymortgage
marketswhichwewouldutilizetosellmortgageloansmaybeintroducedandmayincreasecostsandmakeitmoredifficulttooperatea
residentialmortgageoriginationbusiness.
FederalHomeLoanBankofPittsburghmaynotpaydividendsorrepurchasecapitalstockinthefuture.
OnDecember23,2008,theFederalHomeLoanBankofPittsburgh(FHLB)announcedthatitwouldvoluntarilysuspendthepaymentof
dividendsandtherepurchaseofexcesscapitalstockuntilfurthernotice.TheFHLBannouncedatthattimethatitexpecteditsabilitytopay
dividendsandaddtoretainedearningstobesignificantlycurtailedduetolowshortterminterestrates,anincreasedcostofmaintaining
liquidity,otherthantemporaryimpairmentcharges,andconstrainedaccesstodebtmarketsatattractiverates.WhiletheFHLBresumedpayment
ofdividendsandcapitalstockrepurchasesin2012,capitalstockrepurchasesfrommemberbanksarereviewedonaquarterlybasisbytheFHLB,
andthereisnoguaranteethatsuchdividendsandcapitalstockrepurchaseswillcontinueinthefuture.AsofDecember31,2013,weheld$32.1
millionofFHLBcapitalstock.
Thefairvalueofourinvestmentsecuritiescanfluctuateduetomarketconditions.Adverseeconomicperformancecanleadtoadversesecurity
performanceandotherthantemporaryimpairment.
AsofDecember31,2013,thefairvalueofourinvestmentsecuritiesportfoliowasapproximately$497.6million.Wehavehistoricallyfolloweda
conservativeinvestmentstrategy,withconcentrationsinsecuritiesthatarebackedbygovernmentsponsoredenterprises.Inthefuture,wemay
seektoincreaseyieldsthroughmoreaggressivestrategies,whichmayincludeagreaterpercentageofcorporatesecurities,structuredcredit
productsornonagencymortgagebackedsecurities.Factorsbeyondourcontrolcansignificantlyinfluencethefairvalueofsecuritiesinour
portfolioandcancausepotentialadversechangestothefairvalueofthesesecurities.Thesefactorsinclude,butarenotlimitedto,ratingagency
actionsinrespectofthesecurities,defaultsbytheissuerorwithrespecttotheunderlyingsecurities,andchangesinmarketinterestratesand
continuedinstabilityinthecapitalmarkets.Anyofthesefactors,amongothers,couldcauseotherthantemporaryimpairmentsandrealized
and/orunrealizedlossesinfutureperiodsanddeclinesinothercomprehensiveincome,whichcouldhaveamaterialadverseeffectonus.The
processfordeterminingwhetherimpairmentofasecurityisotherthantemporaryusuallyrequirescomplex,subjectivejudgmentsaboutthe
futurefinancialperformanceandliquidityoftheissuerandanycollateralunderlyingthesecurityinordertoassesstheprobabilityofreceiving
allcontractualprincipalandinterestpaymentsonthesecurity.
ChangestoestimatesandassumptionsmadebymanagementinpreparingfinancialstatementscouldadverselyaffecttheBancorpsbusiness,
operatingresults,reportedassetsandliabilities,financialcondition,andcapitallevels.
ChangestoestimatesandassumptionsmadebymanagementinconnectionwiththepreparationoftheBancorpsconsolidatedfinancial
statementscouldadverselyaffectthereportedamountsofassetsandliabilitiesandthereportedamountsofincomeandexpenses.The
preparationoftheBancorpsconsolidatedfinancialstatementsrequiresmanagementtomakecertaincriticalaccountingestimatesand
assumptionsthatcouldaffectthereportedamountsofassetsandliabilitiesandthereportedamountsofincomeandexpenseduringthereporting
periods.Forexample,asofDecember31,2013,theBancorpreported$10.0millionasareceivablefromtheFDICpursuanttocertainlosssharing
arrangements.Thisamountwasderivedusingmanagementsbestestimateofexpectedfuturecashflowsbasedonrecentperformanceand
expectationsoffutureperformanceofthecoveredportfolio.Totheextentthecoveredassetsperformbetterthanexpected,theBancorpmaynot
beabletocollectall,oraportionof,thereceivablebalancereportedasofDecember31,2013.Intheeventthecoveredassetsperformbetterthan
originallyestimatedatthetimeofacquisition,theBancorpcouldberequiredtoreimburseall,oraportionof,itsdiscountedpurchasepricetothe
FDIC.FurtherinformationregardingtheFDIClosssharingreceivable,andotheraccountingpoliciessubjecttosignificantjudgmentand
estimates,isincludedinManagementsDiscussionandAnalysisCriticalAccountingPolicies.Changestomanagementsassumptionsor
estimatescouldmateriallyandadverselyaffecttheCompanysbusiness,operatingresults,reportedassetsandliabilities,financialcondition,and
capitallevels.

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Changesinaccountingstandardsandpoliciescanbedifficulttopredictandcanmateriallyimpacthowwerecordandreportourfinancial
results.
Ouraccountingpoliciesandmethodsarefundamentaltohowwerecordandreportourfinancialconditionandresultsofoperations.Fromtimeto
time,theFASBortheSECchangesthefinancialaccountingandreportingstandardsorthepoliciesthatgovernthepreparationofourfinancial
statements.Thesechangescanbedifficulttopredictandcanmateriallyimpacthowwerecordandreportourfinancialconditionandresultsof
operations.Wecouldberequiredtoapplyneworrevisedguidanceretrospectively,whichmayresultintherevisionofpriorperiodfinancial
statementsbymaterialamounts.Theimplementationofneworrevisedaccountingguidancecouldhaveamaterialadverseeffectonourfinancial
resultsornetworth.
Wemaynotbeabletomeetthecashflowrequirementsofourloanfundingobligations,depositwithdrawalsorotherbusinessneedsunlesswe
maintainsufficientliquidity.
CustomersBankmustmaintainsufficientliquiditytofunditsbalancesheetgrowthinordertobeabletosuccessfullygrowourrevenues,make
loansandtorepaydepositandotherliabilitiesastheybecomedueoraredemandedbycustomers.Thiswouldrequireustoseekthirdparty
fundingorothersourcesofliquidity.Thisliquiditycanbegatheredinbothwholesaleandnonwholesalefundingmarkets.Ourhistoricalasset
growthhasbeenfundedwithvariousformsofdepositsandwholesalefundingwhichisdefinedaswholesaledeposits(primarilycertificatesof
depositandmoneymarketdepositaccounts)andborrowedfunds(FHLBadvances,FederaladvancesandFederalfundlineborrowings).
WholesalefundingatDecember31,2013representedapproximately20.8%oftotalfundingcomparedwithapproximately24.0%at
December31,2012.Wholesalefundinggenerallycostsmorethandepositsgeneratedfromourtraditionalbranchsystemandissubjecttocertain
practicallimitssuchastheFHLBsmaximumborrowingcapacityandourliquiditypolicylimits.Additionally,regulatorsmightconsider
wholesalefundingbeyondcertainpointstobeimprudentandmightsuggestthatfutureassetgrowthbereducedorhalted.Intheabsenceof
wholesalefundingsources,wemightneedtoreduceearningassetgrowththroughthereductionofcurrentproduction,saleofassets,and/orthe
participatingoutoffutureandcurrentloans.Thisinturnmightreduceourfuturenetincome.Theamountloanedtousisgenerallydependenton
thevalueofthecollateralpledgedandourfinancialcondition.Theselenderscouldreducethepercentagesloanedagainstvariouscollateral
categories,eliminatecertaintypesofcollateralandotherwisemodifyoreventerminatetheirloanprograms,particularlytotheextenttheyare
requiredtodosobecauseofcapitaladequacyorotherbalancesheetconcerns,oriffurtherdisruptionsinthecapitalmarketsoccur.Anychange
orterminationofourborrowingsfromtheFHLB,theFederalReserveBoardorcorrespondentbankswouldhaveanadverseeffectonour
liquidityandprofitability.
DowngradesinU.S.GovernmentandfederalagencysecuritiescouldadverselyaffectCustomersBancorpandtheBank
ThelongtermimpactofthedowngradeoftheU.S.GovernmentandfederalagenciesfromanAAAtoanAA+creditratingisstilluncertain.
However,inadditiontocausingeconomicandfinancialmarketdisruptions,thedowngrade,andanyfuturedowngradesand/orfailurestoraise
theU.S.debtlimitifnecessaryinthefuture,could,amongotherthings,materiallyadverselyaffectthemarketvalueoftheU.S.andother
governmentandgovernmentalagencysecuritiesownedbyCustomersBank,theavailabilityofthosesecuritiesascollateralforborrowing,and
ourabilitytoaccesscapitalmarketsonfavorableterms,aswellashaveothermaterialadverseeffectsontheoperationofourbusinessandour
financialresultsandcondition.Inparticular,itcouldincreaseinterestratesanddisruptpaymentsystems,moneymarkets,andlongtermorshort
termfixedincomemarkets,adverselyaffectingthecostandavailabilityoffunding,whichcouldnegativelyaffectprofitability.Also,theadverse
consequencesasaresultofthedowngradecouldextendtotheborrowersoftheloanstheBankmakesand,asaresult,couldadverselyaffectits
borrowersabilitytorepaytheirloans.
Wemaynotbeabletoretainastrongcoredepositbaseorotherlowcostfundingsources.
CustomersBankdependsonchecking,savingsandmoneymarketdepositaccountbalancesandotherformsofcustomerdepositsasourprimary
sourceoffundingforourlendingactivities.As38.0%ofourdepositsasofDecember31,2013aretimedeposits,Customerswillpriceits
offeringstoensurehighcustomerretentionrateswhichmayincreaseourcostsoffundingourbusinessandreducefutureprofitability.During
2014,$719.6millionofourtimedepositscontractuallymature.
Weareworkingtotransitioncertainofourcustomerstolowercosttraditionalbankingservicesashighercostfundingsources,suchashigh
interesttimedeposits,mature.Theremaybecompetitivepressurestopayhigherinterestratesondeposits,whichcouldincreasefundingcosts
andcompressnetinterestmargins.Customersmaynottransitiontoloweryieldingsavingsandinvestmentproducts,whichcouldmateriallyand
adverselyaffectus.Inaddition,withrecentconcernsaboutbankfailures,customershavebecomeconcernedabouttheextenttowhichtheir
depositsareinsuredbytheFDIC,particularlycustomersthatmaymaintaindepositsinexcessofinsuredlimits.Customersmaywithdrawdeposits
inanefforttoensurethattheamountthattheyhaveondepositwithusisfullyinsuredandmayplacetheminotherinstitutionsormake
investmentsthatareperceivedasbeingmoresecure.Further,evenifweareabletogrowandmaintainourdepositbase,theaccountanddeposit
balancescandecreasewhencustomersperceivealternativeinvestments,suchasthestockmarket,asprovidingabetterrisk/returntradeoff.If
customersmovemoneyoutofbankdeposits,wecouldlosearelativelylowcostsourceoffunds,increasingourfundingcostsandreducingour
netinterestincomeandnetincome.Alossoffundscouldresultinlowerloanoriginations,whichcouldmateriallyandadverselyaffectus.

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Wemaynotbeabletomaintainconsistentearningsorprofitability.
CustomersBankandpredecessorentitieshavehadperiodsinwhichweexperiencedoperatinglosses,includingin2009,portionsof2010and
thefirstquarterof2011.Althoughwemadeaprofitfortheyearsof2011,2012and2013,therecanbenoassurancethatwewillbeabletoremain
profitableinfutureperiods,or,ifprofitable,thatouroverallearningswillremainconsistentorincreaseinthefuture.Ourearningsalsomaybe
reducedbyincreasedexpensesassociatedwithincreasedassets,suchasadditionalemployeecompensationexpense,andincreasedinterest
expenseonanyliabilitiesincurredordepositssolicitedtofundincreasesinassets.Ifearningsdonotgrowproportionatelywithourassetsor
equity,ouroverallprofitabilitymaybeadverselyaffected.
Continuedorworseninggeneralbusinessandeconomicconditionscouldmateriallyandadverselyaffectus.
OurbusinessandoperationsaresensitivetogeneralbusinessandeconomicconditionsintheUnitedStates.IftheU.S.economyexperiences
worseningconditionssuchasarecession,wecouldbemateriallyandadverselyaffected.Weakeconomicconditionsmaybecharacterizedby
deflation,instabilityindebtandequitycapitalmarkets,alackofliquidityand/ordepressedpricesinthesecondarymarketformortgageloans,
increaseddelinquenciesonloans,residentialandcommercialrealestatepricedeclinesandlowerhomesalesandcommercialactivity.Adverse
changesinanyofthesefactorswouldbedetrimentaltoourbusiness.Ourbusinessisalsosignificantlyaffectedbymonetaryandrelatedpolicies
oftheU.S.federalgovernment,itsagenciesandgovernmentsponsoredentities.AdversechangesineconomicfactorsorUSgovernmentpolicies
couldhaveanegativeeffectonCustomersBancorp.
ThegeographicconcentrationintheNortheastandMidAtlanticregionmakesourbusinesssusceptibletodownturnsinthelocaleconomies
anddepressedbankingmarkets,whichcouldmateriallyandadverselyaffectus.
OurloananddepositactivitiesarelargelybasedintheNortheastandMidAtlanticregions.Asaresult,ourfinancialperformancedependsupon
economicconditionsinthisregion.Thisregionhasexperienceddeterioratinglocaleconomicconditionsinthepasteconomiccycleanda
downturnintheregionalrealestatemarketcouldharmourfinancialconditionandresultsofoperationsbecauseofthegeographicconcentration
ofloanswithinthisregionandbecausealargepercentageoftheloansaresecuredbyrealproperty.Ifthereisdeclineinrealestatevalues,the
collateralvalueforourloanswilldecreaseandourprobabilityofincurringlosseswillincreaseastheabilitytorecoverondefaultedloansby
sellingtheunderlyingrealestatewillbelessened.
Additionally,Customershasmadesignificantinvestmentincommercialrealestateloans.Ofteninacommercialrealestatetransaction,
repaymentoftheloanisdependentonthepropertygeneratingsufficientrentalincometoservicetheloan.Economicconditionsmayaffectthe
tenantsabilitytomakerentalpaymentsonatimelybasis,andmaycausesometenantsnottorenewtheirleases,eachofwhichmayimpactthe
debtorsabilitytomakeloanpayments.Further,ifexpensesassociatedwithcommercialpropertiesincreasedramatically,thetenantsabilityto
repay,andthereforethedebtorsabilitytomaketimelyloanpayments,couldbeadverselyaffected.Allofthesefactorscouldincreasethe
amountofnonperformingloans,increaseourprovisionforloanlossesandreduceournetincometoservicetheloan.
Ourbusinessishighlysusceptibletocreditrisk.
Asalender,weareexposedtotheriskthatourcustomerswillbeunabletorepaytheirloansaccordingtothecontractualtermsandthatthe
collateralsecuringthepaymentoftheirloans(ifany)maynotbesufficienttoassurerepayment.Therisksinherentinmakinganyloaninclude
riskswithrespecttotheabilityofborrowerstorepaytheirloansand,ifapplicable,theperiodoftimeoverwhichtheloanisrepaid,risksrelating
toproperloanunderwritingandguidelines,risksresultingfromchangesineconomicandindustryconditions,risksinherentindealingwith
individualborrowersandrisksresultingfromuncertaintiesastothefuturevalueofcollateral.Similarly,wehavecreditriskembeddedinour
securitiesportfolio.Ourcreditstandards,proceduresandpoliciesaredesignedtoreducetheriskofcreditlossestoalowlevel,butmaynot
preventusfromincurringsubstantialcreditlosses.
Additionally,wemayrestructureoriginatedoracquiredloansifwebelievetheborrowersareexperiencingproblemsservingthedebtpursuantto
currenttermsandwebelievetheborrowerislikelytofullyrepaytheirrestructuredobligations.Wemayalsobesubjecttolegalorregulatory
requirementsforrestructuredloans.Withrespecttorestructuredloans,wemaygrantconcessionstoborrowersexperiencingfinancialdifficulties
inordertofacilitaterepaymentoftheloanby(1)reductionofthestatedinterestratefortheremaininglifeoftheloantolowerthanthecurrent
marketratefornewloanswithsimilarriskor(2)extensionofthematuritydate.
Wedependonourexecutiveofficersandkeypersonneltoimplementourstrategyandcouldbeharmedbythelossoftheirservices.
Webelievethattheimplementationofourstrategywilldependinlargepartontheskillsofourexecutivemanagementteamandourabilityto
motivateandretaintheseandotherkeypersonnel.Accordingly,thelossofserviceofoneormoreofourexecutiveofficersorkeypersonnel
couldreduceourabilitytosuccessfullyimplementourgrowthstrategyandmateriallyandadverselyaffectus.Leadershipchangeswilloccur
fromtimetotime,andifsignificantresignationsoccur,wemaynotbeabletorecruitadditionalqualifiedpersonnel.Webelieveourexecutive
managementteampossessesvaluableknowledgeaboutthebankingindustryandthattheirknowledgeandrelationshipswouldbeverydifficult
toreplicate.AlthoughourChiefExecutiveOfficer,President,andChiefFinancialOfficerhaveenteredintoemploymentagreementswithus,itis
possiblethattheymaynotcompletethetermoftheiremploymentagreementormaychoosenottorenewituponexpiration.Oursuccessalso
dependsontheexperienceofourbranch
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managersandlendingofficersandontheirrelationshipswiththecustomersandcommunitiestheyserve.Thelossofthesekeypersonnelcould
negativelyimpactourbankingoperations.Thelossofkeyseniorpersonnel,ortheinabilitytorecruitandretainqualifiedpersonnelinthefuture,
couldhaveamaterialadverseeffectonus.
Wefacesignificantcompetitionfromotherfinancialinstitutionsandfinancialservicesproviders,whichmaymateriallyandadverselyaffect
us.
Consumerandcommercialbankingishighlycompetitive.Ourmarketscontainalargenumberofcommunityandregionalbanksaswellasa
significantpresenceofthecountryslargestcommercialbanks.Wecompetewithotherstateandnationalfinancialinstitutions,including
savingsandloanassociations,savingsbanksandcreditunions,fordepositsandloans.Inaddition,wecompetewithfinancialintermediaries,
suchasconsumerfinancecompanies,mortgagebankingcompanies,insurancecompanies,securitiesfirms,mutualfundsandseveralgovernment
agencies,aswellasmajorretailers,inprovidingvarioustypesofloansandotherfinancialservices.Someofthesecompetitorsmayhavealong
historyofsuccessfuloperationsinourmarkets,greatertiestolocalbusinessesandmoreexpansivebankingrelationships,aswellasbetter
establisheddepositorbases.Competitorsmayalsohavegreaterresourcesandaccesstocapitalandmaypossessotheradvantagessuchas
operatingmoreATMsandconductingextensivepromotionalandadvertisingcampaignsoroperatingamoredevelopedInternetplatform.
Competitorsmayalsoexhibitagreatertoleranceforriskandbehavemoreaggressivelywithrespecttopricinginordertoincreasetheirmarket
share.
Thefinancialservicesindustrycouldbecomeevenmorecompetitiveasaresultoflegislative,regulatoryandtechnologicalchangesand
continuedconsolidation.Increasedcompetitionamongfinancialservicescompaniesduetotherecentconsolidationofcertaincompeting
financialinstitutionsmayadverselyaffectourabilitytomarketourproductsandservices.Technologicaladvanceshaveloweredbarrierstoentry
andmadeitpossibleforbankstocompeteinourmarketwithoutaretailfootprintbyofferingcompetitiverates,aswellasnonbankstooffer
productsandservicestraditionallyprovidedbybanks.Ourabilitytocompetesuccessfullydependsonanumberoffactors,including,among
others:

theabilitytodevelop,maintainandbuilduponlongtermcustomerrelationshipsbasedonhighquality,personalservice,
effectiveandefficientproductsandservices,highethicalstandardsandsafeandsoundassets

thescope,relevanceandcompetitivepricingofproductsandservicesofferedtomeetcustomerneedsanddemands

theabilitytoprovidecustomerswithmaximumconvenienceofaccesstoservicesandavailabilityofbankingrepresentatives

theabilitytoattractandretainhighlyqualifiedemployeestooperateourbusiness

theabilitytoexpandourmarketposition

customeraccesstoourdecisionmakers,andcustomersatisfactionwithourlevelofserviceand

theabilitytooperateourbusinesseffectivelyandefficiently.
Failuretoperforminanyoftheseareascouldsignificantlyweakenourcompetitiveposition,whichcouldmateriallyandadverselyaffectus.
Likeotherfinancialservicesinstitutions,ourassetandliabilitystructuresaremonetaryinnature.Suchstructuresareaffectedbyavarietyof
factors,includingchangesininterestrates,whichcanimpactthevalueoffinancialinstrumentsheldbyus.
Likeotherfinancialservicesinstitutions,wehaveassetandliabilitystructuresthatareessentiallymonetaryinnatureandaredirectlyaffectedby
manyfactors,includingdomesticandinternationaleconomicandpoliticalconditions,broadtrendsinbusinessandfinance,legislationand
regulationaffectingthenationalandinternationalbusinessandfinancialcommunities,monetaryandfiscalpolicies,inflation,currencyvalues,
marketconditions,theavailabilityandterms(includingcost)ofshorttermorlongtermfundingandcapital,thecreditcapacityorperceived
creditworthinessofcustomersandcounterpartiesandthelevelandvolatilityoftradingmarkets.Suchfactorscanimpactcustomersand
counterpartiesofafinancialservicesinstitutionandmayimpactthevalueoffinancialinstrumentsheldbyafinancialservicesinstitution.
Ourearningsandcashflowslargelydependuponthelevelofournetinterestincome,whichisthedifferencebetweentheinterestincomeweearn
onloans,investmentsandotherinterestearningassets,andtheinterestwepayoninterestbearingliabilities,suchasdepositsandborrowings.
Becausedifferenttypesofassetsandliabilitiesmayreactdifferentlyandatdifferenttimestomarketinterestratechanges,changesininterest
ratescanincreaseordecreaseournetinterestincome.Wheninterestbearingliabilitiesmatureorrepricemorequicklythaninterestearningassets
inaperiod,anincreaseininterestrateswouldreducenetinterestincome.Similarly,wheninterestearningassetsmatureorrepricemorequickly,
andbecausethemagnitudeofrepricingofinterestearningassetsisoftengreaterthaninterestbearingliabilities,fallinginterestrateswould
reducenetinterestincome.

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Accordingly,changesinthelevelofmarketinterestratesaffectournetyieldoninterestearningassetsandliabilities,loanandinvestment
securitiesportfoliosandouroverallresults.Changesininterestratesmayalsohaveasignificantimpactonanyfutureloanoriginationrevenues.
Changesininterestratesalsohaveasignificantimpactonthecarryingvalueofasignificantpercentageoftheassets,bothloansandinvestment
securities,onourbalancesheet.Wemayincurdebtinthefutureandthatdebtmayalsobesensitivetointerestratesandanyincreaseininterest
ratescouldmateriallyandadverselyaffectus.Interestratesarehighlysensitivetomanyfactorsbeyondourcontrol,includinggeneraleconomic
conditionsandpoliciesofvariousgovernmentalandregulatoryagencies,particularlytheFederalReserve.AdversechangesintheFederal
Reservesinterestratepoliciesorotherchangesinmonetarypoliciesandeconomicconditionscouldmateriallyandadverselyaffectus.
Wearedependentonourinformationtechnologyandtelecommunicationssystemsandthirdpartyservicers,andsystemsfailures,
interruptionsorbreachesofsecuritycouldhaveamaterialadverseeffectonus.
Ourbusinessishighlydependentonthesuccessfulanduninterruptedfunctioningofourinformationtechnologyandtelecommunications
systemsandthirdpartyservicers.Weoutsourcemanyofourmajorsystems,suchasdataprocessing,loanservicinganddepositprocessing
systems.Thefailureofthesesystems,ortheterminationofathirdpartysoftwarelicenseorserviceagreementonwhichanyofthesesystemsis
based,couldinterruptouroperations.Becauseourinformationtechnologyandtelecommunicationssystemsinterfacewithanddependonthird
partysystems,wecouldexperienceservicedenialsifdemandforsuchservicesexceedscapacityorsuchthirdpartysystemsfailorexperience
interruptions.Ifsignificant,sustainedorrepeated,asystemfailureorservicedenialcouldcompromiseourabilitytooperateeffectively,damage
ourreputation,resultinalossofcustomerbusiness,and/orsubjectustoadditionalregulatoryscrutinyandpossiblefinancialliability,anyof
whichcouldhaveamaterialadverseeffectonus.
Inaddition,weprovideourcustomerswiththeabilitytobankremotely,includingonline,overtheInternetandoverthetelephone.Thesecure
transmissionofconfidentialinformationovertheInternetandotherremotechannelsisacriticalelementofremotebanking.Ournetworkcould
bevulnerabletounauthorizedaccess,computerviruses,phishingschemesandothersecuritybreaches.Wemayberequiredtospendsignificant
capitalandotherresourcestoprotectagainstthethreatofsecuritybreachesandcomputerviruses,ortoalleviateproblemscausedbysecurity
breachesorviruses.Totheextentthatouractivitiesortheactivitiesofourcustomersinvolvethestorageandtransmissionofconfidential
information,securitybreachesandvirusescouldexposeustoclaims,regulatoryscrutiny,litigationandotherpossibleliabilities.Anyinability
topreventsecuritybreachesorcomputervirusescouldalsocauseexistingcustomerstoloseconfidenceinoursystemsandcouldmateriallyand
adverselyaffectus.
Additionally,financialproductsandserviceshavebecomeincreasinglytechnologydriven.Ourabilitytomeettheneedsofourcustomers
competitively,andinacostefficientmanner,isdependentontheabilitytokeeppacewithtechnologicaladvancesandtoinvestinnew
technologyasitbecomesavailable.Certaincompetitorsmayhavegreaterresourcestoinvestintechnologyandmaybebetterequippedto
marketnewtechnologydrivenproductsandservices.Theabilitytokeeppacewithtechnologicalchangeisimportant,andthefailuretodoso
couldhaveamaterialadverseimpactonourbusinessandthereforeonourfinancialconditionandresultsofoperations.
Lossof,orfailuretoadequatelysafeguard,confidentialorproprietaryinformationmayadverselyaffecttheBancorpsoperations,netincome
orreputation.
TheBancorpregularlycollects,processes,transmitsandstoressignificantamountsofconfidentialinformationregardingitscustomers,
employeesandothers.ThisinformationisnecessaryfortheconductoftheBancorpsbusinessactivities,includingtheongoingmaintenanceof
deposit,loan,investmentmanagementandotheraccountrelationshipsforourcustomers,andreceivinginstructionsandaffectingtransactionsfor
thosecustomersandotherusersoftheBancorpsproductsandservices.Inadditiontoconfidentialinformationregardingitscustomers,
employeesandothers,theBancorpcompiles,processes,transmitsandstoresproprietary,nonpublicinformationconcerningitsownbusiness,
operations,plansandstrategies.Insomecases,thisconfidentialorproprietaryinformationiscollected,compiled,processed,transmittedor
storedbythirdpartiesonbehalfoftheBancorp.
Informationsecurityriskshavegenerallyincreasedinrecentyearsbecauseoftheproliferationofnewtechnologiesandtheincreased
sophisticationandactivitiesofperpetratorsofcyberattacks.AfailureinorbreachoftheBancorpsoperationalorinformationsecuritysystems,
orthoseoftheBancorpsthirdpartyserviceproviders,asaresultofcyberattacksorinformationsecuritybreachesorduetoemployeeerror,
malfeasanceorotherdisruptionscouldadverselyaffectourbusiness,resultinthedisclosureormisuseofconfidentialorproprietaryinformation,
damageourreputation,increaseourcostsand/orcauselosses.Asaresult,cybersecurityandthecontinueddevelopmentandenhancementofthe
controlsandprocessesdesignedtoprotecttheBancorpssystems,computers,software,dataandnetworksfromattack,damageorunauthorized
accessremainapriorityfortheBancorp.
Ifthisconfidentialorproprietaryinformationweretobemishandled,misusedorlost,theBancorpcouldbeexposedtosignificantregulatory
consequences,reputationaldamage,civillitigationandfinancialloss.Mishandling,misuseorlossofthisconfidentialorproprietaryinformation
couldoccur,forexample,iftheconfidentialorproprietaryinformationwereerroneouslyprovidedtopartieswhoarenotpermittedtohavethe
information,eitherbyfaultofthesystemsoremployeesoftheBancorp,orthesystemsor

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employeesofthirdpartieswhichhavecollected,compiled,processed,transmittedorstoredtheinformationontheBancorpsbehalf,wherethe
informationisinterceptedorotherwiseinappropriatelytakenbythirdpartiesorwherethereisafailureorbreachofthenetwork,communications
orinformationsystemswhichareusedtocollect,compile,process,transmitorstoretheinformation.
AlthoughtheBancorpemploysavarietyofphysical,proceduralandtechnologicalsafeguardstoprotectthisconfidentialandproprietary
informationfrommishandling,misuseorloss,thesesafeguardsdonotprovideabsoluteassurancethatmishandling,misuseorlossofthe
informationwillnotoccur,orthatifmishandling,misuseorlossoftheinformationdidoccur,thoseeventswouldbepromptlydetectedand
addressed.Additionally,asinformationsecurityrisksandcyberthreatscontinuetoevolve,theBancorpmayberequiredtoexpendadditional
resourcestocontinuetoenhanceitsinformationsecuritymeasuresand/ortoinvestigateandremediateanyinformationsecurityvulnerabilities.
Ourdirectorsandexecutiveofficerscaninfluencetheoutcomeofshareholdervotesand,insomecases,shareholdersmaynothavethe
opportunitytoevaluateandaffecttheinvestmentdecisionregardingapotentialinvestmentoracquisitiontransaction.
AsofDecember31,2013,thedirectorsandexecutiveofficersofCustomersBancorpasagroupownedatotalof1,680,588sharesofVoting
CommonStockandexercisablewarrantstopurchaseuptoanadditional318,961sharesofVotingCommonStock,whichpotentiallygivesthem,
asagroup,theabilitytocontrolapproximately8.2%oftheissuedandoutstandingVotingCommonStock.Inaddition,directorsofCustomers
BankwhoarenotdirectorsofCustomersBancorpownanadditional207,625sharesofVotingCommonStockandexercisableoptionsor
warrantstopurchaseuptoanadditional12,324sharesofVotingCommonStock,whichifcombinedwiththedirectorsandofficersofCustomers
Bancorp,potentiallygivesthem,asagroup,theabilitytocontrolapproximately9.0%oftheissuedandoutstandingVotingCommonStock.We
believeownershipofstockcausesdirectorsandofficerstohavethesameinterestsasshareholders,butitalsogivesthemtheabilitytovoteas
shareholdersformattersthatareintheirpersonalinterest,whichmaybecontrarytothewishesofothershareholders.Shareholderswillnot
necessarilybeprovidedwithanopportunitytoevaluatethespecificmeritsorrisksofoneormoretargetinstitutions.Anydecisionregardinga
potentialinvestmentoracquisitiontransactionwillbemadebyourboardofdirectors.Exceptinlimitedcircumstancesasrequiredbyapplicable
law,consummationofanacquisitionwillnotrequiretheapprovalofholdersofVotingCommonStock.Accordingly,theshareholdermaynot
haveanopportunitytoevaluateandaffecttheinvestmentdecisionregardingpotentialinvestmentoracquisitiontransactions.
Weintendtoengageinacquisitionsofotherbusinessesfromtimetotime.Theseacquisitionsmaynotproducerevenueorearnings
enhancementsorcostsavingsatlevels,orwithintimeframes,originallyanticipatedandmayresultinunforeseenintegrationdifficulties.
Weregularlyevaluateopportunitiestostrengthenourcurrentmarketpositionbyacquiringandinvestinginbanksandinothercomplementary
businesses,oropeningnewbranches,andwhenappropriateopportunitiesarise,subjecttoregulatoryapproval,weplantoengageinacquisitions
ofotherbusinessesandinopeningnewbranches.Suchtransactionscould,individuallyorintheaggregate,haveamaterialeffectonour
operatingresultsandfinancialcondition,includingshortandlongtermliquidity.Ouracquisitionactivitiescouldbematerialtoourbusiness.
Forexample,wecouldissueadditionalsharesofVotingCommonStockinapurchasetransaction,whichcoulddilutecurrentshareholdersvalue
orownershipinterest.Theseactivitiescouldrequireustouseasubstantialamountofcash,otherliquidassetsand/orincurdebt.Inaddition,if
goodwillrecordedinconnectionwithacquisitionsweredeterminedtobeimpaired,thenwewouldberequiredtorecognizeachargeagainstour
earnings,whichcouldmateriallyandadverselyaffectourresultsofoperationsduringtheperiodinwhichtheimpairmentwasrecognized.Our
acquisitionactivitiescouldinvolveanumberofadditionalrisks,includingtherisksof:

incurringtimeandexpenseassociatedwithidentifyingandevaluatingpotentialacquisitionsandnegotiatingthetermsof
potentialtransactions,resultinginourattentionbeingdivertedfromtheoperationofourexistingbusiness

usinginaccurateestimatesandjudgmentstoevaluatecredit,operations,managementandmarketriskswithrespecttothe
targetinstitutionorassets

beingpotentiallyexposedtounknownorcontingentliabilitiesofbanksandbusinessesweacquire

beingrequiredtoexpendtimeandexpensetointegratetheoperationsandpersonnelofthecombinedbusinesses

experiencinghigheroperatingexpensesrelativetooperatingincomefromthenewoperations

creatinganadverseshorttermeffectonourresultsofoperations

losingkeyemployeesandcustomersasaresultofanacquisitionthatispoorlyreceivedand

incurringsignificantproblemsrelatingtotheconversionofthefinancialandcustomerdataoftheentitybeingacquiredinto
ourfinancialandcustomerproductsystems.
Additionally,inevaluatingpotentialacquisitionopportunitieswemayseektoacquirefailedbanksthroughFDICassistedacquisitions.While
theFDICmay,insuchacquisitions,provideassistancetomitigatecertainrisks,suchassharinginexposuretoloanlosses,andproviding
indemnificationagainstcertainliabilities,ofthefailedinstitution,wemaynotbeabletoaccuratelyestimateourpotentialexposuretoloan
lossesandotherpotentialliabilities,orthedifficultyofintegration,inacquiringsuchinstitutions.

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Dependingontheconditionofanyinstitutionsorassetsthatareacquired,anyacquisitionmay,atleastinthenearterm,materiallyadversely
affectourcapitalandearningsand,ifnotsuccessfullyintegratedfollowingtheacquisition,maycontinuetohavesucheffects.Wecannotassure
youthatwewillbesuccessfulinovercomingtheserisksoranyotherproblemsencounteredinconnectionwithpendingorpotentialacquisitions.
Ourinabilitytoovercometheseriskscouldhaveanadverseeffectonlevelsofreportednetincome,returnonequityandreturnonassets,andthe
abilitytoachieveourbusinessstrategyandmaintainmarketvalue.
WearesubjecttocertainrisksrelatedtoFDICassistedacquisitions.
ThesuccessofpastFDICassistedacquisitions,andanyFDICassistedacquisitionsinwhichwemayparticipateinthefuture,willdependona
numberoffactors,includingourabilityto:

fullyintegrate,andtointegratesuccessfully,thebranchesacquiredintobankoperations

limittheoutflowofdepositsheldbynewcustomersintheacquiredbranchesandtosuccessfullyretainandmanageinterest
earningassets(loans)acquiredinFDICassistedacquisitions

retainexistingdepositsandtogeneratenewinterestearningassetsinthegeographicareaspreviouslyservedbytheacquired
banks

effectivelycompeteinnewmarketsinwhichwedidnotpreviouslyhaveapresence

successfullydeploythecashreceivedintheFDICassistedacquisitionsintoassetsbearingsufficientlyhighyieldswithout
incurringunacceptablecreditorinterestraterisk

controltheincrementalnoninterestexpensefromtheacquiredbranchesinamannerthatenablesustomaintainafavorable
overallefficiencyratio

retainandattracttheappropriatepersonneltostafftheacquiredbranchesand

earnacceptablelevelsofinterestandnoninterestincome,includingfeeincome,fromtheacquiredbank.
Aswithanyacquisitioninvolvingafinancialinstitution,particularlyoneinvolvingthetransferofalargenumberofbankbranches(asisoften
thecasewithFDICassistedacquisitions),theremaybehigherthanaveragelevelsofservicedisruptionsthatwouldcauseinconveniencesor
potentiallyincreasetheeffectivenessofcompetingfinancialinstitutionsinattractingourcustomers.Integratingtheacquiredbranchescould
presentuniquechallengesandopportunitiesbecauseofthenatureofthetransactions.Integrationeffortswillalsolikelydivertourmanagements
attentionandresources.Itisnotknownwhetherwewillbeabletointegrateacquiredbranchessuccessfully,andtheintegrationprocesscould
resultinthelossofkeyemployees,thedisruptionofongoingbusinessorinconsistenciesinstandards,controls,proceduresandpoliciesthat
adverselyaffectourabilitytomaintainrelationshipswithclients,customers,depositorsandemployeesortoachievetheanticipatedbenefitsof
theFDICassistedacquisitions.Wemayalsoencounterunexpecteddifficultiesorcostsduringintegrationthatcouldmateriallyadverselyaffect
ourearningsandfinancialcondition.Additionally,wemaybeunabletocompeteeffectivelyinthemarketareaspreviouslyservedbythe
acquiredbranchesortomanageanygrowthresultingfromFDICassistedacquisitionseffectively.
OurwillingnessandabilitytogrowacquiredbranchesfollowingFDICassistedacquisitionsdependonseveralfactors,mostimportantlythe
abilitytoretaincertainkeypersonnelthatwehireortransferinconnectionwithFDICassistedacquisitions.Ourfailuretoretaintheseemployees
couldadverselyaffectthesuccessofFDICassistedacquisitionsandourfuturegrowth.
OurabilitytocontinuetoreceivebenefitsofourLossSharingAgreementswiththeFDICisconditioneduponcompliancewithcertain
requirementsunderthePurchaseandAssumptionAgreements.
PursuanttothePurchaseandAssumptionAgreementswesignedinconnectionwithourFDICassistedacquisitionsofUSABankandISNBank
(PurchaseandAssumptionAgreements),wearethebeneficiaryoflosssharingarrangementswiththeFDIC(theLossSharingAgreements)
thatcallfortheFDICtofundaportionofitslossesonamajorityoftheassetsacquiredinconnectionwiththetransactions.Ourabilitytorecover
aportionoflossesandretainthelosssharingprotectionissubjecttocompliancewithcertainrequirementsimposedonusinthePurchaseand
AssumptionAgreements.TherequirementsoftheLossSharingAgreementsrelateprimarilytoloanservicingstandardsconcerningtheassets
coveredbytheLossSharingAgreements(theCoveredAssets),aswellasobtainingtheconsentsoftheFDICtoengageincertaincorporate
transactionsthatmaybedeemedundertheagreementstoconstituteatransferofthelosssharingbenefits.Forexample,FDICapprovalwillbe
requiredforanymergerweundertakethatwouldresultinthepremergershareholdersofsuchentityowninglessthansixtysixandtwo/thirds
percent(66.66%)oftheequityofthesurvivingentity.
Astheloanservicingstandardsevolve,wemayexperiencedifficultiesincomplyingwiththerequirementsoftheLossSharingAgreements,
whichcouldresultinCoveredAssetslosingsomeoralloftheirlosssharingcoverage.Inaccordancewiththetermsof

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theLossSharingAgreements,wearesubjecttoauditsbytheFDICthroughitsdesignatedagent.TherequiredtermsoftheLossSharing
Agreementsareextensiveandfailuretocomplywithanyoftheguidelinescouldresultinaspecificassetorgroupofassetslosingtheirloss
sharingcoverage.
InsuchinstancesinwhichtheconsentoftheFDICisrequiredunderthePurchaseandAssumptionAgreements,theFDICmaywithholdits
consenttosuchtransactionsormayconditionitsconsentontermsthatwedonotfindacceptable.TherecanbenoassurancethattheFDICwill
grantitsconsentorconditionitsconsentontermsthatwefindacceptable.IftheFDICdoesnotgrantitsconsenttoatransactionwewouldliketo
pursue,orconditionsitsconsentontermsthatwedonotfindacceptable,thismaycauseusnottoengageinacorporatetransactionthatmight
otherwisebenefitshareholdersortopursuesuchatransactionwithoutobtainingtheFDICsconsent,whichcouldresultinterminationofthe
LossSharingAgreementswiththeFDIC.
FDICassistedacquisitionopportunitiesmaynotbecomeavailableandincreasedcompetitionmaymakeitmoredifficultforustobidon
failedbanktransactionsontermsconsideredtobeacceptable.
OurneartermbusinessstrategyincludesconsiderationofpotentialacquisitionsoffailingbanksthattheFDICplanstoplaceinreceivership.The
FDICmaynotplacebanksthatmeetourstrategicobjectivesintoreceivership.Failedbanktransactionsareattractiveopportunitiesinpart
becauseoflosssharingarrangementswiththeFDICthatlimittheacquirersdownsideriskonthepurchasedloanportfolioand,apartfromour
assumptionofdepositliabilities,wehavesignificantdiscretionastothenondepositliabilitiesthatweassume.Inaddition,assetspurchased
fromtheFDICaremarkedtotheirfairvalueandinmanycasesthereislittleornoadditiontogoodwillarisingfromanFDICassistedacquisition.
Thebiddingprocessforfailingbankscouldbecomeverycompetitive,andtheincreasedcompetitionmaymakeitmoredifficultforustobidon
termsweconsidertobeacceptable.Further,allFDICassistedacquisitionswouldrequireustoobtainapplicableregulatoryapproval.
Ifwedonotopennewbranchesasplanned,ordonotachievetargetedprofitabilityonnewbranches,earningsmaybereduced.
Weplantoopenapproximatelyfourtosixnewbranchesannuallyforthenextseveralyearsinandaroundourtargetmarketsofsoutheastern
Pennsylvania,NewJersey,NewYork,Maryland,Connecticut,VirginiaandDelaware.Theseplansmaychange.Theopeningofnewbranchesis
subjecttoregulatoryapprovals.Wecannotpredictwhetherthebankingregulatorswillagreewithourgrowthplansoriforwhentheywill
providethenecessarybranchapprovals.Numerousfactorscontributetotheperformanceofanewbranch,suchastheabilitytoselectasuitable
location,competition,ourabilitytohireandretainqualifiedpersonnel,andtheeffectivenessofourmarketingstrategy.Ittakestimeforanew
branchtogeneratesignificantdepositsandloanvolumetooffsetexpenses,someofwhich,likesalariesandoccupancyexpense,arerelatively
fixedcosts.Theinitialcost,includingcapitalassetpurchases,foreachnewbranchtoopenwouldbeinarangeofapproximately$200,000to
$250,000.Additionally,therecanbenoassurancethatanyofthesenewbrancheswilleverbecomeprofitable.Duringtheperiodoftimebeforea
branchcanbecomeprofitable,operatingabranchwillnegativelyimpactnetincome.
Totheextentthatweareunabletoincreaseloansthroughorganicloangrowth,wemaybeunabletosuccessfullyimplementourgrowth
strategy,whichcouldmateriallyandadverselyaffectus.
Inadditiontogrowingourbusinessthroughstrategicacquisitions,wealsointendtogrowourbusinessthroughorganicloangrowth.Whileloan
growthhasbeenstrongandourloanbalanceshaveincreasedoverthepasttwofiscalyears,muchofthe2012growthcamefromourwarehouse
lendingbusinessand2013loangrowthcamefrommultifamilyandcommercialrealestatelending.Ifthebankisunsuccessfulwithdiversifying
itsloanoriginationsorifwedonotgrowtheexistingbusinesslines,ourresultsofoperationsandfinancialconditioncouldbenegatively
impacted.
Wemaynotbeabletoeffectivelymanageourgrowth.
Ourfutureoperatingresultsandfinancialconditiondependtoalargeextentonourabilitytosuccessfullymanageourrapidgrowth.Ourrapid
growthhasplaced,anditmaycontinuetoplace,significantdemandsonouroperationsandmanagement.Whetherthroughadditional
acquisitionsororganicgrowth,ourcurrentplantoexpandourbusinessisdependentuponourabilityto:

continuetoimplementandimproveouroperational,creditunderwritingandadministration,financial,accounting,enterpriserisk
managementandotherinternalanddisclosurecontrolsandprocessesandourreportingsystemsandproceduresinordertomanagea
growingnumberofclientrelationships

complywithchangesin,andanincreasingnumberof,laws,rulesandregulations,includingthoseofanynationalsecuritiesexchange
onwhichanyofoursecuritiesbecomelisted

scaleourtechnologyandothersystemsplatforms

maintainandattractappropriatestaffingand

supportourassetgrowthwithadequatedeposits,fundingandliquiditytomaintainournetinterestmarginsandmeetourcustomers
andregulatorsliquidityrequirements.

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Wemaynotsuccessfullyimplementimprovementsto,orintegrate,ourmanagementinformationandcontrolsystems,creditunderwritingand
administration,internalanddisclosurecontrols,andproceduresandprocessesinanefficientortimelymannerandmaydiscoverdeficienciesin
existingsystemsandcontrols.Inparticular,ourcontrolsandproceduresmustbeabletoaccommodateanincreaseinloanvolumeinvarious
marketsandtheinfrastructurethatcomeswithnewbankingcentersandbanks.Ourgrowthstrategymaydivertmanagementfromourexisting
businessandmayrequireustoincuradditionalexpenditurestoexpandouradministrativeandoperationalinfrastructureand,ifweareunableto
effectivelymanageandgrowourbankingfranchise,includingtothesatisfactionofourregulators,wecouldbemateriallyandadverselyaffected.
Inaddition,ifweareunabletomanageourcurrentandfutureexpansioninouroperations,wemayexperiencecompliance,operationaland
regulatoryproblemsanddelays,havetoslowourpaceofgrowthorevenstopourmarketandproductexpansion,orhavetoincuradditional
expendituresbeyondcurrentprojectionstosupportsuchgrowth,anyoneofwhichcouldmateriallyandadverselyaffectus.Ifweexperience
difficultieswiththedevelopmentofnewbusinessactivitiesortheintegrationprocessofacquiredbusinesses,theanticipatedbenefitsofany
particularacquisitionmaynotberealizedfully,oratall,ormaytakelongertorealizethanexpected.Additionally,wemaybeunableto
recognizesynergies,operatingefficienciesand/orexpectedbenefitswithinexpectedtimeframesandcostprojections,oratall.Wealsomaynot
beabletopreservethegoodwillofanacquiredfinancialinstitution.Ourgrowthcouldleadtoincreasesinourlegal,audit,administrativeand
financialcompliancecosts,whichcouldmateriallyandadverselyaffectus.
Wemaynotbeabletofundourassetgrowthandprofitabilityunlesswealsoareabletoincreaseourdepositbasesufficiently.
Weneedadequatefundingandliquidityforustocontinuetoincreaseourearningassetsandrevenuesandtoprovidesufficientliquiditytomeet
fluctuationsinourbusinessvolumesandtorepaydepositandotherliabilitiesasthesematureordrawn.Thisliquiditycanbegatheredinboth
wholesaleandnonwholesalefundingmarkets.Ourassetgrowthoverthepastfewyearshasbeenfundedwithvariousformsofdepositsand
wholesalefunding,includingbrokeredandwholesaletimedeposits,FHLBadvances,andFederalfundslineborrowings.Wholesalefundingat
December31,2013representedapproximately20.8%oftotalfundingcomparedwithapproximately24.0%atDecember31,2012.Ourloanto
depositratiowas108.5%atDecember31,2013and113.3%atDecember31,2012.Wholesalefundingcancostmorethandepositsgenerated
fromourtraditionalbranchsystemandcustomerrelationshipsandissubjecttocertainpracticallimitssuchasourliquiditypolicylimits,our
availablecollateralforFHLBborrowingscapacityandFederalfundslinelimitswithourlenders.Additionally,regulatorsconsiderwholesale
fundingbeyondcertainpointstobeimprudentandmightsuggestthatfutureassetgrowthbereducedorhalted.Intheabsenceofappropriate
levelsandmixoffunding,wemightneedtoreduceearningassetgrowththroughthereductionofcurrentproduction,salesofloansand/orthe
saleofparticipationinterestsinfutureandcurrentloans.Thismightreduceourfuturegrowthandnetincome.
Theamountloanedtousisgenerallydependentonthevalueoftheeligiblecollateralpledgedandourfinancialcondition.Theselenderscould
reducethepercentagesloanedagainstvariouscollateralcategories,eliminatecertaintypesofcollateralandotherwisemodifyoreventerminate
theirloanprograms,oriffurtherdisruptionsinthecapitalmarketsoccur.AnychangeorterminationofourborrowingsfromtheFHLBor
correspondentbankscouldhaveanadverseeffectonourprofitabilityandfinancialcondition,includingliquidity.
Wemaynotbeabletodevelopandretainastrongcoredepositbaseandotherlowcost,stablefundingsources.
Weexpecttodependoncustomerdepositsasourprimarysourceoffundingforourlendingactivities.Ourfuturegrowthwilllargelydependon
ourabilitytoretainandgrowastrong,lowcostdepositbase.Because38.0%ofourdepositbaseasofDecember31,2013istimedeposits,itmay
provehardertomaintainandgrowourdepositbasethanwouldotherwisebethecase,especiallysincemanyofthesecurrentlypayinterestat
abovemarketrates.AsofDecember31,2013,$719.6million(63.9%)ofourtotaltimedepositsarescheduledtomaturethroughDecember31,
2014.Weareworkingtotransitioncertainofourcustomerstolowercosttraditionalbankdepositsashighercostfunding,suchastimedeposits,
mature.Ifinterestratesincrease,whetherduetochangesininflation,monetarypolicy,competitionorotherfactors,wewouldexpecttopay
higherinterestratesondeposits,whichwouldincreaseourfundingcostsandcompressournetinterestmargins.Wemaynotsucceedinmoving
ourdepositstoloweryieldingsavingsandtransactionsproducts,whichcouldmateriallyandadverselyaffectus.Inaddition,withconcerns
aboutbankfailuresoverthepastseveralyearsandtheendoftheFDICsnoninteresttransactiondepositguaranteeprogramonDecember31,
2012,customers,particularlythosewhomaymaintaindepositsinexcessofinsuredlimits,havebecomeconcernedabouttheextenttowhich
theirdepositsareinsuredbytheFDIC.Customersmaywithdrawdepositstoensurethattheirdepositswithusarefullyinsured,andmayplace
excessamountsinotherinstitutionsormakeinvestmentsthatareperceivedasbeingmoresecureand/orhigheryielding.Further,evenifweare
abletomaintainandgrowourdepositbase,depositbalancescandecreasewhencustomersperceivealternativeinvestments,suchasthestock
market,willprovideabetterrisk/returntradeoff.Ifcustomersmovemoneyoutofbankdeposits,wecouldlosearelativelylowcostsourceof
funds,increasingourfundingcostsandreducingournetinterestincomeandnetincome.Additionally,anysuchlossoffundscouldresultin
lowerloanoriginationsandgrowth,whichcouldmateriallyandadverselyaffectourresultsofoperationsandfinancialcondition,including
liquidity.

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Ouracquisitionsgenerallywillrequireregulatoryapprovals,andfailuretoobtainthemwouldrestrictourgrowth.
Weintendtocomplementandexpandourbusinessbypursuingstrategicacquisitionsofcommunitybankingfranchisesandotherbusinesses.
Generally,anyacquisitionoftargetfinancialinstitutions,bankingcentersorotherbankingassetsbyuswillrequireapprovalby,and
cooperationfrom,anumberofgovernmentalregulatoryagencies,possiblyincludingtheFederalReserve,theOCCandtheFDIC,aswellasstate
bankingregulators.Inactingonapplications,federalbankingregulatorsconsider,amongotherfactors:

theeffectoftheacquisitiononcompetition

thefinancialcondition,liquidity,resultsofoperations,capitallevelsandfutureprospectsoftheapplicantandthebank(s)
involved

thequantityandcomplexityofpreviouslyconsummatedacquisitions

themanagerialresourcesoftheapplicantandthebank(s)involved

theconvenienceandneedsofthecommunity,includingtherecordofperformanceundertheCommunityReinvestmentAct
(whichwerefertointhisprospectusastheCRA)

theeffectivenessoftheapplicantincombatingmoneylaunderingactivitiesand

theextenttowhichtheacquisitionwouldresultingreaterormoreconcentratedriskstothestabilityoftheUnitedStates
bankingorfinancialsystem.
Suchregulatorscoulddenyourapplicationbasedontheabovecriteriaorotherconsiderations,whichwouldrestrictourgrowth,ortheregulatory
approvalsmaynotbegrantedontermsthatareacceptabletous.Forexample,wecouldberequiredtosellbankingcentersasaconditionto
receivingregulatoryapprovals,andsuchaconditionmaynotbeacceptabletousormayreducethebenefitofanyacquisition.
Thesuccessoffuturetransactionswilldependonourabilitytosuccessfullyidentifyandconsummateacquisitionsofbankingfranchisesthat
meetourinvestmentobjectives.Becauseoftheintensecompetitionforacquisitionopportunitiesandthelimitednumberofpotentialtargets,
wemaynotbeabletosuccessfullyconsummateacquisitionsonattractiveterms,oratall,thatarenecessarytogrowourbusiness.
Ouracquisitionhistoryshouldbeviewedinthecontextoftherecentopportunitiesavailabletousasaresultoftheconfluenceofouraccessto
capitalatatimewhenmarketdislocationsofhistoricalproportionsresultedinattractiveassetacquisitionopportunities.Asconditionschange,
wemayprovetobeunabletoexecuteouracquisitionstrategy,whichwouldmateriallyandadverselyaffectus.Thesuccessoffuturetransactions
willdependonourabilitytosuccessfullyidentifyandconsummatetransactionswithtargetbankingfranchisesthatmeetourinvestment
objectives.Therearesignificantrisksassociatedwithourabilitytoidentifyandsuccessfullyconsummatetheseacquisitions.Therearealimited
numberofacquisitionopportunities,andweexpecttoencounterintensecompetitionfromotherbankingorganizationscompetingfor
acquisitionsandalsofromotherinvestmentfundsandentitieslookingtoacquirefinancialinstitutions.Manyoftheseentitiesarewell
establishedandhaveextensiveexperienceinidentifyingandconsummatingacquisitionsdirectlyorthroughaffiliates.Manyofthese
competitorspossessongoingbankingoperationswithgreaterfinancial,technical,humanandotherresourcesandaccesstocapitalthanwedo,
whichcouldlimittheacquisitionopportunitieswepursue.Ourcompetitorsmaybeabletoachievegreatercostsavings,throughconsolidating
operationsorotherwise,thanwecould.Thesecompetitivelimitationsgiveothersanadvantageinpursuingcertainacquisitions.Inaddition,
increasedcompetitionmaydriveupthepricesfortheacquisitionswepursueandmaketheotheracquisitiontermsmoreonerous,whichwould
maketheidentificationandsuccessfulconsummationofthoseacquisitionslessattractivetous.Competitorsmaybewillingtopaymorefor
acquisitionsthanwebelievearejustified,whichcouldresultinushavingtopaymoreforthemthanwepreferortoforegotheopportunity.Asa
resultoftheforegoing,wemaybeunabletosuccessfullyidentifyandconsummateacquisitionsonattractiveterms,oratall,thatarenecessaryto
growourbusiness.
Wewillgenerallyestablishthepricingoftransactionsandthecapitalstructureofbankingfranchisestobeacquiredbyusonthebasisof
financialprojectionsforsuchbankingfranchises.Ingeneral,projectedoperatingresultswillbebasedonthejudgmentofourmanagementteam.
Inallcases,projectionsareonlyestimatesoffutureresultsthatarebaseduponassumptionsmadeatthetimethattheprojectionsaredeveloped
andtheprojectedresultsmayvarysignificantlyfromactualresults.Generaleconomic,politicalandmarketconditionscanhaveamaterial
adverseimpactonthereliabilityofsuchprojections.Intheeventthattheprojectionsmadeinconnectionwithouracquisitions,orfuture
projectionswithrespecttonewacquisitions,arenotaccurate,suchinaccuraciescouldmateriallyandadverselyaffectus.
Wemaysufferlossesduetominorityinvestmentsinotherfinancialinstitutionsorrelatedcompanies.
Fromtimetotime,wemaymakeorconsidermakingminorityinvestmentsinotherfinancialinstitutionsortechnologycompaniesinthe
financialservicesbusiness.Ifwedoso,wemaynotbeabletoinfluencetheactivitiesofcompaniesinwhichweinvest,andmaysufferlossesdue
totheseactivities.Investmentsinforeigncompaniescouldposeadditionalrisksasaresultofdistance,languagebarriersandpotentiallackof
information(forexample,foreigninstitutions,includingforeignfinancialinstitutions,maynotbeobligatedtoprovideasmuchinformation
regardingtheiroperationsasthoseintheUnitedStates).OurinvestmentinReligare

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EnterprisesLimited(orReligare),whichisadiversifiedfinancialservicescompanyandisapplyingforabankinglicenseinIndia,representssuch
aninvestment.ThereisnoassuranceofthetimingorReligaresabilitytoobtainabankinglicenseinIndia,whichisimportanttoouranticipated
investmentandcrossreferralstrategy,andtheresultsofthisstrategyandthelevelsofnewbusinessderivedfromsuchreferrals,cannotbe
predicted.Theseandotherfactorsmayresultinlowerthanexpectedreturns,oraloss,onourinvestmentinReligare.Wedonotexpecttoreceive
anydividendsonourinvestmentinReligaresecurities.Inaddition,ourinvestmentinReligaremaynothavethemarketliquidityneededto
realizeagainoravoidlossesonourinvestmentandanydispositionsofourReligarecommonstockorwarrantsmaybelimitedordelayedby
marketconditionsortheneedforregulatoryorotherapprovalsinIndia,andthevalueofourinvestmentwillbesubjecttofluctuationsinthe
currencyexchangeratesbetweentheIndianrupeeandtheUnitedStatesdollar.OnDecember31,2013,weannouncedthatourinvestmentin
Religarewouldbecappedat$23.0million(4.1millioncommonshares).Wehadtheabilitytopurchasewarrantstoacquireuptoanadditional
$28.0millionofReligarestockbutdecidednottoacquirethewarrantsorotherwiseincreaseourholdingsofReligarestock.Ourcurrentholdings
represent2.8%ofcurrentoutstandingReligareshares.
WewillberequiredtoholdcapitalforUnitedStatesbankregulatorypurposestosupportourinvestmentinReligaresecurities.
UnderthenewlyadoptedU.S.capitaladequacyrules,whicharecurrentlyscheduledtobeeffectiveasofJanuary1,2015,wewillhavetohold
riskbasedcapitalbasedontheamountofReligarecommonstockweown.Theimpactofthefinalcapitaladequacyrulesisstillbeingevaluated.
DependingupontheimplementationofthefinalU.S.capitaladequacyrules,theseinvestments,totheextentstillheld,willberiskweighted
withinarangeof100%to600%oftheamountoftheinvestment.AnycapitalthatisrequiredtobeusedtosupportourReligareinvestmentwill
notbeavailabletosupportourUnitedStatesoperationsorCustomersBank,ifneeded.
Someinstitutionswecouldacquiremayhavedistressedassetsandtherecanbenoassurancethatwewillbeabletorealizethevaluepredicted
fromtheseassetsorthatwewillmakesufficientprovisionforfuturelossesinthevalueof,oraccuratelyestimatethefuturewritedownstaken
inrespectof,theseassets.
Loanportfoliosandotherassetsacquiredintransactionsmayexperienceincreasesindelinquenciesandlossesintheloanportfolios,orin
amountsthatexceedinitialforecastsdevelopedduringtheduediligenceinvestigationpriortoacquiringthoseinstitutions.Inaddition,asset
valuesmaybeimpairedinthefutureduetofactorsthatcannotcurrentlybepredicted,includingdeteriorationineconomicconditionsand
subsequentdeclinesincollateralvaluesandcreditqualityindicators.Anyoftheseeventscouldadverselyaffectthefinancialcondition,
liquidity,capitalpositionandvalueofinstitutionsacquiredandofourbusinessasawhole.Further,asaregisteredbankholdingcompany,ifwe
acquirebanksubsidiaries,theymaybecomesubjecttocrossguarantyliabilityunderapplicablebankinglaw.Ifwedosoandanyofthe
foregoingadverseeventsoccurwithrespecttoonesubsidiary,theymayadverselyaffectothersubsidiaries.Assetvaluationsareestimatesof
valueandthereisnocertaintythatwewillbeabletosellassetsoftargetinstitutionsattheestimatedvalue,evenifitisdeterminedtobeinour
bestintereststodoso.Theinstitutionswemaytargetmayhavesubstantialamountsofassetclassesforwhichthereiscurrentlylimitedorno
marketability.
Asaresultofaninvestmentoracquisitiontransaction,wemayberequiredtotakewritedownsorwriteoffs,restructuringandimpairmentor
otherchargesthatcouldhaveasignificantnegativeeffectonourfinancialconditionandresultsofoperations.
Weconductduediligenceinvestigationsoftargetinstitutionsweintendtoacquire.Duediligenceistimeconsumingandexpensiveduetothe
operations,accounting,financeandlegalprofessionalswhomustbeinvolvedintheduediligenceprocess.Evenifextensiveduediligenceis
conductedonatargetinstitutionwithwhichwemaybecombined,thisdiligencemaynotrevealallmaterialissuesthatmayaffectaparticular
targetinstitution,andfactorsoutsideourcontrol,orthecontrolofthetargetinstitution,maylaterarise.If,duringthediligenceprocess,wefailto
identifyissuesspecifictoatargetinstitutionortheenvironmentinwhichthetargetinstitutionoperates,wemaybeforcedtolaterwritedownor
writeoffassets,restructureoperationsorincurimpairmentorotherchargesthatcouldresultinreportinglosses.Thesechargesmayalsooccurif
wearenotsuccessfulinintegratingandmanagingtheoperationsofthetargetinstitutionwithwhichwecombine.Inaddition,chargesofthis
naturemaycauseustoviolatenetworthorothercovenantstowhichwemaybesubjectasaresultofassumingpreexistingdebtheldbyatarget
institutionorbyvirtueofobtainingdebtfinancing.
Resourcescouldbeexpendedinconsideringorevaluatingpotentialinvestmentoracquisitiontransactionsthatarenotconsummated,which
couldmateriallyandadverselyaffectsubsequentattemptstolocateandacquireormergewithanotherbusiness.
Weanticipatethattheinvestigationofeachspecifictargetinstitutionandthenegotiation,draftingandexecutionofrelevantagreements,
disclosuredocumentsandotherinstrumentswillrequiresubstantialmanagementtimeandattentionandsubstantialcostsforaccountants,
attorneysandothers.Ifadecisionismadenottocompleteaspecificinvestmentoracquisitiontransaction,thecostsincurreduptothatpointfor
theproposedtransactionlikelywouldnotberecoverable.Furthermore,evenifanagreementisreachedrelatingtoaspecifictargetinstitution,we
mayfailtoconsummatetheinvestmentoracquisitiontransactionforanynumberofreasons,includingthosebeyondourcontrol.Anysuchevent
willresultinalossoftherelatedcostsincurred,andcouldresultinadditionalcostsorexpenses,whichcouldmateriallyandadverselyaffect
subsequentattemptstolocateandacquireormergewithanotherinstitutionandourreportedearnings.

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RisksRelatingtotheRegulationofOurIndustry
TheenactmentoftheDoddFrankWallStreetReformandConsumerProtectionActof2010mayhaveamaterialadverseeffectonour
business.
OnJuly21,2010,PresidentObamasignedintolawtheDoddFrankWallStreetReformandConsumerProtectionActof2010(whichwereferto
astheDoddFrankAct),whichimposessignificantregulatoryandcompliancechanges.ThekeyeffectsoftheDoddFrankActonourbusiness
are:

changestoregulatorycapitalrequirements

exclusionofhybridsecurities,includingtrustpreferredsecurities,issuedonorafterMay19,2010fromtier1capital

creationofnewgovernmentregulatoryagencies(suchastheFinancialStabilityOversightCouncil,whichwilloversee
systemicrisk,andtheConsumerFinancialProtectionBureau,whichwilldevelopandenforcerulesforbankandnonbank
providersofconsumerfinancialproducts)

potentiallimitationsonfederalpreemption

changestodepositinsuranceassessments

regulationofdebitinterchangefeesweearn

changesinretailbankingregulations,includingpotentiallimitationsoncertainfeeswemaychargeand

changesinregulationofconsumermortgageloanoriginationandriskretention.
Inaddition,theDoddFrankActrestrictstheabilityofbankstoengageincertainproprietarytradingortosponsororinvestinprivateequityor
hedgefunds.TheDoddFrankActalsocontainsprovisionsdesignedtolimittheabilityofinsureddepositoryinstitutions,theirholding
companiesandtheiraffiliatestoconductcertainswapsandderivativesactivitiesandtotakecertainprincipalpositionsinfinancialinstruments.
SomeprovisionsoftheDoddFrankActbecameeffectiveimmediatelyuponitsenactment.Manyprovisions,however,stillrequireregulationsto
bepromulgatedbyvariousfederalagenciesinordertobeimplemented,someofwhichhavebeenproposedbytheapplicablefederalagencies.
TheprovisionsoftheDoddFrankActmayhaveunintendedeffects,whichwillnotbeclearuntilimplementation.Thechangesresultingfromthe
DoddFrankActcouldlimitourbusinessactivities,requirechangestocertainofourbusinesspractices,imposeuponusmorestringentcapital,
liquidityandleveragerequirementsorotherwisemateriallyandadverselyaffectus.Thesechangesmayalsorequireustoinvestsignificant
managementattentionandresourcestoevaluateandmakeanychangesnecessarytocomplywithnewstatutoryandregulatoryrequirements.
Failuretocomplywiththenewrequirementscouldalsomateriallyandadverselyaffectus.Anychangesinthelawsorregulationsortheir
interpretationscouldbemateriallyadversetoinvestorsinourVotingCommonStock.ForamoredetaileddescriptionoftheDoddFrankAct,see
SupervisionandRegulationChangesinLaws,RegulationsorPoliciesandtheDoddFrankAct.
Newregulationscouldadverselyimpactourearningsdueto,amongotherthings,increasedcompliancecostsorcostsduetononcompliance.
TheConsumerFinancialProtectionBureauhasissuedarule,effectiveasofJanuary14,2014,designedtoclarifyforlendershowtheycanavoid
monetarydamagesundertheDoddFrankAct,whichwouldholdlendersaccountableforensuringaborrowersabilitytorepayamortgage.
Loansthatsatisfythisqualifiedmortgagesafeharborwillbepresumedtohavecompliedwiththenewabilitytorepaystandard.Underthe
ConsumerFinancialProtectionBureausrule,aqualifiedmortgageloanmustnotcontaincertainspecifiedfeatures,includingbutnotlimited
to:(i)excessiveupfrontpointsandfees(thoseexceeding3%ofthetotalloanamount,lessbonafidediscountpointsforprimeloans)
(ii)interestonlypayments(iii)negativeamortizationand(iv)termslongerthan30years.Also,toqualifyasaqualifiedmortgage,a
borrowerstotalmonthlydebtservicetoincomeratiomaynotexceed43%.Lendersmustalsoverifyanddocumenttheincomeandfinancial
resourcesreliedupontoqualifytheborrowerfortheloanandunderwritetheloanbasedonafullyamortizingpaymentscheduleandmaximum
interestrateduringthefirstfiveyears,takingintoaccountallapplicabletaxes,insuranceandassessments.TheConsumerFinancialProtection
Bureausruleonqualifiedmortgagescouldlimitourabilityordesiretomakecertaintypesofloansorloanstocertainborrowers,orcouldmake
itmoreexpensiveand/ortimeconsumingtomaketheseloans,whichcouldadverselyimpactourgrowthorprofitability.
Additionally,onDecember10,2013,fivefinancialregulatoryagencies,includingourprimaryfederalregulator,theFederalReserve,adopted
finalrules(theFinalRules)implementingthesocalledVolckerRuleembodiedinSection13oftheBankHolding

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CompanyAct,whichwasaddedbySection619oftheDoddFrankAct.TheFinalRulesprohibitbankingentitiesfrom,amongotherthings,
(1)engaginginshorttermproprietarytradingfortheirownaccounts,and(2)havingcertainownershipinterestsinandrelationshipswithhedge
fundsorprivateequityfunds(coveredfunds).TheFinalRulesareintendedtoprovidegreaterclaritywithrespecttoboththeextentofthose
primaryprohibitionsandoftherelatedexemptionsandexclusions.TheFinalRulesalsorequireeachregulatedentitytoestablishaninternal
complianceprogramthatisconsistentwiththeextenttowhichitengagesinactivitiescoveredbytheVolckerRule,whichmustinclude(forthe
largestentities)makingregularreportsaboutthoseactivitiestoregulators.Communitybanks,suchasCustomersBancorp,havebeenafforded
somereliefundertheFinalRules.Ifsuchbanksareengagedonlyinexemptedproprietarytrading,suchastradinginU.S.government,agency,
stateandmunicipalobligations,theyareexemptentirelyfromcomplianceprogramrequirements.Moreover,evenifacommunitybankengages
inproprietarytradingorcoveredfundactivitiesundertherule,theyneedonlyincorporatereferencestotheVolckerRuleintotheirexisting
policiesandprocedures.TheFinalRulesareeffectiveApril1,2014,buttheconformanceperiodhasbeenextendedfromitsstatutoryenddateof
July21,2014untilJuly21,2015.ManagementiscurrentlyevaluatingtheFinalRules,whicharelengthyanddetailed.
Weoperateinahighlyregulatedenvironmentandthelawsandregulationsthatgovernouroperations,corporategovernance,executive
compensationandaccountingprinciples,orchangesinthem,orourfailuretocomplywiththem,couldmateriallyandadverselyaffectus.
Wearesubjecttoextensiveregulation,supervision,andlegislationthatgovernalmostallaspectsofouroperations.Intendedtoprotect
customers,depositorsandtheFDICsDepositInsuranceFund(theDIF)andnotourshareholders,theselawsandregulations,amongother
matters,prescribeminimumcapitalrequirements,imposelimitationsonourbusinessactivities,limitthedividendsordistributionsthatwecan
pay,restricttheabilityofoursubsidiarybanktoengageintransactionswiththeCompany,andimposecertainspecificaccountingrequirements
onusthatmaybemorerestrictiveandmayresultingreaterorearlierchargestoearningsorreductionsinourcapitalthanGAAP.Compliance
withlawsandregulationscanbedifficultandcostly,andchangestolawsandregulationsoftenimposeadditionalcompliancecosts,andmay
makecertainproductsimpermissibleoruneconomic.Ourfailuretocomplywiththeselawsandregulations,evenifthefailurefollowsgoodfaith
effortorreflectsadifferenceininterpretation,couldsubjectustorestrictionsonourbusinessactivities,reputationalharm,finesandother
penalties,anyofwhichcouldmateriallyandadverselyaffectus.Further,anynewlaws,rulesandregulationscouldmakecompliancemore
difficultorexpensiveandalsomateriallyandadverselyaffectus.
OurmostrecentCommunityReinvestmentActratingcouldhaveanegativeeffectontheFederalReservesreviewofcertainbanking
applications.
Inearly2013,ourprimaryfederalregulator,theFederalReserve,conductedaregularlyscheduledexaminationcovering2011and2012to
determinetheBankscompliancewiththeCommunityReinvestmentAct(CRA).CRAandrelatedregulationsrequirebanks,suchastheBank,
tohelpmeetthecreditneedsoftheircommunities,includinglowandmoderateincomeneighborhoods.Duringthefourthquarterof2013,the
FederalReserveissuedtheBanksCRAPerformanceEvaluation.TheBankreceivedaratingofneedstoimprove(whichislowerthanthe
satisfactoryratingreceivedinthe2010examination)principallyasaresultofallegedfairlendingissuesassociatedwithourlimitedmortgage
originationactivitiesduring2011and2012.TheFederalReserveconsiders,amongotherfactors,abankscompliancewiththeCRAin
reviewingcorporateapplications,suchasapplicationstoestablishbranchesorconductmergersandacquisitions,andaratingbelow
satisfactorycanresultinthedenialofsuchapplications.Thefailuretoreceivearatingofsatisfactoryorbettercanalsoresultinother
restrictionsonactivities.SuchrestrictionsmaylastuntilsuchtimeastheBankreceivesaratingofsatisfactoryorbetterwithrespecttoCRA,
andanewreviewoftheBankscompliancemaynotoccurforseveralmonths.
Wearesubjecttonumerouslawsandgovernmentalregulationsandtoregularexaminationsbyourregulatorsofourbusinessandcompliance
withlawsandregulations,andourfailuretocomplywithsuchlawsandregulationsortoadequatelyaddressanymattersidentifiedduringour
examinationscouldmateriallyandadverselyaffectus.
Federalbankingagenciesregularlyconductcomprehensiveexaminationsofourbusiness,includingourcompliancewithapplicablelaws,
regulationsandpoliciesapplicabletotheBancorpandtheBank.Examinationreportsandratings(whichoftenarenotpubliclyavailable)and
otheraspectsofthissupervisoryframeworkcanmateriallyimpacttheconduct,organicandacquisitiongrowth,andprofitabilityofourbusiness.
Ourregulatorshaveextensivediscretionintheirsupervisoryandenforcementactivitiesandmayimposeavarietyofremedialactions,conditions
orlimitationsonourbusinessoperationsif,asaresultofanexamination,theydeterminedthatourfinancialcondition,capitalresources,asset
quality,earningsprospects,management,liquidityorotheraspectsofanyofouroperationshadbecomeunsatisfactory,orthattheCompanyor
itsmanagementwasinviolationofanylaw,regulationorpolicy.Examplesofthoseactions,conditionsorlimitationsincludeenjoiningunsafe
orunsoundpractices,requiringaffirmativeactionstocorrectanyconditionsresultingfromanyassertedviolationoflaw,issuingadministrative
ordersthatcanbejudiciallyenforced,directingincreasesinourcapital,assessingcivilmonetarypenaltiesagainstourofficersordirectors,
removingofficersanddirectorsand,ifaconclusionwasreachedthattheoffendingconditionscannotbecorrectedorthereisanimminentriskof
losstodepositors,terminatingourdepositinsurance.Otheractions,formalorinformal,thatmaybeimposedcouldrestrictourgrowth,including
regulatorydenialstoexpandbranches,relocate,addsubsidiariesandaffiliates,expandintonewfinancialactivitiesormergewithor

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purchaseotherfinancialinstitutions.Thetimingoftheseexaminations,includingthetimingoftheresolutionofanyissuesidentifiedbyour
regulatorsintheexaminationsandthefinaldeterminationbythemwithrespecttotheimpositionofanyremedialactions,conditionsor
limitationsonourbusinessoperations,isgenerallynotwithinourcontrol.Wealsocouldsufferreputationalharmintheeventofanyperceived
oractualnoncompliancewithcertainlawsandregulations.Ifwebecomesubjecttosuchregulatoryactions,wecouldbemateriallyandadversely
affected.
TheFDICsrestorationplanandtherelatedincreasedassessmentratecouldmateriallyandadverselyaffectus.
TheFDICinsuresdepositsatFDICinsureddepositoryinstitutionsuptoapplicablelimits.Theamountofaparticularinstitutionsdeposit
insuranceassessmentisbasedonthatinstitutionsriskclassificationunderanFDICriskbasedassessmentsystem.Aninstitutionsrisk
classificationisassignedbasedonitscapitallevelsandthelevelofsupervisoryconcerntheinstitutionposestoitsregulators.Market
developmentshavesignificantlydepletedtheDIFoftheFDICandreducedtheratioofreservestoinsureddeposits.Asaresultofrecent
economicconditionsandtheenactmentoftheDoddFrankAct,theFDIChasincreasedthedepositinsuranceassessmentratesandthusraised
depositinsurancepremiumsforinsureddepositoryinstitutions.IftheseincreasesareinsufficientfortheDIFtomeetitsfundingrequirements,
theremayneedtobefurtherspecialassessmentsorincreasesindepositinsurancepremiums.Wearegenerallyunabletocontroltheamountof
premiumsthatwearerequiredtopayforFDICinsurance.Ifthereareadditionalbankorfinancialinstitutionfailures,wemayberequiredtopay
evenhigherFDICpremiumsthantherecentlyincreasedlevels.Anyfutureadditionalassessments,increasesorrequiredprepaymentsinFDIC
insurancepremiumsmaymateriallyandadverselyaffectus,includingbyreducingourprofitabilityorlimitingourabilitytopursuecertain
businessopportunities.
Federalbankingagenciesperiodicallyconductexaminationsofourbusiness,includingcompliancewithlawsandregulations,andourfailure
tocomplywithanysupervisoryactionstowhichwebecomesubjectasaresultofsuchexaminationscouldmateriallyandadverselyaffectus.
Federalbankingagenciesperiodicallyconductexaminationsofourbusiness,includingourcompliancewithlawsandregulations.If,asaresult
ofanexamination,afederalbankingagencyweretodeterminethatthefinancialcondition,capitalresources,assetquality,earningsprospects,
management,liquidityorotheraspectsofanyofouroperationshadbecomeunsatisfactory,orthattheCompanyoritsmanagementwasin
violationofanylaworregulation,itmaytakeanumberofdifferentremedialactionsasitdeemsappropriate.Theseactionsincludethepowerto
enjoinunsafeorunsoundpractices,torequireaffirmativeactionstocorrectanyconditionsresultingfromanyviolationorpractice,toissuean
administrativeorderthatcanbejudiciallyenforced,todirectanincreaseinourcapital,torestrictourgrowth,toassesscivilmonetarypenalties
againstourofficersordirectors,toremoveofficersanddirectorsand,ifitisconcludedthatsuchconditionscannotbecorrectedorthereisan
imminentriskoflosstodepositors,toterminateourdepositinsurance.Ifwebecomesubjecttosuchregulatoryactions,wecouldbematerially
andadverselyaffected.
TheFederalReservemayrequireustocommitcapitalresourcestosupportoursubsidiarybanks.
Asamatterofpolicy,theFederalReserve,whichexaminesusandoursubsidiaries,expectsabankholdingcompanytoactasasourceof
financialandmanagerialstrengthtoasubsidiarybankandtocommitresourcestosupportsuchsubsidiarybank.Underthesourceofstrength
doctrine,theFederalReservemayrequireabankholdingcompanytomakecapitalinjectionsintoatroubledsubsidiarybankandmaycharge
thebankholdingcompanywithengaginginunsafeandunsoundpracticesforfailuretocommitresourcestosuchasubsidiarybank.Inaddition,
theDoddFrankActdirectsthefederalbankregulatorstorequirethatallcompaniesthatdirectlyorindirectlycontrolaninsureddepository
institutionserveasasourceofstrengthfortheinstitution.Underthisrequirement,wecouldberequiredtoprovidefinancialassistanceto
CustomersBankoranyothersubsidiarybankswemayowninthefutureshouldtheyexperiencefinancialdistress.
Acapitalinjectionmayberequiredattimeswhenwedonothavetheresourcestoprovideitandthereforewemayberequiredtoborrowthe
fundsorraiseadditionalequitycapitalfromthirdparties.Anyloansbyaholdingcompanytoitssubsidiarybankaresubordinateinrightof
paymenttodepositsandtocertainotherindebtednessofthesubsidiarybank.Intheeventofabankholdingcompanysbankruptcy,the
bankruptcytrusteewillassumeanycommitmentbytheholdingcompanytoafederalbankregulatoryagencytomaintainthecapitalofa
subsidiarybank.Moreover,bankruptcylawprovidesthatclaimsbasedonanysuchcommitmentwillbeentitledtoapriorityofpaymentoverthe
claimsoftheholdingcompanysgeneralunsecuredcreditors,includingtheholdersofitsindebtedness.Anyfinancingthatmustbedonebythe
holdingcompanyinordertomaketherequiredcapitalinjectionmaybedifficultandexpensiveandmaynotbeavailableonattractiveterms,or
atall,whichlikelywouldhaveamaterialadverseeffectonus.
TheshorttermandlongtermimpactofthenewregulatorycapitalstandardsandtheforthcomingnewcapitalrulesonU.S.banksisuncertain.
OnSeptember12,2010,theBaselCommitteeonBankingSupervision,announcedanagreementtoastrengthenedsetofcapitalrequirementsfor
internationallyactivebankingorganizationsintheUnitedStatesandaroundtheworld,knownasBaselIII.BaselIIInarrowsthedefinitionof
capital,introducesrequirementsforminimumTier1commoncapital,increasesrequirementsforminimumTier1capitalandtotalriskbased
capital,andchangesriskweightingmethodologies.BaselIIIisscheduledtobephasedinovertimeuntilfullyphasedinbyJanuary1,2019.

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Table of Contents
OnJuly2,2013,theFederalReserveadoptedafinalruleregardingnewcapitalrequirementspursuanttoBaselIII.Theserules,whichare
currentlyscheduledtobecomeeffectiveonJanuary1,2015forcommunitybanks,couldincreasetherequiredamountofregulatorycapitalthat
wemustholdandleadtolimitationsonthedividendpaymentstousbyCustomersBank.
VariousprovisionsoftheDoddFrankActincreasethecapitalrequirementsofbankholdingcompanies,suchasCustomersBancorp,andnon
bankfinancialcompaniesthataresupervisedbytheFederalReserve.Theleverageandriskbasedcapitalratiosoftheseentitiesmaynotbelower
thantheleverageandriskbasedcapitalratiosforinsureddepositoryinstitutions.WhiletheBaselIIIchangesandotherregulatorycapital
requirementswilllikelyresultingenerallyhigherregulatorycapitalstandards,weareevaluatingthenewrulesandtheireffectonusandour
banksubsidiaries.
WefaceariskofnoncomplianceandenforcementactionwiththeBankSecrecyActandotherantimoneylaunderingstatutesandregulations.
ThefederalBankSecrecyAct,theUnitingandStrengtheningAmericabyProvidingAppropriateToolsRequiredtoInterceptandObstruct
TerrorismActof2001(thePATRIOTAct)andotherlawsandregulationsrequirefinancialinstitutions,amongotherduties,toinstituteand
maintainaneffectiveantimoneylaunderingprogramandfilesuspiciousactivityandcurrencytransactionreportsasappropriate.Thefederal
FinancialCrimesEnforcementNetwork,establishedbytheU.S.TreasuryDepartmenttoadministertheBankSecrecyAct,isauthorizedtoimpose
significantcivilmoneypenaltiesforviolationsofthoserequirements,andhasrecentlyengagedincoordinatedenforcementeffortswiththe
individualfederalbankingregulators,aswellastheU.S.DepartmentofJustice,DrugEnforcementAdministration,andInternalRevenueService.
ThereisalsoincreasedscrutinyofcompliancewiththerulesenforcedbytheOfficeofForeignAssetsControl(theOFAC).Ifourpolicies,
proceduresandsystemsaredeemeddeficientorthepolicies,proceduresandsystemsofthefinancialinstitutionsthatwehavealreadyacquiredor
mayacquireinthefuturearedeficient,wewouldbesubjecttoliability,includingfinesandregulatoryactions(suchasrestrictionsonourability
topaydividendsandthenecessitytoobtainregulatoryapprovalstoproceedwithcertainaspectsofourbusinessplan,includingouracquisition
plans),whichcouldmateriallyandadverselyaffectus.Failuretomaintainandimplementadequateprogramstocombatmoneylaunderingand
terroristfinancingcouldalsohaveseriousreputationalconsequencesforus.
Federal,stateandlocalconsumerlendinglawsmayrestrictourabilitytooriginatecertainmortgageloansorincreaseourriskofliability
withrespecttosuchloansandcouldincreaseourcostofdoingbusiness.
Federal,stateandlocallawshavebeenadoptedthatareintendedtoeliminatecertainlendingpracticesconsideredpredatory.Theselaws
prohibitpracticessuchassteeringborrowersawayfrommoreaffordableproducts,sellingunnecessaryinsurancetoborrowers,repeatedly
refinancingloansandmakingloanswithoutareasonableexpectationthattheborrowerswillbeabletorepaytheloansirrespectiveofthevalue
oftheunderlyingproperty.Itisourpolicynottomakepredatoryloans,buttheselawscreatethepotentialforliabilitywithrespecttoourlending
andloaninvestmentactivities.Theyincreaseourcostofdoingbusinessand,ultimately,maypreventusfrommakingcertainloansandcauseus
toreducetheaveragepercentagerateorthepointsandfeesonloansthatwedomake.
RisksRelatingtoOurVotingCommonStock
CustomersBancorpstock,listedonTheNasdaqStockMarket,LLC(NASDAQ),isthinlytradedandmarketliquiditymaydecreaseinthe
eventofadverseperformanceorchangingmarketconditions.
CustomersBancorp,Inc.sharesaretradedonNASDAQ.AdversenewsoramarketeventcouldaffecttheliquidityforCustomersstock.
Accordingly,shareholdersmaynotbeabletoselltheirsharesofourVotingCommonStockatthevolume,priceandtimedesired.Apublic
tradingmarkethavingthedesiredcharacteristicsofdepth,liquidityandorderliness,dependsuponthepresenceinthemarketplaceofwilling
buyersandsellersofourVotingcommonstockatanygiventime,whichpresencewillbedependentupontheindividualdecisionsofinvestors,
overwhichwehavenocontrol.Illiquidityofthestockmarket,orCustomersBancorpsstocktradedonNASDAQ,couldhaveamaterialadverse
effectonthevalueofourVotingCommonStock.
WedonotexpecttopaycashdividendsonourVotingCommonStockintheforeseeablefuture,andourabilitytopaydividendsissubjectto
regulatorylimitations.
WehavenothistoricallydeclarednorpaidcashdividendsonourVotingCommonStockandwedonotexpecttodosointhenearfuture.Any
futuredeterminationrelatingtodividendpolicywillbemadeatthediscretionofourboardofdirectorsandwilldependonanumberoffactors,
includingearningsandfinancialcondition,liquidityandcapitalrequirements,thegeneraleconomicandregulatoryclimate,abilitytoservice
anyequityordebtobligationsseniortotheVotingCommonStock,andotherfactorsdeemedrelevantbytheboardofdirectors.
Inaddition,asabankholdingcompany,wearesubjecttogeneralregulatoryrestrictionsonthepaymentofcashdividends.Federalbank
regulatoryagencieshavetheauthoritytoprohibitbankholdingcompaniesfromengaginginunsafeorunsoundpracticesinconductingtheir
business,whichdependingonthefinancialconditionandliquidityoftheholdingcompanyatthetime,couldinclude

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thepaymentofdividends.Further,variousfederalandstatestatutoryprovisionslimittheamountofdividendsthatourbanksubsidiariescanpay
tousasitsholdingcompanywithoutregulatoryapproval.SeeMarketPriceofCommonStockandDividendsDividendsonVotingCommon
Stockbelowforfurtherdetailregardingrestrictionsonourabilitytopaydividends.
WemayissueadditionalsharesofourcommonstockinthefuturewhichcouldadverselyaffectthevalueorvotingpoweroftheVoting
CommonStock.
ActualoranticipatedissuancesorsalesofsubstantialamountsofourcommonstockinthefuturecouldcausethevalueofourVotingCommon
Stocktodeclinesignificantlyandmakeitmoredifficultforustosellequityorequityrelatedsecuritiesinthefutureatatimeandontermsthat
wedeemappropriate.Theissuanceofanysharesofourcommonstockinthefuturealsowould,andequityrelatedsecuritiescould,dilutethe
percentageownershipinterestheldbyshareholderspriortosuchissuance.ActualissuancesofourVotingCommonStockcouldalso
significantlydilutethevotingpoweroftheVotingCommonStock.In2013,weissued6,174,104sharesofVotingCommonStockinapublic
offering,andin2012,weissued7,111,819sharesofVotingCommonStockinprivateofferings.
WehavealsomadegrantsofrestrictedstockunitsandstockoptionswithrespecttosharesofVotingCommonStockandClassBNonVoting
CommonStocktoourdirectorsandcertainemployees.Wemayalsoissuefurtherequitybasedawardsinthefuture.Assuchsharesareissued
uponvestingandassuchoptionsmaybeexercisedandtheunderlyingsharesareorbecomefreelytradeable,thevalueorvotingpowerofour
VotingCommonStockmaybeadverselyaffectedandourabilitytosellmoreequityorequityrelatedsecuritiescouldalsobeadverselyaffected.
Exceptfor588,813warrantsheldbycertaininvestorsatDecember31,2013,wearenotrequiredtoissueanyadditionalequitysecuritiesto
existingholdersofourVotingCommonStockonapreemptivebasis.Therefore,additionalcommonstockissuances,directlyorthrough
convertibleorexchangeablesecurities,warrantsoroptions,willgenerallydilutetheholdingsofourexistingholdersofVotingCommonStock
andsuchissuancesortheperceptionofsuchissuancesmayreducethemarketpriceofourVotingCommonStock.Ourpreferredstock,ifissued,
wouldlikelyhaveapreferenceondistributionpayments,periodicallyoruponliquidation,whichcouldeliminateorotherwiselimitourability
tomakedistributionstoholdersofourVotingCommonStock.Becauseourdecisiontoissuedebtorequitysecuritiesorincurotherborrowings
inthefuturewilldependonmarketconditionsandotherfactorsbeyondourcontrol,theamount,timing,natureorsuccessofourfuturecapital
raisingeffortsisuncertain.Thus,holdersofourVotingCommonStockbeartheriskthatourfutureissuancesofdebtorequitysecuritiesorour
incurrenceofotherborrowingswillnegativelyaffectthevalueofourVotingCommonStock.
Futureissuancesofdebtorequitysecurities,whichwouldrankseniortoourVotingCommonStockuponourliquidation,andfutureissuances
ofequitysecurities,whichwoulddilutetheholdingsofourexistingholdersofVotingCommonandmaybeseniortoourVotingCommon
Stockforthepurposesofmakingdistributions,periodicallyoruponliquidation,maynegativelyaffectthemarketpriceofourVotingCommon
Stock.
Inthefuture,wemayissuedebtorequitysecuritiesorincurotherborrowings.Uponourliquidation,holdersofourdebtsecuritiesandother
loansandpreferredstockwillreceiveadistributionofouravailableassetsbeforeholdersofourVotingCommonStock.Ifweincurdebtinthe
future,ourfutureinterestcostscouldincrease,andadverselyaffectourliquidity,cashflowsandresultsofoperations.
Provisionsinourarticlesofincorporationandbylawsmayinhibitatakeoverofus,whichcoulddiscouragetransactionsthatwouldotherwise
beinthebestinterestsofourshareholdersandcouldentrenchmanagement.
Provisionsofourarticlesofincorporationandbylaws,andapplicableprovisionsofPennsylvanialawandthefederalChangeinBankControl
Actmaydelay,inhibitorpreventsomeonefromgainingcontrolofourbusinessthroughatenderoffer,businesscombination,proxycontestor
someothermethodeventhoughsomeofourshareholdersmightbelieveachangeincontrolisdesirable.Theymightalsoincreasethecostsof
completingatransactioninwhichweacquireanotherfinancialservicesbusiness,mergewithanotherfinancialinstitution,orsellourbusinessto
anotherfinancialinstitution.Theseincreasedcostscouldreducethevalueofthesharesheldbyourshareholdersuponcompletionofthesetypes
oftransactions.
Shareholdersmaybedeemedtobeactinginconcertorotherwiseincontrolofusandourbanksubsidiaries,whichcouldimposeprior
approvalrequirementsandresultinadverseregulatoryconsequencesforsuchholders.
WeareabankholdingcompanyregulatedbytheFederalReserve.Anyentity(includingagroupcomposedofnaturalpersons)owning25%or
moreofaclassofouroutstandingsharesofvotingstock,oralesserpercentageifsuchholderorgroupotherwiseexercisesacontrolling
influenceoverus,maybesubjecttoregulationasabankholdingcompanyinaccordancewiththeBankHoldingCompanyActof1956,as
amended(theBHCA).Inaddition,(1)anybankholdingcompanyorforeignbankwithaU.S.presenceisrequiredtoobtaintheapprovalofthe
FederalReserveundertheBHCAtoacquireorretain5%ormoreofaclassofouroutstandingsharesofvotingstock,and(2)anypersonother
thanabankholdingcompanymayberequiredtoobtainpriorregulatoryapprovalundertheChangeinBankControlActtoacquireorretain
10%ormoreofouroutstandingsharesofvotingstock.AnyshareholderthatisdeemedtocontroltheCompanyforbankregulatorypurposes
wouldbecomesubjecttopriorapproval

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requirementsandongoingregulationandsupervision.Suchaholdermayberequiredtodivestamountsequaltoorexceeding5%ofthevoting
sharesofinvestmentsthatmaybedeemedincompatiblewithbankholdingcompanystatus,suchasaninvestmentinacompanyengagedinnon
financialactivities.Regulatorydeterminationofcontrolofadepositoryinstitutionorholdingcompanyisbasedonalloftherelevantfactsand
circumstances.Potentialinvestorsareadvisedtoconsultwiththeirlegalcounselregardingtheapplicableregulationsandrequirements.
Ourcommonstockownedbyholdersdeterminedbyabankregulatoryagencytobeactinginconcertwouldbeaggregatedforpurposesof
determiningwhetherthoseholdershavecontrolofabankorbankholdingcompany.Eachshareholderobtainingcontrolthatisacompany
wouldberequiredtoregisterasabankholdingcompany.Actinginconcertgenerallymeansknowingparticipationinajointactivityor
parallelactiontowardsthecommongoalofacquiringcontrolofabankoraparentcompany,whetherornotpursuanttoanexpressagreement.
Themannerinwhichthisdefinitionisappliedinindividualcircumstancescanvaryandcannotalwaysbepredictedwithcertainty.Manyfactors
canleadtoafindingofactinginconcert,includingwhere:(i)theshareholdersarecommonlycontrolledormanaged(ii)theshareholdersare
partiestoanoralorwrittenagreementorunderstandingregardingtheacquisition,votingortransferofcontrolofvotingsecuritiesofabankor
bankholdingcompany(iii)theshareholderseachownstockinabankandarealsomanagementofficials,controllingshareholders,partnersor
trusteesofanothercompanyor(iv)bothashareholderandacontrollingshareholder,partner,trusteeormanagementofficialofsuchshareholder
ownequityinthebankorbankholdingcompany.
TheFDICspolicystatementimposingrestrictionsandcriteriaonprivateinvestorsinfailedbankacquisitionswillapplytousandour
investors.
OnAugust26,2009,theFDICissuedapolicystatementimposingrestrictionsandcriteriaonprivateinvestorsinfailedbankacquisitions.The
policystatementisbroadinscopeandbothcomplexandpotentiallyambiguousinitsapplication.Inmostcasesitwouldapplytoaninvestor
withmorethan5%ofthetotalvotingpowerofanacquireddepositoryinstitutionoritsholdingcompany,butincertaincircumstancesitcould
applytoinvestorsholdingfewervotingshares.Thepolicystatementwillbeappliedtousifwemakeadditionalfailedbankacquisitionsfromthe
FDICoriftheFDICchangesitsinterpretationofthepolicystatementordeterminesatsomefuturedatethatitshouldbeappliedbecauseofour
circumstances.
Investorssubjecttothepolicystatementcouldbeprohibitedfromsellingortransferringtheirinterestsforthreeyears.Theyalsowouldbe
requiredtoprovidetheFDICwithinformationabouttheinvestorandallentitiesintheinvestorsownershipchain,includinginformationonthe
sizeofthecapitalfundorfunds,itsdiversification,itsreturnprofile,itsmarketingdocuments,anditsmanagementteamandbusinessmodel.
Investorsowning80%ormoreoftwoormorebanksorsavingsassociationswouldberequiredtopledgetheirproportionateinterestsineach
institutiontocrossguaranteetheFDICagainstlossestotheDepositInsuranceFund.
Underthepolicystatement,theFDICalsocouldprohibitinvestmentthroughownershipstructuresinvolvingmultipleinvestmentvehiclesthat
areownedorcontrolledbythesameparentcompany.Investorsthatdirectlyorindirectlyhold10%ormoreoftheequityofabankorsavings
associationinreceivershipalsowouldnotbeeligibletobidtobecomeinvestorsinthedepositliabilitiesofthatfailedinstitution.Inaddition,an
investorusingownershipstructureswithentitiesthataredomiciledinbanksecrecyjurisdictionswouldnotbeeligibletoownadirectorindirect
interestinaninsureddepositoryinstitutionunlesstheinvestorsparentcompanyissubjecttocomprehensiveconsolidatedsupervisionas
recognizedbytheFederalReserveandtheinvestorentersintocertainagreementswiththeU.S.bankregulatorsregardingaccesstoinformation,
maintenanceofrecordsandcompliancewithU.S.bankinglawsandregulations.Ifthepolicystatementapplies,we(includinganyfailedbankwe
acquire)couldberequiredtomaintainaratioofTier1commonequitytototalassetsofatleast10%foraperiodof3years,andthereafter
maintainacapitallevelsufficienttobewellcapitalizedunderregulatorystandardsduringtheremainingperiodofownershipoftheinvestors.
Banksubsidiariesalsomaybeprohibitedfromextendinganynewcredittoinvestorsthatownatleast10%ofourequity.

Item1B. UnresolvedStaffComments
None.

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Table of Contents
Item2. Properties
Thetablebelowsummarizesourleasedbranchandofficeproperties,bycounty,asofDecember31,2013.Wedonotcurrentlyownanyreal
property.

BankBranches
County State Leased
Berks(1) PA 4
Bucks PA 3
Chester(2) PA 3
Delaware PA 2
Westchester NY 1
Mercer NJ 1

14

AdministrativeOffices
County State Leased
Berks(3) PA 3
Bucks(6) PA 1
Chester(2) PA 2
Delaware(7) PA 1
Philadelphia(8) PA 1
Fairfax(9) VA 1
Mercer(4) NJ 1
NewYork(10) NY 1
Westchester(5) NY 2
Providence(11) RI 1
Suffolk(12) MA 1

15

(1) Includesthefullservicebranchat1001PennAvenue,Wyomissing,PAaswellasthreebranchesacquiredthroughtheBerkshireBancorp,
Inc.acquisition.Theleaseonthislocationexpiresin2015.
(2) IncludesthecorporateheadquartersofCustomersBankandafullservicebranchlocatedinafreestandingbuildingat99BridgeSt.,
Phoenixville,PA19460,whereinweleaseapproximately23,176squarefeeton3floors.Theleaseonthislocationexpiresin2020.Also
includestheleaseof5,523squarefeetofpropertyat513KimbertonRoadinPhoenixville,Pennsylvaniawherewemaintainafullservice
commercialbankbranchandcorporateoffices.Theleaseonthislocationexpiresin2014.
(3) IncludesthecorporateheadquartersofCustomersBancorpandafullservicebranchlocatedat1015PennAvenue,Wyomissing,PA.The
leasedspacecoversatotalof9,604squarefeet.Thisleaseexpiresin2015.Also,includestheadministrativeofficesforthecorporate
lendinggroupwhichishousedwithintheExeterbranchlocationandtwootheradministrativeofficesforCompanypersonnel.
(4) Welease7,327squarefeetofspaceinHamilton,NewJerseyfromwhichweconductourmortgagewarehouseandretaillendingactivities.
Theleaseonthislocationexpiresin2019.
(5) RepresentsadministrativeofficesforCompanypersonnel.Theleaseonthislocationexpiresin2022.
(6) RepresentsadministrativeofficeforCompanypersonnel.Theleaseonthislocationexpiresin2017.
(8) RepresentsloanofficeforCompanypersonnel.Theleaseonthislocationexpiresin2014.
(10) RepresentsloanofficeforCompanypersonnel.Theleaseonthislocationexpiresin2020.
TheBankbranchlocations,whichrangeinsizefromapproximately1,800to3,900squarefeet,haveleasesontheselocationswhichexpire
between2014and2022.
Thetotalminimumcashleasepaymentsforourcurrentbranches,administrativeofficesandmortgagewarehouselendinglocationsamountto
approximately$208,000permonth.

Item3. LegalProceedings
OnAugust7,2013,CustomersreceivedaletterfromtheFederalReserveBankofPhiladelphia(ReserveBank)ofitsdetermination,in
connectionwithitsconsumercomplianceandCommunityReinvestmentActexaminationsoftheBankfortheperiodof2011and2012,tomake
areferraltotheDepartmentofJustice.TheReserveBankinformedusthatitmadethereferralbasedonitsbeliefthat

8/26/2014 Form 10-K
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Table of Contents
CustomersBankhasnotcompliedwithcertainprovisionsoftheEqualCreditOpportunityAct(ECOA),FairHousingAct(FHA)and
RegulationBwithregardtotheCityofPhiladelphia.CustomersBankreceivednotificationasofSeptember24,2013thattheDepartmentof
JusticehasinitiatedaninvestigationofCustomersundertheECOAandFHA.CustomersbelievesthattheBankhascompliedwiththeselaws
andregulations.WearecooperatingfullywiththeDepartmentofJusticeintheconductofitsinvestigation.Otherthanrequestsforinformation,
towhichwehaveresponded,wehavenotreceivedanycommunicationfromtheDepartmentofJusticeregardingtheresultsoftheirinvestigation
ofthismatter.

Item4. MineSafetyDisclosures
NotApplicable.
PARTII

Item5. MarketForRegistrantsCommonEquity,RelatedShareholderMattersandIssuerPurchasesofEquitySecurities
TradingMarketforVotingCommonStock
SinceMay2013,thecommonstockofCustomersBancorphasbeenlistedforquotationontheNasdaqGlobalSelectMarketunderthesymbol
CUBI.PriortoMay2013,bidquotationsforthecommonstockofCustomersBancorpwerelistedontheOTCPinkSheetsunderthesymbol
CUUU.
MarketPriceofVotingCommonStock
ThechartbelowdisplaysthehighandlowsalepricesofthecommonstockofCustomersBancorpasreportedontheNasdaqGlobalSelect
MarketbetweenMay16,2013andDecember31,2013.FromJanuary1,2012untilMay15,2013,thechartdisplaysthehighandlowsaleprices
ofthecommonstockofCustomersBancorpknownbymanagementtohaveoccurredorbidquotationsontheOTCPinkSheets.

Quarterended High Low
December31,2013 $23.14 $15.83
September30,2013 17.99 15.53
June30,2013 18.00 15.15
March31,2013 18.50 13.50
December31,2012 18.25 13.00
September30,2012 14.00 13.99
June30,2012 12.00 12.00
March31,2012 12.00 12.00
AsofMarch3,2014,therewere:(1)approximately441shareholdersofrecordofourVotingCommonStockandoneshareholderofrecordofour
ClassBNonVotingCommonStockand(2)23,264,351outstandingsharesofourVotingCommonStockand1,019,755outstandingsharesof
ourClassBNonVotingCommonStock.
DividendsonVotingCommonStock
NeitherCustomersBancorpnorCustomersBank(priortothereorganizationintoaBankHoldingCompanystructure),historicallyhaspaidany
cashdividendsonitssharesofcommonstock,anditdoesnotexpecttodosointhenearfuture.Anyfuturedeterminationrelatingtodividend
policywillbemadeatthediscretionofCustomersBancorpsboardofdirectorsandwilldependonanumberoffactors,includingearningsand
financialcondition,liquidityandcapitalrequirements,thegeneraleconomicandregulatoryclimate,abilitytoserviceanyequityordebt
obligationsseniortotheVotingCommonStock,andotherfactorsdeemedrelevantbytheboardofdirectors.
Inaddition,asabankholdingcompany,CustomersBancorpissubjecttogeneralregulatoryrestrictionsonthepaymentofcashdividends.
Federalbankregulatoryagencieshavetheauthoritytoprohibitbankholdingcompaniesfromengaginginunsafeorunsoundpracticesin
conductingtheirbusiness,whichdependingonthefinancialconditionandliquidityoftheholdingcompanyatthetime,couldincludethe
paymentofdividends.Further,variousfederalandstatestatutoryprovisionslimittheamountofdividendsthatbanksubsidiariescanpaytotheir
parentholdingcompanywithoutregulatoryapproval.Generally,subsidiariesareprohibitedfrompayingdividendswhendoingsowouldcause
themtofallbelowtheregulatoryminimumcapitallevels,andlimitsexistonpayingdividendsinexcessofnetincomeforspecifiedperiods.

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BeginningJanuary1,2015,theabilitytopaydividendsandtheamountsthatcanbepaid,willbelimitedtotheextentthebankcapitalratiosdo
notexceedtheminimumrequiredlevelsplus250basispoints(seediscussionontheriskbasedcapitalrequirementsonpage71).
IssuerPurchasesofEquitySecurities
OnNovember26,2013,theBancorpsBoardofDirectorsauthorizedastockrepurchaseplaninwhichtheBancorpcouldacquireupto5%ofits
currentoutstandingsharesatpricesnottoexceeda20%premiumoverthethencurrentbookvalue.Therepurchaseprogramhasnoexpiration
datebutmaybesuspended,modifiedordiscontinuedatanytime,andtheBancorphasnoobligationtorepurchaseanyamountofitscommon
stockundertheprogram.
ThefollowingtablepresentstheBancorpsmonthlyrepurchasesofitscommonstockduringthefourthquarterof2013:

Period
TotalNumber
ofShares
Purchased
AveragePrice
PaidperShare
TotalNumber
ofShares
Purchasedas
PartofPublicly
AnnouncedPlans
orPrograms
Maximum
Numberof
SharesthatMay
YetBePurchased
UnderthePlans
orPrograms
October1,2013toOctober31,2013
November1,2013toNovember30,2013 484,641 $ 16.00 484,641 750,551
December1,2013toDecember31,2013 484,641 750,551
CommonStockPerformanceGraph
ThefollowinggraphcomparestheperformanceofourcommonstockfortheyearendedDecember31,2013,tothatofthetotalreturnindexfor
theSNLMidAtlanticBankIndexandtheSNLU.S.BankNASDAQIndex,assuminganinvestmentof$100onDecember31,2012.In
calculatingtotalannualshareholderreturn,reinvestmentofdividends,ifany,isassumed.CustomersBancorpobtainedtheinformation
containedintheperformancegraphfromSNLFinancial.
ThegraphbelowisfurnishedunderthisPartII,Item5ofthisForm10Kandshallnotbedeemedtobesolicitingmaterialortobefiledwith
theCommissionorsubjecttoRegulation14Aor14C,ortotheliabilitiesofSection18oftheExchangeActof1934,asamended.

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Item6. SelectedFinancialData
CustomersBancorp,Inc.andSubsidiaries
ThefollowingtablepresentsCustomersBancorpssummaryconsolidatedfinancialdata.CustomersBancorpderivedthebalancesheetand
incomestatementdatafortheyearsendedDecember31,2013,2012,2011,2010,and2009fromitsauditedfinancialstatements.Thesummary
consolidatedfinancialdatashouldbereadinconjunctionwith,andisqualifiedintheirentiretyby,CustomersBancorpsfinancialstatements
andtheaccompanyingnotesandtheotherinformationincludedelsewhereinthisAnnualReport.Certainamountsreportedinthistablehave
beenreclassifiedtoconformtothe2013presentation.ThesereclassificationsdidnotsignificantlyimpactBancorpsfinancialpositionorresults
ofoperations.

2013 2012 2011(1) 2010(2) 2009
(dollarsinthousands,exceptpershareinformation)
FortheYearendedDecember31,
Interestincome $ 127,516 $ 93,543 $ 61,245 $ 30,907 $ 13,486
Interestexpense 24,301 21,761 22,464 11,546 6,336
Netinterestincome 103,215 71,782 38,781 19,361 7,150
Provisionforloanlosses 2,236 14,270 7,495 10,397 11,778
Bargainpurchasegainsonacquisitions 0 0 0 40,254 0
Totalnoninterestincome,excludingbargainpurchase
gains 23,343 29,229 11,469 5,416 1,043
Totalnoninterestexpense 74,024 50,651 36,886 26,168 9,650
Income(loss)beforetaxes 50,298 36,090 5,869 28,466 (13,235)
Incometaxexpense 17,604 12,272 1,835 4,731 0
Netincome(loss) 32,694 23,818 4,034 23,735 (13,235)
Netincome(loss)attributabletocommonshareholders 32,694 23,818 3,990 23,735 (13,235)
Basicearnings(loss)percommonshare(3) 1.47 1.78 0.40 3.78 (10.98)
Dilutedearnings(loss)percommonshare(3) 1.43 1.73 0.39 3.69 (10.98)
AtPeriodEnd
Totalassets $ 4,153,173 $ 3,201,234 $ 2,077,532 $1,374,407 $ 349,760
Cashandcashequivalents 233,068 186,016 73,570 238,724 68,807
Investmentsecurities(4) 497,573 129,093 398,684 205,828 44,588
Loansheldforsale(6) 747,593 1,439,889 174,999 199,970 0
LoansreceivablenotcoveredbyLossSharingAgreements
withtheFDIC(5) 2,398,353 1,216,941 1,215,117 514,087 230,298
Allowanceforloanlosses 23,998 25,837 15,032 15,129 10,032
LoansreceivablecoveredbyLossSharingAgreementswith
theFDIC(5) 66,725 107,526 126,276 164,885 0
FDIClosssharingreceivable(5) 10,046 12,343 13,077 16,702 0
Deposits 2,959,922 2,440,818 1,583,189 1,245,690 313,927
Borrowings 771,750 471,000 331,000 11,000 0
Shareholdersequity 386,623 269,475 147,748 105,140 21,503
Tangiblecommonequity(8) 382,947 265,786 144,043 105,140 21,503
SelectedRatiosandShareData
Returnonaverageassets 0.95% 1.02% 0.24% 3.40% (4.69)%
Returnonaverageequity 9.49% 12.69% 3.06% 41.29% (65.35)%
Bookvaluepershare(3) $ 15.96 $ 14.60 $ 13.02 $ 12.52 $ 11.68
Tangiblebookvaluepercommonshare(3)(8) $ 15.81 $ 14.40 $ 12.69 $ 12.52 $ 11.68
Commonsharesoutstanding(3) 24,224,151 18,459,502 11,347,683 8,398,014 1,840,902
Netinterestmargin 3.17% 3.26% 2.47% 2.76% 2.62%
Equitytoassets 9.31% 8.42% 7.11% 7.65% 6.14%
Tangiblecommonequitytotangibleassets(8) 9.23% 8.31% 6.95% 7.65% 6.14%
Tier1leverageratioCustomersBank 10.81% 7.74% 7.11% 8.67% 6.68%
Tier1leverageratioCustomersBancorp 10.11% 9.30% 7.37% n/a n/a
Tier1riskbasedcapitalratioCustomersBank 13.33% 8.50% 9.66% 19.65% 9.76%
Tier1riskbasedcapitalratioCustomersBancorp
12.44% 10.23% 10.01% n/a n/a
TotalriskbasedcapitalratioCustomersBank 14.11% 9.53% 10.78% 21.14% 11.77%
TotalriskbasedcapitalratioCustomersBancorp 13.21% 11.26% 11.13% n/a n/a
AssetQualityNoncoveredAssets(5)
Nonperformingloans $ 13,513 $ 22,347 $ 29,633 $ 22,242 $ 10,341
Nonperformingloanstototalnoncoveredloans 0.56% 1.84% 2.44% 4.33% 4.49%
Otherrealestateowned $ 5,312 $ 4,005 $ 7,316 $ 1,906 $ 1,155
8/26/2014 Form 10-K
Nonperformingassets 18,825 26,352 36,949 24,148 11,496
Nonperformingnoncoveredassetstototalnoncovered
assets 0.78% 2.16% 3.02% 4.68% 4.97%
Allowanceforloanlossestototalnoncoveredloans(7) 0.62% 1.20% 1.24% 2.94% 4.36%
Allowanceforloanlossestononperformingnoncovered
loans(7) 109.16% 65.26% 50.73% 68.02% 97.01%
Netchargeoffs $ 6,894 $ 5,466 $ 9,547 $ 5,250 $ 4,622
Netchargeoffstoaveragenoncoveredloans 0.38% 0.45% 1.10% 1.41% 2.04%
AssetQualityCoveredAssets(5)
Nonperformingloans $ 5,650 $ 10,504 $ 6,993 $ 8,084 $ 0
Nonperformingloanstototalcoveredloans 8.47% 22.69% 16.72% 9.18% 0.00%
Otherrealestateowned $ 6,953 $ 4,109 $ 6,166 $ 5,342 $ 0
Nonperformingassets 12,603 14,613 13,159 13,426 0
Nonperformingassetstototalcoveredassets 17.11% 13.09% 9.94% 7.89% 0.00%

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(1) OnSeptember17,2011,CustomersBancorpcompleteditsacquisitionofBerkshireBancorp,Inc.usingthepurchaseaccountingmethodin
accountingfortheacquisition.Thepurchasemethodprovidesthatalltransactionsaftertheacquisitiondatearereflectedintheacquirers
financialaccountingrecords.
(2) Duringthethirdquarterof2010,CustomersBancorpacquiredtwobanksinFDICassistedtransactionsusingthepurchaseaccounting
method.
(3) EffectiveSeptember17,2011,CustomersBankreorganizedintotheholdingcompanystructurepursuanttowhichalloftheissuedand
outstandingcommonstockoftheBankwasexchangedonaoneforthreebasisforcommonstockofCustomersBancorp.Allshareandper
shareinformationforperiodspriortothereorganizationhasbeenrestatedretrospectivelytoreflectthereorganization.
(4) Includesavailableforsaleandheldtomaturityinvestmentsecurities.
(5) Certainloansandotherrealestateowned(describedascovered)acquiredinthetwoFDICassistedtransactionsin2010aresubjecttoloss
sharingagreementsbetweenCustomersBankandtheFDIC.Ifcertainprovisionswithinthelosssharingagreementsaremaintained,the
FDICwillreimburseCustomersBankfor80%oftheunpaidprincipalbalancesandcertainexpenses.Alosssharingreceivablewasrecorded
baseduponthecreditevaluationoftheacquiredloanportfolioandtheestimatedperiodsforrepayments.Loansreceivableandassetsthat
arenotsubjecttothelosssharingagreementaredescribedasnoncovered.
(6) In2013and2012,loansheldforsaleincluded$747,593and$1,248,935ofmortgagewarehouseloansatfairvalue,respectively.
(7) Allowanceforloanlossesusedforthiscalculationexcludestheportionrelatedtopurchasedcreditimpaired(PCI)loansof$9.2million
in2013and$11.3millionin2012.
(8) CustomersBancorpsselectedfinancialdatacontainsnonGAAPfinancialmeasurescalculatedusingnonGAAPamounts.Thesemeasures
includetangiblecommonequityandtangiblebookvaluepercommonshareandtangiblecommonequitytotangibleassets.Management
usesthesenonGAAPmeasurestopresenthistoricalperiodscomparabletothecurrentperiodpresentation.Inaddition,management
believestheuseofthesenonGAAPmeasuresprovidesadditionalclaritywhenassessingtheBancorpsfinancialresultsanduseofequity.
ThesedisclosuresshouldnotbeviewedassubstitutesforresultsdeterminedtobeinaccordancewithU.S.GAAP,noraretheynecessarily
comparabletononGAAPperformancemeasuresthatmaybepresentedbyotherentities.CustomersBancorpcalculatestangiblecommon
equitybyexcludingintangibleassetsfromtotalshareholdersequity.Tangiblebookvaluepercommonshareequalstangiblecommon
equitydividedbycommonsharesoutstanding.
Areconciliationofshareholdersequitytotangiblecommonequityissetforthbelow.

2013 2012 2011 2010 2009
(inthousands,exceptpersharedata)
Shareholdersequity $ 386,623 $ 269,475 $ 147,748 $ 105,140 $ 21,503
Less:intangibleassets (3,676) (3,689) (3,705) 0 0
Tangiblecommonequity

$ 382,947
$ 265,786
$ 144,043
$ 105,140
$ 21,503
Sharesoutstanding

24,224
18,460
11,348
8,398
1,841
Bookvaluepershare

$ 15.96
$ 14.60
$ 13.02
$ 12.52
$ 11.68
Less:effectofexcludingintangibleassets

(0.15)
(0.20)
(0.33)
0
Tangiblebookvaluepershare

$ 15.81
$ 14.40
$ 12.69
$ 12.52
$ 11.68
Totalassets

$4,153,173
$3,201,234
$2,077,532
$1,374,407
$349,760
Less:intangibleassets

(3,676)
(3,689)
(3,705)
0
Totaltangibleassets

$4,149,497
$3,197,545
$2,073,827
$1,374,407
$349,760
Equitytoassets

9.31%
8.42%
7.11%
7.65%
6.15%
Less:effectofexcludingintangibleassets

(0.08)
(0.11)
(0.16)
0
Tangiblecommonequitytotangibleassets

9.23%
8.31%
6.95%
7.65%
6.15%

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Item7. ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations
YoushouldreadthisManagementDiscussionandAnalysisinconjunctionwithBusinessExecutiveSummaryandtheBancorps
consolidatedfinancialstatementsandrelatednotesfortheyearendedDecember31,2013.Certainamountsreportedinthe2012and2011
financialstatementshavebeenreclassifiedtoconformtothe2013presentation.Thesereclassificationsdidnotsignificantlyimpactthe
Bancorpsfinancialpositionorresultsofoperations.
CriticalAccountingPolicies
CustomersBancorphasadoptedvariousaccountingpoliciesthatgoverntheapplicationofaccountingprinciplesgenerallyacceptedinthe
UnitedStatesofAmerica(USGAAP)andthatareconsistentwithgeneralpracticeswithinthebankingindustryinthepreparationofitsfinancial
statements.TheBancorpssignificantaccountingpoliciesaredescribedinNOTE3SIGNIFICANTACCOUNTINGPOLICIESANDBASISOF
PRESENTATIONtoitsauditedfinancialstatements.
CertainaccountingpoliciesinvolvesignificantjudgmentsandassumptionsbyCustomersBancorpthathaveamaterialimpactonthecarrying
valueofcertainassetsandliabilities.CustomersBancorpconsiderstheseaccountingpoliciestobecriticalaccountingpolicies.Thejudgment
andassumptionsusedarebasedonhistoricalexperienceandotherfactors,whicharebelievedtobereasonableunderthecircumstances.Because
ofthenatureofthejudgmentsandassumptionsmanagementmakes,actualresultscoulddifferfromthesejudgmentsandestimates,whichcould
haveamaterialimpactonthecarryingvaluesoftheBancorpsassetsandliabilitiesandresultsofoperations.
ThefollowingisasummaryofthepoliciesCustomersBancorprecognizesasinvolvingcriticalaccountingestimates:AllowanceforLoan
Losses,StockBasedCompensation,UnrealizedGainsandLossesonAvailableforSaleSecurities,FairValueAccounting,Accountingfor
PurchasedCreditImpaired(PCI)Loans,FDICReceivableforLoss,andDeferredIncomeTaxes.
AllowanceforLoanLosses.CustomersBancorpmaintainsanallowanceforloanlossesatalevelmanagementbelievesissufficienttoabsorb
estimatedcreditlossesincurredasofthereportdate.Managementsdeterminationoftheadequacyoftheallowanceisbasedonperiodic
evaluationsoftheloanportfolioandotherrelevantfactors.However,thisevaluationisinherentlysubjectiveasitrequiressignificantestimates
bymanagement.Considerationisgiventoavarietyoffactorsinestablishingtheseestimatesincludinghistoricallosses,currentandanticipated
economicconditions,thesizeandcompositionoftheloanportfolio,delinquencystatistics,criticizedandclassifiedassetsandimpairedloans,
resultsofinternalloanreviews,borrowersperceivedfinancialandmanagementstrengths,theadequacyofunderlyingcollateral,thedependence
oncollateral,orthestrengthofthepresentvalueoffuturecashflowsandotherrelevantfactors.Thesefactorsmaybesusceptibletosignificant
change.Totheextentactualoutcomesdifferfrommanagementestimates,additionalprovisionsforloanlossesmayberequiredwhichmay
adverselyaffecttheBancorpsresultsofoperationsinthefuture.
Estimatesofcashflowsexpectedtobecollectedforpurchasedcreditimpairedloansareupdatedeachreportingperiod.IftheBankhasprobable
decreasesinexpectedcashflowstobecollectedafteracquisition,theBankchargestheprovisionforloanlossesandestablishesanallowancefor
loanlosses.
StockBasedCompensation.CustomersBancorprecognizescompensationexpenseforsharebasedawardsinaccordancewithFASBAccounting
StandardsCodification(ASC)718CompensationStockCompensation.Expenserelatedtostockoptionawardsisbasedonthefairvalueof
theoptionatthegrantdate,withcompensationexpenserecognizedovertheserviceperiod,whichisusuallythevestingperiod.Customers
BancorputilizestheBlackScholesoptionpricingmodeltoestimatethefairvalueofeachoptiononthedateofgrant.TheBlackScholesmodel
takesintoconsiderationtheexercisepriceoftheoption,theexpectedlifeoftheoption,thecurrentpriceoftheunderlyingstockanditsexpected
volatility,expecteddividendsonourstock,andthecurrentriskfreeinterestratefortheexpectedlifeoftheoption.TheBancorpsestimateofthe
fairvalueofastockoptionisbasedonexpectationsderivedfromitslimitedhistoricalexperienceandmaynotnecessarilyequatetomarket
valuewhenfullyvested.
UnrealizedGainsandLossesonSecuritiesAvailableforSale.CustomersBancorpreceivesestimatedfairvaluesofdebtsecuritiesfrom
independentvaluationservicesandbrokers.Indevelopingthesefairvalues,thevaluationservicesandbrokersuseestimatesofcashflowsbased
onhistoricalperformanceofsimilarinstrumentsinsimilarrateenvironments.Debtsecuritiesavailableforsalearemostlycomprisedofmortgage
backedsecuritiesandU.S.governmentagencysecurities.CustomersBancorpusesvariousindicatorsindeterminingwhetherasecurityisother
thantemporarilyimpairedincluding,fordebtsecurities,whenitisprobablethatthecontractualinterestandprincipalwillnotbecollected,orfor
equitysecurities,whetherthemarketvalueisbelowitscostforanextendedperiodoftimewithlowexpectationofrecovery.Thedebtsecurities
aremonitoredforchangesincreditratingsbecauseadversechangesincreditratingscouldindicateachangeintheestimatedcashflowsofthe
underlyingcollateralorissuer.Theunrealizedlossesassociatedwithsecuritiesthatmanagementdoesnotintendtosell,andmorelikelythannot
thatwewillnotberequiredtosellpriortomaturityormarketpricerecovery,werenotconsideredtobeotherthantemporarilyimpairedasof
December31,2013andDecember31,2012,becausetheunrealizedlosseswererelatedtochangesininterestratesanddidnotaffect

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theexpectedcashflowsoftheunderlyingcollateralorissuer.Theunrealizedlossesassociatedwiththeequityinvestmentsthatmanagement
doesnotintendtosell,andmorelikelythannotwewillnotberequiredtosell,werenotconsideredotherthantemporarilyimpairedasof
December31,2013or2012becausethedecreaseinmarketpriceorforeigncurrencyexchangerateswasestimatedtobetemporary.
FairValue.Thefairvalueofafinancialinstrumentisdefinedastheamountatwhichtheinstrumentcouldbeexchangedinacurrenttransaction
betweenwillingparties,otherthaninaforcedorliquidationsale.Managementestimatesthefairvalueofafinancialinstrumentusingavariety
ofvaluationmethods.Wherefinancialinstrumentsareactivelytradedandhavequotedmarketprices,quotedmarketpricesareusedforfair
value.Whenthefinancialinstrumentsarenotactivelytraded,otherobservablemarketinputs,suchasquotedpricesofsecuritieswithsimilar
characteristics,maybeused,ifavailable,todeterminefairvalue.Whenobservablemarketpricesdonotexist,CustomersBancorpestimatesfair
value.Thevaluationmethodsandinputsconsiderfactorssuchastypesofunderlyingassetsorliabilities,ratesofestimatedcreditlosses,interest
rateordiscountrateandcollateral.Thebestestimateoffairvalueinvolvesassumptionsincluding,butnotlimitedto,variousperformance
indicators,suchashistoricalandprojecteddefaultandrecoveryrates,creditratings,currentdelinquencyrates,loantovalueratiosandthe
possibilityofobligorrefinancing.USGAAPrequirestheuseoffairvaluesindeterminingthecarryingvaluesofcertainassetsandliabilities,as
wellasforspecificdisclosures.Themostsignificantusesoffairvaluesincluderesidentialmortgageloansacquiredsubjecttoanagreementto
resell,residentialmortgageloansoriginatedwithanintenttosell,impairedloansandforeclosedpropertyandthenetassetsacquiredinbusiness
combinations.Foradditionalinformation,refertoNOTE19DISCLOSURESABOUTFAIRVALUEOFFINANCIALINSTRUMENTS.
PurchasedCreditImpairedLoans
Forcertainacquiredloansthathaveexperiencedadeteriorationofcreditquality,CustomersBancorpfollowstheguidancecontainedin
ASC31030,LoansandDebtSecuritiesAcquiredwithDeterioratedCreditQuality.Purchasedcreditimpaired(PCI)loansareloansthatwere
acquiredinbusinesscombinationsorassetpurchaseswithevidenceofcreditdeteriorationsinceoriginationtothedateacquiredandforwhichit
isprobablethatallcontractuallyrequiredpaymentswillnotbecollectedareconsideredtobecreditimpaired.Evidenceofcreditquality
deteriorationasofpurchasedatesmayincludeinformationsuchaspastdueandnonaccrualstatus,borrowercreditscoresandrecentloanto
valuepercentages.LoansacquiredthroughbusinesscombinationsthatdonotmeetthespecificcriteriaofASC31030,butforwhichadiscount
isattributableatleastinparttocreditquality,arealsoaccountedforunderthisguidanceunlesstheloantypeisexcludedfromitsscope.
Thefairvalueofloanswithevidenceofcreditdeteriorationisrecordednetofanonaccretabledifferenceand,ifappropriate,anaccretableyield.
Thedifferencebetweencontractuallyrequiredpaymentsatacquisitionandthecashflowsexpectedtobecollectedatacquisitionisthe
nonaccretabledifference,whichisnotincludedinthecarryingamountofacquiredloans.Subsequentdecreasesintheestimatedcashflowsofthe
loanwillgenerallyresultinaprovisionforloanlosses.Subsequenttoacquisition,estimatesofcashflowsexpectedtobecollectedareupdated
eachreportingperiodbasedonupdatedassumptionsregardingdefaultrates,lossseverities,andotherfactorsthatarereflectiveofcurrentmarket
conditions.Subsequentincreasesincashflowsresultinareversaloftheprovisionforloanlossestotheextentofpriorcharges,ora
reclassificationofthedifferencefromnonaccretabletoaccretablewithapositiveimpactonaccretionofinterestincomeinfutureperiods.
Further,anyexcessofcashflowsexpectedatthetimeofacquisitionovertheestimatedfairvalueisreferredtoastheaccretableyieldandis
recognizedininterestincomeovertheremaininglifeoftheloanwhenthereisareasonableexpectationabouttheamountandtimingofthose
cashflows.
Purchasedcreditimpairedloansacquiredinthesamefiscalquartermaybeaggregatedintooneormorepools,providedthattheloanshave
commonriskcharacteristics.Apoolisthenaccountedforasasingleassetwithasinglecompositeinterestrateandanaggregateexpectationof
cashflows.Onaquarterlybasis,theBankreestimatesthetotalcashflows(bothprincipalandinterest)expectedtobecollectedoverthe
remaininglifeofeachpool.Theseestimatesincorporateassumptionsregardingdefaultrates,lossseverities,theamountsandtimingof
prepaymentsandotherfactorsthatreflectthencurrentmarketconditions.Ifthetimingand/oramountsofexpectedcashflowsonpurchased
creditimpairedloansweredeterminednottobereasonablyestimable,nointerestwouldbeaccretedandtheloanswouldbereportedasnon
accrualloanshowever,whenthetimingandamountsofexpectedcashflowsforpurchasedcreditimpairedloansarereasonablyestimable,
interestisbeingaccretedandtheloansarebeingreportedasperformingloans.Chargeoffsarenotrecordedonpurchasedcreditimpairedloans
untilactuallossesexceedtheestimatedlossesthatwererecordedaspurchaseaccountingadjustmentsatacquisitiondate.
FDICReceivableforLossShareAgreements.ThemajorityoftheloansandotherrealestateassetsacquiredinanFDICassistedacquisitionis
coveredunderlossshareagreementswiththeFDICinwhichtheFDIChasagreedtoreimbursetheBankfor80%ofalllossesincurredin
connectionwiththoseassets.ManagementestimatedtheamountthattheBankwillreceivefromtheFDICunderthelossshareagreementsthat
willresultfromlossesincurredastheBankdisposesofcoveredloansandotherrealestateassetsandrecordstheestimateasareceivablefromthe
FDIC.
TheFDIClosssharingreceivableismeasuredseparatelyfromtherelatedcoveredassetsbecauseitisnotcontractuallyembeddedintheassets
andisnottransferableiftheassetsaresold.ManagementestimatedthefairvalueoftheFDIClosssharingreceivableusingthepresentvalueof
cashflowsrelatedtothelossshareagreementsbasedontheexpectedreimbursementsforlossesandtheapplicablelossshare
percentages.ManagementreviewsandupdatesthefairvalueoftheFDICreceivableprospectivelyasloss

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estimatesrelatedtocoveredloansandotherrealestateownedchange.TheultimaterealizationoftheFDIClosssharingreceivabledependson
theperformanceoftheunderlyingcoveredassets,thepassageoftime,andclaimspaidbytheFDIC.Changesinestimatedcashflowsofthe
coveredassetslikewiseresultinchangesintheestimatedcashflowstobereceivedpursuanttothereimbursementagreementbetweentheBank
andtheFDIC.Anincreaseinacashflowestimateforacoveredloanwillresultinadecreaseintheindemnificationasset,andadecreaseinacash
flowestimateforacoveredloanwillresultinanincreaseintheindemnificationasset.Increasestotheindemnificationassetarerecordedasa
reductiontotheprovisionforloanlossesanddecreasestotheindemnificationassetarerecordedeitherasanincreasetotheprovisionforloan
losses(totheextentanincreaseintheFDICreceivablebalancewaspreviouslyrecordedasareductiontotheprovisionforloanlosses)or
recognizedoverthelifeofthelossshareagreements.
DeferredIncomeTaxes.TheBancorpprovidesfordeferredincometaxesontheliabilitymethodwherebytaxassetsarerecognizedfordeductible
temporarydifferencesanddeferredtaxliabilitiesarerecognizedfortaxabletemporarydifferences.Temporarydifferencesarethedifferences
betweenthereportedamountsofassetsandliabilitiesinthefinancialstatementsandtheirtaxbasis.Deferredtaxassetsarereducedbya
valuationallowancewhen,intheopinionofmanagement,itismorelikelythannotthatsomeportionorallofthedeferredtaxassetswillnotbe
realized.Deferredtaxassetsandliabilitiesareadjustedfortheeffectsofchangesintaxlawsandratesonthedateofenactment.
AccountingChanges
TheFairValueOption
TheBankelectedthefairvalueoptionformortgagewarehouselendingtransactionsdocumentedunderaMasterRepurchaseAgreement
originatedafterJuly1,2012inordertomoreaccuratelyrepresenttheshorttermnatureofthetransactionanditsinherentcreditrisk.TheBank
alsoelectedthefairvalueoptionformortgageloansoriginatedwiththeintenttoselleffectiveOctober1,2013.Theseadoptionsarein
accordancewiththeparametersestablishedbyAccountingStandardsCodification(ASC)8251025,FinancialInstrumentsOverall
Recognition:TheFairValueOption.Theinterestincomefromthewarehouselendingtransactionsandmortgageloansoriginatedwiththeintent
tosellareclassifiedinInterestIncomeLoansheldforsaleontheincomestatement.Theunrealizedfairvaluechangesrelatedtotheseloans
areclassifiedinMortgagebankingincomeontheconsolidatedstatementsofincome.Anallowanceforloanlossesisnotrecordedforloans
measuredatfairvaluesinceunderASC825astheexitprice(therepurchasepriceorsalesprice)usedasthefairvaluemeasureconsiders
estimatedcreditlosses.
ChangeinAccountingEstimates
Estimatesofcashflowsfrompurchasedcreditimpairedloanswererevisedduringthethirdquarterof2012duetoaconversiontoamore
sophisticatedandpreciseloanvaluationsystem.InaccordancewiththeguidanceinASC31030,interestincomeisbasedonanacquiredloans
expectedcashflows.Complexmodelsareneededtocalculateloanleveland/orpoollevelexpectedcashflowsinaccordancewithASC31030.
Theloandataanalysisprovidedbythenewsoftwareisamoreprecisequantificationoffuturecashflowsthantheanalysisthatwaspreviously
calculatedmanually.Uponconversiontothenewsoftware,acquisitiondateloanvalueswereloadedintothesystem,andthenewsoftware
calculatedtheirfairvaluesusingitscomplexvaluationmodel.ConversiontothenewsystemwascompletedinSeptember2012.Toadjustthe
acquisitiondateloanbalancesrecordedonCustomersBanksbookstotheamountscalculatedbythenewsoftware,approximately$4.5million
wasrecognizedinothernoninterestincomeinthethirdquarterof2012.Therevisedvaluationforthepurchasedcreditimpairedacquisition
dateloanbalancesduetotheconversiontothenewsoftwarewasaccountedforprospectivelyasachangeinaccountingestimate.
Whenconvertingtothenewsoftwaresystem,theBankwasrequiredtocalculatetheestimatedcashflowsfromthevariousacquisitiondatesof
thepurchasedcreditimpairedloansthroughthedatethesoftwarewasimplementedasitwasimpracticabletoperformthesecalculationsona
monthlyorquarterlybasis.Inthethirdquarterof2012,approximately$4.5millionwasrecognizedininterestincomerelatedtothischange.The
impactoftherevisedvaluationofcashflowsforthepurchasedcreditimpairedloanactivityduetotheconversiontothenewsoftwarewas
accountedforprospectivelyasachangeinaccountingestimate.
Alsoduringthethirdquarterof2012,theBankreestimatedthecashflowsforthepurchasedcreditimpairedloansusingcurrentdata.There
estimatedexpectedcashflowsdecreasedfrompriorestimatedcashflows.ConsistentwithASC31010sfundamentalpremisethatadecreasein
expectedcashflowsresultsinaccrualofalosscontingencyandshouldnotresultinachangeinyield,theBankevaluatedtheadequacyofthe
allowanceforloanlossesforpurchasedcreditimpairedloansanddeterminedthatanadditionalprovisionforloanlossesof$7.5millionwas
appropriate.Asaresultofthechangesinestimates,netincomefortheyearendedDecember31,2012increasedby$900,000,netoftax,and
basicanddilutedearningsincreasedby$0.07pershare.
BackgroundandReorganization
CustomersBancorpwasformedinApril2010tofacilitateareorganizationintoabankholdingcompanystructurepursuanttowhichCustomers
BankbecameawhollyownedsubsidiaryofCustomersBancorp(theReorganization)onSeptember17,2011.PursuanttotheReorganization,
alloftheissuedandoutstandingsharesofVotingCommonStockandClassBNonVotingCommonStockof

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CustomersBankwereexchangedonaoneforthreebasisforsharesofVotingCommonStockandClassBNonVotingCommonStock,
respectively,ofCustomersBancorp.TheBancorpisauthorizedtoissueupto100,000,000sharesofVotingCommonStock,100,000,000shares
ofClassBNonVotingCommonStockand100,000,000sharesofpreferredstock.Allshareandpershareinformationforperiodspriortothe
reorganizationhasbeenrestatedtoreflecttheReorganization,includingtheoneforthreeconsiderationusedintheReorganization.
IntheReorganization,theBanksissuedandoutstandingsharesofVotingCommonStockof22,525,825sharesandClassBNonVoting
CommonStockof6,834,895sharesconvertedinto7,508,473sharesoftheBancorpsVotingCommonStockand2,278,294sharesofthe
BancorpsClassBNonVotingCommonStock.Cashwaspaidinlieuoffractionalshares.Outstandingwarrantstopurchase1,410,732sharesof
theBanksVotingCommonStockwithaweightedaverageexercisepriceof$3.55pershareand243,102sharesoftheBanksClassBNon
VotingCommonStockwithaweightedaverageexercisepriceof$3.50persharewereconvertedintowarrantstopurchase470,260sharesofthe
BancorpsVotingCommonStockwithaweightedaverageexercisepriceof$10.64pershareandwarrantstopurchase81,036sharesofthe
BancorpsClassBNonVotingCommonStockwithaweightedaverageexercisepriceof$10.50pershare.Outstandingstockoptionsto
purchase2,572,404sharesoftheBanksVotingCommonStockwithaweightedaverageexercisepriceof$3.50pershareandstockoptionsto
purchase231,500sharesoftheBanksClassBNonVotingCommonStockwithaweightedaverageexercisepriceof$4.00persharewere
convertedintostockoptionstopurchase855,774sharesoftheBancorpsVotingCommonStockwithaweightedaverageexercisepriceof
$10.49pershareandstockoptionstopurchase77,166sharesoftheBancorpsClassBNonVotingCommonStockwithaweightedaverage
exercisepriceof$12.00pershare.
Accordingly,descriptionsofbalancesheetandincomestatementitemspriortoSeptember17,2011representthoseofCustomersBank,and
descriptionsofbalancesheetandincomestatementitemsafterSeptember17,2011representtheconsolidatedresultsofCustomersBancorp.The
consolidatedresultsofoperationsandfinancialconditionpresentedforthoseperiodsaftertheReorganizationDate,September17,2011,include
combinedresultsforCustomersBancorpandCustomersBank.Allshareandpershareinformationhasbeenretrospectivelyrestatedtoreflectthe
Reorganization,includingtheoneforthreeconsiderationusedintheReorganization.
Overview
ThefollowingdiscussionandanalysispresentsmaterialfactorsaffectingthefinancialconditionofCustomersBancorpasofDecember31,2013
andDecember31,2012andresultsofoperationsfortheyearsendedDecember31,2013,2012,and2011.Thisdiscussionandanalysisshouldbe
readinconjunctionwiththefinancialstatements,notestheretoandotherfinancialinformationofCustomersBancorpappearingelsewherein
thisForm10K.
Likemostfinancialinstitutions,CustomersBancorpderivesthemajorityofitsincomefrominterestitreceivesonitsinterestearningassets,such
asloansandinvestments.TheBancorpsprimarysourceoffundsformakingtheseloansandinvestmentsisitsdeposits,onwhichitpays
interest.Consequently,oneofthekeymeasuresoftheBancorpssuccessisitsamountofnetinterestincome,orthedifferencebetweenthe
incomeonitsinterestearningassetsandtheexpenseonitsinterestbearingliabilities,suchasdepositsandborrowings.Anotherkeymeasureis
thespreadbetweentheyieldearnedontheseinterestearningassetsandtheratepaidontheseinterestbearingliabilities,whichiscallednet
interestspread.
Thereiscreditriskinherentinallloans,soCustomersBancorpmaintainsanallowanceforloanlossestoabsorbprobablelossesonexistingloans
thatmaybecomeuncollectible.TheBancorpmaintainsthisallowancebychargingaprovisionforloanlossesagainstitsoperating
earnings.CustomersBancorphasincludedadetaileddiscussionofthisprocess,aswellasseveraltablesdescribingitsallowanceforloanlosses.
2014EconomicOutlook
ThegrowthoutlookoverthenexttwelvemonthslooksmoderateastheUSeconomycontinuestorecoverfromthe20082009recession.The
economyhasovercomemanyheadwindssincetherecessionofficiallyendedin2009.Growthislikelytoberestrainedin2014becausethe
consumerremainsunderpressurefromalackoftrueincomegrowth.However,thereareseveralpositivedevelopments.Thereislessuncertainty
facingbusinessesin2014duetothetwoyearbudgetagreementandamorecertainpoliticallandscape.Unemploymentratescontinuetobe
moderateinthegeographicregionsinwhichCustomerscompetes.TheFederalReservehasbegunreducingitshistoricquantitativeeasing
economicintervention,indicatingitsviewsofamorestableeconomy.Furthermore,theFederalReservehasindicatedshortterminterestratesare
notexpectedtoincreaseuntil2015,andtheFederalReservehasindicateditwilltoleratesomeinflationoverincreasingshorttermrates.
Additionally,thereisamorerobustmanufacturingbaseandbalancedhousingmarketwhichshouldallcontributetogrowthinthe2.00%to
2.50%rangefor2014.
WhiletheoutlookintheUSremainsoptimistic,fearsofaslowingChinacouldhaveanegativeimpactontheUSeconomyaswellastheglobal
economy.WhilemanyfeelthataChineseslowdownisexpected,adeeperthanexpectedslowdowncouldcauseripple

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effectsacrosstheglobe.IntheBancorpsmarketarea,managementseescontinuedmoderate(2%3%)growthin2014.Thehousingmarket
appearstohavestabilizedwithmodestincreasesinvalueinselectedareas.Unemploymentshouldremainatcurrentratesorslightlyimprove
duringtheyear.ManagementisseeingimprovementinloandemandintheBancorpscommercialandindustrial,multifamilyandcommercial
realestateloanportfoliosandexpectstosignificantlyimprovemortgagelendinginthecomingyear.Therecontinuestobesomeuncertaintyin
thepoliticalandexternalenvironmentsin2014,anditislikelythatthesechallengingconditionswillcontinueinthenextfewyears.Overall,the
Bancorpsmanagementisoptimisticthat2014willshowacontinuationoftheimprovingenvironmentthatwasseenin2013.
ResultsofOperations
ThefollowingdiscussionofCustomersBancorpsconsolidatedresultsofoperationsshouldbereadinconjunctionwithitsconsolidated
financialstatements,includingtheaccompanyingnotes.AlsoseeCRITICALACCOUNTINGPOLICIESandNOTE3SIGNIFICANT
ACCOUNTINGPOLICIESANDBASISOFPRESENTATIONforinformationconcerningcertainsignificantaccountingpoliciesandestimates
appliedindeterminingreportedresultsofoperations.
FortheyearsendedDecember31,2013and2012
Netincomeavailabletocommonshareholdersincreased$8.9million(37.3%)to$32.7millionfortheyearendedDecember31,2013,compared
to$23.8millionfortheyearendedDecember31,2012.Theincreasednetincomeresultedfroma$31.4millionincreaseinnetinterestincome
anda$12.0milliondecreaseintheprovisionforloanlosses,offsetbydecreasesinnoninterestincomeof$5.9million,anincreaseinnon
interestexpenseof$23.4millionanda$5.3millionincreaseinincometaxexpense.
Theincreasednetinterestincomeof$31.4million(43.8%)fortheyearendedDecember31,2013to$103.2millioncomparedto$71.8million
fortheyearendedDecember31,2012resultedprincipallyfromanincreaseinaverageloanbalances(loansheldforsaleandloansreceivable)of
$964.7millionto$2.8billion,offsetinpartbya39basispointdecreaseinaverageyieldsonloansto4.26%netwitha22basispointdecreasein
thecostoffunding.Thegrowthinaverageloanswasprincipallyinloanstomortgagebankerstofundwarehouselinesandmultifamilyand
othercommercialrealestateloans.Thedecreaseinyieldresultsfromacombinationofchangedmarketconditions,includingincreased
competitionforloans,andproductmix,assecuredmultifamilyloansyieldlessthanothercommercialproductsandwasourprimarygrowtharea.
During2013,theprovisionforloanlosseswas$2.2million,adecreaseof$12.0millionfromaprovisionof$14.3millionduring2012.The
decreaseintheprovisionforloanlossesin2013resultedprimarilyfrom(i)$7.5millionincreaseintheprovisionrecordedin2012duetothere
estimationofcashflowsrelatedtopurchasedcreditimpairedloans,(ii)$2.6millionreductionintheprovisionduring2013duetobetter
sustainedperformanceoftheBancorpscommercial(includingmultifamily)andresidentialmortgageloanportfolios,(iii)$0.3millionnet
reductionintheprovision,includingtheeffectofawritedownoftheFDICreceivablebalance,in2013uponfinalpayoffofcoveredloanswhich
previouslyhadaspecificallowance,and(iv)approximately$1.6millionnetreductionintheprovisionduetogenerallydecreaseddelinquencies
andimprovedassetqualityandmarketconditionspartiallyoffsetbyanincreaseintheprovisionforassetgrowthduring2013.
Noninterestincomedeclined$5.9millionintheyearendedDecember31,2013to$23.3millioncomparedto$29.2millionfortheyearended
December31,2012.Thedecreasein2013isattributedtothe$7.7milliondecreaseingainsonsalesofinvestmentsecurities,offsetinpartbythe
launchingofthemortgagebankingbusiness(generating$1.1millionofincome)andincreasedinvestmentinbankownedlifeinsurance
(generatinganincreaseinincomeof$1.1million).
Noninterestexpenseincreased$23.4millionduringtheyearendedDecember31,2013to$74.0millioncomparedto$50.7millionduringthe
yearendedDecember31,2012.Expensesincreasedin2013comparedto2012principallyforsalariesandemployeebenefitsasstaffinglevels
grewtosupportthegrowingbusiness(up$11.6million),assessmentforFDICinsuranceandotherregulatoryfeesasthebankgrewandother
costswereincurred($2.5million),professionalservicesforloanworkout,litigation,anddevelopmentofmaterialstorespondtoregulatory
inquiriesincreasedreflectinggrowthandmorecomplexissues($2.1million),occupancyasthebusinessexpansionintonewmarketsand
increasedactivityinexistingmarketsrequiredadditionalfacilities($2.0million),andaprovisionforlosscontingencyasaresultofafraud
perpetratedonaloantofundaresidentialmortgagewarehouselineofcredit($2.0million).
Incometaxexpenseincreased$5.3millionin2013to$17.6millioncomparedto$12.3millionin2012.Theincreasedincometaxexpensewas
drivenprimarilyfromtheincreaseintaxableincomein2013comparedto2012(up$36.1millionto$50.3million)anda1.0%increaseinthe
effectivetaxrateto35.0%from34.0%duetoanincreaseinpretaxbookincome.
Netincomeavailabletocommonshareholdersincreased$19.8million(496.9%)to$23.8millionfortheyearendedDecember31,2012
comparedto$4.0millionfortheyearendedDecember31,2011.The$19.8millionincreaseinnetincomeresultedprincipallyfroma$33.0
millionincreaseinnetinterestincomeanda$17.8millionincreaseinnoninterestincome,offsetinpartbya$6.8millionincreaseinthe
provisionforloanlosses,a$13.8millionincreaseinnoninterestexpenses,anda$10.4millionincreaseinincometaxexpense.

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Theincreaseinnetinterestincomeof$33.0million(85.1%)to$71.8millionfortheyearendedDecember31,2012resultedlargelyfroman
increaseinaverageloanbalances(loansheldforsaleandloanreceivable)of$916.6millionto$1.9billion,offsetinpartbya33basispoint
decreaseinaverageyieldsonloansto4.65%netwithadecreaseinthecostoffundingof47basispoints.Theincreasedaveragebalances
resultedgenerallyfromCustomerseffortstobuilditsloanstofundmortgagebusinessactivitiesaswellasitsotherloanlines.Thedecreasein
interestratesreflectsgeneralmarketbehaviorasratesdeclinedduring2012.Customersalsodecreaseditsinvestmentsecuritybalancesduring
2012(averagesecuritiesbalancesweredownapproximately$257.2millionin2012comparedto2011),usingthesalesproceedstofunda
portionoftheloangrowth.
2012Noninterestincomeincreased$17.8millionto$29.2millioncomparedto2011noninterestincomeof$11.5million.Noninterestincome
increasedlargelyduetoanincreaseinthegainonsaleofinvestmentsecuritiesof$6.3millionasthesecuritiesportfoliowasinpartliquidatedto
fundloangrowth,theincreaseinmortgagewarehousetransactionalfeesof$6.7millionasloanstofundmortgagewarehouselinesofcreditgrew
indicatingahighernumberoftransactionsflowingthroughtheaccounts,anda$4.5millionadditiontotheFDICIndemnificationassettoreflect
changedestimatedofrelatedcashflows.
The$6.8millionprovisionforloanlossesincreasein2012to$14.3millioncomparedto$7.5millionin2011resultedlargelyfromthe$7.5
millionprovisionmadetorecognizeimpairmentrelatedtothepurchasedcreditimpairedloanportfolio.In2012areviewoftheestimatedcash
flowsoftheseloansidentifieddecreasesinestimatedamountstobereceivedthanpreviouslyestimated,resultinginrecognitionofthe
impairment.
Theincreaseinnoninterestexpenseof$13.8millionin2012to$50.7millioncomparedtothe2011noninterestexpenseof$36.9million
resultedprincipallyfromanincreaseinsalariesandemployeebenefitsof$7.2millionasthebusinessexpandedandemployeeswerehiredandan
increaseinoccupancyof$2.5millionasfacilitieswereexpandedoraddedtosupportthegrowingbusiness.
Incometaxexpenseincreased$10.4millionin2012to$12.3millioncomparedto$1.8millionin2011.Theincreasedincometaxexpense
resultedinlargepartfromtheincreaseintaxableincomein2012comparedto2011(up$30.2millionto$36.1million)anda2.7%increasein
theeffectivetaxrateto34.0%from31.3%duetoanincreaseinpretaxbookincome,whichdilutedtheimpactofbankownedlifeinsuranceand
otherpermanentdifferences.

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NETINTERESTINCOME
Netinterestincome(thedifferencebetweentheinterestearnedonloans,investmentsandinterestearningdepositswithbanks,andinterestpaid
ondeposits,borrowedfundsandsubordinateddebt)istheprimarysourceofCustomersBancorpsearnings.Thefollowingtablesummarizesthe
Bancorpsnetinterestincomeandrelatedspreadandmarginfortheperiodsindicated.

FortheYearendedDecember31,
2013 2012 2011

Average
balance
Interest
incomeor
expense
Average
yieldor
cost
Average
balance
Interest
incomeor
expense
Average
yieldor
cost
Average
balance
Interest
incomeor
expense
Average
yieldor
cost
(dollarsinthousands)
Assets
Interestearningdeposits $ 190,642$ 482 0.25%$ 138,655$ 352 0.25%$ 164,376$ 416 0.25%
Federalfundssold 0 0 0.00 0 0 0.00 2,285 3 0.15
Investmentsecurities,taxable(A) 260,862 6,314 2.42 224,075 6,663 2.97 481,319 14,063 2.92
Investmentsecurities,non
taxable(A) 0 0 0.00 1,642 68 4.16 2,080 86 4.15
Loansheldforsale 992,421 38,140 3.84 423,886 15,950 3.76 139,072 5,279 3.80
Loans,taxable(B) 1,825,634 82,127 4.50 1,429,200 70,334 4.92 797,435 41,335 5.18
Loans,nontaxable(B) 16,677 453 2.71 7,596 176 2.31 1,304 63 4.86
Allowanceforloanlosses (26,800) (17,865) (15,316)

Totalinterestearningassets

3,259,436
127,516
3.91
2,207,189
93,543
4.24
1,572,555
61,245
3.89

Noninterestearningassets

195,900

118,114

83,017

Totalassets

$3,455,336

$2,325,303

$1,655,572

Liabilities

Interestchecking

$ 45,613
237
0.52
$ 36,701
193
0.52
20,364
95
0.46
Moneymarketdepositaccounts

1,112,009
7,606
0.68
856,338
7,423
0.87
505,269
6,705
1.33
Othersavings

26,191
120
0.46
20,267
112
0.56
13,542
92
0.68
Certificatesofdeposit

1,251,707
13,057
1.04
935,207
13,348
1.43
808,637
14,969
1.85

Totalinterestbearingdeposits

2,435,520
21,020
0.86
1,848,513
21,076
1.14
1,347,812
21,861
1.62
Borrowings

278,297
3,281
1.18
100,484
685
0.68
68,553
603
0.88

Totalinterestbearingliabilities

2,713,817
24,301
0.90
1,948,997
21,761
1.12
1,416,365
22,464
1.59

Noninterestbearingdeposits

385,175

180,719

94,768

Totaldepositsandborrowings

3,098,992

0.78
2,129,716

1.02
1,511,133

1.49
Othernoninterestbearingliabilities

11,791

7,952

12,423

Totalliabilities

3,110,783

2,137,668

1,523,556

ShareholdersEquity

344,553

187,635

132,016

Totalliabilitiesandshareholders
equity
$3,455,336

$2,325,303

$1,655,572

Netinterestearnings

103,215

71,782

38,781
Taxequivalentadjustment(C)

244

131

81

Netinterestearnings

$103,459

$ 71,913

$ 38,862

Interestspread

3.13%

3.22%

2.41%
Netinterestmargin(D)

3.17

3.25

2.47
Netinterestmargintax
equivalent(C)(D)

3.17

3.26

2.47

(A) Forpresentationinthistable,balancesandthecorrespondingaverageratesforinvestmentsecuritiesarebaseduponhistoricalcost,
adjustedforamortizationofpremiumsandaccretionofdiscounts.
(B) Includesnonaccrualloans,theeffectofwhichistoreducetheyieldearnedonloans,anddeferredloanfees.
(C) Fulltaxequivalentbasis,usinga35%statutorytaxratetoapproximateinterestincomeasataxableasset.

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8/26/2014 Form 10-K
Table of Contents
(D) Excludingtheadjustmenttointerestincomeforthechangeinaccountingestimateonpurchasedcreditimpairedloansof$4.5million,net
interestmarginandnetinterestmargintaxequivalentare3.05%forthetwelvemonthsendedDecember31,2012.
(E) Certainamountsreportedinthe2012and2011financialstatementshavebeenreclassifiedtoconformtothe2013presentation.These
reclassificationsdidnotsignificantlyimpacttheBancorpsfinancialpositionorresultsofoperations.
Thefollowingtablepresentsthedollaramountofchangesininterestincomeandinterestexpenseforthemajorcategoriesofinterestearning
assetsandinterestbearingliabilities.Informationisprovidedforeachcategoryofinterestearningassetsandinterestbearingliabilitieswith
respectto(i)changesattributabletovolume(i.e.,changesinaveragebalancesmultipliedbythepriorperiodaveragerate)and(ii)changes
attributabletorate(i.e.,changesinaverageratemultipliedbypriorperiodaveragebalances).Forpurposesofthistable,changesattributableto
bothrateandvolumewhichcannotbesegregatedhavebeenallocatedproportionatelytothechangeduetovolumeandthechangeduetorate.

2013vs.2012 2012vs.2011

Increase(decrease)due
tochangein
Increase(decrease)due
tochangein
Rate Volume Total Rate Volume Total
(inthousands)
Interestincome:
Interestearningdeposits $ 0 $ 130 $ 130 $ 0 $ (64) $ (64)
Federalfundssold 0 0 0 (3) 0 (3)
Investmentsecurities,taxable (1,232) 883 (349) 241 (7,641) (7,400)
Investmentsecurities,nontaxable (68) 0 (68) 0 (18) (18)
Loansheldforsale 339 21,851 22,190 (56) 10,727 10,671
Loans,taxable (6,003) 17,796 11,793 (2,073) 31,072 28,999
Loans,nontaxable 30 247 277 (33) 146 113
Totalinterestincome

(6,934)
40,907
33,973
(1,924)
34,222
32,298
Interestexpense:

Interestchecking

0
44
44
12
86
98
Moneymarketdepositaccounts

(1,627)
1,810
183
(2,324)
3,042
718
Savings

(20)
28
(16)
36
20
Certificatesofdeposit

(3,647)
3,356
(291)
(3,396)
1,775
(1,621)
Totalinterestbearingdeposits

(5,294)
5,238
(56)
(5,724)
4,939
(785)
Borrowings

502
2,094
2,596
(137)
219
82
Totalinterestexpense

(4,792)
7,332
2,540
(5,861)
5,158
(703)
Netinterestincome

$ (2,142)
$ 33,575
$31,433
$ 3,937
$ 29,064
$33,001

NetinterestincomefortheyearendedDecember31,2013was$103.2million,anincreaseof$31.4million,or43.8%,whencomparedtonet
interestincomefortheyearendedDecember31,2012of$71.8million.Thisincreaseinnetinterestincomewasprimarilyattributabletoan
increaseof$568.5millioninaverageloansheldforsale,principallyloanstomortgagebankerstofundinventory,andanincreaseof$396.4
millioninaverageloans,taxabledrivenbyincreasedaveragebalancesincommercialandmultifamilyloans.
Thekeymeasureofnetinterestincomeisnetinterestmargin.WhiletheBancorpsnetinterestmargindecreasedto3.17%fortheyearended
December31,2013from3.25%fortheyearendedDecember31,2012,theimpactonnetinterestincomewassecondarytothesignificant
increasesinloanvolume.
Netinterestincomewas$71.8millionfortheyearendedDecember31,2012,comparedto$39.0millionfortheyearendedDecember31,2011,
anincreaseof$32.8millionor84.1%.Thisnetincreasewasattributabletoincreasesof$634.6millioninaveragevolumeofaverageinterest
earningassets,offsetbyanincreaseof$532.6millioninaverageinterestbearingliabilities.Theprimarydriveroftheincreaseinnetinterest
incomewashigherloanvolumefromthefollowing:

$271.5millionincreaseinaveragemortgagewarehouseloansduetogrowthofthemortgagewarehouselendingbusiness

$113.7millionincreaseinaveragecommercialloansduetogrowthofthecommercialloanportfolioand

$126.8millionincreaseinaveragemultifamilyloansduetogrowthofthemultifamilylendingbusiness.

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Table of Contents
Thekeymeasureofnetinterestincomeisnetinterestmargin.TheBancorpsnetinterestmarginincreasedto3.25%for2012from2.47%for
2011.
PROVISIONFORLOANLOSSES
Formoreinformationaboutourprovisionandallowanceforloanlossesmethodologyandourlossexperience,seeCreditRiskandAsset
QualityhereinandNOTE3SIGNIFICANTACCOUNTINGPOLICIESANDBASISOFPRESENTATION.
Customersmaintainsitsallowanceforloanlossesthroughaprovisionforloanlosseschargedasanexpenseontheconsolidatedstatementsof
income.Theloanportfolioisreviewedquarterlytoevaluatetheoutstandingloansandtomeasureboththeperformanceoftheportfolioandthe
adequacyoftheallowanceforloanlosses.Theallowanceforloanlossesisestimatedasoftheendofeachquarterandcomparedtothebalance
recordedinthegeneralledgernetofchargeoffsandrecoveries.Theallowanceisadjustedtotheestimatedallowanceforloanlossesbalancevia
acharge(ordebit)totheprovisionforloanlosses.AtDecember31,2013,approximately2.1%ofthetotalloanportfoliowascoveredunderloss
sharingagreementswiththeFDIC.Reductionsinestimatedcashflowsonthecoveredloansaretakenasadditionalprovisions,anda
correspondingreceivableduefromtheFDICisrecordedasareductiontotheprovisionforloanlossesfortheportionanticipatedtoberecovered
underthelosssharingagreements.
During2013,theprovisionforloanlosseswas$2.2million,adecreaseof$12.0millionfromaprovisionof$14.3millionduring2012.The
decreaseintheprovisionforloanlossesin2013resultedprimarilyfrom(i)$7.5millionincreaseintheprovisionrecordedin2012duetothere
estimationofcashflowsrelatedtopurchasedcreditimpairedloans,(ii)$2.6millionreductionintheprovisionduring2013duetobetter
sustainedperformanceoftheBancorpscommercial(includingmultifamily)andresidentialmortgageloanportfolios,(iii)$0.3millionnet
reductionintheprovision,includingtheeffectofawritedownoftheFDICreceivablebalance,in2013uponfinalpayoffofcoveredloanswhich
previouslyhadaspecificallowance,and(iv)approximately$1.6millionnetreductionintheprovisionduetogenerallydecreaseddelinquencies
andimprovedassetqualityandmarketconditions,partiallyoffsetbyanincreaseintheprovisionforassetgrowthduring2013.
ThemajorityoftheBanksborrowersaresmall,localbusinessesandindividualswithinvestmentsinresidentialorcommercialrealestate.The
typicalborrowerprovidesselfpreparedoraccountantassistedfinancialstatementsandtaxreturnsthatarenotaudited,andthereforeareless
reliablethaninformationthatwouldbeobtainedfrommoresophisticatedborrowers.Theabsenceofobjectivelyverifiedfinancialinformationis
achallengetoallcommunitybanksandrepresentsalayerofriskthatmustbeconsideredinjudgingtheadequacyoftheallowanceforloan
losses.
During2012,theprovisionforloanlosseswas$14.3million,anincreaseof$6.8millionfrom$7.5millionin2011.Theyearoveryearincrease
isprimarilyrelatedtoassetgrowthinthecommercialandresidentialrealestateloanportfoliosaswellasa$7.5millionadjustmentthatis
attributabletothechangeinaccountingestimateforthereestimationofcashflowsforthepurchasedcreditimpairedloans.SinceJuly2012,the
majorityoftheBankswarehouseloanswereaccountedforatfairvalue,andaccordinglynoallowanceforloanlosseswasrecognizedforthese
loansin2012,comparedtoanallowanceof$0.9millionin2011.Netchargeoffswere$5.5millionand$9.5million,respectively,fortheyears
endedDecember31,2012and2011.
AsaresultofsignificantchangestotheBanksunderwritingguidelinesin2009,allloansoriginatedsubsequentto2009havebeengrouped
separatelyandarecalledthePost2009portfolio.Thisportfoliocontinuestoperformverywellwithalmostnodelinquencies,however,dueto
growthinloanvolumeforconstructionandcommercialrealestate,theallowancerelatedtothePost2009portfolioincreasedby$3.5million.
ThisincreasewasoffsetbyadecreaseintheLegacy,orpre2009,originatedportfolioof$1.6millionduemainlytoprincipalrepayments.
Fortheacquiredportfolio,thelevelofdelinquent,nonperforming,andimpairedloansincreasedin2012comparedto2011.CustomersBancorp
recordedaprovisionforloanlossesof$4.1millionforBerkshirein2012,andincreasedtheprovisionfortheFDICcoveredloansby$3.2
million.Theseincreaseswererecordedinpartinanadjustmentof$7.5millionthatwasrecordedtotheprovisionforloanlossesduringthethird
quarterof2012thatwasrelatedtoachangeinaccountingestimateforthepurchasedcreditimpairedloans.Foradditionalinformationaboutthe
changeinaccountingestimaterefertoNOTE3SIGNIFICANTACCOUNTINGPOLICIESANDBASISOFPRESENTATIONChangein
AccountingEstimates.
OnJuly24,2012,theBankpurchased$62.4millioninmanufacturedhousingloanswitharecourseprovision,wherebytheBankisreimbursed
bytheoriginatorforanyincurredlossesonthem,andthereforetherearenoanticipatedlossesrequiringanallowanceforloanlossesforthese
loans.

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NONINTERESTINCOME
ThechartbelowshowsthevariouscomponentsofnoninterestincomeforeachoftheyearsendedDecember31,2013,2012and2011.

YearsEndedDecember31,
2013 2012 2011
(inthousands)
Mortgagewarehousetransactionfees $12,962 $12,289 $ 5,581
Bankownedlifeinsurance 2,482 1,332 1,404
Gainsonsalesofinvestmentsecurities 1,274 9,017 2,731
Mortgagebankingincome 1,142 0 0
GainsonsalesofSBAloans 852 357 329
Depositfees 675 481 436
Other 3,956 5,753 988

Totalnoninterestincome

$23,343
$29,229
$11,469

Noninterestincomewas$23.3millionfortheyearendedDecember31,2013,adecreaseof$5.9millionfromnoninterestincomeof$29.2
millionfortheyearendedDecember31,2012.Thedecreasewasprimarilytheresultofthe$9.0milliongainrealizedonthesaleofavailablefor
salesecurities,themajorityofwhichwererealizedinthesecondquarterof2012intheamountof$8.8million,whichwasexecutedtoprovide
fundingforloangrowth.Also,2012othernoninterestincomeincludesabenefitof$4.5millionresultingfromanincreasedestimateofcash
flowstobereceivedfromtheFDICforfuturelossesoncoveredloans.Offsettingthesedecreasesisincomerecognizedonmortgagebanking
incomeof$1.1millionasCustomerslaunchedthisbusinessandagainof$1.3milliononsecuritiessoldtostrategicallyreduceinterestraterisk
intheinvestmentportfolio.
Noninterestincomewas$29.2millionfortheyearendedDecember31,2012,anincreaseof$17.8millionfromnoninterestincomeof$11.5
millionfortheyearendedDecember31,2011.Thisincreasewasdueto:(1)anincreaseof$6.7millioninmortgagewarehousetransactionfees
duetoincreasedvolumeduringtheyear,(2)anetgainonthesaleofinvestmentsecuritiesof$9.0wasrealizedin2012primarilyduetothesale
of$257.6millioninavailableforsalesecuritiesinthesecondquarterof2012,whichwasexecutedtoprovidefundingforloangrowth,and
(3)anadjustmentof$4.5milliontoothernoninterestincomethatwasrelatedtoachangeinaccountingestimateforthepurchasedcredit
impairedloans.ForadditionalinformationaboutthechangeinaccountingestimaterefertoNOTE3SIGNIFICANTACCOUNTINGPOLICIES
ANDBASISOFPRESENTATIONChangeinAccountingEstimates.

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NONINTERESTEXPENSE
ThebelowchartshowsthevariouscomponentsofnoninterestexpenseforeachoftheyearsendedDecember31,2013,2012,and2011.

2013 2012 2011
(inthousands)
Salariesandemployeebenefits $35,493 $23,846 $16,602
Occupancy 8,829 6,816 4,286
FDICassessments,taxes,andregulatoryfees 5,568 3,037 2,366
Professionalservices 5,548 3,468 5,124
Technology,communicationandbankoperations 4,330 2,805 1,797
Loanworkout 2,245 2,243 1,429
Losscontingency 2,000 0 0
Otherrealestateowned 1,365 (85) 809
Advertisingandpromotion 1,274 1,219 994
Mergerrelatedexpenses 352 90 531
Stockofferingexpenses 0 1,437 0
Other 7,020 5,775 2,948

Totalnoninterestexpenses

$74,024
$50,651
$36,886

ThebelowchartshowsthevariouscomponentsofothernoninterestexpenseforeachoftheyearsendedDecember31,2013,2012,and2011.

2013 2012 2011
(inthousands)
Loaninsuranceexpense $ 477 $1,344 $ 928
Loanoriginationandservicingfees 2,069 905 137
Customerrelatedandofficesupplies 394 345 317
Other 4,080 3,181 1,566

Totalothernoninterestexpenses

$7,020
$5,775
$2,948

Noninterestexpensewas$74.0millionfortheyearendedDecember31,2013,whichwasanincreaseof$23.4millionovernoninterestexpense
of$50.7millionfortheyearendedDecember31,2012.
Salariesandemployeebenefits,whichrepresentthelargestcomponentofnoninterestexpense,increased$11.6million(48.8%)to$35.5million
fortheyearendedDecember31,2013from$23.8millionfortheyearendedDecember31,2012.Theprimaryreasonforthisincreasewasdueto
theincreaseinthenumberofemployeesfrom242fulltimeequivalentsatDecember31,2012to383fulltimeequivalentsatDecember31,2013.
Thiswasdirectlyrelatedtotheneedforadditionalemployeestosupportourorganicgrowthandtheexpansionintonewmarkets.Specifically,
theincreasedheadcountisneededtosupportourgrowingcommercialloan,multifamily/commercialrealestate,andmortgagebanking
businessesandtherelatedadministrativesupport.
Occupancyexpenseincreasedby29.5%,or$2.0million,risingto$8.8millionfortheyearendedDecember31,2013from$6.8millionforthe
yearendedDecember31,2012.Theincreasewasrelatedtobuildingtheinfrastructuretosupportourgrowthaswellasthecostofexpansioninto
newmarkets.
FDICassessments,taxesandregulatoryfeesincreasedby83.3%,or$2.5millionto$5.6millionfortheyearendedDecember31,2013from$3.0
millionfortheyearendedDecember31,2012.TheprimaryreasonsforthisincreasewererelatedtohigherPennsylvaniabanksharestaxexpense
thatresultedfromlegislativechangestothetaxcalculation,depositpremiumsandotherregulatoryandfilingfees.

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Professionalservicesexpenseincreasedby60.0%,or$2.1million,to$5.5millionfortheyearendedDecember31,2013from$3.5millionfor
theyearendedDecember31,2012.Thisincreasewasprimarilyattributabletohigherlegalandconsultingexpensesin2013relatedtoregulatory
filingsandothermatters,includingrespondingtoallegedFairLendingviolations.
Technologycommunicationandbankoperationsincreasedby54.4%,or$1.5million,risingto$4.3millionfortheyearendedDecember31,
2013from$2.8millionfortheyearendedDecember31,2012.Theprimaryreasonforthisincreasewasrelatedtobuildingtheinfrastructureto
supportthegrowththroughincreasedtechnologyimprovementsandupgradesaswellasthecostsrelatedtoexpandingoftechnological
platformsintonewmarkets.Thiscorrespondswithourphilosophyofhightouch,hightech,wherebyweprovideanexceptionallevelof
customerservicesupportedbystateofthearttechnology.
InMarch2013,asuspectedfraudwasdiscoveredintheBanksloansheldforsaleportfolio.Totalloansinvolvedinthisfraudinitiallyappeared
tobe$5.2million.TheBankdeterminedthatanaggregateof$1.0millionoftheloanswerenotinvolvedinthefraud,andtheseloanswere
subsequentlysoldduring2013.Inaddition,theBankrecovered$1.5millionincashfromtheallegedperpetratorin2013.During2013,aloss
contingencyexpenseof$2.0millionwasprovided,resultinginanetamountof$0.7millionclassifiedinotherassetsasofDecember31,2013.
Otherexpensesincreasedby21.6%,or$1.2millionto$7.0millionfortheyearendedDecember31,2013,comparedto$5.8millionfortheyear
endedDecember31,2012.Theincreasewasprimarilyattributedtothe$1.2millionincreaseinloanoriginationandservicingfeesto$2.1
millionfortheyearendedDecember31,2013,comparedto$0.9millionfortheyearendedDecember31,2012.
Noninterestexpensewas$50.7millionfortheyearendedDecember31,2012,whichwasanincreaseof$13.8millionovernoninterestexpense
of$36.9millionfortheyearendedDecember31,2011.Thefollowingcontributedtothehigher2012noninterestexpense:Salariesand
employeebenefits,whichrepresentthelargestcomponentofnoninterestexpense,increasedby$7.2millionoccupancyexpenseincreasedby
$2.5millionandtechnology,communications,andbankoperationsexpenseincreasedby$1.0million.Theincreaseintheseexpensesrelated
primarilytothehiringofadditionalemployeestosupporttheBancorpsgrowth,theBerkshireacquisitionwhichaddedthreeadditional
branches,andopeningofadditionalbranches.Thestockofferingexpensesof$1.4millionwererecordedin2012asaresultofthepostponement
oftheBancorpspublicofferingofVotingCommonStockinMay2012.Theincreaseof$0.7millioninFDICassessments,taxes,andregulatory
feeswasattributedtoincreasesinFDICpremiumsprimarilyasaresultofthegrowthoftheBancorpsassessmentbase(averageconsolidatedtotal
assetsminusaveragetangibleequity)andadditionalPennsylvaniasharestaxexpenseduetotheBancorpsincreasedassetsize.Offsettingthe
increasedexpensesweredecreasesinprofessionalservicesexpenseof$1.7million.Thisdecreasewasprimarilyattributabletolegaland
consultingexpensesincurredin2011relatedtoregulatoryfilingsandtheBerkshireacquisition.Loaninsuranceandloanoriginationand
servicingfeesincreasedduetohigherloanvolume.
INCOMETAXES
Theincometaxexpenseandeffectivetaxrateincludebothfederalandstateincometaxes.In2013,incometaxexpensewas$17.6millionwith
aneffectivetaxrateof35%,comparedtoanexpenseof$12.3millionandarateof34.00%for2012.Incometaxexpensewasdrivenprimarilyby
netincomebeforetaxesof$50.3millionand$36.1million,forthetwelvemonthsendedDecember31,2013,andDecember31,2012,
respectively.In2013,incometaxexpensewasoffsetbyataxbenefitfrombankownedlifeinsuranceof$869,000,ora1.73%taxratereduction.
In2012,incometaxexpensewasoffsetbyataxbenefitfrombankownedlifeinsuranceof$466,000,ora1.29%taxratereduction.
Theincometaxexpenseandeffectivetaxrateincludebothfederalandstateincometaxes.In2012,incometaxexpensewas$12.3millionwith
aneffectivetaxrateof34%,comparedtoanexpenseof$1.8millionandarateof31.27%for2011.Incometaxexpensewasdrivenprimarilyby
netincomebeforetaxesof$36.1millionand$5.9million,forthetwelvemonthsendedDecember31,2012,andDecember31,2011,
respectively.In2012,incometaxexpensewasoffsetbyataxbenefitfrombankownedlifeinsuranceof$466,000,ora1.29%taxratereduction.
In2011,incometaxexpensewasoffsetbyataxbenefitfrombankownedlifeinsuranceof$490,000,oran8.35%taxratereduction.
ForadditionalinformationregardingtheBancorpsincometaxes,refertoNOTE15INCOMETAXESintheconsolidatedfinancial
statementsappearinginPartII,Item8.

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FINANCIALCONDITION
GENERAL
Totalassetswere$4.2billionatDecember31,2013.Thisrepresenteda$1.0billion,or29.7%increasefrom$3.2billionatDecember31,
2012.Themajorchangeinourfinancialpositionoccurredastheresultofthegrowthinloansreceivablenotcoveredbylosssharingagreements
withtheFDIC,whichincreasedby97.1%or$1.2billionto$2.4billionatSeptember30,2013,from$1.2billionatDecember31,2012.
Themaindriveroftheincreaseinassetswasprimarilyfromtheexpansionofmultifamily/commercialrealestatelending,whichincreasedby
$1.0billion(111.2%)to$1.8billionatDecember31,2013from$0.8billionatDecember31,2012.Additionally,commercialandindustrial
loansincreasedby$159.0million(184.4%)to$245.3millionatDecember31,2013from$86.3millionatDecember31,2012.Approximately
97.5%ofthecommercialloangrowthfromDecember31,2012wastheresultofthepurchaseof$155.1millionofcommercialloansfromFlagstar
BankonMarch28,2013.Inaddition,aspartofourorganicgrowthstrategy,CustomersestablishedabranchintheCityofPhiladelphiato,
amongotherobjectives,serviceunderservedandlowerandmoderateincomecustomers.
Totalliabilitieswere$3.8billionatDecember31,2013.Thisrepresenteda$0.8billion,or28.5%,increasefrom$2.9billionatDecember31,
2012.Theincreaseintotalliabilitieswasduetoahigherlevelofdepositsin2013,comparedto2012.Totaldepositsgrewby$0.5billion
(21.3%),to$3.0billionatDecember31,2013from$2.4billionatDecember31,2012.DepositsareobtainedprimarilyfromwithintheBanks
geographicserviceareaandthroughwholesaleandbrokernetworks.Thesenetworksprovidelowcostfundingalternativestoretaildepositsand
diversitytotheBankssourcesoffunds.Theincreaseinbankdepositswasprimarilyduetotheintroductionofstudentdepositsin2013.The
growthinretaildepositswasprimarilyduetoexceptionalsalesexecution,despitelowerinterestratesin2013.

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Thefollowingtablesetsforthcertainkeycondensedbalancesheetdata:

December31,
2013 2012
(inthousands)
Cashandcashequivalents $ 233,068 $ 186,016
Investmentsecurities,availableforsale 497,573 129,093
Loansheldforsale(includes$747,593and$1,248,935,respectively,at
fairvalue) 747,593 1,439,889
LoansreceivablenotcoveredunderLossSharingAgreementswiththe
FDIC 2,398,353 1,216,941
LoansreceivablecoveredunderLossSharingAgreementswiththeFDIC 66,725 107,526
Totalloansreceivable,netoftheallowanceforloanlosses 2,441,080 1,298,630
Totalassets 4,153,173 3,201,234
Totaldeposits 2,959,922 2,440,818
Federalfundspurchased 13,000 5,000
FHLBadvances 706,500 471,000
Otherborrowings 65,250 2,000
Totalliabilities 3,766,550 2,931,759
Totalshareholdersequity 386,623 269,475
Totalliabilitiesandshareholdersequity 4,153,173 3,201,234
CASHANDDUEFROMBANKS
Cashandduefrombanksconsistsmainlyofvaultcashandcashitemsintheprocessofcollection.Thesebalancestotaled$59.3millionat
December31,2013.Thisrepresentsa$46.4millionincreasefrom$12.9millionatDecember31,2012.Thesebalancesvaryfromdaytoday,
primarilyduetovariationsincustomersdepositswiththeBank.
INTERESTEARNINGDEPOSITSWITHBANKS
InterestearningdepositsconsistmainlyofdepositsattheFederalReserveBankofPhiladelphia.Thesedepositstotaled$173.7millionat
December31,2013,whichisa$0.6milliondecreasefrom$173.1millionatDecember31,2012.Thisbalancevariesfromdaytoday,depending
onseveralfactors,suchasvariationsincustomersdepositswiththeBankandthepaymentofchecksdrawnoncustomersaccounts.
INVESTMENTSECURITIES
Theinvestmentsecuritiesportfolioisanimportantsourceofinterestincomeandliquidity.ItconsistsofU.S.Treasury,governmentagencyand
mortgagebackedsecurities(guaranteedbyanagencyoftheUnitedStatesgovernmentandnonagencyguaranteed),municipalsecurities,
domesticcorporatedebt,assetbackedsecurities,andmarketableequitysecurities.Inadditiontogeneratingrevenue,theinvestmentportfoliois
maintainedtomanageinterestraterisk,provideliquidity,providecollateralforotherborrowingsanddiversifythecreditriskofearningassets.
Theportfolioisstructuredtomaximizenetinterestincome,givenchangesintheeconomicenvironment,liquiditypositionandbalancesheet
mix.
AtDecember31,2013,investmentsecuritieswere$497.6millioncomparedto$129.1millionatDecember31,2012.Theincreasewasprimarily
theresultofthepurchaseofAgencyMortgageBackedSecurities,someofwhichqualifiedasCRAeligibleinvestments.TheCRAeligible
securitiesarecomprisedofloansinourassessmentarea.Duringthethirdquarterof2013,CustomersBankinvestedexcessliquiditygenerated
fromareductioninwarehouseloanbalancesandincreasednoninterestbearingdemanddepositaccountsintoAgencyCollateralizedMortgage
BackedSecurities.
Unrealizedgainsandlossesonavailableforsalesecuritiesareincludedinothercomprehensiveincomeandreportedasaseparatecomponentof
shareholdersequity,netoftherelatedtaxeffect.

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Thefollowingtablesetsforththeamortizedcostoftheinvestmentsecuritiesatthelastthreefiscalyearends:

December31,
2013 2012 2011
(inthousands)
AvailableforSale:
U.S.Treasuryandgovernmentagencies $ 0 $ 0 $ 1,002
Mortgagebackedsecurities(1) 461,988 102,449 55,818
Assetbackedsecurities 0 0 622
Municipalsecurities 0 0 2,071
Corporatenotes 25,000 25,000 20,000
Equitysecurities(2) 23,074 6 0

$510,062
$127,455
$ 79,513

HeldtoMaturity:

Mortgagebackedsecurities(1)

$ 0
$ 0
$319,547

(1) Comprisedprimarilyofmortgagebackedsecuritiesissuedbygovernmentsponsoredagencies,includingFHLMC,FNMA,andGNMA.
(2) Comprisedprimarilyofequitysecuritiesinaforeignentityin2013.
Forfinancialreportingpurposes,availableforsalesecuritiesarecarriedatfairvalue.
Thefollowingtablesetsforthinformationaboutthematuritiesandweightedaverageyieldofthesecuritiesportfolio.Yieldsarenotreportedona
taxequivalentbasis.

December31,2013
AmortizedCost
Fair
Value

<
1yr
15
years
510
years
After10
years
No
Specific
Maturity Total Total
AvailableforSale
Mortgagebackedsecurities $ $ $ $ $461,988 $461,988 $451,536
Yield 2.50% 2.50%
Corporatenotes 25,000 25,000 25,323
Yield 2.70% 2.70%
Equitysecurities 23,074 23,074 20,714
Yield 0.00% 0.00%
Total

$
$25,000
$485,062
$510,062
$497,573
WeightedAverageYield

%
2.70%
2.50%
2.52%
ThemortgagebackedsecuritiesintheportfoliowereissuedbyFannieMae,FreddieMac,andGinnieMaeandcontainguaranteesforthe
collectionofprincipalandinterestontheunderlyingmortgages.Thecorporatenotesintheportfolioarehighqualityinvestmentsinfinancial
serviceindustrycompanies.

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LOANS
ExistinglendingrelationshipsareprimarilywithsmallbusinessesandindividualconsumersprimarilyinBucks,Berks,Chester,Montgomery,
Delaware,andPhiladelphiaCounties,PennsylvaniaCamdenandMercerCounties,NewJerseyandWestchesterCountyandNewYorkCity,
NewYorkandtheNewEnglandarea.Theloanportfolioisprimarilycomprisedofloanstosupportmortgagebankingcompaniesfunding
needs,multifamily/commercialrealestate,construction,andcommercialandindustrialloans.TheBankcontinuestofocusonsmallbusiness
loanstogrowitscommerciallendingefforts,establishaspecialtylendingbusiness,andexpanditsconsumerlendingproducts,asoutlined
below:
CommercialLending
TheBankscommerciallendingisdividedintothreegroups:BusinessBanking,SmallBusinessBanking,andMultifamily/commercialreal
estate.Thisgroupingisdesignedtoallowforgreaterresourcedeployment,higherstandardsofriskmanagement,strongassetquality,lower
interestrateriskandhigherproductivitylevels.
Thecommerciallendinggroupfocusesoncompanieswithannualrevenuesrangingfrom$5millionto$50million,whichtypicallyhavecredit
requirementsbetween$0.5millionand$10million.
Thesmallbusinessbankingplatformoriginatesloans,includingSmallBusinessAdministrationloans,throughthebranchnetworksalesforce
andateamofdedicatedSmallBusinessrelationshipmanagers.Thesupportadministrationofthisplatformiscentralizedincludingrisk
management,productmanagement,marketing,performancetrackingandoverallstrategy.Creditandsalestraininghasbeenestablishedforthe
Bankssalesforce,ensuringthatithassmallbusinessexpertsinplaceprovidingappropriatefinancialsolutionstothesmallbusinessownersin
itscommunities.Adivisionapproachfocusesonindustriesthatofferhighassetqualityandaredepositrichtodriveprofitability.
AsofDecember31,2013,theBankhad$2.2billionincommercialloansoutstanding,composingapproximately67.1%ofitstotalloan
portfolio,whichincludesloansheldforsale,comparedto$1.0million,composingapproximately37.0%atDecember31,2012.
SpecialtyLending
In2009,theBanklauncheditslendingtomortgagebankingbusinessesproducts,whichprovidefinancingtomortgagebankersforresidential
mortgageoriginationsfromloanclosinguntilsaleinthesecondarymarket.Manyprovidersofliquidityinthissegmentexitedthebusinessin
2009duringtheperiodofexcessivemarketturmoil.Thereisanopportunitytoprovideliquiditytothisbusinessatattractivespreads.Thereis
alsoopportunitytoattractescrowdepositsandtogeneratefeeincomeinthisbusiness.
Thegoalofthewarehouselendinggroupistoprovideliquiditytomortgagecompanies.Theselinesareusedbymortgagecompaniestofund
theirpipelinesfromclosingofindividualmortgageloansuntiltheirsaleintothesecondarymarket.Theresidentialloansaretakenascollateral
forCustomersloans.AsofDecember31,2013,loansinthewarehouselendingportfoliototaled$740.7millionoutstanding,comprising23.0%
oftheBankstotalloanportfolio,whichincludesloansheldforsale.
ThegoaloftheBanksmultifamily/commercialrealestatelendingproductsistobuildaportfolioofhighqualitymultifamilyandcommercial
realestateloanswithintheBankscoveredmarkets,whilecrosssellingotherproductsandservices.Thisproductprimarilysupportsrefinancing
existingloansusingconservativeunderwritingandprovidespurchasemoneyfornewacquisitionsbyborrowers.Theprimarycollateralforthese
loansisafirstlienmortgageonthemultifamilyproperty,plusanassignmentofallleasesrelatedtosuchproperty.AsofDecember31,2013,the
Bankhadmultifamilyloansof$1.1billionoutstanding,makingupapproximately33.3%oftheBankstotalloanportfolio,whichincludes
loansheldforsale,comparedto$0.4billion,orapproximately12.9%ofthetotalloanportfolioatDecember31,2012.
ConsumerLending
TheBankprovideshomeequityandresidentialmortgageloanstocustomers.Underwritingstandardsforhomeequitylendingareconservative
andlendingisofferedtosolidifycustomerrelationshipsandgrowrelationshiprevenuesinthelongterm.ThislendingisimportantintheBanks
effortstogrowtotalrelationshiprevenuesforitsconsumerhouseholds.AsofDecember31,2013,theBankhad$166.1millioninconsumerloans
outstanding,or5.2%oftheBankstotalloanportfolio,whichincludesloansheldforsale.TheBankplanstoexpanditsproductofferingsinreal
estatesecuredconsumerlending.
8/26/2014 Form 10-K
CustomersBankhaslaunchedacommunityoutreachprograminPhiladelphiatoencourageahigherpercentageofhomeownershipinurban
communities.Aspartofthisprogram,theBankisofferinganAffordableMortgageProduct.Thiscommunityoutreachprogramispenetrating
theunderservedpopulation,especiallyinlowandmoderateincomeneighborhoods.Aspartofthiscommitment,aloanproductionofficeisopen
inProgressPlaza,1501NorthBroadStreet,Philadelphia,PA.Theprogramincludeshomebuyerseminarsthatpreparepotentialhomebuyersfor
homeownershipbyteachingmoneymanagementandbudgetingskills,includingthefinancialresponsibilitiesthatcomewithhavingamortgage
andowningahome.TheAffordableMortgageProductisofferedthroughoutCustomersBanksassessmentareas.

55
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Thecompositionofnetloansreceivable(excludingloansheldforsale)wasasfollows:

December31,
2013 2012 2011 2010 2009
(inthousands)
CoveredLoans:

Construction $ 14,627 $ 27,792 $ 37,926 $ 38,280 $
BusinessBanking:
Commercialrealestate 24,258 44,901 48,789 75,245
Commercialandindustrial 5,814 11,153 13,084 22,876
Residentialrealestate 18,733 19,952 22,465 23,822
Manufacturedhousing 3,293 3,728 4,012 4,662
TotalloanreceivablecoveredunderFDIClosssharingagreements
(a)

66,725
107,526
126,276
164,885
NonCoveredLoans:

Construction

36,901
28,897
15,271
13,387
21,742
Commercialrealestate/multifamily

1,835,186
835,488
350,929
144,849
133,433
Commercialandindustrial

239,509
75,118
69,736
35,942
25,290
Mortgagewarehouse(b)

866
9,565
619,318
186,113
16,435
Manufacturedhousing

139,471
154,703
104,565
102,924

Residentialrealestate

145,188
109,430
53,476
28,964
27,422
Consumer

2,144
2,061
2,211
1,581
5,524
Unearnedorigination(fees)costs,net

(912)
1,679
(389)
327
452
TotalloanreceivablenotcoveredunderFDIClosssharing
agreements

2,398,353
1,216,941
1,215,117
514,087
230,298
Totalloansreceivable

2,465,078
1,324,467
1,341,393
678,972
230,298
Allowanceforloanlosses

(23,998)
(25,837)
(15,032)
(15,129)
(10,032)
Loansreceivable,net

$2,441,080
$1,298,630
$1,326,361
$663,843
$220,266

(a) CoveredloansreceivableacquiredfromtheformerUSABankandISNBankarecoveredundertheFDIClosssharingagreementsoverafive
totenyearperiod,dependinguponthetypeofloan.
(b) Duringthethirdquarterof2012,theBancorpelectedthefairvalueoptionforcertainwarehouselendingtransactionsoriginatedafter
July1,2012.Thedocumentationontheloanswasmodifiedtoapurchasewithagreementtoresellcontract.Assuch,qualifiedwarehouse
lendingtransactionsonitsbalancesheetatDecember31,2013and2012,wereaccountedforatfairvalueandclassifiedasheldforsale.
WarehouselendingtransactionsontheBancorpsbalancesheetatDecember31,2011wereclassifiedasloansreceivablenotcoveredunder
FDIClosssharingagreements.
Mortgagewarehouseloansandcertainresidentialloansexpectedtobesoldareclassifiedasloansheldforsale.Loansheldforsaletotaled$0.7
billionand$1.4billionatDecember31,2013and2012,respectively.Loansheldforsalearenotincludedintheloanreceivableamounts.The
mortgagewarehouseproductlineprovidesfinancingtomortgagecompaniesnationwidefromthetimeofthehomepurchaseorrefinancingofa
mortgageloanthroughthesaleoftheloanbythemortgageoriginatorintothesecondarymarket,eitherthrougharepurchasefacilityorthe
purchaseoftheunderlyingmortgages.Asamortgagewarehouselender,weprovideaformoffinancingtomortgagebankersbypurchasingfor
resaletheunderlyingresidentialmortgagesonashorttermbasisunderamasterrepurchaseagreement.Wearesubjecttotherisksassociatedwith
suchlending,including,butnotlimitedto,therisksoffraud,bankruptcyanddefaultofthemortgagebankeroroftheunderlyingresidential
borrower,anyofwhichcouldresultincreditlosses.Themortgagewarehouselendingemployeesmonitorthesemortgageoriginatorsby
obtainingfinancialandotherrelevantinformationtoreducetheserisksduringthelendingperiod.
Loansreceivable,net,increasedby$1.1billionto$2.4billionatDecember31,2013from$1.3billionatDecember31,2012.Inthefirstquarter
of2013,thebankacquired$182.3millionincommercialloancommitmentsfromMichiganbasedFlagstarBankofwhich$139.6millionis
currentlyoutstanding.Inaddition,theincreaseinLoansreceivable,net,wasalsoattributabletohigherbalancesforcommercialrealestateand
commercialandindustrialloanswhichincreased$979.1millionand$159.1million,respectivelyfromDecember31,2012.Themulti
family/commercialrealestateloanbalanceisincreasingduetothefocusonthiselementofCustomersorganicgrowthstrategy.Offsettingthese
increasesinpartwastheloanrunoffforpurchasedcreditimpairedandcoveredloans.

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Thefollowingtablesetsforthcertaincategoriesofloans*asofDecember31,2013,intermsofcontractualmaturitydate:

Within
oneyear
Afterone
but
within
five
years
After
five
years Total
(inthousands)
TypesofLoans:
Construction $ 16,639 $ 1,174 $ 33,715$ 51,528
Commercialrealestate 46,288 632,974 1,180,283 1,859,545
Commercialandindustrial 62,196 42,496 137,408 242,100
Total

$125,123
$676,644
$1,351,406
$2,153,173
Amountofsuchloanswith:

Predeterminedrates

$ 48,063
$606,319
$1,060,256
$1,714,638
Floatingoradjustablerates

77,060
70,325
291,150
438,535
Total

$125,123
$676,644
$1,351,406
$2,153,173

* Includescoveredandnoncoveredloans.
CREDITRISK
CustomersBancorpmanagescreditriskbymaintainingdiversificationinitsloanportfolio,byestablishingandenforcingprudential
underwritingstandards,bycollectioneffortsandbycontinuousandperiodicloanclassificationreviews.Managementalsoconsiderstheeffectof
creditriskonfinancialperformancebyreviewingquarterlyandmaintaininganadequateallowanceforloanlosses.Creditlossesarecharged
whentheyareidentified,andprovisionsareadded,totheallowanceforloanlosseswhenandasappropriate,butatleastquarterly.Theallowance
forloanlossesisevaluatedatleastquarterly.
Theprovisionforloanlosseswas$2.2million,$14.3million,and$7.5millionfortheyearsendedDecember31,2013,2012and2011,
respectively.Theallowanceforloanlossesmaintainedforloansreceivable(excludesloansheldforsaleasestimablecreditlossesareembedded
inthefairvaluesatwhichtheloansarereported)was$24.0million,or1.0%oftotalnoncoveredloans,atDecember31,2013,and$25.8
million,or2.1%oftotalnoncoveredloans,atDecember31,2012.Thecoverageratiodeclinedduring2013largelyduetothedecreaseinnon
performingloansasaresultofnetchargeoffs($6.9million),transferstootherrealestateowned,sustainedperformanceimprovementsthatledto
lowerreservefactorsforcommercial,multifamilyandresidentialmortgageloans,andthegrowthofthemultifamilyloanportfoliowhichdraws
onlya40bpsreservelevelduetoitshistoricalpaymentexperience.Netchargeoffswere$6.9millionfortheyearendedDecember31,2013,an
increaseof$1.4millioncomparedtothe$5.5millionfortheyearendingDecember31,2012.TheBankhadapproximately$66.7millionin
loansthatwerecoveredunderlosssharearrangementswiththeFDICasofDecember31,2013and$107.5millionasofDecember31,2012.
CustomersBankconsidersthecoveredloansinestimatingtheallowanceforloanlossesandconsidersrecoveryofestimatedcreditlossesfrom
theFDICintheFDICindemnificationasset.

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ThechartbelowdepictstheBancorpsallowanceforloanlosses,excludingtheeffectsoftheFDICreceivable,fortheperiodsindicated.

December31,
2013 2012 2011 2010 2009
Balanceoftheallowanceatthebeginningoftheyear $25,837 $15,032 $15,129 $10,032 $ 2,876
Loanchargeoffs(1)
Construction 2,096 2,507 1,179 1,214 920
Commercialrealestate 3,358 2,462 5,775 964 2,597
Commercialandindustrial 1,387 522 2,543 1,699 1,080
Residentialrealestate 410 649 109 1,366
Consumerandother 87 26 55 22 33
TotalChargeoffs(2)

7,338
6,166
9,661
5,265
4,630
Loanrecoveries

Construction

Commercialrealestate

42
63
94


391
514
11
8

2

Consumerandother

9
114
TotalRecoveries

444
700
114
15
Totalnetchargeoffs

6,894
5,466
9,547
5,250
4,622
Provisionforloanlosses(3)

5,055
16,271
9,450
10,397
11,778
Transfer(4)

(50)
Balanceoftheallowanceforloanlossesattheendoftheyear

$23,998
$25,837
$15,032
$15,129
$10,032
Netchargeoffsasapercentageofaveragenoncoveredloans

0.38%
0.43%
1.13%
1.00%
2.05%

(1) Chargeoffsonpurchasedcreditimpairedloansthatarepooledarenotrecognizeduntilthepoolmatures.
(2) Thelargechargeoffsin2011wererelatedtoloansacquiredinthe2010FDICassistedtransactionsandtheLegacyportfolio.
(3) For2013,2012and2011,excludesthebenefitoftheFDIClosssharearrangementsof$2.8million,$2.0millionand$2.0million,
respectively.Therearenocomparableamountsfor2010and2009.
(4) In2010,CustomersBancorphadareserveof$50,000forunfundedcommitmentspreviouslyincludedintheallowanceforloanlosses.The
reserveforunfundedloancommitmentswasreclassifiedtootherliabilities.
Theallowanceforloanlossesisbasedonaperiodicevaluationoftheloanportfolioandismaintainedatalevelthatmanagementconsiders
adequatetoabsorbpotentiallosses.Allcommercialloansareassignedcreditriskratings,baseduponanassessmentoftheborrower,thestructure
ofthetransactionandtheavailablecollateraland/orguarantees.Allloansaremonitoredregularlybytheresponsibleofficer,andtheriskratings
areadjustedwhenconsideredappropriate.Theriskassessmentallowsmanagementtoidentifyproblemloanstimely.Managementconsidersa
varietyoffactors,andrecognizestheinherentriskoflossthatalwaysexistsinthelendingprocess.Managementusesadisciplinedmethodology
toestimatetheappropriatelevelofallowanceforloanlosses.Managementsmethodologytoestimateanaggregatereserveisdescribedin
NOTE3SIGNIFICANTACCOUNTINGPOLICIESANDBASISOFPRESENTATION.SeeAssetQualityforfurtherdiscussionofthe
allowanceforloanlosses.
Customersmethodologyincludesanevaluationoflosspotentialfromindividualproblemcredits,aswellasageneralreservefortheportfolio
consideringanticipatedspecificandgeneraleconomicfactorsthatmaypositivelyoradverselyaffectcollectability.Thisassessmentincludesa
reviewofchangesinthecompositionandvolumeoftheloanportfolio,overallportfolioqualityandpastlossexperience,reviewofspecific
problemloans,currenteconomicconditionsthatmayaffectborrowersabilitytorepay,andotherfactorsthatmaywarrantconsiderationin
estimatingthereserve.Inaddition,theBancorpsinternalauditors,loanreview,andvariousregulatoryagenciesperiodicallyreviewthe
adequacyoftheallowanceasanintegralpartoftheirworkresponsibilitiesorexaminationprocess.CustomersBancorpmaybeaskedto
recognizeadditionsorreductionstotheallowanceforloanlossesbasedontheirjudgmentsofinformationavailableatthetimeoftheir
examination.

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Inthecoveredloantable,manyoftheBankscommercialandindustrialloanshavebeenclassifiedascoveredrealestate.Approximately75
80%oftheBankscommercialrealestate,commercialandresidentialconstruction,consumerresidentialandcommercialandindustrialloan
typeshaverealestateascollateral(collectively,therealestateportfolio).TheBankslienpositionontherealestatecollateralwillvaryona
loanbyloanbasisandwillchangeasaresultofchangesinthevalueofthecollateral.Currentappraisalsprovidingcurrentvalueestimatesofthe
propertyarereceivedwhentheBankscreditgroupdeterminesthatthefactsandcircumstanceshavesignificantlychangedsincethedateofthe
lastappraisal,includingthatrealestatevalueshavedeteriorated.Thecreditcommitteeandloanofficersreviewloansthatarefifteenormoredays
delinquentandallnonaccrualloansonaperiodicbasis.Inaddition,loanswheretheloanofficershaveidentifiedaborrowerofinterestare
discussedtodetermineifadditionalanalysisisnecessarytoapplytheriskratingcriteriaproperly.Theriskratingsfortherealestateloan
portfolioaredeterminedbaseduponthecurrentinformationavailable,includingbutnotlimitedtodiscussionswiththeborrower,updated
financialinformation,economicconditionswithinthegeographicareaandotherfactorsthatmayaffectthecashflowoftheloan.Onaquarterly
basis,ifnecessary,thecollateralvaluesordiscountedcashflowmodelsareusedtodeterminetheestimatedfairvalueoftheunderlyingcollateral
forthequantificationofaspecificreserveforimpairedloans.Appraisalsusedwithinthisevaluationprocessdonottypicallyagemorethantwo
yearsbeforeanewappraisalisobtained.Forloanswhererealestateisnottheprimarysourceofcollateral,updatedfinancialinformationis
obtained,includingaccountsreceivableandinventoryagingreportsandrelevantsupplementalfinancialdatatodeterminethefairvalueofthe
underlyingcollateral.
Theseevaluations,however,areinherentlysubjectiveastheyrequirematerialestimates,including,amongothers,theamountsandtimingof
expectedfuturecashflowsonimpairedloans,estimatedlossesintheloanportfolio,andgeneralamountsforhistoricallossexperience,economic
conditions,uncertaintiesinestimatinglossesandinherentrisksinthevariouscreditportfolios,allofwhichmaybesusceptibletosignificant
change.PursuanttoASC450ContingenciesandASC31040TroubledDebtRestructuringsbyCreditors,impairedloans,consistingofnon
accrualandrestructuredloans,areconsideredinthemethodologyfordeterminingtheallowanceforcreditlosses.Impairedloansaregenerally
evaluatedbasedontheexpectedfuturecashflowsorthefairvalueoftheunderlyingcollateral(lessestimatedcoststosell)ifprincipalrepayment
isexpectedtocomefromthesaleoroperationofsuchcollateral.

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Thefollowingtableshowshowtheallowanceforloanlosseswasallocatedamongthevariousloanportfoliosthatwereoutstanding.This
allocationwasbasedonmanagementsspecificreviewofthecreditriskoftheoutstandingloanportfoliosineachcategoryaswellashistorical
trends.

December31,
2013 2012 2011

Allowance
forloan
losses
Percentof
Loansin
each
category
tototal
loans(a)
Allowance
forloan
losses
Percentof
Loansin
each
category
tototal
loans(a)
Allowance
forloan
losses
Percentof
Loansin
each
category
tototal
loans(a)
Construction $ 2,385 9.9% $ 3,991 4.3% $ 4,656 4.0%
Commercialrealestate/multifamily 15,705 65.4 15,439 66.5 7,030 29.8
Commercialandindustrial 2,638 11.0 1,477 6.5 1,441 6.2
Residentialrealestate 2,490 10.4 3,233 9.8 844 5.6
Consumerandother 130 0.5 154 0.2 77 0.1
Mortgagewarehouse 36 0.2 71 0.7 929 46.2
Manufacturedhousing 614 2.6 750 12.0 1 8.1
ResidualReserve 722 54

$ 23,998
100.0%
$ 25,837
100.0%
$ 15,032
100.0%

December31,
2010 2009

Allowance
forloan
losses
Percentof
Loansin
each
category
tototal
loans(a)
Allowance
forloan
losses
Percentof
Loansin
each
category
tototal
loans
Construction $ 2,126 9.5% $ 2,349 9.5%
Commercialrealestate/multifamily 6,280 32.0 4,874 58.0
Commercialandindustrial 1,663 7.2 1,350 11.0
Residentialrealestate 3,988 7.8 1,284 11.9
Consumerandother 11 0.2 75 2.4
Mortgagewarehouse 465 27.4 7.2
Manufacturedhousing 15.9
ResidualReserve 596 100
$ 15,129
100.0%
$ 10,032
100.0%

(a) Totalloansincludecoveredandnoncoveredloansin2013,2012,2011,and2010.Nocoveredloanswereheldpriorto2010.
ASSETQUALITY
Customersdividesitsloanportfoliointotwocategoriestoanalyzeandunderstandloanactivityandperformance:loansthatwereoriginated,and
loansthatwereacquired.Customersfurtherdividesoriginatedloansintotwocategories:thoseoriginatedpriortothecurrentunderwriting
standardsin2009andthoseoriginatedsubjecttothosestandardspost2009,andpurchasedloansintotwocategories:thosepurchasedatacredit
discount,andthosenotacquiredwithcreditdiscount.Managementbelievesthatthisadditionalinformationprovidesforabetterunderstanding
oftheriskintheportfolioandthevarioustypesofreservesthatareavailabletoabsorbloanlossesthatmayariseinfutureperiods.Creditlosses
fromoriginatedloansareabsorbedbytheallowanceforloanlossreserves.Creditlossesfromacquiredloansareabsorbedbytheallowancefor
loanlosses,nonaccretabledifferencefairvaluemarks,andcashreserves,asdescribedbelow.Theallowanceforloanlossesistoabsorbonlythose
lossesestimatedtohavebeenincurredafteracquisition,whereasthefairvaluemarkandcashreservesabsorblossesestimatedtohavebeen
embeddedintheacquiredloansatacquisition.Thisscheduleincludesbothloansheldforsaleandloansheldforinvestment.

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AssetQualityatDecember31,2013

LoanType TotalLoans
PCI
Loans Current
3090
Days
Greater
than90
Days
and
Accruing
Non
accrual/
NPL(a)
OREO
(b)
NPA
(a)+(b)
NPL
to
Loan
Type
(%)
NPA
to
Loans+
OREO
(%)
NewCenturyOrig.Loans
Legacy $ 74,344 $ 0 $ 64,321 $ 555 $ 0 $9,468$ $ 3,754 $13,222 12.74 16.93
TDRs 1,692 0 978 0 0 714 0 714 42.20 42.20
TotalOriginatedLoans

76,036
65,299
555
10,182
3,754
13,936
13.39
17.47
OriginatedLoans

WarehouseRepo

4,743
4,743
0.00
0.00
Manufactured

4,179
4,179
0.00
0.00
Commercial

801,229
800,718
511
511
0.06
0.06
Multifamily

1,056,696
1,056,696
0.00
0.00
Consumer/Mortgage

110,593
110,593
0.00
0.00
CRA

8,149
8,149
0.00
0.00

1,985,589
1,985,078
511
511
0.03
0.03
AcquiredLoans

Berkshire

11,832
9,449
10
2,373
1,201
3,574
20.06
27.42
FDICCovered

42,250
35,914
686
5,650
6,953
12,603
13.37
25.61
FDICNoncovered

15
15
0.00
0.00
ManufacturedHousing2010

74,694
69,877
4,817
0.00
0.00

0
357
357
n/a
100.00

53,461
46,667
3,022
3,772
0.00
0.00
Flagstar

139,582
139,582
0.00
0.00
TDRs

2,929
2,400
82
447
447
15.26
15.26
TotalAcquiredLoans

324,763
303,904
8,617
3,772
8,470
8,511
16,981
2.61
5.10
AcquiredPCILoans

Berkshire

50,329
50,329
45,303
446
4,580
0

FDICCovered

24,475
24,475
4,325
51
20,099
0


5,478
5,478
2,534
470
2,474
0

TotalAcquiredPCILoans

80,282
80,282
52,162
967
27,153
0

FairValue/DeferredFeesand
Expenses

(1,592)
(1,592)
0

TotalLoansHeldforInvestment

2,465,078
80,282
2,404,851
10,139
30,925
19,163
12,265
31,428

TotalLoansHeldforSale

747,593
747,593
0

TotalPortfolio

$3,212,671
$80,282
$3,152,444
$10,139
$30,925
$19,163
$12,265
$31,428
0.60
0.97

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AssetQualityatDecember31,2013(continued)

LoanType TotalLoans NPL ALL
Credit
Marks
Cash
Reserve
Total
Credit
Reserves
Reserves
toLoans
(%)
Reserves
toNPLs
(%)
NewCenturyOrig.Loans
Legacy $ 74,344 $ 9,468 $ 2,386 $ 0 $ 0 $ 2,386 3.21 25.20
TDRs 1,692 714 56 0 0 56 3.31 7.84

TotalNewCenturyOrig.Loans

76,036
10,182
2,442
2,442
3.21
23.98

OriginatedLoans

WarehouseRepo

4,743
36
36
0.76
n/a
Manufactured

4,179
84
84
2.01
n/a
Commercial

801,229
511
5,936
5,936
0.74
1161.64
Multifamily

1,056,696
4,227
4,227
0.40
n/a
Consumer/Mortgage

110,593
396
396
0.36
n/a
CRA

8,149
61
61
0.75
n/a


1,985,589
511
10,740
10,740
0.54
2101.76

AcquiredLoans

Berkshire

11,832
2,373
510
510
4.31
21.49
FDICCovered

42,250
5,650
924
924
2.19
16.35
FDICNoncovered

15
0.00
n/a

74,694
3,086
3,086
4.13
n/a

0
n/a
n/a

53,461
0.00
n/a
Flagstar

139,582
0.00
n/a
TDRs

2,929
447
135
135
4.61
30.20

TotalAcquiredLoans

324,763
8,470
1,569
3,086
4,655
1.43
54.96

AcquiredPCILoans

Berkshire

50,329
4,241
(2,161)
2,080
4.13
n/a
FDICCovered

24,475
4,476
(49)
4,427
18.09
n/a

5,478
530
4,423
4,953
90.42
n/a

TotalAcquiredPCILoans

80,282
9,247
2,213
11,460
14.27
n/a

FairValue/DeferredFeesandExpenses

(1,592)
0

TotalLoansHeldforInvestment

2,465,078
0

TotalLoansHeldforSale

747,593
0

TotalPortfolio

$3,212,671
$19,163
$23,998
$ 2,213
$3,086
$29,297
0.91
152.88

OriginatedLoans
Originatedloanstotaled$2.1billion,or64.2%oftotalloansatDecember31,2013comparedto$2.4billion,or57.7%atDecember31,2012.
$76.0millionoftheseloanswereoriginatedpriortoSeptember2009(LegacyLoans/NewCentury)whenthenewmanagementteamadopted
newunderwritingstandardsthatmanagementbelievesbetterlimitsrisksofloss.AtDecember31,2013,theolderNewCentury/Legacyloans
comprised$13.9millionofnonperformingassets(NPA,whichincludesnonperformingloansof$10.2millionandotherrealestateownedof
$3.7million),or96.5%oftotalNPAfororiginatedloansand44.4%oftotalNPA.Thehighlevelofnonperformingloans(NPL)intheLegacy
Loanportfolio(13.4%NPL/Loans)issupportedby$2.4millionoftheallowanceforloanlosses,orabout25.0%ofnonperformingLegacy
Loans.Nonperformingoriginatedloanstotaled$0.5millionasofDecember31,2013andweresupportedby$10.7millionofallowanceforloan
losses(nearly21timestheamountofNPA.)
Originatedcommercialloansandmultifamilyloanstotaled$1.9billionandweresupportedwith$10.2millionoftheallowanceforloan
losses.Consumerandmortgageloanstotaled$110.6millionandweresupportedby$0.4millionoftheallowanceforloanlosses.Themortgage
warehouseloansareclassifiedasheldforsaleandcreditallowancesareembeddedinthereportednumbers,sonoallowanceforloanlossesis
maintained.Aspreviouslynoted,thetotalamountofnonperformingloansoriginatedsince2009was$0.5million.
AcquiredLoans
AtDecember31,2013,CustomersBankreported$0.4billionofacquiredloanswhichwas12.6%oftotalloanscomparedto$0.3billion,or8.1%
oftotalloansatDecember31,2012.Whenloansareacquired,theyarerecordedonthebalancesheetatfairvalue.Acquiredloansinclude
purchasedportfolios,FDICfailedbankacquisitions,andunassistedacquisitions.Creditlossesonacquiredloansareabsorbedfirstbythecredit
markontheloanatthetimeitwasacquiredandsecondbytheallowancecreatedfor

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deteriorationincreditqualitysubsequenttoacquisition.OftheloanspurchasedfromTammacpriorto2012,$74.7millionweresupportedbya
$3.1millioncashreservethatwascreatedaspartofthepurchasetransactiontoabsorblossesandismaintainedinademanddepositaccountat
CustomersBank.Allcurrentlossesanddelinquentinterestareabsorbedbythisreserve.Forthemanufacturedhousingloanspurchasedin2012
intheamountof$56.0million,TammachasanobligationtopayCustomersBankthefullpayoffamountofadefaultedloan,includingany
principal,unpaidinterest,oradvancesontheloans,oncetheborrowervacatestheproperty.
Manyoftheacquiredloanswerepurchasedatadiscount.Thepricepaidconsideredmanagementsjudgmentastothecreditandinterestraterisk
inherentintheportfolioatthetimeofpurchase.Everyquarter,managementreassessestheriskandadjuststhecashflowforecasttoincorporate
changesinthecreditoutlook.Adecreaseinforecastcashflowsforapurchasedloanwillresultinaprovisionforloanlosses,andabsentcharge
offs,anincreaseintheallowanceforloanlosses.TotalNPAintheacquiredportfoliowere$17.0million,or54.0%oftotalNPA.OftotalNPA,
40.1%haveFDIClossshareprotection(80%FDICcoverageoflosses).AtDecember31,2013,theFDICcoveredloanshad$5.4millionof
allowanceforloanlossesand$2.2millionofnonaccretabledifferencefairvaluemarkstoabsorbincurredandfuturecreditlosses.11.4%oftotal
NPAwerefromloansrelatedtotheBerkshireacquisition,while1.1%oftotalNPAswererelatedtoloansacquiredfromTammacwithacash
depositof$3.1milliontoabsorbcertainlossesandaguaranteetoabsorbcertainotherlosses.
AcquiredloanshaveasignificantlyhigherpercentageofnonperformingassetsthanloansoriginatedafterSeptember2009.Management
acquiredtheseloanswiththeexpectationthatnonperformingloanlevelswouldbeelevated,andthereforeincorporatedthatexpectationinto
thepricepaid.ManagementalsocreatedaSpecialAssetsgroupthathasamajorfocusonworkoutsfortheseacquirednonperformingassets.
HeldforSaleLoans
Theloansheldforsaleportfolioincluded$740.7millionofloanstomortgagebankingbusinessesand$6.9millionofresidentialmortgage
loans.Heldforsaleloansarecarriedonourbalancesheetatfairvalueorlowerofcostormarket.Ascreditlossexpectationsareembeddedinthe
fairvalueestimate,anallowanceforloanlossesisnotneeded.
Loansnotcoveredunderlosssharingarrangements
Thetablesbelowsetforthnoncoverednonperformingloansandnonperformingassetsandassetqualityratios:

December31,
2013 2012 2011 2010 2009
(inthousands)
Loans90+daysdelinquentstillaccruing $ 3,772 $ 1,966 $ 0 $ 5 $ 4,119
Nonaccrualloans $13,513 $22,347 $29,633 $22,242 $10,341
OREO 5,312 4,005 7,316 1,906 1,155

Nonperformingnoncoveredassets

$18,825
$26,352
$36,949
$24,148
$11,496

December31,
2013 2012 2011 2010 2009
Nonaccrualnoncoveredloanstototalnoncoveredloans 0.56% 1.84% 2.44% 4.33% 4.49%
Nonperformingnoncoveredassetstototalnoncoveredassets 0.78% 2.16% 3.02% 4.68% 4.97%
Nonaccrualnoncoveredloansand90+daysdelinquenttototalnoncoveredassets 0.72% 1.99% 2.42% 4.31% 6.25%
Allowanceforloanlossesto(1):
Totalnoncoveredloans 0.62% 1.20% 1.24% 2.94% 4.36%
Nonperformingnoncoveredloans 109.16% 65.26% 50.73% 68.02% 97.01%
Nonperformingnoncoveredassets 78.36% 55.34% 40.68% 62.65% 87.27%

(1) Excludestheimpactofpurchasedcreditimpairedloansandtheirrelatedallowanceforloanlossesof$9.2millionfor2013and$11.3
millionfor2012.Therewasnorelatedallowanceforloanlossesfor2011and2010.Therewerenopurchasedcreditimpairedloansinthe
portfolioin2009.

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ThetablebelowsetsforthtypesofnoncoveredloansthatwerenonperformingatDecember31,2013,2012,2011,2010and2009.

December31,
2013 2012 2011 2010 2009
(inthousands)
Construction $ 2,049 $ 2,423 $ 5,630 $ 4,673 $ 2,838
Residentialrealestate 969 1,669 1,643 1,125 390
Commercialrealestate 9,924 17,770 19,535 15,739 6,177
Commercialandindustrial 123 288 2,785 705 721
Manufacturedhousing 448 141 0 0 0
Consumerandother 0 56 40 0 215

Totalnonperformingloans

$13,513
$22,347
$29,633
$22,242
$10,341

TheBankseekstomanagecreditriskthroughthediversificationoftheloanportfolioandtheapplicationofcreditunderwritingpoliciesand
proceduresdesignedtofostersoundcreditstandardsandmonitoringpractices.Whilevariousdegreesofcreditriskareassociatedwith
substantiallyallinvestingactivities,thelendingfunctioncarriesthegreatestdegreeofpotentialloss.
Assetqualityassuranceactivitiesincludecarefulmonitoringofborrowerpaymentstatusandtheperiodicreviewofborrowercurrentfinancial
informationtoensureongoingfinancialstrengthandborrowercashflowviability.TheBankhasestablishedcreditpoliciesandprocedures,
seekstheconsistentapplicationofthosepoliciesandproceduresacrosstheorganization,andadjustspoliciesasappropriateforchangesin
marketconditionsandapplicableregulations.
ProblemLoanIdentificationandManagement
Tofacilitatethemonitoringofcreditqualitywithinthecommercialandindustrial,commercialrealestate,constructionportfolioandresidential
realestatesegments,andforpurposesofanalyzinghistoricallossratesusedinthedeterminationoftheallowanceforloanlossesforthe
respectiveportfoliosegment,theBankutilizesthefollowingcategoriesofriskratings:pass(therearesixriskratingsofpassloans),special
mention,substandard,doubtfulorloss.Theriskratingcategories,whicharederivedfromstandardregulatoryratingdefinitions,areassigned
uponinitialapprovalofcredittoborrowersandupdatedperiodicallythereafter.Passratings,whichareassignedtothoseborrowerswhodonot
haveanidentifiedpotentialorwelldefinedweaknessesandforwhichthereisahighlikelihoodoforderlyrepayment,areupdatedperiodically
basedonthesizeandcreditcharacteristicsoftheborrower.Allothercategoriesareupdatedonaquarterlybasisduringthemonthprecedingthe
endofthecalendarquarter.Whileassigningriskratingsinvolvesjudgment,theriskratingprocessallowsmanagementtoidentifyriskiercredits
inatimelymannerandallocatetheappropriateresourcestomanagingtheloans.
TheBankassignsaspecialmentionratingtoloansthathavepotentialweaknessesthatdeservemanagementscloseattention.Ifleftuncorrected,
thesepotentialweaknessesmay,atsomefuturedate,resultinthedeteriorationoftherepaymentprospectsfortheloanandourcreditposition.At
December31,2013and2012,specialmentionloanswere$40.4millionand$28.8million,respectively.
Riskratingsarenotestablishedforhomeequityloans,consumerloans,andinstallmentloans,mainlybecausetheseportfoliosconsistofalarger
numberofhomogenousloanswithsmallerbalances.Instead,theseportfoliosareevaluatedforriskmainlybasedonaggregatepaymenthistory,
throughthemonitoringofdelinquencylevelsandtrends.
Aregularreportingandreviewprocessisinplacetoprovideforproperportfoliooversightandcontrol,andtomonitorthoseloansidentifiedas
problemcreditsbymanagement.Thisprocessisdesignedtoassessourprogressinworkingtowardasolution,andtoassistindeterminingan
appropriatespecificallowanceforpossiblelosses.Allloanworkoutsituationsinvolvetheactiveparticipationofmanagementandarereported
regularlytotheBoard.Whenaloanbecomesdelinquent90daysormore,orearlierifconsideredappropriate,theloanisassignedtoCustomers
SpecialAssetGroup(SAG)forworkoutorotherresolution.
Loanchargeoffsaredeterminedonacasebycasebasis.Loansaregenerallychargedoffwhenprincipalislikelytobeunrecoverableandafter
appropriatecollectionstepshavebeentaken.LoanchargeoffsareproposedbytheSAGandapprovedbytheBoardofDirectors.
Loanpoliciesandproceduresarereviewedinternallyforpossiblerevisionsandchangesonaregularbasis.Inaddition,thesepoliciesand
procedures,togetherwiththeloanportfolio,arereviewedonaperiodicbasisbyvariousregulatoryagenciesandbyourinternal,externaland
loanreviewauditors,aspartoftheirexaminationandauditprocedures.
TroubledDebtRestructurings(TDRs)
AtDecember31,2013and2012,therewere$4.6millionand$6.1million,respectively,inloansreportedasTDRs.TDRsareconsidered
impairedloansinthecalendaryearoftheirrestructuringandareevaluatedtodeterminewhethertheyshouldbeplacedon

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8/26/2014 Form 10-K
Table of Contents
nonaccrualstatus.Insubsequentyears,aTDRmaybereturnedtoaccrualstatusifitsatisfiesaminimumsixmonthperformancerequirement
however,itwillremainclassifiedasanimpairedloan.Generally,CustomersBankrequiressustainedperformanceforninemonthsbefore
returningaTDRtoaccrualstatus.
Modificationofpurchasedcreditimpairedloansthatareaccountedforwithinloanpoolsinaccordancewiththeaccountingstandardsfor
purchasedcreditimpairedloansdonotresultintheremovaloftheseloansfromthepoolevenifmodificationswouldotherwisebeconsidereda
TDR.Accordingly,aseachpoolisaccountedforasasingleassetwithasinglecompositeinterestrateandanexpectationofcashflows,
modificationsofloanswithinsuchpoolsarenotTDRs.
TDRmodificationsprimarilyinvolveinterestrateconcessions,extensionsofterm,deferralsofprincipal,andothermodifications.Other
modificationstypicallyreflectothernonstandardtermswhichtheBancorpwouldnotofferinnontroubledsituations.Duringtheyearsended
December31,2013and2012,respectively,loansaggregating$1.2millionand$1.5millionweremodifiedintroubleddebtrestructurings.TDR
modificationsofloanswithinthecommercialandindustrialcategorywereprimarilyinterestrateconcessions,deferralsofprincipalandother
modificationsmodificationsofcommercialrealestateloanswereprimarilydeferralsofprincipal,extensionsoftermandothermodifications
andmodificationsofresidentialrealestateloanswereprimarilyinterestrateconcessionsanddeferralsofprincipal.AsofDecember31,2013and
2012,therewerenocommitmentstolendadditionalfundstodebtorswhosetermshavebeenmodifiedintroubleddebtstructuring.
TherewerenovaluationlossesatthetimeofthetroubleddebtrestructuringandtheTDRhadnoimpactontheallowanceforloanlosses.During
thetwelvemonthperiodendingDecember31,2013,fiveTDRloansdefaultedwithatotalrecordedinvestmentof$0.4million.Duringthe
twelvemonthperiodendingDecember31,2012,threeTDRloansdefaultedwithatotalrecordedinvestmentof$0.3million.Sincetheseloans
wereincludedintheloanportfoliothatissubjecttothecashreserve,theywillberemovedfromtheloanportfoliowhentheybecomeninetydays
pastdueaccordingly,therewerenodefaultedTDRloansatDecember31,2013and2012.
Allloansmodifiedintroubleddebtrestructuringsareconsideredimpairedandmeasuredforimpairment.Thenatureandextentofimpairmentof
TDRs,includingthosewhichhaveexperiencedasubsequentdefault,isconsideredinthedeterminationofanappropriatelevelofallowancefor
loanlosses.TherewerenospecificallowancesresultingfromTDRmodificationsduring2013,comparedtospecificallowancesof$0.1million
during2012.
NonperformingloansandassetscoveredunderFDIClosssharingagreements
ThetablesbelowsetforthnonaccrualcoveredloansandnonperformingcoveredassetscoveredunderFDIClosssharingagreementsexcluding
purchasedcreditimpairedloans.

December31,
2013 2012 2011
(inthousands)
Nonaccrualcoveredloans $ 5,650 $10,504 $ 6,993
Coveredotherrealestateowned 6,953 4,109 6,166

Totalnonperformingcoveredassets

$12,603
$14,613
$13,159

Thetablebelowsetsforththetypesofcoveredloansthatwerenonperformingexcludingpurchasedcreditimpairedloans.

December31,
2013 2012 2011
(inthousands)
Construction $3,382 $ 5,244 $2,584
Residentialrealestate 564 1,358 1,074
Commercialrealestate 1,691 3,712 3,185
Commercialandindustrial 2 100 72
Manufacturedhousing 11 90 78

Totalnonperformingcoveredloans

$5,650
$10,504
$6,993

FDICLOSSSHARINGRECEIVABLE
AsofDecember31,2013,$66.7million,or2.1%,ofoutstandingloans,and$7.0million,or56.7%ofotherrealestateassets,werecoveredunder
lossshareagreementswiththeFDICinwhichtheFDIChasagreedtoreimburseusfor80%ofalllossesincurredin

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connectionwiththoseassets.WeestimatedtheFDICreimbursementthatwillresultfromlossesorexpensesincurredaswedisposeofcovered
loansandotherrealestateassets,andincludedqualifyingincurredexpenses,werecordedthetotalasareceivablefromtheFDIC.TheFDICloss
sharingreceivablewasapproximately$10.0millionand$12.3millionasofDecember31,2013and2012,respectively.IncreasesintheFDIC
indemnificationassetreflectanestimateddecreaseincashflowsonacoveredloan,andadecreaseintheindemnificationassetreflectsan
increaseintheestimatedcashflowsofacoveredloan,andthechangeinestimatedcollectionsispresentednetintheprovisionforloanlosses.
ACCRUEDINTERESTRECEIVABLE
Accruedinterestreceivableincreasedby$2.6millionor44.4%,to$8.4millionatDecember31,2013from$5.8millionatDecember31,2012.
Thisincreaseprimarilywasassociatedwiththeincreaseofintotalloansreceivableof$1.1billionto$2.4billionatDecember31,2013from
$1.3billionatDecember31,2012.
PREMISESANDEQUIPMENTANDOTHERASSETS
Ourpremisesandequipment,netofaccumulateddepreciation,was$11.6millionand$9.7millionatDecember31,2013and2012,respectively.
Leaseholdimprovementsandfurnitureandequipmentpurchasesfromrelocationofabankbranchandbackofficecontributed$2.8milliontothe
increase.Technologyequipmentcontributed$1.0millionduetotheincreaseofadditionaltechnologyfacilitiesandemployees.
CustomersBanksrestrictedstockholdingsatDecember31,2013andDecember31,2012were$42.4millionand$30.2million,
respectively.TheseconsistofstockoftheFederalReserveBank,FederalHomeLoanBankandAtlanticCentralBankersBank,andarerequired
aspartofourrelationshipwiththesebanks.
OtherassetsatDecember31,2013andDecember31,2012were$41.0millionand$21.6,respectively.Activitythatcontributedtotheincrease
of$19.4millionincluded$6.6millioninstudentdeposits,$1.1millionofequityinvestmentsand$3.8millionofcashpledgedforinterestrate
swaps.
BOLIpurchasesof$45.0millionduring2013contributedtotheincreaseinourBOLIcashsurrendervalueof$102.2millionatDecember31,
2013from$54.7millionatDecember31,2012.BOLIisusedbytheBankastaxfreefundingforemployeebenefits.IncludedinBOLIonthe
balancesheetistheSupplementalExecutiveRetirementPlan(SERP)balanceof$2.3millionand$1.5millionatDecember31,2013and
2012,respectively.
DEPOSITS
Weofferavarietyofdepositaccounts,includingchecking,savings,moneymarketdepositaccounts(MMDA)andtimedeposits.Depositsare
obtainedprimarilyfromourgeographicservicearea.Totaldepositsgrewto$3.0billionatDecember31,2013,anincreaseof$519.1million,or
21.3%,from$2.4billionatDecember31,2012.Weexperiencedgrowthinretaildepositsduetoexceptionalsalesbehaviors,despitelower
interestratesin2013.
Thecomponentsofdepositswereasfollowsatthedatesindicated:

December31,
2013 2012 2011
(inthousands)
Demand,noninterestbearing $ 478,103 $ 219,687 $ 114,044
Demand,interestbearing 58,013 37,260 37,044
Savings,includingMMDA 1,298,468 1,003,985 719,341
Time,$100,000andover 797,322 708,487 408,853
Time,other 328,016 471,399 303,907

Totaldeposits

$2,959,922
$2,440,818
$1,583,189

Timedepositsof$100,000ormorewere$797.3millionatDecember31,2013comparedto$708.5millionatDecember31,2012,anincreaseof
$88.8millionor12.5%.TheincreasewasprimarilyduetodepositpromotionsandtheadditionoftheCertificateofDepositAccountRegistry
Service(CDARS)depositprogram.Noninterestbearingdemanddepositstotaled$478.1millionatDecember31,2013,upfrom$258.4
millionatDecember31,2012.Theseaccountsincludedepositsofstudentsmadepursuanttoa

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programservicedbyathirdpartyonbehalfofCustomers.Depositsofstudentstotaled$232.8millionasofDecember31,2013and$0asof
December31,2012.Thesedepositsareseasonal,peakinginthefallandmidwinterandlowestinthesummer.Averagedepositbalancesbytype
andtheassociatedaverageratepaidaresummarizedbelow:

AverageDepositBalances
YearendedDecember31, 2013 2012 2011

Average
Balance
Average
RatePaid
Average
Balance
Average
RatePaid
Average
Balance
Average
RatePaid
Demanddeposits $ 385,175 0.00% $ 180,719 0.00% $ 94,768 0.00%
Interestbearingdemanddeposits 45,613 0.52 36,701 0.52 22,394 0.46
Savings,includingMMDA 1,138,200 0.68 876,605 0.86 516,811 1.32
Timedeposits 1,251,707 1.04 935,207 1.43 808,637 1.85

Total

$2,820,695

$2,029,232

$1,442,610

AtDecember31,2013,thescheduledmaturitiesoftimedepositsgreaterthan$100,000wereasfollows:

December31,
(inthousands)
3monthsorless $ 207,460
Over3through6months 123,147
Over6through12months 155,235
Over12months 311,481
Total

$ 797,323
FHLBADVANCESandOTHERBORROWINGS
Borrowedfundsfromvarioussourcesaregenerallyusedtosupplementdepositgrowthandmeetotheroperatingneeds.
Shorttermdebt
Shorttermdebtwasasfollows:

December31,
2013 2012 2011
Amount Rate Amount Rate Amount Rate
FHLBadvances $611,500 0.26% $411,000 0.25% $320,000 0.25%
Federalfundspurchased 13,000 0.48 5,000 0.20 5,000 0.12

Totalshorttermborrowings

$624,500

$416,000

$325,000

Therewere$13.0millionand$5.0millionofFederalfundspurchasedasofDecember31,2013and2012,respectively.Federalfundstypically
matureinoneday.FHLBovernightadvancestotaled$611.5millionand$411.0millionasofDecember31,2013and2012,respectively.For
additionalinformationontheCompanysshorttermdebt,refertoNOTE11BORROWINGS.

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Longtermdebt
Debt,originallyissuedaslongterm,totaled$160.3millionand$62.0millionasofDecember31,2013and2012,respectively.Thecontractual
maturitiesoffixedratelongtermFHLBadvancesareasnotedbelow.

December31,
2013 2012
Amount Rate Amount Rate
2014 $ 0 0.00% $15,0000.52%
2015 50,000 0.37 25,0000.61
2016 35,000 0.66 10,0000.77
2017 5,000 3.08 5,0003.08
2018 5,000 3.31 5,0003.31
$95,000

$60,000
Seniornotes
InJulyandAugust2013,theBancorpissued$63.3millioninaggregateprincipalamountofseniornotesdue2018.Thenotesbearinterestat
6.375%peryearwhichispayableonMarch15,June15,September15,andDecember15ofeachyear.Thenotesareunsecuredobligationsof
theBancorpandrankequallywithallofitssecuredandunsecuredseniorindebtedness.
Subordinateddebt
CustomersBankissuedasubordinatedtermnoteduringthesecondquarterof2004.Thenotewasissuedfor$2.0millionatafloatingratebased
uponthethreemonthLIBORrate,determinedquarterly,plus2.75%perannum.QuarterlyinterestpaymentsaremadeonthisnoteinJanuary,
April,JulyandOctober.AtDecember31,2013,thequarterlyaverageratewas2.99%andtheaverageratefortheyearwas3.02%.Thenote
maturesinthefourthquarterof2014.
SHAREHOLDERSEQUITY
Shareholdersequityincreasedby$117.1millionto$386.6millionatDecember31,2013,from$269.5millionatDecember31,2012.The
increaseinequitywasprimarilytheresultofapublicofferingof6.8millionsharesofcommonstock,whichresultedinnetproceedsof$97.5
million.Thereweretwoprivateofferingsofanaggregateof7.1millionsharesofcommonstockin2012thatresultedinnetproceedsaggregating
$94.6million.
InMay2013,theBancorpsBoardofDirectorsapprovedtheconversionofallClassBNonVotingCommonStocktoClassAVotingCommon
Stock.
InNovember2013,theBancorpsBoardofDirectorsauthorizedastockrepurchaseplaninwhichtheBancorpcouldacquireupto5%ofits
currentoutstandingsharesatpricesnottoexceeda20%premiumoverthecurrentbookvalue.Therepurchaseprogrammaybesuspended,
modifiedordiscontinuedatanytime,andtheBancorphasnoobligationtorepurchaseanyamountofitscommonstockundertheprogram.
Inaddition,during2013,theBancorp:

sold6.2millionsharesofnewissueVotingcommonstockatapricetothepublicof$16.75pershare.Thenetproceedsafterdeducting
underwritingdiscountsandcommissionsandofferingexpenseswere$97.5million

converted3.7millionsharesofClassBNonVotingcommonstockinto3.7millionsharesofVotingcommonstock

repurchased0.5millionsharesunderthestockrepurchaseprogramdiscussedabove

issued23,413sharesofcommonstockundersharebasedcompensationarrangements

issued31,904sharesofClassBNonVotingcommonstockand14,869sharesofVotingcommonstockuponexerciseofoutstanding
warrantsand

repurchasedwarrantstopurchase17,227sharesofvotingcommonstockand17,227sharesofClassBNonVotingstock.

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During2012,theBancorp:

sold7.1millionsharesofcommonstockinprivateofferings.Theproceeds,netofofferingcosts,were$94.6millionand

announcedthat,duetomarketconditions,ithadpostponeditsinitialpublicofferingofvotingcommonstock.Costsrelatedtothis
postponedofferingintheamountof$1.4millionwereexpensedandareacomponentofnoninterestexpenses.
During2011,theBancorp:

soldanaggregateof1.3millionsharesofcommonstockand1.1millionsharesofClassBNonVotingCommonStockinprivate
offerings.Totalproceeds,netofofferingcosts,were$28.5million

acquiredBerkshireBancorp,Inc.(BBI)andexchangedeachoutstandingshareofBBIcommonstockfor0.1534sharesoftheBancorps
commonstock,resultingintheissuanceof0.6millionsharesoftheBancorpscommonstockand

repurchasedfromtheUnitedStatesDepartmentofTreasury(Treasury)2,892shares,constitutingalloftheissuedandoutstandingshares,
oftheBancorpsSeriesAPreferredStockatarepurchasepriceequaltotheliquidationvalueof$1,000pershare,oratotalof$2.9million
plusaccrued,unpaiddividendsonsuchsharesequalto$17,000,and145shares,constitutingalloftheissuedandoutstandingshares,ofthe
BancorpsSeriesBPreferredStockand,togetherwiththeSeriesAPreferredStock,(thepreferredshares),atarepurchasepriceequaltothe
liquidationvalueof$1,000pershare,oratotalof$145,000,plusaccrued,unpaiddividendsonsuchsharesequalto$2,000.Thetotal
repurchasepriceforthepreferredsharesequaled$3.1million,includingaccrueddividends.Therepurchaseofthepreferredsharesrelatedto
theTARPLetterAgreemententeredintobyandamongtheBancorp,BerkshireandtheTreasuryonSeptember16,2011.
ForadditionaldetailsrelatingtochangesintheBancorpsshareholdersequity,refertotheConsolidatedStatementsofChangesin
ShareholdersEquitypresentedinPartII,Item8.FinancialStatementsandSupplementaryDataofthisForm10K.
LIQUIDITYANDCAPITALRESOURCES
Liquidityforafinancialinstitutionisameasureofthatinstitutionsabilitytomeetdepositorsneedsforfunds,tosatisfyorfundloan
commitments,andforotheroperatingpurposes.EnsuringadequateliquidityisanobjectiveoftheAsset/LiabilityManagement
process.CustomersBancorpcoordinatesitsmanagementofliquiditywithourinterestratesensitivityandcapitalposition,andstrivesto
maintainastrongliquidityposition.
TheBanksinvestmentportfolioprovidesperiodiccashflowsthroughregularmaturitiesandamortization,andcanbeusedascollateraltosecure
additionalliquidityfunding.Ourprincipalsourcesoffundsareproceedsfromstockissuance,deposits,debtissuance,principalandinterest
paymentsonloans,andotherfundsfromoperations.BorrowingarrangementsaremaintainedwiththeFederalHomeLoanBankandtheFederal
ReserveBankofPhiladelphiatomeetshorttermliquidityneeds.AsatDecember31,2013and2012,ourborrowingcapacitywiththeFederal
HomeLoanBankwas$1.6billion,and$608.9million,respectively,ofwhich$611.5millionand$411.0million,respectively,wasusedin
shorttermborrowings.AsofDecember31,2013and2012,ourborrowingcapacitywiththeFederalReserveBankofPhiladelphiawas$92.3
millionand$107.0million,respectively.
Netcashflowsprovidedbyoperatingactivitieswere$722.0millionforthetwelvemonthsendedDecember31,2013,comparedtonetcashflows
usedinoperatingactivitiesof$1.2billionforthetwelvemonthsendedDecember31,2012.Originationofloansheldforsaleinexcessofthe
proceedsfromthesalesofloanscontributed$689.6milliontocashflowsusedinoperatingactivitiesduring2013.Originationofloansheldfor
saleinexcessoftheproceedsfromthesalesofloanscontributed$1.265billiontocashflowsusedinoperatingactivitiesduring2012.
Investingactivitiesusednetcashflowsof$1.6billionforthetwelvemonthsendedDecember31,2013.Purchaseslessproceedsfromsalesof
investmentsecuritiescontributed$381.8million,whichincludedthesaleof$160.3millionofavailableforsalesecuritiesduring2013.Anet
decreaseinloanscontributed$1.0billiontoinvestingactivities.ForthetwelvemonthsendedDecember31,2012,netcashflowsprovidedby
investingactivitieswere$262.1million.
Financingactivitiesprovided$913.0millionforthetwelvemonthsendedDecember31,2103,asincreasesincashfromdepositsprovided
$519.2million,andnetproceedsof$97.5millionwerereceivedfromprivatesecuritiesofferingsduring2013.Thesefinancingactivities,in
additiontoincreasesinshorttermandFHLBtermborrowingsof$208.5millionand$91.0million,respectively,providedsufficientcashflows
tosupportoperatingandinvestingactivities.
Overall,basedonourcoredepositbaseandavailablesourcesofborrowedfunds,managementbelievesthatwehaveadequateresourcestomeet
ourshorttermandlongtermcashrequirementswithintheforeseeablefuture.

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CAPITALADEQUACY
TheBoardofGovernorsoftheFederalReserveSystemhasadoptedriskbasedcapitalandleverageratiorequirementsforbankholding
companiesliketheBancorpandbankslikeCustomersBankthataremembersoftheFederalReserveSystem.ThePennsylvaniaDepartmentof
BankingandSecuritiesalsosetsminimumcapitalrequirements.AtDecember31,2013and2012,theBancorpmeteachofourminimumcapital
requirements.ManagementbelievesthattheBancorpmeetstheregulatorywellcapitalizedcriteriaasofDecember31,2013.Banking
regulatorshavediscretiontoestablishaninstitutionsclassificationbasedonotherfactors,inadditiontotheinstitutionsnumericcapitallevels.
Managementisnotawareofanydevelopmentsthathaveoccurredandthatcould,orwouldbereasonablylikelyto,causetheBancorps
classificationtobereducedbelowalevelofwellcapitalizedforregulatorypurposes.TheBancorpscapitalclassificationisdetermined
pursuanttopromptcorrectiveactionregulations,andtodeterminelevelsofdepositinsuranceassessments,andmaynotconstituteanaccurate
representationofouroverallfinancialconditionorprospects.
TheBankexperiencedrapidloangrowthduringthefinaldaysof2012.DuringthestandardclosingprocessoftheBanksDecember2012
financialstatements,managementdeterminedonJanuary30,2013thattherapidloangrowthresultedinareductionintheBankscapitalratios,
causingtheBanktobecomeadequatelycapitalizedasofDecember31,2012.Managementimmediatelytransferredsufficientcapitalfromthe
BancorptotheBank,returningtheBanktowellcapitalizedstatus.SufficientcashismaintainedattheBancorptoensurethattheBankremains
wellcapitalized,andmanagementremainscommittedtotakingallstepsnecessarytoensurethatboththeBancorpandtheBankremainwell
capitalizedgoingforward.SincetheBankwasadequatelycapitalizedatDecember31,2012,regulatoryapprovalisrequiredtoaccept,renewor
rolloveranybrokereddeposits.Theinterestratepaidfordepositsbyinstitutionsthatarelessthanwellcapitalizedislimitedto75basispoints
abovethenationalrateforsimilarproductsunlesstheinstitutioncansupporttotheFDICthatprevailingratesinitsmarketareaexceedthe
nationalaverage.
ThefollowingtablesummarizestherequiredcapitalratiosandthecorrespondingregulatorycapitalpositionsoftheBancorpandCustomers
Bankfortheperiodsordatesindicated:

Actual
ForCapitalAdequacy
Purposes
ToBeWellCapitalized
Under
PromptCorrectiveAction
Provisions
(Dollarsinthousands) Amount Ratio Amount Ratio Amount Ratio
AsofDecember31,2013:
Totalcapital(toriskweightedassets)
CustomersBancorp,Inc. $411,52713.21% $249,196 8.0% N/A N/A
CustomersBank $435,43214.11% $246,936 8.0% $ 308,670 10.0%
Tier1capital(toriskweightedassets)
CustomersBank $411,43413.33% $123,468 4.0% $ 185,202 6.0%
Tier1capital(toaverageassets)
CustomersBank $411,43410.81% $152,191 4.0% $ 190,239 5.0%
CustomersBank $244,710 9.53% $205,442 8.0% $ 256,802 10.0%
CustomersBank $218,394 8.50% $102,721 4.0% $ 154,081 6.0%
CustomersBancorp,Inc. $262,719 9.30% $112,939 4.0% N/A N/A
CustomersBank $218,394 7.74% $112,892 4.0% $ 141,115 5.0%
CapitalRatios
TheBankcontinuedtobuildcapitalduring2013.Ingeneral,inthepastfewyears,capitalgrowthhasbeenachievedbyearningsandincreasesin
capitalfromsalesofcommonstock.

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TheBankisunawareofanycurrentrecommendationsbytheregulatoryauthoritieswhich,iftheyweretobeimplemented,wouldhaveamaterial
effectonourliquidity,capitalresources,oroperations.
ThemaintenanceofappropriatelevelsofcapitalisanimportantobjectiveofourAssetandLiabilityManagementprocess.Throughourinitial
capitalizationandoursubsequentofferings,webelievewehavecontinuedtomaintainastrongcapitalposition.
EffectiveJanuary1,2015,CustomersBancorpandCustomersBankwillbecomesubjecttonewcapitalrequirementsasdetailedearlierinthis
document.Customershasreviewedthesenewcalculationsandrequirements,andexpectstocomplywiththerequirementswhentheybecome
effective.
OFFBALANCESHEETARRANGEMENTS
TheBankisinvolvedwithfinancialinstrumentsandothercommitmentswithoffbalancesheetrisks.Financialinstrumentswithoffbalance
sheetrisksareincurredinthenormalcourseofbusinesstomeetthefinancingneedsofourcustomers.Thesefinancialinstrumentsinclude
commitmentstoextendcredit,includingunusedportionsoflinesofcredit,andstandbylettersofcredit.Thoseinstrumentsinvolve,tovarying
degrees,elementsofcreditriskinexcessoftheamountrecognizedonthebalancesheets.
Withcommitmentstoextendcredit,exposurestocreditlossintheeventofnonperformancebytheotherpartytothefinancialinstrumentis
representedbythecontractualamountofthoseinstruments.Thesamecreditpoliciesareusedinmakingcommitmentsandconditional
obligationsasforonbalancesheetinstruments.Sincetheyinvolvecreditrisksimilartoextendingaloan,theyaresubjecttotheBanksCredit
Policyandotherunderwritingstandards.
AsofDecember31,2013and2012,thefollowingoffbalancesheetcommitments,financialinstrumentsandotherarrangementswere
outstanding:

December31,
2013 2012
(inthousands)
Commitmentstofundloans $202,809 $136,007
Unfundedcommitmentstofundmortgagewarehouseloans 905,442 428,400
Unfundedcommitmentsunderlinesofcredit 177,457 87,220
Lettersofcredit 29,116 3,064
Otherunusedcommitments 8,010 0
Commitmentstofundloans,unfundedcommitmentstofundmortgagewarehouseloans,unfundedcommitmentsunderlinesofcreditandletters
ofcreditareagreementstoextendcredittoorforthebenefitofacustomerintheordinarycourseofourbusiness.
Commitmentstofundloansandunfundedcommitmentsunderlinesofcreditmaybeobligationsofoursaslongasthereisnoviolationofany
conditionestablishedinthecontract.Sincemanyofthecommitmentsareexpectedtoexpirewithoutbeingdrawnupon,thetotalcommitment
amountsdonotnecessarilyrepresentfuturecashrequirements.Commitmentsgenerallyhavefixedexpirationdatesorotherterminationclauses
andmayrequirepaymentofafee.Weevaluateeachcustomerscreditworthinessonacasebycasebasis.Theamountofcollateralobtained,ifwe
deemitnecessaryuponextensionofcredit,isbasedonmanagementscreditevaluation.Collateralheldvariesbutmayincludepersonalor
commercialrealestate,accountsreceivable,inventoryandequipment.
Mortgagewarehouseloancommitmentsareagreementstopurchasemortgageloansfrommortgagebankersthatagreetopurchasetheloansback
inashortperiodoftimeortoselltothirdpartymortgageoriginators.Thesecommitmentsgenerallyfluctuatemonthlyasexistingloansare
repurchasedbythemortgagebankersandnewloansarepurchasedbytheBank.
Outstandinglettersofcreditwrittenareconditionalcommitmentsissuedbyustoguaranteetheperformanceofacustomertoathirdparty.Letters
ofcreditmayobligateustofunddrawsunderthoselettersofcreditwhetherornotacustomercontinuestomeettheconditionsoftheextension
ofcredit.Thecreditriskinvolvedinissuinglettersofcreditisessentiallythesameasthatinvolvedinextendingloanfacilitiestocustomers.

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CONTRACTUALOBLIGATIONS
Thefollowingtablesetsforthcontractualobligationsandothercommitmentsrepresentingrequiredandpotentialcashoutflowsasof
December31,2013.Interestonsubordinatednotes,FHLBlongtermadvances,andseniornoteswascalculatedusingthencurrentcontractual
interestrates.

Total
Withinone
year
Afteronebut
withinthreeyears
Afterthreebut
withinfiveyears
Morethan
fiveyears
(inthousands)
Operatingleases $ 14,211 $ 3,008 $ 4,609 $ 3,771 $ 2,823
Benefitplancommitments 4,500 0 300 600 3,600
Contractualmaturitiesoftimedeposits 1,125,339 719,643 339,223 66,473 0
Subordinatednotesplusinterestexpense 2,050 2,050 0 0 0
Loancommitments 1,285,709 1,258,037 733 657 26,282
FHLBlongtermadvances 95,000 0 85,000 10,000 0
InterestonFHLBlongtermadvances 2,316 820 1,122 374 0
Seniornotes 63,250 0 0 63,250 0
Interestonseniornotes 18,480 4,032 8,064 6,384 0
Othercommitments(1) 8,010 0 0 8,010 0
Standbylettersofcredit 29,116 27,288 1,442 341 45

Total

$2,647,981
$2,014,878
$ 440,493
$ 159,860
$ 32,750

(1) Representsacommitmentexpiringinapproximatelyfouryearsthatissubjecttounscheduledrequestsforpayment.
NEWACCOUNTINGPRONOUNCEMENTS
Forinformationabouttheimpactthatrecentlyadoptedorissuedaccountingguidancewillhaveonus,refertoNOTE3SIGNIFICANT
ACCOUNTINGPOLICIESANDBASISOFPRESENTATIONappearinginPartII,Item8ofthisForm10K.

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Item7A.QuantitativeandQualitativeDisclosureAboutMarketRisk
InterestRateSensitivity
Thelargestcomponentofournetincomeisnetinterestincome,andthemajorityofourfinancialinstrumentsareinterestratesensitiveassetsand
liabilitieswithvarioustermsandmaturities.Oneoftheprimaryobjectivesofmanagementistomaximizenetinterestincomewhileminimizing
interestraterisk.Interestrateriskisderivedfromtimingdifferencesintherepricingofassetsandliabilities,loanprepayments,deposit
withdrawals,anddifferencesinlendingandfundingrates.OurAsset/LiabilityCommitteeactivelyseekstomonitorandcontrolthemixof
interestratesensitiveassetsandinterestratesensitiveliabilities.
Weusetwocomplementarymethodstoanalyzeandmeasureinterestratesensitivityaspartoftheoverallmanagementofinterestraterisk.They
areincomesimulationmodelingandestimatesofeconomicvalueofequity.Thecombinationofthesetwomethodsprovidesareasonably
comprehensivesummaryofthelevelsofinterestrateriskofourexposuretotimefactorsandchangesininterestrateenvironments.
Incomesimulationmodelingisusedtomeasureourinterestratesensitivityandmanageourinterestraterisk.Incomesimulationconsidersnot
onlytheimpactofchangingmarketinterestratesuponforecastednetinterestincome,butalsootherfactorssuchasyieldcurverelationships,the
volumeandmixofassetsandliabilities,customerpreferencesandgeneralmarketconditions.
Throughtheuseofincomesimulationmodeling,wehaveestimatedthenetinterestincomefortheyearendingDecember31,2013,basedupon
theassets,liabilitiesandoffbalancesheetfinancialinstrumentsinexistenceatDecember31,2013.Wehavealsoestimatedchangestothat
estimatednetinterestincomebaseduponinterestratesrisingorfallingimmediately(rateshocks).Rateshocksassumethatallinterestrates
increaseordecreaseimmediately.Thefollowingtablereflectstheestimatedpercentagechangeinestimatednetinterestincomefortheyear
endingDecember31,2013,resultingfromchangesininterestrates.
Netchangeinnetinterestincome

RateShocks
%
Change
Up3% (4.9)%
Up2% (1.2)%
Up1% 1.1%
Down1% (1.4)%
Down2% (3.1)%
Down3% (5.7)%
ThenetchangesinnetinterestincomeinallscenariosarewithinCustomersBanksinterestrateriskpolicyguidelines.
EconomicValueofEquity(EVE)estimatesthediscountedpresentvalueofassetandliabilitycashflows.Discountratesarebaseduponmarket
pricesforcomparableassetsandliabilities.UpwardanddownwardrateshocksareusedtomeasurevolatilityofEVEinrelationtoaconstantrate
environment.ThismethodofmeasurementprimarilyevaluatesthelongertermrepricingrisksandoptionsinCustomersBanksbalance
sheet.ThefollowingtablereflectstheestimatedEVEatriskandtheratioofEVEtoEVEadjustedassetsatDecember31,2013,resultingfrom
shockstointerestrates.

RateShocks Frombase
Up3% (36.1)%
Up2% (20.4)%
Up1% (7.8)%
Down1% (0.6)%
Down2% (4.7)%
Down3% (8.9)%

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Thematchingofassetsandliabilitiesmayalsobeanalyzedbyexaminingtheextenttowhichsuchassetsandliabilitiesareinterestratesensitive
andbymonitoringabanksinterestratesensitivitygap.Anassetorliabilityissaidtobeinterestratesensitivewithinaspecifictimeperiodif
itwillmatureorrepricewithinthattimeperiod.Theinterestratesensitivitygapisdefinedasthedifferencebetweentheamountofinterest
earningassetsmaturingorrepricingwithinaspecifictimeperiodandtheamountofinterestbearingliabilitiesmaturingorrepricingwithinthat
timeperiod.
ThefollowingtablesetsforththeamountsofinterestearningassetsandinterestbearingliabilitiesoutstandingatDecember31,2013thatare
anticipated,baseduponcertainassumptions,torepriceormatureineachofthefuturetimeperiodsshown.Exceptasstatedbelow,theamountof
assetsandliabilitiesshownthatrepriceormatureduringaparticularperiodweredeterminedinaccordancewiththeearlieroftermtorepricingor
thecontractualmaturityoftheassetorliability.Thetablesetsforthanapproximationoftheprojectedrepricingofassetsandliabilitiesat
December31,2013onthebasisofcontractualmaturities,anticipatedprepayments,andscheduledrateadjustmentswithinathreemonthperiod
andsubsequentselectedtimeintervals.Theloanamountsinthetablereflectprincipalbalancesexpectedtoberepaidand/orrepricedasaresult
ofcontractualamortizationandanticipatedprepaymentsofadjustableandfixedrateloans,andasaresultofcontractualrateadjustmentson
adjustablerateloans.

BalanceSheetGapAnalysisatDecember31,
2013

3months
orless
3to6
months
6to12
months
1to3
years
3to5
years
Over5
years Total
Assets
Interestearningdepositsandfederalfundssold $ 173,729 $ 0 $ 0 $ 0 $ 0 $ 57,681 $ 231,410
Investmentsecurities 32,018 17,235 25,334 103,478 90,770 258,725 527,560
Loansreceivable(a) 1,259,257 99,510 176,322 561,706 543,557 549,624 3,189,976
Totalinterestearningassets 1,465,004 116,745 201,656 665,184 634,327 866,030 3,948,946

Noninterestearningassets 0 0 0 0 7 171,562 171,569
Totalassets 1,465,004 116,745 201,656 665,184 634,334 1,037,592 $4,120,515
Liabilities
Otherinterestbearingdeposits $1,264,875 $ 0 $ 0 $ 0 $ 0 $ 91,607 $1,356,482
Timedeposits 322,103 184,153 231,772 330,002 57,248 57 1,125,335
Otherborrowings 619,501 0 15,000 84,996 0 3 719,500
Subordinateddebt 2,000 0 0 0 0 0 2,000
Totalinterestbearingliabilities 2,208,479 184,153 246,772 414,998 57,248 91,667 3,203,317

Noninterestbearingliabilities 0 0 0 0 0 503,606 503,606
Shareholdersequity 0 0 0 7 102 413,483 413,592
Totalliabilitiesandshareholdersequity 2,208,479 184,153 246,772 415,005 57,350 1,008,756 $4,120,515
Interestsensitivitygap $ (743,475) $ (67,408) $ (45,116) $ 250,179 $576,984 $ 28,836

Cumulativeinterestsensitivitygap 0 (810,883) (855,999) (605,820) (28,836) 0
Cumulativeinterestsensitivitygaptototalassets (18.0)% (19.7)% (20.8)% (14.7)% (0.7)% 0.0%
Cumulativeinterestearningassetstocumulativeinterest
bearingliabilities 66.3% 66.1% 67.6% 80.2% 99.1% 123.3%

(a) Includingloansheldforsale
Asshownabove,wehaveanegativecumulativegap(cumulativeinterestsensitiveassetsarelowerthancumulativeinterestsensitiveliabilities)
withinthenextyear,whichgenerallyindicatesthatanincreaseinratesmayleadtoadecreaseinnetinterestincome,andadecreaseinratesmay
leadtoanincreaseinnetinterestincome.Interestratesensitivitygapanalysismeasureswhetherassetsorliabilitiesmayrepricebutdoesnot
capturetheabilitytorepriceortherangeofpotentialrepricingonassetsorliabilities.Thusindicationsbasedonanegativeorpositivegap
positionneedtobeanalyzedinconjunctionwithotherinterestrateriskmanagementtools.
Managementbelievesthattheassumptionsandcombinationofmethodsutilizedinevaluatingestimatednetinterestincomeare
reasonable.However,theinterestratesensitivityofourassets,liabilitiesandoffbalancesheetfinancialinstruments,aswellastheestimated
effectofchangesininterestratesonestimatednetinterestincome,couldvarysubstantiallyifdifferentassumptionsareusedoractualexperience
differsfromtheassumptionsusedinthemodel.

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Item8. FinancialStatementsandSupplementaryData

FinancialStatementsforthethreeyearsended
December31,2013,2012and2011
INDEXTOCUSTOMERSBANCORP,INC.FINANCIALSTATEMENTS

ReportofIndependentRegisteredPublicAccountingFirm

76
ReportofIndependentRegisteredPublicAccountingFirmonInternalControls

77

78
ConsolidatedBalanceSheetsasofDecember31,2013and2012

79
ConsolidatedStatementsofIncomefortheyearsendedDecember31,2013,2012and2011

80
ConsolidatedStatementsofComprehensiveIncomefortheyearsendedDecember31,2013,2012and2011

81
ConsolidatedStatementsofChangesInShareholdersEquityfortheyearsendedDecember31,2013,2012and2011

82
ConsolidatedStatementsofCashFlowsfortheyearsendedDecember31,2013,2012and2011

83
NotestoConsolidatedFinancialStatementsfortheyearsendedDecember31,2013,2012and2011

85

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BoardofDirectorsandShareholders
CustomersBancorp,Inc.
WehaveauditedtheaccompanyingconsolidatedbalancesheetofCustomersBancorp,Inc.andSubsidiaries(theBancorp)asofDecember31,
2013,andtherelatedconsolidatedstatementsofincome,comprehensiveincome,changesinshareholdersequityandcashflowsfortheyear
thenended.TheseconsolidatedfinancialstatementsaretheresponsibilityoftheBancorpsmanagement.Ourresponsibilityistoexpressan
opiniononthesefinancialstatementsbasedonouraudit.
WeconductedourauditinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandards
requirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmaterial
misstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements.An
auditalsoincludesassessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverall
financialstatementpresentation.Webelievethatourauditprovidesareasonablebasisforouropinion.
Inouropinion,theconsolidatedfinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,thefinancialpositionofCustomers
Bancorp,Inc.andSubsidiariesasofDecember31,2013,andtheresultsoftheiroperationsandtheircashflowsfortheyearthenended,in
conformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),theBancorps
internalcontroloverfinancialreportingasofDecember31,2013,basedoncriteriaestablishedinInternalControlIntegratedFramework
(1992)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO)andourreportdatedMarch12,2014
expressedanunqualifiedopinion.
/s/BDOUSA,LLP
Philadelphia,Pennsylvania
March12,2014

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ReportofIndependentRegisteredPublicAccountingFirmonInternalControls
WehaveauditedCustomersBancorp,Inc.andSubsidiaries(theBancorp)internalcontroloverfinancialreportingasofDecember31,2013,
basedoncriteriaestablishedinInternalControlIntegratedFramework(1992)issuedbytheCommitteeofSponsoringOrganizationsofthe
TreadwayCommission(theCOSOcriteria).TheBancorpsmanagementisresponsibleformaintainingeffectiveinternalcontroloverfinancial
reporting,andforitsassessmentoftheeffectivenessofinternalcontroloverfinancialreportingincludedintheaccompanyingManagements
ResponsibilityforFinancialStatementsandReportonInternalControloverFinancialReporting.Ourresponsibilityistoexpressanopinionon
theBancorpsinternalcontroloverfinancialreportingbasedonouraudit.
WeconductedourauditinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandards
requirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethereffectiveinternalcontroloverfinancialreportingwas
maintainedinallmaterialrespects.Ourauditofinternalcontroloverfinancialreportingincludedobtaininganunderstandingofinternalcontrol
overfinancialreporting,assessingtheriskthatamaterialweaknessexists,andtestingandevaluatingthedesignandoperatingeffectivenessof
internalcontrolbasedontheassessedrisk.Ourauditalsoincludedperformingsuchotherproceduresasweconsiderednecessaryinthe
circumstances.Webelievethatourauditprovidesareasonablebasisforouropinion.
Acompanysinternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancial
reportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithaccountingprinciplesgenerallyacceptedinthe
UnitedStatesofAmerica.Acompanysinternalcontroloverfinancialreportingincludesthosepoliciesandproceduresthat(1)pertaintothe
maintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsofthecompany
(2)providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatementsinaccordancewith
generallyacceptedaccountingprinciples,andthatreceiptsandexpendituresofthecompanyarebeingmadeonlyinaccordancewith
authorizationsofmanagementanddirectorsofthecompanyand(3)providereasonableassuranceregardingpreventionortimelydetectionof
unauthorizedacquisition,use,ordispositionofthecompanysassetsthatcouldhaveamaterialeffectonthefinancialstatements.
Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofany
evaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthat
thedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
Inouropinion,CustomersBancorp,Inc.andSubsidiariesmaintained,inallmaterialrespects,effectiveinternalcontroloverfinancialreportingas
ofDecember31,2013,basedontheCOSOcriteria.
Wehavealsoaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),theconsolidated
balancesheetofCustomersBancorp,Inc.andSubsidiariesasofDecember31,2013andtherelatedconsolidatedstatementofincome,
comprehensiveincome,changesinshareholdersequity,andcashflowfortheyearthenendedandourreportdatedMarch12,2014expressedan
unqualifiedopinion.
/s/BDOUSA,LLP
Philadelphia,Pennsylvania
March12,2014

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WehaveauditedtheaccompanyingconsolidatedbalancesheetofCustomersBancorp,Inc.andSubsidiaries(theBancorp)asofDecember31,
2012,andtherelatedconsolidatedstatementsofincome,comprehensiveincome,changesinshareholdersequityandcashflowsforeachofthe
yearsinthetwoyearperiodendedDecember31,2012.TheseconsolidatedfinancialstatementsaretheresponsibilityoftheBancorps
management.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.
WeconductedourauditsinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandards
requirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmaterial
misstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements.An
auditalsoincludesassessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverall
financialstatementpresentation.Webelievethatourauditsprovideareasonablebasisforouropinion.
Inouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,thefinancialpositionofCustomersBancorp,Inc.
andSubsidiariesasofDecember31,2012,andtheresultsoftheiroperationsandtheircashflowsforeachoftheyearsinthetwoyearperiod
endedDecember31,2012inconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.
/s/ParenteBeardLLC
Allentown,Pennsylvania
March18,2013

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CONSOLIDATEDBALANCESHEETS
(dollarsinthousands,exceptsharedata)

December31,
2013 2012
ASSETS
Cashandduefrombanks $ 59,339 $ 12,908
Interestearningdeposits 173,729 173,108
Cashandcashequivalents

233,068
186,016
Investmentsecuritiesavailableforsale,atfairvalue

497,573
129,093
Loansheldforsale(includes$747,593and$1,248,935,respectively,atfairvalue)

747,593
1,439,889
LoansreceivablenotcoveredunderLossSharingAgreementswiththeFDIC

2,398,353
1,216,941
LoansreceivablecoveredunderLossSharingAgreementswiththeFDIC

66,725
107,526

(23,998)
(25,837)
Totalloansreceivable,netofallowanceforloanlosses

2,441,080
1,298,630
FHLB,FederalReserveBank,andotherrestrictedstock

42,424
30,163
Accruedinterestreceivable

8,362
5,790
FDIClosssharingreceivable

10,046
12,343
Bankpremisesandequipment,net

11,625
9,672
Bankownedlifeinsurance

104,433
56,191
Otherrealestateowned(includes$6,953and$4,109,respectively,coveredunderLossSharingAgreementswith
theFDIC)

12,265
8,114
Goodwillandotherintangibles

3,676
3,689
Otherassets

41,028
21,644
Totalassets

$4,153,173
$3,201,234
LIABILITIESANDSHAREHOLDERSEQUITY

Liabilities:

Deposits:

Demand,noninterestbearing

$ 478,103
$ 219,687
Interestbearing

2,481,819
2,221,131
Totaldeposits

2,959,922
2,440,818
Federalfundspurchased

13,000
5,000
FHLBadvances

706,500
471,000
Otherborrowings

65,250
2,000
Accruedinterestpayableandotherliabilities

21,878
12,941
Totalliabilities

3,766,550
2,931,759
Commitmentsandcontingencies(NOTES17and21)

Shareholdersequity:

Preferredstock,noparvalueorassetbytheboard100,000,000sharesauthorized,noneissued

0
0
Commonstock,parvalue$1.00pershare200,000,000sharesauthorized24,756,411and18,507,121shares
issuedasofDecember31,2013and201224,224,151and18,459,502sharesoutstandingasof
December31,2013and2012

24,756
18,507
Additionalpaidincapital

307,231
212,090
Retainedearnings

71,008
38,314
Accumulatedothercomprehensive(loss)income,net

(8,118)
1,064
Treasurystock,atcost(532,260and47,619shares,respectively)

(8,254)
(500)
Totalshareholdersequity

386,623
269,475
Totalliabilitiesandshareholdersequity

$4,153,173
$3,201,234
Seeaccompanyingnotestotheconsolidatedfinancialstatements.

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CONSOLIDATEDSTATEMENTSOFINCOME
(dollarsinthousands,exceptsharedata)

YearEndedDecember31,
2013 2012 2011
Interestincome:
Loansreceivable,includingfees $ 82,580 $70,510 $41,398
Loansheldforsale 38,140 15,950 5,279
Investmentsecurities 6,314 6,731 14,149
Other 482 352 419

Totalinterestincome

127,516
93,543
61,245

Interestexpense:

Deposits

21,020
21,076
21,861
Otherborrowings

1,988
69
66
FHLBadvances

1,192
606
447
Federalfundspurchased

101
10
2
Securitiessoldunderrepurchaseagreements

0
88

Totalinterestexpense

24,301
21,761
22,464

Netinterestincome

103,215
71,782
38,781
Provisionforloanlosses

2,236
14,270
7,495

Netinterestincomeafterprovisionforloanlosses

100,979
57,512
31,286

Noninterestincome:

Mortgagewarehousetransactionalfees

12,962
12,289
5,581
Bankownedlifeinsurance

2,482
1,332
1,404
Gainsonsalesofinvestmentsecurities

1,274
9,017
2,731
Mortgagebankingincome

1,142
0
GainsonsalesofSBAloans

852
357
329
Depositfees

675
481
436
Other

3,956
5,753
988

Totalnoninterestincome

23,343
29,229
11,469

Noninterestexpense:

Salariesandemployeebenefits

35,493
23,846
16,602
Occupancy

8,829
6,816
4,286
FDICassessments,taxes,andregulatoryfees

5,568
3,037
2,366
Professionalservices

5,548
3,468
5,124
Technology,communicationandbankoperations

4,330
2,805
1,797
Loanworkout

2,245
2,243
1,429
Losscontingency

2,000
0
Otherrealestateowned

1,365
(85)
809
Advertisingandpromotion

1,274
1,219
994
Mergerrelatedexpenses

352
90
531
Stockofferingexpenses

0
1,437
0
Other

7,020
5,775
2,948

Totalnoninterestexpense

74,024
50,651
36,886

Incomebeforeincometaxexpense

50,298
36,090
5,869
Incometaxexpense

17,604
12,272
1,835

Netincome

32,694
23,818
4,034
Dividendsonpreferredstock

0
44

Netincomeavailabletocommonshareholders

$ 32,694
$23,818
$ 3,990

Basicearningspercommonshare

$ 1.47
$ 1.78
$ 0.40
Dilutedearningspercommonshare

1.43
1.73
0.39

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CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINCOME
(inthousands)

2013 2012 2011
Netincome $ 32,694 $23,818 $ 4,034
Othercomprehensiveincome(loss):

Unrealizedholding(losses)gainsonavailableforsalesecuritiesarisingduringtheperiod

(12,860)
2,522
5,271
Incometaxeffect

4,501
(883)
(1,845)
Unrealizedholdinggainsonforeigncurrencyitemsarisingduringtheperiod

7
0
Incometaxeffect

(2)
0
Unrealizedholdinggainsonavailableforsalesecuritiestransferredfromtheheldtomaturitycategory
intotheavailableforsalecategory

0
8,509
0
Incometaxeffect

0
(2,978)
0
Reclassificationadjustmentforavailableforsalesecuritygainsincludedinnetincome

(1,274)
(9,017)
(2,731)
Incometaxeffect

446
3,156
956
Othercomprehensive(loss)income,netofincometaxeffect

(9,182)
1,309
1,651
Comprehensiveincome

$ 23,512
$25,127
$ 5,685

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CONSOLIDATEDSTATEMENTSOFCHANGESINSHAREHOLDERSEQUITY
FortheyearsendedDecember31,2013,2012and2011

Sharesof
Preferred
Stock
Sharesof
Common
Stock
Preferred
Stock
Common
Stock
Additional
Paidin
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income(Loss)
Treasury
Stock Total
Balance,January1,2011 0 8,398,015 $ 0 $ 8,398 $ 88,132 $10,506 $ (1,896) $ 0 $105,140
Netincome 4,034 4,034
Othercomprehensiveincome 1,651 1,651
Sharebasedcompensationexpense 704 704
Issuanceofcommonstock,netof
costsof$603 2,373,601 2,374 26,152 28,526
AcquisitionofBerkshireBancorp 3,037 623,686 3,037 623 7,614 11,274
Repurchaseofpreferredstock (3,037) (3,037) (3,037)
Repurchaseofshares (47,619) (500) (500)
Dividendsonpreferredstock (44) (44)
Balance,December31,2011

0
11,347,683
11,395
122,602
14,496
(245)
(500)
147,748
NetIncome

23,818

23,818
Othercomprehensiveincome

1,309

1,309
Sharebasedcompensationexpense

2,014

2,014
Issuanceofcommonstock,netof
costsof$4,970

7,111,819

7,112
87,474

94,586

0
18,459,502
18,507
212,090
38,314
1,064
(500)
269,475
Netincome

32,694

32,694
Othercomprehensiveloss

(9,182)

(9,182)
Sharebasedcompensationexpense

3,368

3,368
Publicofferingofcommonstock,net
ofcostsof$5,994

6,179,104

6,179
91,328

97,507
Exerciseandredemptionofwarrants

46,773

47
217

264
Issuanceofcommonstockunder
sharebasedcompensation
arrangements

23,413

23
228

251
Repurchaseofshares

(484,641)

(7,754)
(7,754)

0
24,224,151
$ 0
$24,756
$307,231
$71,008
$ (8,118)
$ (8,254)
$386,623

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CONSOLIDATEDSTATEMENTSOFCASHFLOWS
(inthousands)

FortheYearEndedDecember31,
2013 2012 2011
CashFlowsfromOperatingActivities
Netincome $ 32,694 $ 23,818 $ 4,034
Adjustmentstoreconcilenetincometonetcashprovidedby(usedin)operating
activities:
Provisionforloanlosses,netofFDICreceivablebenefit 2,236 14,270 7,495
Losscontingency 2,000 0 0
Provisionfordepreciationandamortization 3,129 2,024 1,375
Sharebasedcompensationexpense 3,368 2,014 704
Deferredtaxes 2,210 (3,731) (2,728)
Netamortization(accretion)ofinvestmentsecuritiespremiumsanddiscounts 475 3,062 (143)
Gainonsaleofinvestmentsecurities (1,274) (9,017) (2,731)
GainonsaleofSBAloans (852) (357) (329)
Originationofloansheldforsale (20,670,866) (13,410,485) (2,243,122)
Proceedsfromthesaleofloansheldforsale 21,360,465 12,145,595 2,268,340
NetincreaseinFDIClosssharingreceivable (1,610) (3,838) (1,965)
(Accretion)amortizationoffairvaluediscounts (912) (240) 280
Loss(gain)onsalesofotherrealestateowned 732 1,228 (367)
Impairmentchargesonotherrealestateowned 839 295 576
Changeininvestmentinbankownedlifeinsurance (2,482) (1,458) (1,404)
(Increase)decreaseinaccruedinterestreceivableandotherassets (15,091) (9,587) 2,257
Increase(decrease)inaccruedinterestpayableandotherliabilities 6,974 4,346 (2,369)
NetCashProvidedby(Usedin)OperatingActivities

722,035
(1,242,061)
29,903
CashFlowsfromInvestingActivities

Purchasesofinvestmentsecuritiesavailableforsale

(542,110)
(114,049)
(72,932)
Purchasesofinvestmentsecuritiesheldtomaturity

0
(397,482)
Proceedsfrommaturities,callsandprincipalrepaymentsoninvestment
securitiesavailableforsale

25,109
31,420
22,137
Proceedsfrommaturitiesandprincipalrepaymentsoninvestmentsecuritiesheldto
maturity

0
50,968
78,049
Proceedsfromsalesofinvestmentsecuritiesavailableforsale

135,193
309,221
182,743
Net(increase)decreaseinloans

(1,008,410)
61,202
(581,339)
Purchaseofloanportfolios

(164,033)
(63,246)
(10,000)
ProceedsfromsaleofSBAloans

11,624
4,502
5,172
Net(purchaseof)proceedsfrombankownedlifeinsurance

(45,465)
(25,465)
273
PurchaseofFHLB,FederalReserveBank,andotherrestrictedstock

(12,261)
(8,345)
(16,702)
ReimbursementsfromtheFDIConlosssharingagreements

6,726
6,573
7,545
Purchasesofbankpremisesandequipment

(3,894)
(2,713)
(2,721)
Cashproceedsfromacquisitions

0
19,207
Proceedsfromsalesofotherrealestateowned

9,506
12,062
5,572
NetCash(Usedin)ProvidedbyInvestingActivities

(1,588,015)
262,130
(760,478)
CashFlowsfromFinancingActivities

Netincreaseindeposits

519,179
857,791
215,495
Netincreaseinshorttermborrowedfunds

208,500
91,000
325,000
ProceedsfromlongtermFHLBborrowings

35,000
49,000
0
Proceedsfromissuanceoflongtermdebt,net

60,336
0

264
0
Purchaseoftreasurystock

(7,754)
(500)
RepaymentofTARP

0
(3,056)
Netproceedsfromissuanceofcommonstock

97,507
94,586
28,526
PaymentofTARPpreferredstockdividends

0
(44)
NetCashProvidedbyFinancingActivities

913,032
1,092,377
565,421
NetIncrease(Decrease)inCashandCashEquivalents

47,052
112,446
(165,154)
CashandCashEquivalentsBeginning

186,016
73,570
238,724
CashandCashEquivalentsEnding

$ 233,068
$ 186,016
$ 73,570
8/26/2014 Form 10-K


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CONSOLIDATEDSTATEMENTSOFCASHFLOWS(continued)
(inthousands)

2013 2012 2011
SupplementaryCashFlowInformation
Interestpaid $24,157 $ 21,709 $ 22,642
Incometaxespaid 9,815 19,366 2,816
NoncashItems:
Transferofloanstootherrealestateowned $15,003 $ 10,457 $ 8,630
Transferofheldtomaturitysecuritiestoavailableforsale 0 268,671 0
Issuanceofcommonstockrelatedtothemerger 0 0 624
Acquisitions:
Assetsacquired $ 0 $ 0 $130,481
Liabilitiesassumed 0 0 122,836

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NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS
NOTE1DESCRIPTIONOFTHEBUSINESS
CustomersBancorp,Inc.(theBancorporCustomersBancorp)isabankholdingcompanyengagedinbankingactivitiesthroughitswholly
ownedsubsidiary,CustomersBank(theBank).CustomersBancorpalsohasmadecertainequityinvestmentsthroughitswhollyowned
subsidiariesCBGreenVenturesPteLtd.andCUBIIndiaVenturesPteLtd.
TheconsolidatedfinancialstatementshavebeenpreparedinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStates
(U.S.GAAP)andpursuanttotherulesandregulationsoftheSecuritiesandExchangeCommission(SEC).
CustomersBancorp,Inc.anditswhollyownedsubsidiaries,CustomersBankandnonbanksubsidiaries,serveresidencesandbusinessesin
SoutheasternPennsylvania(Bucks,Berks,Chester,PhiladelphiaandDelawareCounties),Rye,NewYork(WestchesterCounty),Hamilton,New
Jersey(MercerCounty),Boston,Massachusetts,Providence,RhodeIslandandManhattan,NewYork.OnSeptember17,2011,theBancorp
purchasedBerkshireBancorp,Inc.In2010,CustomersBankacquiredtwobanks,USABankandISNBank,inFDICassistedtransactionsthat
expandeditsfootprintintocentralNewJerseyandsoutheastNewYork.TheBankhas14branchesandprovidescommercialbankingproducts,
primarilyloansanddeposits.CustomersBankprovidesloanproductstocustomersthroughitsloanproductionofficesinBostonMassachusetts,
Providence,LongIsland,Manhattan,NewYorkandPhiladelphia,Pennsylvania.TheBancorpalsoprovidesliquiditytoresidentialmortgage
originatorsnationwidethroughcommercialloanstomortgagecompanies.CustomersBankissubjecttoregulationofthePennsylvania
DepartmentofBankingandSecuritiesandtheFederalReserveBankandisperiodicallyexaminedbythoseregulatoryauthorities.
NOTE2REORGANIZATIONANDACQUISITIONACTIVITY
ReorganizationintoCustomersBancorp,Inc.
TheBancorpandtheBankenteredintoaPlanofMergerandReorganizationeffectiveSeptember17,2011pursuanttowhichalloftheissued
andoutstandingcommonstockoftheBankwasexchangedonaoneforthreebasisforsharesofVotingcommonstockandNonVotingcommon
stockoftheBancorp(i.e.,eachthreesharesofCustomersBankwasexchangedforoneshareofCustomersBancorp).TheBankbecameawholly
ownedsubsidiaryoftheBancorp(theReorganization).TheBancorpisauthorizedtoissueupto100,000,000sharesofcommonstock,
100,000,000sharesofClassBNonVotingCommonStockand100,000,000sharesofpreferredstock.
IntheReorganization,theBanksissuedandoutstandingsharesofVotingcommonstockof22,525,825sharesandClassBNonVotingcommon
stockof6,834,895sharesconvertedinto7,508,473sharesoftheBancorpsVotingcommonstockand2,278,294sharesoftheBancorpsClassB
NonVotingcommonstock.Cashwaspaidinlieuoffractionalshares.Outstandingwarrantstopurchase1,410,732sharesoftheBanksVoting
commonstockwithaweightedaverageexercisepriceof$3.55pershareand243,102sharesoftheBanksClassBNonVotingcommonstock
withaweightedaverageexercisepriceof$3.50persharewereconvertedintowarrantstopurchase470,260sharesoftheBancorpsVoting
commonstockwithaweightedaverageexercisepriceof$10.64pershareandwarrantstopurchase81,036sharesoftheBancorpsClassBNon
Votingcommonstockwithaweightedaverageexercisepriceof$10.50pershare.Outstandingstockoptionstopurchase2,572,404sharesofthe
BanksVotingcommonstockwithaweightedaverageexercisepriceof$3.50pershareandstockoptionstopurchase231,500sharesofthe
BanksClassBNonVotingcommonstockwithaweightedaverageexercisepriceof$4.00persharewereconvertedintostockoptionsto
purchase855,774sharesoftheBancorpsVotingcommonstockwithaweightedaverageexercisepriceof$10.49pershareandstockoptionsto
purchase77,166sharesoftheBancorpsClassBNonVotingcommonstockwithaweightedaverageexercisepriceof$12.00pershare.
AcquisitionActivity
CMSBancorp,Inc.Acquisition
OnDecember20,2013,CustomersBancorpannouncedtheterminationoftheMergerAgreementbetweenCustomersBancorpandCMS.
CustomersBancorpbelievestheterminationwasbymutualconsent.AsperthetermsoftheMergerAgreement,intheeventtheAgreementwas
terminatedbymutualconsent,CustomerswouldnotoweCMSa$1.0millionterminationfee.
AcaciaFederalSavingsBankAcquisition
OnApril4,2013,CustomersBancorp,Inc.,AcaciaLifeInsuranceCompany(Acacia)andAmeritasLifeInsuranceCorp.(togetherwithAcacia,
Sellers)announcedtheirmutualdecision,duetodelaysinthereceiptofregulatoryapprovals,nottoextendthetermofthatcertainStock
PurchaseAgreement,datedasofJune20,2012,asamendedbythosecertainAmendmenttoStockPurchase

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Agreement,datedasofDecember18,2012,AmendmentNo.2toStockPurchaseAgreementdatedasofJanuary30,2013,andAmendmentNo.3
toStockPurchaseAgreementdatedasofFebruary28,2013,byandamongtheCompanyandSellers(thePurchaseAgreement).Instead,on
April4,2013,thepartiesenteredintoaTerminationandNonRenewalAgreementtoterminatethePurchaseAgreementandthetransactions
contemplatedthereby(theTerminationAgreement).Eachpartyrecognizeditsowncostsandexpensesinconnectionwiththeterminated
transaction,withoutpenalties.Thepartiesmutuallyagreedthattheterminationwasineachcompanysbestinterest.Costsrelatedtothe
acquisitionhavebeenexpensed.
NewEnglandCommercialLendingAcquisition
OnMarch28,2013,CustomersBankcompletedthepurchaseofcertaincommercialloansfromMichiganbasedFlagstarBank.Undertheterms
oftheagreement,CustomersBankacquired$182.3millionincommercialloanandrelatedcommitments,ofwhich$155.1millionwasdrawnat
thedateofacquisition.Also,aspartoftheagreement,CustomersBankassumedtheleasesfortwoofFlagstarscommerciallendingofficesin
NewEngland.Thepurchasepricewas98.7%ofloansoutstanding.
BerkshireBancorp
OnSeptember17,2011,theBancorpcompleteditsacquisitionofBerkshireBancorp,Inc.(BBI)anditssubsidiary,BerkshireBank
(collectively,Berkshire).BerkshireBankmergedwithandintotheBankimmediatelyfollowingtheacquisition.BBIservedBerksCounty,
Pennsylvaniathroughthefivebranchesofitssubsidiary,BerkshireBank.Underthetermsofthemergeragreement,eachoutstandingshareof
BBIcommonstock(atotalof4,067,729)wasexchangedfor0.1534sharesoftheBancorpscommonstock,resultingintheissuanceof623,686
sharesoftheBancorpscommonstock.Cashwaspaidinlieuoffractionalshares.Thethenmostrecentpriceatthetimeforthesaleofthe
Bancorpcommonstock,$13.20,wasusedtodeterminethefairvalueoftheBancorpstockissued.Thetotalpurchasepricewasapproximately
$11.3million.
Thetablebelowillustratesthecalculationoftheconsiderationeffectivelytransferred.

ReconcilementofProFormaSharesOutstanding:

Berkshiresharesoutstanding

4,067,729
Exchangeratio

0.1534
BancorpsharestobeissuedtoBerkshire

623,686
Customerssharesoutstanding

9,786,765
ProFormaCustomerssharesoutstanding

10,410,755
PercentageownershipforCustomers

94.01%
PercentageownershipforBerkshire

5.99%
Inaddition,theBancorpexchangedeachshareofBBIssharesofSeriesAPreferredSecuritiesandSeriesBPreferredSharesownedbytheU.S.
TreasuryforoneshareoftheBancorpsFixedRateCumulativePerpetualPreferredStockforthetotalissuanceof2,892sharesofSeriesAFixed
RateCumulativePerpetualPreferredStock(SeriesAPreferredStock)and145sharesofSeriesBFixedRateCumulativePerpetualPreferred
Stock(SeriesBPreferredStock)withaparvalueof$1.00pershareandaliquidationvalueof$1,000pershare.Cumulativedividendsonthe
SeriesAPreferredStockwere5%peryearandSeriesBPreferredStockwere9%.UpontheexchangeoftheSeriesAandBpreferredshares,the
BancorppaidtotheTreasury$218,000ofcumulativedividendswhichwerepreviouslyunpaid.
TheacquisitionwasaccountedforunderASC810,BusinessCombinations,andaccordingly,assetsacquired,liabilitiesassumed,and
considerationtransferredwererecordedatestimatedfairvalueontheacquisitiondate.Subsequenttotheacquisitiondate,theBancorpreceived
newinformationaboutthefactsandcircumstancessurroundingotherrealestateowned(OREO),customersloansandtheacquiredfederalnet
operatingloss.Asaresult,theBancorpadjusteditsacquisitiondateinformationbyrecognizingincreasestogoodwillanddeferredtaxassetsof
$1.2millionand$1.6million,respectively,offsetbydecreasestootherrealestateownedof$1.4million,andloansreceivablenotcoveredby
losssharingagreementswiththeFDICof$1.4million.Inaddition,theadjustmenttodeferredtaxassetsincludeda$626,000writeoffof
acquiredNOLsthatwouldhaveexpiredbeforehavingbeenused.Thesemeasurementperiodadjustmentshavebeenretrospectivelyappliedto
comparativefinancialinformationforpriorperiods.

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Thefollowingtablepresentsthefinalfairvaluesofassetsacquiredandliabilitiesassumed.

BerkshireBank
September17,2011
(inthousands)
Totalpurchaseprice $11,274
Netassetsacquired:
Cash $ 19,207
Restrictedinvestments 947
Loans 97,014
Accruedinterestreceivable 276
Premisesandequipment,net 3,416
Otherrealestateowned 1,817
Deferredtaxassets 4,815
Otherassets 2,989
Timedeposits (45,721)
Depositsotherthantimedeposits (76,145)
Accruedinterestpayable (48)
Otherliabilities (922)

7,645
GoodwillresultingfromBerkshireMerger

$ 3,629
Inaddition,774,571warrantstopurchasesharesofBBIcommonstockwereconvertedintowarrantstopurchase118,853sharesoftheBancorps
commonstockwithanexercisepricerangingfrom$21.38to$73.01pershare.Thewarrantswereextendedforafiveyearperiodandwillexpire
onSeptember17,2016.
BBIsoperatingresultsareincludedintheBancorpsfinancialresultsfromthedateofacquisition,September17,2011.
ManufacturedHousingLoans
During2011and2012,CustomersBankpurchasedmanufacturinghousingloansfromTammacHoldingCorporation(Tammac).These
followingpurchaseswereopportunisticpurchasesandmaynotbeindicativeoffuturestrategiesorpurchases:

OnSeptember30,2011,theBankpurchasedfromTammac$19.3millionofmanufacturedhousingloansanda1.50%interestonly
stripsecuritywithanestimatedvalueof$3millionsecuredbyapoolof$70millionofloansoriginatedbyTammacforatotal
purchasepriceof$13million.

OnJuly24,2012,theBankpaid$63.2milliontoacquiremanufacturedhousingloansfromVanderbiltMortgageandFinanceInc.at
par.TheseloanswereoriginatedbyTammacandwillbeservicedbyTammacontheBanksbehalf.Approximately85%oftheloans
arechattel,withtheother15%representingrealestate.Theloanscarryan11.3%couponrate,whereTammacearnsa2.0%servicing
feeandalsoretainstherightstoa2.0%IOStripinrelationtothispoolofloans.Thefullrecourseforlossesontheseloansresideswith
Tammac.
NOTE3SIGNIFICANTACCOUNTINGPOLICIESANDBASISOFPRESENTATION
BasisofPresentation
TheaccountingandreportingpoliciesoftheBancorpareinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesof
Americaandpredominantpracticesofthebankingindustry.Thepreparationoffinancialstatementsrequiresmanagementtomakeestimatesand
assumptionsthataffectthereportedbalancesofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedateofthefinancial
statementsandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Actualresultscoulddifferfromthose
estimates.Materialestimatesthatareparticularlysusceptibletosignificantchangeintheneartermrelatetothedeterminationoftheallowance
forloanlosses,creditdeteriorationandexpectedcashflowsofpurchasedcreditimpairedloans,FDICindemnificationasset,thevaluationof
deferredtaxassets,determinationofotherthantemporaryimpairmentlossesonsecurities,thefairvalueoffinancialinstruments,andannual
goodwillimpairmentanalysis.
Certainamountsreportedinthe2012and2011financialstatementshavebeenreclassifiedtoconformtothe2013presentation.These
reclassificationsdidnotsignificantlyimpacttheBancorpsfinancialpositionorresultsofoperations.

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PrinciplesofConsolidation
Theaccompanyingconsolidatedfinancialstatementsincludetheaccountsoftheparentcompanyanditswhollyownedsubsidiaries:Customers
Bank,CBGreenVenturesPteLtd.andCUBIIndiaVenturesPteLtd.CustomersBankincludestheaccountsofitswhollyownedsubsidiaryCIC,
Inc.Allsignificantintercompanybalancesandtransactionshavebeeneliminatedinconsolidation.
CashandCashEquivalents
Cashandcashequivalentsincludecashonhand,amountsduefrombanks,interestbearingdepositswithbankswithamaturitydateofthree
monthsorless.
RestrictionsonCashandAmountsduefromBanks
CustomersBankisrequiredtomaintainaveragebalancesonhandorwiththeFederalReserveBank.AtDecember31,2013and2012,these
reservebalanceswere$50.1millionand$26.2million,respectively.
InvestmentSecurities
Customersacquiressecurities,largelymortgagebackedsecurities,toeffectivelyutilizecashandcapitalandtogenerateearnings.Security
transactionsarerecordedasofthetradedate.Securitiesareclassifiedatthetimeofacquisitionasavailableforsale,heldtomaturity,ortrading,
andtheirdesignationdeterminestheiraccountingasfollows:
Availableforsale:InvestmentssecuritiesclassifiedasavailableforsalearethosedebtandequitysecuritiesthattheBancorpintendstoholdfor
anindefiniteperiodoftimebutnotnecessarilytomaturity.Investmentsecuritiesavailableforsalearecarriedatfairvalue.Unrealizedgainsor
lossesarereportedasincreasesordecreasesinaccumulatedothercomprehensiveincome,netoftherelateddeferredtaxeffect.Realizedgainsor
losses,determinedonthebasisofthecostofthespecificsecuritiessold,areincludedinearningsandrecordedatthetradedate.Premiumsand
discountsarerecognizedininterestincomeusingtheinterestmethodoverthetermsofthesecurities.
Heldtomaturity:InvestmentsecuritiesclassifiedasheldtomaturityarethosedebtsecuritiesthattheBancorphasboththeintentandabilityto
holdtomaturityregardlessofchangesinmarketconditions,liquidityneeds,orchangesingeneraleconomicconditions.Thesesecuritiesare
carriedatcost,adjustedfortheamortizationofpremiumandaccretionofdiscount,computedbyamethodwhichapproximatestheinterest
methodoverthetermsofthesecurities.Inaccordancewithregulatoryandaccountingrequirements,theBancorpisprohibitedfromclassifying
securitypurchasesasheldtomaturityforaperiodoftwoyears.ForadditionalinformationaboutthisrestrictionrefertoNOTE5
INVESTMENTSECURITIES.
Trading:Investmentsecuritiesclassifiedastradingasthosedebtandequitysecuritiesthatmanagementintendstoactivelytrade.These
securitiesarecarriedattheircurrentfairvalue,withchangesinfairvaluereportedinincome.Customershasnotactivelytradedanysecurities.
Foravailableforsaleandheldtomaturitysecurities,managementmustperiodicallyassesswhetherthesecuritiesareotherthantemporarily
impaired.Otherthantemporaryimpairmentmeansthatmanagementbelievesthesecuritysreductioninvalueisduetofactorsthatcouldinclude
theissuersinabilitytopayinterestordividends,itspotentialfordefault,and/orotherfactors.Whenaheldtomaturityoravailableforsaledebt
securityisassessedforotherthantemporaryimpairment,managementhastofirstconsider(a)whethertheBancorpintendstosellthesecurity,
and(b)whetheritismorelikelythannotthattheBancorpwillberequiredtosellthesecuritypriortorecoveryofitsamortizedcostbasis.
Ifoneofthesecircumstancesappliestoasecurity,anotherthantemporaryimpairmentlossisrecognizedintheconsolidatedstatementsof
incomeequaltothefullamountofthedeclineinfairvaluebelowamortizedcost.Ifneitherofthesecircumstancesappliestoasecurity,butthe
Bancorpdoesnotexpecttorecovertheentireamortizedcost,anotherthantemporaryimpairmenthasoccurredthatmustbeseparatedintotwo
categories:(a)theamountrelatedtocreditloss,and(b)theamountrelatedtootherfactors.Inassessingthelevelofotherthantemporary
impairmentattributabletocreditloss,managementcomparesthepresentvalueofcashflowsexpectedtobecollectedwiththeamortizedcost
basisofthesecurity.Theportionofthetotalotherthantemporaryimpairmentrelatedtocreditlossisrecognizedinearnings(asthedifference
betweenthefairvalueandthepresentvalueoftheestimatedcashflows),whiletheamountrelatedtootherfactorsisrecognizedinother
comprehensiveincome.Thetotalotherthantemporaryimpairmentlossispresentedinthestatementofincome,lesstheportionrecognizedin
othercomprehensiveincome.Whenadebtsecuritybecomesotherthantemporarilyimpaired,itsamortizedcostbasisisreducedtoreflectthe
portionofthetotalimpairmentrelatedtocreditloss.
8/26/2014 Form 10-K
Formarketableequitysecurities,theBancorpconsiderstheissuersfinancialcondition,capitalstrengthandneartermprospectstodetermine
whetheranimpairmentistemporaryorotherthantemporary.TheBancorpalsoconsidersthevolatilityofasecurityspriceincomparisontothe
marketasawholeandanyrecoveriesordeclinesinfairvaluesubsequenttothebalancesheetdate.Ifmanagementdeterminesthatthe
impairmentisotherthantemporary,theentireamountoftheimpairmentasofthebalancesheetdateisrecognizedinearningsevenifthe
decisiontosellthesecurityhasnotbeenmade.Thefairvalueofthesecuritybecomesthenewamortizedcostbasisoftheinvestmentandisnot
adjustedforsubsequentrecoveriesinfairvalue.

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LoanAccountingFramework
Theaccountingforaloandependsonmanagementsstrategyfortheloan,andonwhethertheloanwascreditimpairedatthedateofacquisition.
TheBankaccountsforloansbasedonthefollowingcategories:

Loansheldforsale

Loansatfairvalue

Purchasedloans

LoansreceivablenotcoveredunderLossSharingAgreementswiththeFDIC

LoansreceivablecoveredunderLossSharingAgreementswiththeFDIC
Thefollowingprovidesadetaileddiscussionoftheaccountingforloansinthesecategories:
LoansHeldforSale
LoansoriginatedbytheBankwiththeintenttosellinthesecondarymarketarecarriedeitheratthelowerofcostorfairvalue,determinedinthe
aggregate,oratfairvalue,dependingupontheelectionmadeatthetimetheloanismade.Theseloansaresoldonanonrecoursebasiswith
servicingreleased.Gainsandlossesonthesaleofloansaccountedforatlowerofcostorfairvaluearerecognizedinearningsbasedonthe
differencebetweenproceedsreceivedandthecarryingamountoftheloans,inclusiveofdeferredoriginationfeesandcosts,ifany.Asaresultof
changesineventsandcircumstancesordevelopmentsregardingmanagementsviewoftheforeseeablefuture,loansnotoriginatedoracquired
withtheintenttosellmaysubsequentlybedesignatedasheldforsale.Theseloansaretransferredtotheheldforsaleportfolioatthelowerof
amortizedcostorfairvalue.
LoansoriginatedbytheBankwiththeintenttosellforwhichfairvalueaccountingiselectedaremarkedtofairvaluewithanydifference
betweentheproceedsreceivedandthecarryingamountoftheloanrecognizedinearnings.Nofeesorcostsrelatedtosuchloansaredeferred,so
theydonotaffectthegainorlosscalculationatthetimeofsale.
WealsoelectedthefairvalueoptionforcertainlendingtransactionsdocumentedunderaMasterRepurchaseAgreementoriginatedafterJuly1,
2012.ThisadoptionisinaccordancewiththeparametersestablishedbyASC8251025,FinancialInstrumentsOverallRecognition:TheFair
ValueOption.Asaresultofthiselection,theselendingtransactionsareclassifiedasLoansheldforsaleandarecarriedatfairvalueonthe
balancesheetwithunrealizedchangesinfairvaluepresentedinearnings.
Anallowanceforloanlossesisnotmaintainedrelativetoloansclassifiedasheldforsaleaseitherthelowercostormarketorfairvaluehasan
embeddedmarkforcreditlosses.
LoansReceivable
Loansreceivablethatmanagementhastheintentandabilitytoholdfortheforeseeablefutureoruntilmaturityorpayoffarestatedattheir
outstandingunpaidprincipalbalances,netofanallowanceforloanlossesandanydeferredfees.Interestincomeisaccruedontheunpaid
principalbalance.Loanoriginationfees,netofcertaindirectoriginationcosts,aredeferredandrecognizedasanadjustmentoftheyield(interest
income)oftherelatedloansusingthelevelyieldmethodwithoutanticipatingprepayments.TheBankisgenerallyamortizingtheseamounts
overthecontractuallifeoftheloans.
Theaccrualofinterestisgenerallydiscontinuedwhenthecontractualpaymentofprincipalorinteresthasbecome90dayspastdueorwhen
managementhasdoubtsaboutfurthercollectabilityofprincipalorinterest,eventhoughtheloaniscurrentlyperforming.Aloanmayremainon
accrualstatusifitisintheprocessofcollectionandiswellsecured.Whenaloanisplacedonnonaccrualstatus,unpaidinterestcreditedto
incomeisreversed.Interestreceivedonnonaccrualloansisappliedagainstprincipaluntilallprincipalhasbeenrepaid.Thereafter,interest
paymentsarerecognizedasincomeuntilallunpaidinteresthasbeenreceived.Generally,loansarerestoredtoaccrualstatuswhentheobligation
isbroughtcurrentandhasperformedinaccordancewiththecontractualtermsforaminimumofsixmonthsandtheultimatecollectabilityofthe
totalcontractualprincipalandinterestisnolongerindoubt.
Transfersoffinancialassets,includingloanparticipationssold,areaccountedforassales,whencontrolovertheassetshasbeensurrendered
(settlementdate).Controlovertransferredassetsisdeemedtobesurrenderedwhen(1)theassetshavebeenisolatedfromtheBank,(2)the
transfereeobtainstheright(freeofconditionsthatconstrainitfromtakingadvantageofthatright)topledgeorexchangethetransferredassets,
and(3)theBankdoesnotmaintaineffectivecontroloverthetransferredassetsthroughanagreementtorepurchasethembeforetheirmaturity.

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PurchasedLoans
TheBancorpbelievesthatthevaryingcircumstancesunderwhichitpurchasesloansandthediversequalityofloanspurchasedshoulddrivethe
decisionastowhetherloansinaportfolioshouldbedeemedtobepurchasedcreditimpairedloans.Therefore,loanacquisitionsareandwillbe
evaluatedonacasebycasebasistodeterminetheappropriateaccountingtreatment.Loansacquiredthatdonothaveevidenceofcredit
deteriorationatthepurchasedateareandwillbeaccountedforinaccordancewithASC31020,NonrefundableFeesandOtherCosts,andloans
acquiredwithevidenceofcreditdeteriorationsinceoriginationandforwhichitisprobablethatallcontractuallyrequiredpaymentswillnotbe
collectedareandwillbeaccountedforinaccordancewithASC31030,LoansandDebtSecuritiesAcquiredwithDeterioratedCreditQuality.
Loansthatarepurchasedthatdonothaveevidenceofcreditdeterioration
Purchasedperformingloansarerecordedatfairvalueandincludecreditandinterestratemarksassociatedwithacquisitionaccounting
adjustments,asaccountedforunderthecontractualcashflowmethodofaccounting.Thefairvalueadjustmentisaccretedasanadjustmentto
yieldovertheestimatedcontractuallivesoftheloans.Thereisnoallowanceforloanlossesestablishedattheacquisitiondatefortheacquired
performingloans.Aprovisionforloanlossesisrecordedforanycreditdeteriorationintheseloanssubsequenttoacquisition.
Loansthatarepurchasedthathaveevidenceofcreditdeteriorationsinceoriginationandforwhichitisprobablethatall
contractuallyrequiredpaymentswillnotbecollected
Forpurchasesofthistypeofloan,evidenceofdeterioratedcreditqualitymayincludepastdueandnonaccrualstatus,borrowercreditscoresand
recentloantovaluepercentages.
Thefairvalueofloanswithevidenceofcreditdeteriorationisrecordednetofanonaccretabledifferenceandaccretableyield.Thedifference
betweencontractuallyrequiredpaymentsatacquisitionandthecashflowsexpectedtobecollectedatacquisitionisthenonaccretable
difference,whichisnotincludedinthecarryingamountofacquiredloans.Subsequenttoacquisition,estimatesofcashflowsexpectedtobe
collectedareupdatedeachreportingperiodbasedonupdatedassumptionsregardingdefaultrates,lossseverities,andotherfactorsthatare
reflectiveofcurrentmarketconditions.Subsequentdecreasestotheexpectedcashflowswillgenerallyresultinaprovisionforloanlosses.
Subsequentincreasesincashflowsresultinareversaloftheprovisionforloanlossestotheextentofpriorcharges,orareclassificationofthe
differencefromnonaccretabletoaccretablewithapositiveimpactonaccretionofinterestincomeinfutureperiods.Further,anyexcessofcash
flowsexpectedatacquisitionovertheestimatedfairvalueisreferredtoastheaccretableyieldandisrecognizedininterestincomeoverthe
remaininglifeoftheloanwhenthereisareasonableexpectationabouttheamountandtimingofthosecashflows.
Purchasedcreditimpairedloansacquiredinthesamefiscalquartermaybeaggregatedintooneormorepools,providedthattheloanshave
commonriskcharacteristics.Apoolisthenaccountedforasasingleassetwithasinglecompositeinterestrateandanaggregateexpectationof
cashflows.Onaquarterlybasis,theBankreestimatesthetotalcashflows(bothprincipalandinterest)expectedtobecollectedoverthe
remaininglifeofeachpool.Theseestimatesincorporateassumptionsregardingdefaultrates,lossseverities,theamountsandtimingof
prepaymentsandotherfactorsthatreflectthencurrentmarketconditions.Ifthetimingand/oramountsofexpectedcashflowsonpurchased
creditimpairedloansweredeterminednottobereasonablyestimable,nointerestwouldbeaccretedandtheloanswouldbereportedasnon
accrualloanshowever,whenthetimingandamountsofexpectedcashflowsforpurchasedcreditimpairedloansarereasonablyestimable,
interestisbeingaccretedandtheloansarebeingreportedasperformingloans.
LoansReceivableCoveredUnderLossSharingAgreements
LoansacquiredintheFDICassistedtransactionsin2010fromUSABankandISNBankaresubjecttolosssharingagreementswiththeFDIC.
Theseloansarereferredtoascoveredloansandarereportedseparatelyinthebalancesheet.
AllowanceforLoanLosses
Theallowanceforloanlossesisestablishedaslossesareestimatedtohaveoccurredthroughprovisionsforloanlosseschargedagainst
income.Loansdeemedtobeuncollectiblearechargedagainsttheallowanceforloanlosses,andsubsequentrecoveries,ifany,arecreditedtothe
allowance.Theallowanceforloanlossesismaintainedatalevelconsideredappropriatetomeetprobableloanlosses.
TheBankdisaggregatesitsloanportfoliointogroupsforpurposesofdeterminingtheallowanceforloanlosses.
TheBanksportfoliogroupsincludecommercialandindustrial,commercialrealestate,construction,residentialrealestate,mortgagewarehouse,
manufacturedhousing,consumer,andPCIloans.TheBankfurtherdisaggregatesitsresidentialrealestateportfoliointotwoclassesbasedupon
certainriskcharacteristicsfirstmortgagesandhomeequity.Theremainingportfoliogroupsarealsoconsideredclassesforpurposesof
monitoringandassessingcreditqualitybasedoncertainriskcharacteristics.Additionally,withineachloangrouptheacquiredloansthatare
accountedforunderASC31010arefurthersegregated.

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Thetotalallowanceforloanlossesconsistsofanallowanceforimpairedloans,ageneralallowanceforlosses,andmayalsoincluderesidualnon
specificreserveamounts.Theallowanceforloanlossesismaintainedatalevelconsideredadequatetoprovideforlossesthatareestimatedto
havebeenincurred.Managementperformsaquarterlyevaluationoftheadequacyoftheallowance,whichisbasedontheBankspastloanloss
experience,knownandinherentrisksintheportfolio,adversesituationsthatmayaffecttheborrowersabilitytorepay,theestimatedvalueof
anyunderlyingcollateral,compositionoftheloanportfolio,currenteconomicconditionsandotherrelevantfactors.Thisevaluationis
inherentlysubjectiveasitrequiresmaterialestimatesthatmaybesusceptibletosignificantrevisionasmoreinformationbecomesavailable.The
Bankscurrentmethodologyfordeterminingtheallowanceforloanlossesisbasedonhistoricallossrates,riskratings,specificallocationon
loansidentifiedasimpairedabovespecifiedthresholdsandotherqualitativeadjustments.
TheimpairedloancomponentrelatestoloansforwhichitislikelythattheBankwillbeunabletocollectallcontractualprincipalandinterest
due.Forsuchloans,anallowanceisestablishedwhenthe(i)discountedcashflows,(ii)collateralvalue,or(iii)theimpairedloanvalueislower
thanthecarryingvalueoftheloan.
Thegeneralcomponentofthereserveforloanlossescoverspoolsofloansbyloanclassincludingcommercialloansnotconsideredimpaired,as
wellassmallerbalancehomogeneousloans,suchasresidentialrealestate,homeequityloans,homeequitylinesofcreditandotherconsumer
loans.Thesepoolsofloansareevaluatedforlossexposurebaseduponloanriskratingsandhistoricallossratesforeachofthesecategoriesof
loans,adjustedforrelevantqualitativefactors.Separatequalitativeadjustmentsaremadeforhigherriskcriticizedloansthatarenotimpaired.
Thesequalitativeriskfactorsinclude:

Lendingpoliciesandprocedures,includingunderwritingstandardsandhistoricalbasedloss/collection,chargeoff,andrecovery
practices.

National,regional,andlocaleconomicandbusinessconditionsaswellastheconditionofvariousmarketsegments,includingthe
valueofunderlyingcollateralforcollateraldependentloans.

Natureandvolumeoftheportfolioandtermsofloans.

Experience,ability,anddepthoflendingmanagementandstaff.

Volumeandseverityofpastdue,classifiedandnonaccrualloansaswellastrendsandotherloanmodifications.

Existenceandeffectofanyconcentrationsofcreditandchangesinthelevelofsuchconcentrations.
Eachfactorisassignedavaluetoreflectimproving,stableordecliningconditionsbasedonmanagementsbestjudgmentusingrelevant
informationavailableatthetimeoftheevaluation.
Aresidualreservemaybemaintainedtocoveruncertaintiesthatcouldaffectmanagementsestimateofprobablelosses.Theresidualreserve
amountreflectsthemarginofimprecisioninherentintheunderlyingassumptionsusedinthemethodologiesforestimatingspecificandgeneral
lossesintheportfolio.
Commercialandindustrialloansareunderwrittenafterevaluatinghistoricalandprojectedprofitabilityandcashflowtodeterminetheborrowers
abilitytorepaytheirobligationasagreed.Commercialandindustrialloansaremadeprimarilybasedontheidentifiedcashflowoftheborrower
andsecondarilyontheunderlyingcollateralsupportingtheloanfacility.Accordingly,therepaymentofacommercialandindustrialloan
dependsprimarilyonthecreditworthinessoftheborrower(andanyguarantors),whileliquidationofcollateralisasecondaryandoften
insufficientsourceofrepayment.
Constructionloansareunderwrittenbaseduponafinancialanalysisofthedevelopersandpropertyownersandconstructioncostestimates,in
additiontoindependentappraisalvaluations.Theseloanswillrelyonthevalueassociatedwiththeprojectuponcompletion.Thesecostand
valuationestimatesmaybeinaccurate.Constructionloansgenerallyinvolvethedisbursementofsubstantialfundsoverashortperiodoftime
withrepaymentsubstantiallydependentuponthesuccessofthecompletedproject.Sourcesofrepaymentoftheseloanswouldbepermanent
financinguponcompletionorsalesofdevelopedproperty.Theseloansarecloselymonitoredbyonsiteinspectionsandareconsideredtobeofa
higherriskthanotherrealestateloansduetotheirultimaterepaymentbeingsensitivetogeneraleconomicconditions,availabilityoflongterm
financing,interestratesensitivity,andgovernmentalregulationofrealproperty.
Commercialrealestateloansaresubjecttotheunderwritingstandardsandprocessessimilartocommercialandindustrialloans,inadditionto
thoseunderwritingstandardsforrealestateloans.Theseloansareviewedprimarilyascashflowdependentandsecondarilyasloanssecuredby
realestate.Repaymentoftheseloansisgenerallydependentuponthesuccessfuloperationofthepropertysecuringtheloanortheprincipal
businessconductedonthepropertysecuringtheloan.Commercialrealestateloansmaybeadverselyaffectedbyconditionsintherealestate
marketsortheeconomyingeneral.Managementmonitorsandevaluatescommercialrealestateloansbasedoncollateralandriskratingcriteria.
TheBankalsoutilizesthirdpartyexpertstoprovideenvironmentalandmarketvaluations.Thenatureofcommercialrealestateloansmakes
themmoredifficulttomonitorandevaluate.

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Residentialrealestateloansaresecuredbyonetofourdwellingunits.Thisgroupisfurtherdividedintofirstmortgageandhomeequity
loans.Firstmortgageshavelimitedriskastheyareoriginatedataloantovalueratioof80%orless.Homeequityloanshaveadditionalrisksasa
resultoftypicallybeinginasecondpositionorlowerintheeventcollateralisliquidated.
Mortgagewarehouseloansrepresentloanstothirdpartymortgageoriginatorsduringtheperiodoffinancingtheirloaninventoryuntiltheloans
aresoldtoinvestors.Mortgagewarehouselendinghasalowerriskprofilethanotherrealestateloansbecausetheloansareconformingoneto
fourfamilyrealestateloansthataresubjecttopurchasecommitmentsfromapprovedinvestors.
Manufacturedhousingloansrepresentloansthataresecuredbythepersonalpropertywheretheborrowermayormaynotowntheunderlying
realestateandthereforehaveahigherriskthanaresidentialrealestateloan.
ConsumerloansconsistofloanstoindividualsoriginatedthroughtheBanksretailnetworkandaretypicallyunsecuredorsecuredbypersonal
property.Consumerloanshaveagreatercreditriskthanresidentialloansbecauseofthedifferenceintheunderlyingcollateral,ifany.The
applicationofvariousfederalandstatebankruptcyandinsolvencylawsandmaylimittheamountthatcanberecoveredonsuchloans.
Delinquencymonitoringisusedtoidentifycreditrisks,andthegeneralreservesareestablishedbasedontheexpectednetchargeoffs,adjusted
forqualitativefactors.Lossratesarebasedontheaveragenetchargeoffhistorybyportfoliosegment.Historicallossratesmaybeadjustedfor
significantfactorsthat,inmanagementsjudgment,arenecessarytoreflectlossesinherentintheportfolio.Factorsthatmanagementconsidersin
theanalysisincludetheeffectsofthenationalandlocaleconomiestrendsinthenatureandvolumeofdelinquencies,chargeoffsandtrendsin
nonaccrualloanschangesinloanmixriskmanagementandloanadministrationchangesintheinternallendingpoliciesandcreditstandards
collectionpracticesandtheBanksregulatoryexaminers.
Chargeoffsonthecommercialandindustrial,constructionandcommercialrealestateloansegmentsarerecordedwhenmanagementestimates
thatthereareinsufficientcashflowstorepaytheloancontractualobligationbaseduponfinancialinformationavailableandvaluationofthe
underlyingcollateral.Additionally,theBanktakesintoaccountthestrengthofanyguaranteesandtheabilityoftheborrowertoprovidevalue
relatedtothoseguaranteesindeterminingtheultimatechargeofforreserveassociatedwithanyimpairedloans.Accordingly,theBankmay
chargeoffaloantoavaluebelowthenetappraisedvalueifitbelievesthatanexpeditiousliquidationisdesirableinthecircumstanceandithas
legitimateoffersorotherindicationsofinteresttosupportavaluethatislessthanthenetappraisedvalue.Alternatively,theBankmaycarrya
loanatavaluethatisinexcessoftheappraisedvalueiftheBankhasaguaranteefromaborrowerthattheBankbelieveshasrealizablevalue.In
evaluatingthestrengthofanyguarantee,theBankevaluatesthefinancialwherewithaloftheguarantor,theguarantorsreputation,andthe
guarantorswillingnessanddesiretoworkwiththeBank.TheBankthenconductsareviewofthestrengthofaguaranteeonafrequency
establishedasthecircumstancesandconditionsoftheborrowerwarrant.
TheBankrecordsaloanchargeofffortheresidentialrealestate,consumer,manufacturedhousingandmortgagewarehouseloans,noteligible
forfairvalueaccounting,after120daysofdelinquencyorsoonerwhencashflowsaredeterminedtobeinsufficientforrepayment.TheBank
mayalsochargeofftheseloantypesbelowthenetappraisedvaluationiftheBankholdsajuniormortgagepositioninapieceofcollateral
wherebytherisktoacquiringcontrolofthepropertythroughthepurchaseoftheseniormortgagepositionisdeemedtopotentiallyincreasethe
riskoflossuponliquidationduetotheamountoftimetoultimatelymarketthepropertyandthevolatilemarketconditions.Insuchcases,the
Bankmayabandonitsjuniormortgageandchargeofftheloanbalanceinfull.
EstimatesofcashflowsexpectedtobecollectedforPCIloansareupdatedeachreportingperiod.IftheBankestimatesdecreasesinexpectedcash
flowstobecollectedafteracquisition,theBankchargestheprovisionforloanlossesandestablishesanallowanceforloanlosses.
CreditQualityFactors
Commercialandindustrial,commercialrealestate,residentialrealestateandconstructionloansarebasedonaninternallyassignedriskrating
systemwhichareassignedattheloanoriginationandreviewedonaperiodicoronanasneededbasis.Consumer,mortgagewarehouseand
manufacturedhousingloansareevaluatedbasedonthepaymentactivityoftheloan.Riskratingsarenotestablishedforhomeequityloans,
consumerloans,andinstallmentloans,mainlybecausetheseportfoliosconsistofalargernumberofhomogenousloanswithsmallerbalances.
Instead,theseportfoliosareevaluatedforriskmainlybasedonaggregatepaymenthistory(throughthemonitoringofdelinquencylevelsand
trends).ForadditionalinformationaboutcreditqualityfactorratingsrefertoNOTE7LOANSRECEIVABLEANDALLOWANCEFOR
LOANLOSSES.
ImpairedLoans
Aloanisconsideredimpairedwhen,basedoncurrentinformationandevents,itisprobablethattheBankwillbeunabletocollectallamounts
dueaccordingtothecontractualtermsoftheloanagreement.Factorsconsideredbymanagementindeterminingimpairmentincludepayment
status,collateralvalueandtheprobabilityofcollectingscheduledprincipalandinterestpaymentswhendue.Loans

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thatexperienceinsignificantpaymentdelaysandpaymentshortfallsgenerallyarenotclassifiedasimpaired.Managementdeterminesthe
significanceofpaymentdelaysandpaymentshortfallsonacasebycasebasis,takingintoconsiderationallofthecircumstancessurroundingthe
loanandtheborrower,includingthelengthofthedelay,thereasonsforthedelay,theborrowerspriorpaymentrecordandtheamountofthe
shortfallinrelationtotheprincipalandinterestowed.
Impairmentismeasuredonaloanbyloanbasisforbothcoveredandnoncoveredloansforcommercialandconstructionloansbythepresent
valueofexpectedfuturecashflowsdiscountedattheloanseffectiveinterestrate,theloansobtainablemarketpriceorthefairvalueofthe
collateraliftheloaniscollateraldependent.Thefairvalueofthecollateralismeasuredbasedonthevalueofthecollateralsecuringtheloans,
lesscosttosell.Collateralmaybeintheformofrealestateorbusinessassetsincludingequipment,inventory,andaccountsreceivable.Thevast
majorityofCustomerscollateralisrealestate.Thevalueofrealestatecollateralisdeterminedutilizinganincomeormarketvaluationapproach
basedonanappraisalconductedbyanindependent,licensedappraiseroutsideoftheBankusingobservablemarketdata.Thevalueofbusiness
equipmentisbaseduponanoutsideappraisalifdeemedsignificant,orthenetbookvalueontheapplicablebusinessfinancialstatementsifnot
consideredsignificantusingobservablemarketdata.Likewise,valuesforinventoryandaccountsreceivablecollateralarebasedonfinancial
statementbalancesoragingreports.
CoveredloansareandwillcontinuetobesubjecttotheBanksinternalandexternalcreditreviewandmonitoringthatisappliedtothenon
coveredloanportfolio.Ifcreditdeteriorationisexperiencedsubsequenttotheinitialacquisitionasindicatedabove,suchdeteriorationwillbe
measured,andaprovisionforloanlosseswillbechargedtoearnings.TheseprovisionswillbeoffsetbyanincreasetotheFDIClosssharing
receivablefortheestimatedportionanticipatedtobereceivedfromtheFDIC.
Goodwill
Goodwillrepresentstheexcessofcostovertheidentifiablenetassetsofbusinessesacquired.Goodwillisrecognizedasanassetandisreviewed
forimpairmentannuallyasofOctober31andbetweenannualtestswheneventsandcircumstancesindicatethatimpairmentmayhaveoccurred.
FHLB,FederalReserveBank,andotherrestrictedstock
FHLB,FederalReserveBank,andotherrestrictedstockrepresentsrequiredinvestmentinthecapitalstockoftheFederalHomeLoanBank
(FHLB),theFederalReserveBank,andAtlanticCentralBankersBankandiscarriedatcost.InFebruary2012,theFHLBofPittsburgh
declaredadividendpayabletotheirshareholdersandalsoresumedrepurchaseofexcesscapitalstock.ThiswasarecoveryfromDecember2009,
whentheFHLBofPittsburghnotifiedmemberbanksthatitwassuspendingdividendpaymentsandtherepurchaseofcapitalstock.
OtherRealEstateOwned
Realestatepropertiesacquiredthrough,orinlieuof,loanforeclosureareinitiallyrecordedatfairvaluelesscosttosellatthedateofforeclosure
establishinganewcostbasis.Afterforeclosure,valuationsareperiodicallyperformedbymanagementandtherealestateiscarriedatthelowerof
itscarryingamountorfairvaluelessthecosttosell.Revenueandexpensesfromoperationsandchangesinthevaluationallowanceareincluded
inthestatementofincome.CertainotherrealestateownedthatwasacquiredfromUSABankandISNBankorthroughtheforeclosureofloansof
thosebanksissubjecttoLossSharingAgreementswiththeFDIC.
FDICLossSharingReceivable
TheFDIClosssharingreceivableismeasuredseparatelyfromtherelatedcoveredassetsbecauseitisnotcontractuallyembeddedintheassets
andisnottransferrableiftheassetsaresold.TheFDIClosssharingreceivablewasinitiallyrecordedatfairvalue,basedonthediscountedvalue
ofexpectedfuturecashflowsunderthelossshareagreements.Thedifferencebetweenthepresentvalueandtheundiscountedcashflows
theBankexpectstocollectfromtheFDICisaccretedintointerestincomeoverthelifeoftheFDIClosssharingreceivable.
TheFDIClosssharingreceivableisreviewedquarterlyandadjustedforchangesinexpectedcashflowsbasedonrecentperformanceand
expectationsforfutureperformanceofthecoveredportfolio.Theseadjustmentsaremeasuredonthesamebasisastherelatedcoveredloansand
coveredotherrealestateowned.IncreasesinestimatedcashflowsonthecoveredassetswillreducetheFDIClosssharingreceivableand
decreasesinestimatedcashflowsonthecoveredassetswillincreasetheFDIClosssharingreceivable.IncreasestotheFDIClosssharing
receivablearerecordedasareductiontotheprovisionforloanlossesanddecreasestotheFDIClosssharingreceivablearerecordedeitherasan
increasetotheprovisionforloanlosses(totheextentanincreaseintheFDICreceivablebalancewaspreviouslyrecordedasareductiontothe
provisionforloanlosses)orrecognizedoverthelifeofthelossshareagreements.

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BankOwnedLifeInsurance
BankownedlifeinsurancepoliciesinsurethelivesofofficersoftheBank,andnametheBankasbeneficiary.Noninterestincomeisgenerated
taxfree(subjecttocertainlimitations)fromtheincreaseinthepoliciesunderlyinginvestmentsmadebytheinsurancecompany.TheBankis
capitalizingontheabilitytopartiallyoffsetcostsassociatedwithemployeecompensationandbenefitprogramswiththebankownedlife
insurance.
BankPremisesandEquipment
Bankpremisesandequipmentarestatedatcostlessaccumulateddepreciation.Depreciationiscomputedonthestraightlinemethodover
theestimatedusefullivesoftherelatedassets.Leaseholdimprovementsareamortizedovertheshorterofthetermoftheleaseorestimateduseful
life,unlessextensionoftheleasetermisreasonablyassured.
TreasuryStock
Commonstockpurchasedfortreasuryisrecordedatcost.Notreasurystockhasbeenreissued.
IncomeTaxes
TheBancorpaccountsforincometaxesundertheliabilitymethodofaccountingforincometaxes.Theincometaxaccountingguidanceresults
intwocomponentsofincometaxexpense:currentanddeferred.Currentincometaxexpensereflectstaxestobepaidorrefundedforthecurrent
periodbyapplyingtheprovisionsoftheenactedtaxlawtothetaxableincomeorexcessofdeductionsoverrevenues.TheBancorpdetermines
deferredincometaxesusingtheliability(orbalancesheet)method.Underthismethod,thenetdeferredtaxassetorliabilityisbasedonthetax
effectsofthedifferencesbetweenthebookandtaxbasesofassetsandliabilities,andenactedchangesintaxratesandlawsarerecognizedinthe
periodinwhichtheyoccur.
Ataxpositionisrecognizedifitismorelikelythannot,basedonthetechnicalmerits,thatthetaxpositionwillberealizedorsustainedupon
examination.Thetermmorelikelythannotmeansalikelihoodofmorethan50percentthetermsexaminedanduponexaminationalsoinclude
resolutionoftherelatedappealsorlitigationprocess,ifany.Ataxpositionthatmeetsthemorelikelythannotrecognitionthresholdisinitially
andsubsequentlymeasuredasthelargestamountoftaxbenefitthathasagreaterthan50percentlikelihoodofbeingrealizeduponsettlement
withataxingauthoritythathasfullknowledgeofallrelevantinformation.Thedeterminationofwhetherornotataxpositionhasmetthemore
likelythannotrecognitionthresholdconsidersthefacts,circumstances,andinformationavailableatthereportingdateandissubjectto
managementsjudgment.
Inassessingtherealizabilityoffederalorstatedeferredtaxassets,managementconsiderswhetheritismorelikelythannotthatsomeportionor
allofthedeferredtaxassetswillnotberealized.Theultimaterealizationofdeferredtaxassetsisdependentuponthegenerationoffuturetaxable
incomeduringperiodsinwhichthosetemporarydifferencesbecomedeductible.Managementconsidersthescheduledreversalofdeferredtax
liabilities,projectedfuturetaxableincomeandprudent,feasibleandpermissibleaswellasavailabletaxplanningstrategiesinmakingthis
assessment.Basedonthelevelofhistoricaltaxableincomeandprojectionsforfuturetaxableincomeovertheperiodsinwhichthedeferredtax
assetsaredeductibleaswellasavailabletaxplanningstrategies,managementbelievesitismorelikelythannotthatBancorpwillrealizethe
benefitsofthesedeferredtaxassets.
ShareBasedCompensation
CustomersBancorphasthreeactivesharebasedcompensationplans.Sharebasedcompensationaccountingguidancerequiresthatthe
compensationcostrelatingtosharebasedpaymenttransactionsberecognizedinfinancialstatements.Thatcostismeasuredbasedonthegrant
datefairvalueoftheequityorliabilityinstrumentsissued.
Compensationcostforallshareawardsiscalculatedandrecognizedovertheemployeesserviceperiod,generallydefinedasthevesting
period.Forawardswithcliffvesting,compensationcostisrecognizedonastraightlinebasisovertherequisiteserviceperiodfortheentire
award.TheBlackScholesmodelisusedtoestimatethefairvalueofstockoptions,whilethemarketpriceofCustomersBancorpscommonstock
atthedateofgrantisusedforrestrictedstockawards.
ComprehensiveIncome
Comprehensiveincome(loss)consistsofnetincome(loss)andothercomprehensiveincome(loss).Othercomprehensiveincomeincludes
changesinunrealizedgainsandlossesonsecuritiesavailableforsalearisingduringtheperiodandreclassificationadjustmentsforrealizedgains
andlossesonsecuritiesavailableforsaleincludedinnetincome.Unrealizedgainsandlossesonsecuritiesavailableforsaleincludea
componentforunrealizedchangesinforeigncurrencyexchangeratesrelatingtotheBancorpsinvestmentincertainforeignequitysecurities.
Unrealizedgainsandlossesonavailableforsalesecuritiesaretheonlycomponentsofaccumulatedothercomprehensiveincome.

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EarningsperShare
Basicearningspersharerepresentsnetincomedividedbytheweightedaveragenumberofcommonsharesoutstandingduringthe
period.Dilutedearningspershareincludesallpotentiallydilutivecommonsharesoutstandingduringtheperiod.Potentialcommonsharesthat
maybeissuedrelatedtooutstandingstockoptions,restrictedstockunits,andwarrantsaredeterminedusingthetreasurystockmethod.
SegmentInformation
CustomersBancorp,Inc.hasonereportablesegment,CommunityBanking.AlloftheCompanysactivitiesareinterrelated,andeachactivity
isdependentandassessedbasedonhoweachoftheactivitiesoftheCompanysupportstheothers.Forexample,lendingisdependentuponthe
abilityoftheCompanytofunditselfwithdepositsandborrowingswhilemanagingtheinterestrateandcreditrisk.Accordingly,allsignificant
operatingdecisionsarebaseduponanalysisoftheBankasonesegmentorunit.
AccountingChanges
TheFairValueOption
WeelectedthefairvalueoptionforloanstoprovideliquiditytomortgagebankersunderaMasterRepurchaseAgreementoriginatedafterJuly1,
2012inordertomoreaccuratelyrepresenttheshorttermnatureofthetransactionanditsinherentcreditrisk.Thisadoptionisinaccordancewith
theparametersestablishedbyAccountingStandardsCodification(ASC)8251025,FinancialInstrumentsOverallRecognition:TheFair
ValueOption.Asaresultofthiselection,newwarehouselendingtransactionsareclassifiedasLoansheldforsaleonthebalancesheet.The
interestincomefromthewarehouselendingtransactionsareclassifiedinInterestIncomeLoansheldforsaleontheconsolidatedstatements
ofincome.AnallowanceforloanlossesisnotrecordedforthewarehouselendingtransactionswhenmeasuredatfairvaluesinceunderASC825,
theexitprice(therepurchaseprice)forwarehouselendingtransactionsconsiderstheeffectofexpectedcreditlosses.
WealsoelectedtousefairvalueaccountingforresidentialmortgageloansoriginatedafterOctober1,2013withtheintenttosellattimeof
origination.Theaccountingfortheresidentialmortgageloanssubjecttothisfairvalueelectionfollowstheaccountingdescribedforthe
warehouseloansalsosubjecttothefairvalueaccountingelection.Theunrealizedfairvaluechangesrelatedtotheseloansareclassifiedin
Mortgagebankingincomeontheconsolidatedstatementsofincome.
ChangeinAccountingEstimates
Estimatesofcashflowsfrompurchasedcreditimpaired(PCI)loanswererevisedduringthethirdquarterof2012duetoaconversiontoamore
sophisticatedandpreciseloanvaluationsystem.InaccordancewiththeguidanceinASC31030,interestincomeisbasedonanacquiredloans
expectedcashflows.Complexmodelsareneededtocalculateloanleveland/orpoollevelexpectedcashflowsinaccordancewithASC31030.
Theloandataanalysisprovidedbythenewsoftwareisamoreprecisequantificationoffuturecashflowsthantheanalysisthatwaspreviously
calculatedmanually.Uponconversiontothenewsoftware,acquisitiondateloanvalueswereloadedintothesystemandthenewsoftware
calculatedtheirfairvaluesusingitscomplexvaluationmodel.ConversiontothenewsystemwascompletedinSeptember2012.Toadjustthe
acquisitiondateloanbalancesrecordedonCustomersBanksbookstotheamountscalculatedbythenewsoftware,approximately$4.5million
wasrecognizedinothernoninterestincomeinthethirdquarterof2012.TherevisedvaluationforthePCIacquisitiondateloanbalancesdueto
theconversiontothenewsoftwareisaccountedforprospectivelyasachangeinaccountingestimate.
Whenconvertingtothenewsoftwaresystem,wewererequiredtocalculatetheestimatedcashflowsfromthevariousacquisitiondatesofthePCI
loansthroughthedatethesoftwarewasimplementedasitwasimpracticabletoperformthesecalculationsonamonthlyorquarterlybasis.Inthe
thirdquarterof2012,approximately$4.5millionwasrecognizedininterestincomerelatedtothischange.Theimpactoftherevisedvaluationof
cashflowsforthePCIloanactivityduetotheconversiontothenewsoftwareisaccountedforprospectivelyasachangeinaccountingestimate.
Alsoduringthethirdquarterof2012,wereestimatedthecashflowsforthePCIloansusingcurrentdata.Thereestimatedexpectedcashflows
decreasedfrompriorestimatedcashflows.ConsistentwithASC31010sfundamentalpremisethatadecreaseinexpectedcashflowsresultsin
accrualofalosscontingencyandshouldnotresultinachangeinyield,weevaluatedtheadequacyoftheallowanceforloanlossesforPCIloans
anddeterminedthatanadditionalprovisionforloanlossesof$7.5millionwasappropriate.Inthefuture,wewillreestimatethecashflowson
thePCIloansonaquarterlybasis,andadjustments,ifany,arenotexpectedtohaveamaterialimpactonfutureearnings.
Asaresultofthechangesinestimates,netincomefortheyearendedDecember31,2012increasedby$900,000,netoftax,andbasicanddiluted
earningsincreasedby$0.07pershare.

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RecentlyIssuedAccountingStandardsandUpdates
InJanuary2014,theFinancialAccountingStandardsBoard(FASB)issuedAccountingStandardUpdate(ASU)201404,Reclassificationof
ResidentialRealEstateCollateralizedConsumerMortgageLoansuponForeclosure,aconsensusoftheFASBEmergingIssuesTaskForce.The
ASUclarifiesthataninsubstancerepossessionorforeclosureoccurs,andacreditorisconsideredtohavereceivedphysicalpossessionof
residentialrealestatepropertycollateralizingaconsumermortgageloan,uponeither(1)thecreditorobtaininglegaltitletotheresidentialreal
estatepropertyuponcompletionofaforeclosureor(2)theborrowerconveyingallinterestintheresidentialrealestatepropertytothecreditorto
satisfythatloanthroughcompletionofadeedinlieuofforeclosureorthroughasimilarlegalagreement.TheASUalsorequiresadditional
relatedinterimandannualdisclosures.TheguidanceinthisASUiseffectiveforannualandinterimperiodsbeginningafterDecember15,2014.
TheBancorpdoesnotexpectthisASUtohaveasignificantimpactonitsfinancialconditionorresultsofoperation.
InJanuary2014,theFASBissuedASU201401,AccountingforInvestmentsinQualifiedAffordableHousingProjects,aconsensusoftheFASB
EmergingIssuesTaskForce.TheASUprovidesguidanceonaccountingforinvestmentsbyareportingentityinflowthroughlimitedliability
entitiesthatmanageorinvestinaffordablehousingprojectsthatqualifyforthelowincomehousingtaxcredit.TheguidanceinthisASUis
effectiveforannualperiodsandinterimreportingperiodswithinthoseannualperiods,beginningafterDecember15,2014.TheBancorpdoesnot
expectthisASUtohaveasignificantimpactonitsfinancialconditionorresultsofoperation.
InDecember2013,theFASBissuedASU201312,DefinitionofaPublicBusinessEntityAnAdditiontotheMasterGlossary.TheASU
improvesU.S.GAAPbyprovidingasingledefinitionofpublicbusinessentityforuseinfuturefinancialaccountingandreportingguidance.The
amendmentdoesnotaffectexistingrequirements.ThereisnoactualeffectivedatefortheguidanceinthisASU.TheBancorpdoesnotexpect
thisASUtohaveasignificantimpactonitsfinancialconditionorresultsofoperation.
InJuly2013,theFASBissuedASU201310,InclusionoftheFedFundsEffectiveSwapRate(orOvernightIndexSwapRate)asaBenchmark
InterestRateforHedgeAccountingPurposes,aconsensusoftheFASBEmergingIssuesTaskForce.TheASUpermitstheFedFundsEffective
SwapRate(OIS)tobeusedasaU.S.benchmarkinterestrateforhedgeaccountingpurposesunderTopic815,inadditiontoUSTandLIBOR.The
ASUalsoremovestherestrictiononusingdifferentbenchmarkratesforsimilarhedges.TheguidanceinthisASUwaseffectiveprospectivelyfor
qualifyingneworredesignatedhedgingrelationshipsenteredintoonorafterJuly17,2013.ThisASUhasnothadasignificantimpactonthe
Bancorpsfinancialconditionorresultsofoperation.
InFebruary2013,theFASBissuedASU201304,ObligationsResultingfromJointandSeveralLiabilityArrangementsforWhichtheTotal
AmountoftheObligationIsFixedattheReportingDate,aconsensusoftheFASBEmergingIssuesTaskForce.TheguidanceinthisUSU
requiresanentitytomeasureobligationsresultingfromjointandseveralliabilityarrangementsforwhichthetotalamountoftheobligation
withinthescopeofthisguidanceisfixedatthereportingdate,asthesumofthefollowing:(a)theamountthereportingentityagreedtopayon
thebasisofitsarrangementamongitscoobligors,and(b)anyadditionalamountthereportingentityexpectstopayonbehalfofitscoobligors.
TheguidanceinthisASUiseffectiveforfiscalyears,andinterimperiodswithinthoseyears,beginningafterDecember15,2013.TheBancorp
doesnotexpectthisASUtohaveasignificantimpactonitsfinancialconditionorresultsofoperation.
InFebruary2013,theFASBissuedASU201302,ReportingofAmountsReclassifiedOutofAccumulatedOtherComprehensiveIncome,which
addsnewdisclosurerequirementsforitemsreclassifiedoutofaccumulatedothercomprehensiveincome(AOCI).TheASUrequiresentitiesto
discloseadditionalinformationaboutreclassificationadjustments,including(1)changesinaccumulatedothercomprehensiveincomebalances
bycomponentand(2)significantitemsreclassifiedoutofAOCI.Thenewdisclosurerequirementswereeffectiveforfiscalyearsandinterim
periodsbeginningafterDecember15,2012forpubliccompanies.
InJanuary2013,theFASBissuedASU201301,ClarifyingtheScopeofDisclosuresaboutOffsettingAssetsandLiabilities,toclarifythatthe
scopeofASU201111appliestoderivativesaccountedforinaccordancewithTopic815,DerivativesandHedging,includingbifurcated
embeddedderivatives,repurchaseagreementsandreverserepurchaseagreements,andsecuritiesborrowingandsecuritieslendingtransactions
thatareeitheroffsetinaccordancewithrelevantaccountingguidanceorsubjecttoanenforceablemasternettingarrangementorsimilar
agreement.TheguidanceinthisASUwaseffectiveforthefirstinterimorannualperiodbeginningonorafterJanuary1,2013(thesameeffective
dateforASU201111)andwastobeappliedretrospectively.SeeNOTE20DERIVATIVEINSTRUMENTSANDHEDGING
ACTIVITIESfortherequireddisclosures.
InOctober2012,theFASBissuedASU201206,BusinessCombinations(Topic805):SubsequentAccountingforanIndemnificationAsset
RecognizedattheAcquisitionDateasaResultofaGovernmentAssistedAcquisitionofaFinancialInstitution(aconsensusoftheFASB
EmergingIssuesTaskForce).ThisASUrequiresanentitytosubsequentlyaccountforthechangeinthemeasurementoftheindemnification
assetonthesamebasisasthechangeintheassetssubjecttoindemnification.TheamendmentsinthisASUwereeffectiveforthefirstinterim
periodsorannualperiodbeginningonorafterDecember15,2012andweretohavebeenappliedprospectively.ThisASUhasnothada
significantimpactontheBancorpsfinancialconditionorresultsofoperation.

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NOTE4EARNINGSPERSHARE
ThefollowingarethecomponentsandresultsoftheBancorpsearningspersharecalculationfortheperiodspresented:

December31,
2013 2012 2011
(dollarsinthousands,exceptpersharedata)
Netincomeavailabletocommonshareholders $ 32,694 $ 23,818 $ 3,990

Weightedaveragenumberofcommonsharesoutstanding
basic

22,259,162
13,416,396
10,071,566
Stockbasedcompensationplans

421,867
250,701
141,263
Warrants

180,473
119,978
71,532

Weightedaveragenumberofcommonsharesdiluted

22,861,502
13,787,075
10,284,361

Basicearningspershare

$ 1.47
$ 1.78
$ 0.40
Dilutedearningspershare

1.43
1.73
0.39
ThefollowingisasummaryofsecuritiesthatcouldpotentiallydilutebasicEPSinthefuturethatwerenotincludedinthecomputationof
dilutedEPSbecausetodosowouldhavebeenantidilutivefortheperiodspresented.

December31,
2013 2012 2011
Antidilutivesecurities:
Sharebasedcompensationawards 745,035 152,251 34,130
Warrants 118,745 129,946 130,047

Totalantidilutivesecurities

863,780
282,197
164,177

NOTE5INVESTMENTSECURITIES
InMay2012,CustomersBancorpreclassifiedits$269.0millionheldtomaturityinvestmentportfoliotoavailableforsale.Duetoitsstrong
outlookforloangrowth,fallinginterestrates,anditsthenrecentdecisiontopostponeitsinitialpublicofferingofstock,theBancorpdecidedto
proceedwiththisreclassificationtoprovideliquidity.Thereclassificationincreasedtotalshareholdersequityby$5.5millionassociatedwith
recordingthenetsecuritygainsontheportfolio,netoftaxeffects,toaccumulatedothercomprehensiveincome.Thesesecuritieswere
subsequentlysoldduring2012.Inaccordancewithregulatoryandaccountingrequirements,theBancorpisprohibitedfromclassifyingsecurity
purchasesasheldtomaturityforaperiodoftwoyears,endingMay2014.
Theamortizedcostandapproximatefairvalueofinvestmentsecuritiesaresummarizedasfollows:

December31,2013

Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses FairValue
(inthousands)
AvailableforSale:
Mortgagebackedsecurities(1) $ 461,988 $ 207 $ (10,659) $ 451,536
Corporatenotes 25,000 344 (21) 25,323
Equitysecurities(2) 23,074 0 (2,360) 20,714
Total

$ 510,062
$ 551
$ (13,040)
$ 497,573

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December31,2012

Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses FairValue
(inthousands)
AvailableforSale:
Mortgagebackedsecurities(1) $ 102,449 $ 1,795 $ (109) $ 104,135
Corporatenotes 25,000 89 (137) 24,952
Equitysecurities 6 0 0 6
Total

$ 127,455
$ 1,884
$ (246)
$ 129,093

(2) Comprisedprimarilyofequitysecuritiesinaforeignentity.
Thefollowingtableshowsproceedsfromthesaleofavailableforsaleinvestmentsecurities,grossgains,andgrosslossesonthosesalesof
securities:

FortheYearsEndedDecember31,
2013 2012 2011
(inthousands)
Proceedsfromsaleofavailableforsaleinvestmentsecurities $135,193 $309,221 $182,743

Grossgains

$ 1,274
$ 9,017
$ 2,731
Grosslosses

0
0

Netgains

$ 1,274
$ 9,017
$ 2,731

Thesegainsandlossesweredeterminedusingthespecificidentificationmethodandwereincludedinnoninterestincome.
Thefollowingtableshowsinvestmentsecuritiesbystatedmaturity.Investmentsecuritiesbackedbymortgageshaveexpectedmaturitiesthat
differfromcontractualmaturitiesbecauseborrowershavetherighttocallorprepay,andare,therefore,classifiedseparatelywithnospecific
maturitydate:

December31,2013
AvailableforSale

Amortized
Cost
Fair
Value
(inthousands)
Dueinoneyearorless $ 0 $ 0
Dueafteroneyearthroughfiveyears 25,000 25,323
Dueafterfiveyearsthroughtenyears 0 0
Dueaftertenyears 0 0
Mortgagebackedsecurities 461,988 451,536
Totaldebtsecurities

$486,988
$476,859

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TheBancorpsinvestmentsgrossunrealizedlossesandfairvalueaggregatedbyinvestmentcategoryandlengthoftimethatindividual
securitiesthathavebeeninacontinuousunrealizedlosspositionwereasfollows:

December31,2013
Lessthan12months 12monthsormore Total
FairValue
Unrealized
Losses FairValue
Unrealized
Losses FairValue
Unrealized
Losses
(inthousands)
AvailableforSale:
Mortgagebackedsecurities(1) $ 425,623 $ (10,061) $ 5,274 $ (598) $ 430,897 $ (10,659)
Corporatenotes 4,982 (18) 4,997 (3) 9,979 (21)
Equitysecurities(2) 20,714 (2,360) 0 0 20,714 (2,360)

Total

$ 451,319
$ (12,439)
$ 10,271
$ (601)
$ 461,590
$ (13,040)

December31,2012
Lessthan12months 12monthsormore Total
FairValue
Unrealized
Losses FairValue
Unrealized
Losses FairValue
Unrealized
Losses
(inthousands)
AvailableforSale:
Mortgagebackedsecurities(1) $ 5,695 $ (87) $ 429 $ (22) $ 6,124 $ (109)
Corporatenotes 0 0 9,862 (137) 9,862 (137)

Total

$ 5,695
$ (87)
$ 10,291
$ (159)
$ 15,986
$ (246)

(2) Comprisedprimarilyofequitysecuritiesinaforeignentity.
AtDecember31,2013,therewerethirtysixavailableforsaleinvestmentsecuritiesinthelessthantwelvemonthcategoryandeightavailable
forsaleinvestmentsecuritiesinthetwelvemonthormorecategory.AtDecember31,2012,thereweretwoavailableforsaleinvestment
securitiesinthelessthantwelvemonthcategoryandeightavailableforsaleinvestmentsecuritiesinthetwelvemonthormorecategory.
Customershasanalyzedtheseinvestmentsforotherthantemporaryimpairment.Theunrealizedlossesonthemortgagebackedsecuritiesare
guaranteedbygovernmentsponsoredentitiesandprimarilyrelatetochangesinmarketpricesandmarketinterestrates.Allamountsareexpected
toberecoveredwhenmarketpricesrecoveroratmaturity.Theunrealizedlossesontheequitysecuritiesreflectdecreasesinmarketpriceor
foreigncurrencyexchangerates.Customersevaluatedthefinancialconditionandcapitalstrengthoftheissuerofthesesecuritiesandconcluded
thatthedeclineinfairvaluewastemporaryandwouldrecoverbywayofchangesinmarketpricesorforeigncurrencyexchangerates.The
Companyintendstoholdthesesecuritiesfortheforeseeablefuture,anddoesnotintendtosellthesecuritiesbeforethepricerecovers.Customers
considersitmorelikelythannotthatitwillnotberequiredtosellthesecurities.Accordingly,Customershasconcludedthatthesecuritiesare
nototherthantemporarilyimpaired.
AtDecember31,2013and2012,CustomersBankhadpledgedinvestmentsecuritiesaggregating$451.1millionand$103.5millionfairvalue,
respectively,ascollateralthatthecounterpartiesdonothavetheabilitytosellorrepledge.
NOTE6LOANSHELDFORSALE
Thecompositionofloansheldforsalewasasfollows:

December31,
2013 2012
(inthousands)
Mortgagewarehouseloansatfairvalue $740,694 $1,248,935
Othermortgagewarehouseloans 0 190,954
Residentialmortgageloansatfairvalue 6,899 0
Loansheldforsale

$747,593
$1,439,889

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NOTE7LOANSRECEIVABLEANDALLOWANCEFORLOANLOSSES
ThefollowingtablepresentsloansreceivableasofDecember31,2013and2012:

December31,
2013 2012
(inthousands)
Construction $ 14,627 $ 27,792
Commercialrealestate 24,258 44,901
Commercialandindustrial 5,814 11,153
Residentialrealestate 18,733 19,952
Manufacturedhousing 3,293 3,728
TotalloansreceivablecoveredunderFDIClosssharing
agreements(1)

66,725
107,526
Construction

36,901
28,897
Commercialrealestate

1,835,186
835,488

239,509
75,118
Mortgagewarehouse

866
9,565
Manufacturedhousing

139,471
154,703

145,188
109,430
Consumer

2,144
2,061
TotalloansreceivablenotcoveredunderFDIClosssharing
agreements

2,399,265
1,215,262
Totalloansreceivable

2,465,990
1,322,788
Deferred(fees)costs,net

(912)
1,679

(23,998)
(25,837)
Loansreceivable,net

$2,441,080
$1,298,630

(1) LoansthatwereacquiredinthetwoFDICassistedtransactionsandarecoveredunderlosssharingagreementswiththeFDICarereferredto
ascoveredloansthroughoutthesefinancialstatements.
NonCoveredLoans
ThefollowingtablesummarizesnoncoveredloansbyclassandperformancestatusasofDecember31,2013and2012:

December31,2013

3089Days
PastDue(1)
90Or
MoreDays
PastDue(1)
TotalPast
DueStill
Accruing(1)
Non
Accrual Current(2)
Purchased
Credit
Impaired
Loans(3) TotalLoans(4)
(inthousands)
Commercialandindustrial $ 10 $ 0 $ 10 $ 123 $ 237,453 $ 1,923 $ 239,509
Commercialrealestate 0 0 0 9,924 1,788,144 37,118 1,835,186
Construction 0 0 0 2,049 33,922 930 36,901
Residentialrealestate 555 0 555 969 133,158 10,506 145,188
Consumer 0 0 0 0 1,728 416 2,144
Mortgagewarehouse 0 0 0 0 866 0 866
Manufacturedhousing(5) 7,921 3,772 11,693 448 122,416 4,914 139,471

Total

$ 8,486
$ 3,772
$ 12,258
$ 13,513
$2,317,687
$ 55,807
$ 2,399,265

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December31,2012

3089Days
PastDue(1)
90Or
MoreDays
PastDue(1)
TotalPast
DueStill
Accruing(1)
Non
Accrual Current(2)
Purchased
Credit
Impaired
Loans(3) TotalLoans(4)
(inthousands)
Commercialrealestate 1,437 0 1,437 17,770 770,508 45,773 835,488
Construction 0 0 0 2,423 25,022 1,452 28,897
Residentialrealestate 381 0 381 1,669 95,396 11,984 109,430
Consumer 0 0 0 56 1,486 519 2,061
Mortgagewarehouse 0 0 0 0 9,565 0 9,565
Manufacturedhousing(5) 9,234 1,966 11,200 141 135,924 7,438 154,703

Total

$ 11,090
$ 1,966
$ 13,056
$ 22,347
$1,110,616
$ 69,243
$ 1,215,262

(1) Includespastdueloansthatareaccruinginterestbecausecollectionisconsideredprobable.
(2) Loanswherenextpaymentdueislessthan30daysfromthereportdate.
(3) Purchasedcreditimpairedloansthatwereaggregatedintoapoolareaccountedforasasingleassetwithasinglecompositeinterestrate
andanaggregateexpectationofcashflows,andthepastduestatusofthepools,orthatoftheindividualloanswithinthepools,isnot
meaningful.BecausetheBankrecognizesinterestincomeoneachpoolofloans,theyareconsideredtobeperforming.Purchasedcredit
impairedloansthatarenotinpoolsaccreteinterestwhenthetimingandamountoftheirexpectedcashflowsarereasonablyestimable,and
arereportedasperformingloans.Foradditionalinformationaboutpurchasedcreditimpairedloans,refertorefertoNOTE3
SIGNIFICANTACCOUNTINGPOLICIESANDBASISOFPRESENTATIONPurchasedLoans.
(4) Amountsexcludedeferredcostsandfeesandtheallowanceforloanlosses.
(5) Manufacturedhousingloanspurchasedin2010aresubjecttocashreservesheldattheBankthatareusedtofundpastduepaymentswhen
theloanbecomes90daysormoredelinquent.Subsequentpurchasesaresubjecttovaryingprovisionsintheeventofborrowers
delinquencies.
CoveredLoans
ThefollowingtablesummarizescoveredloansbyclassandperformancestatusasofDecember31,2013and2012:

December31,2013

3089Days
PastDue(1)
90Days
OrMore
PastDue(1)
TotalPast
DueStill
Accruing(1)
Non
Accrual Current(2)
Purchased
Credit
Impaired
Loans(3)
Total
Loans(4)
(inthousands)
Commercialrealestate 245 0 245 1,691 13,586 8,736 24,258
Construction 0 0 0 3,382 1,967 9,278 14,627
Residentialrealestate 90 0 90 564 14,108 3,971 18,733
Manufacturedhousing 56 0 56 11 3,081 145 3,293

Total

$ 686
$ 0
$ 686
$ 5,650
$ 35,914
$ 24,475
$ 66,725

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December31,2012

3089Days
PastDue(1)
90Days
OrMore
PastDue(1)
TotalPast
DueStill
Accruing(1)
Non
Accrual Current(2)
Purchased
Credit
Impaired
Loans(3)
Total
Loans(4)
(inthousands)
Commercialrealestate 0 0 0 3,712 20,859 20,330 44,901
Construction 0 0 0 5,244 6,472 16,076 27,792
Residentialrealestate 0 0 0 1,358 14,226 4,368 19,952
Manufacturedhousing 48 0 48 90 3,527 63 3,728

Total

$ 268
$ 0
$ 268
$ 10,504
$ 53,488
$ 43,266
$ 107,526

(1) Includespastdueloansthatareaccruinginterestbecausecollectionisconsideredprobable.
(2) PurchasedloansfromtheFDICwithnoevidenceofcreditdeteriorationsinceorigination.
(3) Purchasedcreditimpairedloansaggregatedintoapoolareaccountedforasasingleassetwithasinglecompositeinterestrateandan
aggregateexpectationofcashflows,thepastduestatusofthepools,orthatoftheindividualloanswithinthepools,isnotmeaningful.
BecausetheBankrecognizesinterestincomeoneachpoolofloans,theyareconsideredtobeperforming.Purchasedcreditimpairedloans
thatarenotinpoolsaccreteinterestwhenthetimingandamountoftheirexpectedcashflowsarereasonablyestimable,andarereportedas
performingloans.Foradditionalinformationaboutpurchasedcreditimpairedloans,refertorefertoNOTE3SIGNIFICANT
ACCOUNTINGPOLICIESANDBASISOFPRESENTATIONPurchasedLoans.
(4) Amountsexcludedeferredcostsandfeesandallowanceforloanlosses.
AllowanceforLoanLossesandFDICLossSharingReceivable
ProspectivelossesincurredoncoveredloansareeligibleforpartialreimbursementbytheFDIC.Subsequenttothepurchasedate,theexpected
cashflowsonthecoveredloansaresubjecttoevaluation.Decreasesinthepresentvalueofexpectedcashflowsarerecognizedbyrecordingan
allowanceforloanlosseswiththerelatedprovisionforloanlossesreducedfortheamountreimbursablebytheFDIC.Iftheexpectedcashflows
onthecoveredloansincreasesuchthatapreviouslyrecordedimpairmentcanbereversed,theBancorprecordsareductionintheallowancefor
loanlosseswitharelatedreductioninlossesreimbursablebytheFDIC.Increasesinexpectedcashflowsofpurchasedloansanddecreasesin
expectedcashflowsoftheFDIClosssharingreceivable,whentherearenopreviouslyrecordedimpairments,areconsideredtogetherand
recognizedovertheremaininglifeoftheloansasinterestincome.

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ThefollowingtablepresentschangesintheallowanceforloanslossesandtheFDICsharingreceivablefortheyearsendedDecember31,3013,
2012and2011.

AllowanceforLoanLosses
ForTheYearsEndedDecember31,
2013 2012 2011
(inthousands)
BeginningBalance $25,837 $15,032 $15,129
Provisionforloanlosses(1) 5,055 16,271 9,450
Chargeoffs (7,338) (6,166) (9,661)
Recoveries 444 700 114
EndingBalance

$23,998
$25,837
$15,032

FDICLossSharingReceivable
ForTheYearsEndedDecember31,
2013 2012 2011
(inthousands)
BeginningBalance $ 12,343 $ 13,077 $ 16,702
Increasedestimatedcashflows(2) 2,819 2,001 1,955
Otheractivity,net(3) 1,610 3,838 1,965
CashreceiptsfromFDIC (6,726) (6,573) (7,545)
EndingBalance

$ 10,046
$ 12,343
$ 13,077
(1)Provisionforloanlosses

$ 5,055
$ 16,271
$ 9,450
(2)BenefitattributabletoFDIClosssharearrangements

(2,819)
(2,001)
(1,955)
Netamountreportedasprovisionforloanlosses

$ 2,236
$ 14,270
$ 7,495

(3) Includesexternalcosts,suchaslegalfees,realestatetaxesandappraisalexpenses,thatqualifyforreimbursementunderlossshare
arrangements.For2012,includeschangeinaccountingestimateasdescribedinNOTE3SIGNIFICANTACCOUNTINGPOLICIESAND
BASISOFPRESENTATION.
ImpairedLoansCoveredandNonCovered
ThefollowingtablespresentasummaryofimpairedloansasoftheyearsendedDecember31,2013and2012.Purchasedcreditimpairedloans
areconsideredtobeperformingandarenotincludedinthetablesbelow.

December31,2013

Recorded
Investment
Netof
ChargeOffs
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
(inthousands)
Withnorelatedallowancerecorded:
Commercialandindustrial $ 13,097 $13,159 $ $ 9,953 $ 35
Commercialrealestate 14,397 15,249 22,475 158
Construction 2,777 4,046 6,408 0
Consumer 0 0 90 0
Residentialrealestate 2,831 2,831 2,523 898
Withanallowancerecorded:
Commercialandindustrial 2,469 3,739 829 1,616 25
Commercialrealestate 2,261 3,167 946 7,497 82
Construction 1,132 1,132 351 5,054 0
Consumer 64 64 17 48 5
Residentialrealestate 252 252 199 875 254

Total

$ 39,280
$43,639
$ 2,342
$ 56,539
$ 1,457

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December31,2012

Recorded
Investment
Netof
ChargeOffs
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
(inthousands)
Withnorelatedallowancerecorded:
Commercialandindustrial $ 3,844 $ 3,844 $ $ 4,922 $ 209
Commercialrealestate 26,626 27,477 23,089 1,247
Construction 6,588 6,618 7,420 9
Consumer 101 101 130 1
Residentialrealestate 3,188 3,188 2,543 63
Withanallowancerecorded:
Commercialandindustrial 374 374 295 673 12
Commercialrealestate 8,708 10,022 2,505 8,998 149
Construction 5,116 6,022 1,541 6,545 205
Consumer 100 100 14 43 6
Residentialrealestate 1,331 1,331 270 1,040 13

Total

$ 55,976
$59,077
$ 4,625
$ 55,403
$ 1,914

TroubledDebtRestructurings
AtDecember31,2013and2012,therewere$4.6millionand$6.1million,respectively,inloanscategorizedastroubleddebtrestructurings
(TDRs).TDRsarereportedasimpairedloansinthecalendaryearoftheirrestructuringandareevaluatedtodeterminewhethertheyshouldbe
placedonnonaccrualstatus.Insubsequentyears,aTDRmaybereturnedtoaccrualstatusifitsatisfiesaminimumsixmonthperformance
requirementhowever,itwillremainclassifiedasimpaired.Generally,theBancorprequiressustainedperformanceforninemonthsbefore
returningaTDRtoaccrualstatus.
Modificationofpurchasedcreditimpairedloansthatareaccountedforwithinloanpoolsinaccordancewiththeaccountingstandardsfor
purchasedcreditimpairedloansdonotresultintheremovaloftheseloansfromthepoolevenifmodificationswouldotherwisebeconsidereda
TDR.Accordingly,aseachpoolisaccountedforasasingleassetwithasinglecompositeinterestrateandanaggregateexpectationofcash
flows,modificationsofloanswithinsuchpoolsarenotTDRs.
ThefollowingisananalysisofloansmodifiedinatroubleddebtrestructuringbytypeofconcessionatDecember31,2013and2012.Therewere
nomodificationsthatinvolvedforgivenessofdebt.

December31,2013

TDRsin
Compliance
withTheir
Modified
Termsand
Accruing
Interest
TDRsin
Compliancewith
TheirModified
Termsand
Not
Accruing
Interest Total
(inthousands)
Extendedunderforbearance $ 0 $ 0 $ 0
Multipleextensionsresultingfromfinancialdifficulty 0 0 0
Interestratereductions 790 448 1,238

Total

$ 790
$ 448
$1,238

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December31,2012

TDRsin
Compliance
withTheir
Modified
Termsand
Accruing
Interest
TDRsin
Compliancewith
TheirModified
Termsand
Not
Accruing
Interest Total
(inthousands)
Extendedunderforbearance $ 0 $ 514 $ 514
Multipleextensionsresultingfromfinancialdifficulty 47 0 47
Interestratereductions 792 141 933

Total

$ 839
$ 655
$1,494

ThefollowingtablesprovidebyclassthenumberofloansmodifiedintroubleddebtrestructuringsandrecordedinvestmentsatDecember31,
2013and2012.

December31,2013

TDRsinCompliancewith
TheirModifiedTermsand
AccruingInterest
TDRsinCompliancewithTheir
ModifiedTermsandNot
AccruingInterest

Number
ofLoans
Recorded
Investment
Number
ofLoans
Recorded
Investment
Commercialandindustrial 0 $ 0 0 $ 0
Commercialrealestate 0 0 0 0
Construction 0 0 0 0
Manufacturedhousing 8 758 5 448
Residentialrealestate 0 0 0 0
Consumer 1 32 0 0
Totalloans

9
$ 790
$ 448

December31,2012

TDRsinCompliancewith
TheirModifiedTermsand
AccruingInterest
TDRsinCompliancewithTheir
ModifiedTermsandNot
AccruingInterest

Number
ofLoans
Recorded
Investment
Number
ofLoans
Recorded
Investment
Commercialandindustrial 0 $ 0 0 $ 0
Commercialrealestate 0 0 0 0
Construction 0 0 0 0
Manufacturedhousing 4 223 3 141
Residentialrealestate 1 564 1 67
Consumer 1 52 1 447
Totalloans

6
$ 839
$ 655
AsofDecember31,2013and2012,therewerenocommitmentstolendadditionalfundstodebtorswhosetermshavebeenmodifiedinTDRs.
FortheyearendedDecember31,2013,therecordedinvestmentofloansdeterminedtobeTDRswas$1.2million,bothbeforeandafter
restructuring.FortheyearendedDecember31,2012,therecordedinvestmentofloansdeterminedtobeTDRswas$1.5million,bothbeforeand
afterrestructuring.DuringtheyearperiodendingDecember31,2013,fiveTDRloansdefaultedwitharecordedinvestmentof$0.4million.
DuringtheyearendDecember31,2012,threeTDRloansdefaultedwitharecordedinvestmentof$0.3million.Sincetheseloanswereincluded
intheloanportfoliothatissubjecttothecashreserve,theywillberemovedfromtheloanportfoliowhentheybecomeninetydayspastdue.

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Loansmodifiedintroubleddebtrestructuringsareevaluatedforimpairment.ThenatureandextentofimpairmentofTDRs,includingthose
whichhaveexperiencedasubsequentdefault,isconsideredinthedeterminationofanappropriatelevelofallowanceforcreditlosses.Therewere
nospecificallowancesresultingfromTDRmodificationsduring2013,comparedtospecificallowancesof$0.1millionfor2012.
CreditQualityIndicators
Commercialandindustrial,commercialrealestate,residentialrealestateandconstructionloansarebasedonaninternallyassignedriskrating
systemwhichareassignedattheloanoriginationandreviewedonaperiodicoronanasneededbasis.Consumer,mortgagewarehouseand
manufacturedhousingloansareevaluatedbasedonthepaymentactivityoftheloan.
Tofacilitatethemonitoringofcreditqualitywithinthecommercialandindustrial,commercialrealestate,construction,andresidentialreal
estateclasses,andforpurposesofanalyzinghistoricallossratesusedinthedeterminationoftheallowanceforloanlossesfortherespective
portfolioclass,theBankutilizesthefollowingcategoriesofriskratings:pass/satisfactory(includesriskrating1through6),specialmention,
substandard,doubtful,andloss.Theriskratingcategories,whicharederivedfromstandardregulatoryratingdefinitions,areassignedupon
initialapprovalofcredittoborrowersandupdatedperiodicallythereafter.Pass/satisfactoryratings,whichareassignedtothoseborrowerswhodo
nothaveidentifiedpotentialorwelldefinedweaknessesandforwhomthereisahighlikelihoodoforderlyrepayment,areupdatedperiodically
basedonthesizeandcreditcharacteristicsoftheborrower.Allothercategoriesareupdatedonaquarterlybasisduringthemonthprecedingthe
endofthecalendarquarter.Consumerloansarenotassignedtoariskrating.Whileassigningriskratingsinvolvesjudgment,theriskrating
processallowsmanagementtoidentifyriskiercreditsinatimelymannerandallocatetheappropriateresourcestomanagingtheloans.
Theriskratinggradesaredefinedasfollows:
1Pass/Excellent
Loansrated1representacreditextensionofthehighestquality.Theborrowershistoric(atleastfiveyears)cashflowsmanifestextremelylarge
andstablemarginsofcoverage.Balancesheetsareconservative,wellcapitalized,andliquid.Afterconsideringdebtserviceforproposedand
existingdebt,projectedcashflowscontinuetobestrongandprovideamplecoverage.Theborrowertypicallyreflectsbroadgeographicand
productdiversificationandhasaccesstoalternativefinancialmarkets.
2Pass/Superior
Loansrated2arethoseforwhichtheborrowerhasastrongfinancialcondition,balancesheet,operations,cashflow,debtcapacityandcoverage
withratiosbetterthanindustrynorms.Theborrowersoftheseloansexhibitalimitedleverageposition,borrowersarevirtuallyimmunetolocal
economiesinstablegrowingindustries,andwheremanagementiswellrespectedandthecompanyhasreadyaccesstopublicmarkets.
3Pass/Strong
Loansrated3arethoseloansforwhichtheborrowerhasaboveaveragefinancialconditionandflexibilitymorethansatisfactorydebtservice
coverage,balancesheetandoperatingratiosareconsistentwithorbetterthanindustrypeers,havelittleindustryrisk,moveindiversified
marketsandareexperiencedandcompetentintheirindustry.Theseborrowersaccesstocapitalmarketsislimitedmostlytoprivatesources,often
secured,buttheborrowertypicallyhasaccesstoawiderangeofrefinancingalternatives.
4Pass/Good
Loansrated4haveasoundprimaryandsecondarysourceofrepayment.Theborrowermayhaveaccesstoalternativesourcesoffinancing,bust
sourcesarenotaswidelyavailableastheyaretoahighergradeborrower.Theseloanscarryanormallevelofrisk,withverylowlossexposure.
Theborrowerhastheabilitytoperformaccordingtothetermsofthecreditfacility.Themarginsofcashflowcoveragearesatisfactorybut
vulnerabletomorerapiddeteriorationthanthehigherqualityloans.
5Satisfactory
Loansrated5areextendedtoborrowerswhoaredeterminedtobeareasonablecreditriskanddemonstratetheabilitytorepaythedebtfrom
normalbusinessoperations.Riskfactorsmayincludereliabilityofmarginsandcashflows,liquidity,dependenceonasingleproductorindustry,
cyclicaltrends,depthofmanagement,orlimitedaccesstoalternativefinancingsources.Theborrowershistoricalfinancialinformationmay
indicateerraticperformance,butcurrenttrendsarepositiveandthequalityoffinancialinformationisadequate,butisnotasdetailedand
sophisticatedasinformationfoundonhighergradloans.Ifadversecircumstancesarise,theimpactontheborrowermaybesignificant.

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6Satisfactory/BankablewithCare
Loansrated6arethoseforwhichtheborrowerhashigherthannormalcreditriskhowevercashflowandassetvaluesaregenerallyintact.These
borrowersmayexhibitdecliningfinancialcharacteristics,whichincreasingleverageanddecreasingliquidityandmayhavelimitedresources
andaccesstofinancialalternatives.Signsofweaknessintheseborrowersmayincludedelinquenttaxes,tradeslownessanderodingprofit
margins.
7SpecialMention
LoansratedSpecialMentionarecreditfacilitiesthatmayhavepotentialdevelopingweaknessesanddeserveextraattentionfromtheaccount
managerandothermanagementpersonnel.Intheeventthatpotentialweaknessesarenotcorrectedormitigated,deteriorationintheabilityofthe
borrowertorepaythedebtinthefuturemayoccur.Thisgradeisnotassignedtoloansthatbearcertainpeculiarrisksnormallyassociatedwith
thetypeoffinancinginvolved,unlesscircumstanceshavecausedtherisktoincreasetoalevelhigherthanwouldhavebeenacceptablewiththe
creditwasoriginallyapproved.Loanswheresignificantactual,notpotential,weaknessesorproblemsareclearlyevidentaregradedinthe
categorybelow.
8Substandard
LoansareclassifiedSubstandardwhentheloansareinadequatelyprotectedbythecurrentsoundworthandpaymentcapacityoftheobligororof
thecollateralpledged,ifany.Loanssoclassifiedmusthaveawelldefinedweaknessorweaknessesthatjeopardizetheliquidationofthedebt
andarecharacterizedbythedistinctpossibilitythattheCompanywillsustainsomelossiftheweaknessesarenotcorrected.
9Doubtful
TheBankassignsadoubtfulratingtoloansthathavealltheattributesofasubstandardratingwiththeaddedcharacteristicthattheweaknesses
makecollectionorliquidationinfull,onthebasisofcurrentlyexistingfacts,conditions,andvalues,highlyquestionableandimprobable.The
possibilityoflossisextremelyhigh,butbecauseofcertainimportantandreasonablespecificpendingfactorsthatmayworktotheadvantageof
andstrengthenthecreditqualityoftheloan,itsclassificationasanestimatedlossisdeferreduntilitsmoreexactstatusmaybedetermined.
Pendingfactorsmayincludeaproposedmergeroracquisition,liquidationproceeding,capitalinjection,perfectingliensonadditionalcollateral
orrefinancingplans.
10Loss
TheBankassignsalossratingtoloansconsidereduncollectibleandofsuchlittlevaluethattheircontinuanceasanactiveassetisnotwarranted.
Lossestimatesinexcessof30%willresultinalossclassification.Amountsclassifiedaslossareimmediatelychargedoff.
Riskratingsarenotestablishedforhomeequityloans,consumerloans,andinstallmentloans,mainlybecausetheseportfoliosconsistofalarger
numberofhomogenousloanswithsmallerbalances.Instead,theseportfoliosareevaluatedforriskmainlybaseduponaggregatepaymenthistory
throughthemonitoringofdelinquencylevelsandtrendsandareclassifiedasperformingandnonperforming.

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ThefollowingpresentsthecreditqualitytablesasofDecember31,2013and2012forthenoncoveredloanportfolio.

December31,2013

Commercial
and
Industrial
Commercial
RealEstate Construction
Residential
RealEstate
(inthousands)
Pass/Satisfactory $ 228,748 $1,808,804 $ 34,822 $ 142,588
SpecialMention 10,314 12,760 29 940
Substandard 447 13,622 2,050 1,660
Doubtful 0 0 0 0
Total

$ 239,509
$1,835,186
$ 36,901
$ 145,188

Consumer
Mortgage
Warehouse
Manufactured
Housing
(inthousands)
Performing $ 2,144 $ 866 $ 127,330
Nonperforming(1) 0 0 12,141

Total

$ 2,144
$ 866
$ 139,471

December31,2012

Commercial
and
Industrial
Commercial
Residential
RealEstate
(inthousands)
Pass/Satisfactory $ 70,955 $ 794,187 $ 26,020 $ 105,490
SpecialMention 3,836 18,737 454 1,017
Substandard 327 21,801 1,971 2,919
Doubtful 0 763 452 4
Total

$ 75,118
$ 835,488
$ 28,897
$ 109,430

Consumer
Mortgage
Warehouse
Manufactured
Housing
(inthousands)
Performing $ 2,005 $ 9,565 $ 154,562
Nonperforming(1) 56 0 141

Total

$ 2,061
$ 9,565
$ 154,703

(1) IncludesloansthatareonnonaccrualstatusatDecember31,2013and2012.

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ThefollowingpresentsthecreditqualitytablesasofDecember31,2013and2012forthecoveredloanportfolio.

December31,2013

Commercial
and
Industrial
Commercial
Residential
RealEstate
(inthousands)
SpecialMention 223 2,989 0 455
Substandard 1,903 6,939 12,660 4,141
Doubtful 0 0 0 0
Total

$ 5,814
$ 24,258
$ 14,627
$ 18,733

Manufactured
Housing
(inthousands)
Performing $ 3,226
Nonperforming(1) 67
Total

$ 3,293

December31,2012

Commercial
and
Industrial
Commercial
Residential
RealEstate
(inthousands)
SpecialMention 51 225 4,038 455
Substandard 2,214 18,481 21,320 5,476
Doubtful 0 0 0 0
Total

$ 11,153
$ 44,901
$ 27,792
$ 19,952

Manufactured
Housing
(inthousands)
Performing $ 3,638
Nonperforming(1) 90
Total

$ 3,728

(1) IncludesloansthatareonnonaccrualstatusatDecember31,2013and2012.
ThechangesintheallowanceforloanlossesfortheyearsendedDecember31,2013and2012andtheloansandallowanceforloanlossesby
classandimpairmentmethodasofDecember31,arepresentedinthetablesbelow.Theamountspresentedbelowfortheprovisionforloanlosses
donotincludeexpectedbenefitsresultingfromtheFDIClosssharearrangementsforthecoveredloans.

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TwelvemonthsendedDecember31,
2013
Commercial
and
Industrial
Commercial
Residential
RealEstate
Manufactured
Housing Consumer
Mortgage
Warehouse
Residual
Reserve Total
(inthousands)
BeginningBalance,January1,
2013 $ 1,477$ 15,439$ 3,991$ 3,233$ 750$ 154$ 71$ 722$ 25,837
Chargeoffs (1,387) (3,358) (2,096) (410) 0 (87) 0 0 (7,338)
Recoveries 391 42 0 2 0 9 0 0 444
Provisionforloanlosses 2,157 3,582 490 (335) (136) 54 (35) (722) 5,055
EndingBalance,December31,
2013

$ 2,638
$ 15,705
$ 2,385
$ 2,490
$ 614
$ 130
$ 36
$ 0
$ 23,998
Loans:

Individuallyevaluatedfor
impairment

$ 15,566
$ 16,658
$ 3,909
$ 3,083
$ 0
$ 64
$ 0

$ 39,280
Collectivelyevaluatedfor
impairment

225,489
1,796,932
37,411
146,361
137,705
1,664
866

2,346,428
Loansacquiredwithcredit
deterioration

4,268
45,854
10,208
14,477
5,059
416
0

80,282
$ 245,323
$1,859,444
$ 51,528
$ 163,921
$ 142,764
$ 2,144
$ 866

$2,465,990
Allowanceforloanlosses:

impairment

$ 829
$ 946
$ 351
$ 199
$ 0
$ 17
$ 0
$ 0
$ 2,342
impairment

1,574
9,642
267
767
84
38
36
12,408
deterioration

235
5,117
1,767
1,524
530
75
9,248
$ 2,638
$ 15,705
$ 2,385
$ 2,490
$ 614
$ 130
$ 36
$ 0
$ 23,998

TwelvemonthsendedDecember31,
2012
Commercial
and
Industrial
Commercial
Residential
RealEstate
Manufactured
Housing Consumer
Mortgage
Warehouse
Residual
Reserve Total
(inthousands)
BeginningBalance,January1,
2012 $ 1,441$ 7,029$ 4,656$ 844$ 18$ 61$ 929$ 54$ 15,032
Chargeoffs (522) (2,462) (2,507) (649) 0 (26) 0 0 (6,166)
Recoveries 514 63 4 5 0 114 0 0 700
Provisionforloanlosses 44 10,809 1,838 3,033 732 5 (858) 668 16,271
EndingBalance,December31,
2012

$ 1,477
$ 15,439
$ 3,991
$ 3,233
$ 750
$ 154
$ 71
$ 722
$ 25,837
Loans:

impairment

$ 4,218
$ 35,334
$ 11,704
$ 4,519
$ 0
$ 201
$ 0

$ 55,976
impairment

77,547
778,952
27,457
108,511
150,930
1,341
9,565

1,154,303
deterioration

4,506
66,103
17,528
16,352
7,501
519
0

112,509
$ 86,271
$ 880,389
$ 56,689
$ 129,382
$ 158,431
$ 2,061
$ 9,565

$1,322,788
Allowanceforloanlosses:

impairment

$ 295
$ 2,505
$ 1,541
$ 270
$ 0
$ 14
$ 0
$ 0
$ 4,625
impairment

731
7,048
350
917
63
55
71
722
9,957
deterioration

451
5,886
2,100
2,046
687
85
11,255
$ 1,477
$ 15,439
$ 3,991
$ 3,233
$ 750
$ 154
$ 71
$ 722
$ 25,837

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ThenoncoveredmanufacturedhousingportfoliowaspurchasedinAugust2010.Aportionofthepurchasepricemaybeusedtoreimbursethe
BankunderthespecifiedtermsinthePurchaseAgreementfordefaultsoftheunderlyingborrowerandotherspecifieditems.AtDecember31,
2013and2012,fundsavailableforreimbursement,ifnecessary,were$3.1millionand$3.5million,respectively.Eachquarter,thesefundsare
evaluatedtodetermineiftheywouldbesufficienttoabsorbprobablelosseswithinthemanufacturedhousingportfolio.
Thefollowingtablepresentsthechangesinaccretableyieldrelatedtopurchasedcreditimpairedloans:

December31,
2013 2012 2011
(inthousands)
Accretableyieldbalance,beginningofperiod $32,174 $ 45,358 $ 7,176
Additionsresultingfromacquisition 0 0 41,306
Accretiontointerestincome (6,213) (11,723) (3,556)
Reclassificationfromnonaccretabledifferenceanddisposals,net (3,404) (1,461) 432
Accretableyieldbalance,endofperiod

$22,557
$ 32,174
$45,358
NOTE8BANKPREMISESANDEQUIPMENT
Thecomponentsofbankpremisesandequipmentwereasfollows:

December31,
ExpectedUsefulLife 2013 2012
(inthousands)
Leaseholdimprovements 3to25years $11,507 $ 9,789
Furniture,fixturesandequipment 5to10years 4,353 3,268
ITequipment 3to5years 3,740 2,752
Automobiles 5to10years 172 112
19,772
15,921
Accumulateddepreciation
(8,147)
(6,249)
Total
$11,625
$ 9,672

Futureminimumrentalcommitmentsundernoncancelableleaseswereasfollows:

December31,2013
(inthousands)
2014 $ 3,008
2015 2,390
2016 2,219
2017 2,001
2018 1,770
Subsequentto2018 2,823
Totalminimumpayments

$ 14,211
Rentexpense,whichincludesreimbursementstothelessorforrealestatetaxes,wasapproximately$2.5million,$2.1millionand$1.6million
fortheyearsendedDecember31,2013,2012and2011,respectively.TheBancorpsleasesareforlandandbranchorofficespace.Amajorityof
theleasesprovideforthepaymentoftaxes,maintenance,insuranceandcertainotherexpensesapplicabletotheleasedpremises.Manyofthe
leasescontainextensionprovisionsandescalationclauses.Theseleasesaregenerallyrenewableandmay,incertaincases,containrenewal
provisionsandoptionstoexpandandcontractspaceandterminatetheleasesatpredeterminedcontractualdates.Inaddition,escalationclauses
mayexist,whicharetiedtoapredeterminedrateormaychangebasedonaspecifiedpercentageincreaseortheConsumerPriceIndex.

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NOTE9GOODWILL
TheBancorpsgoodwillwasrecognizedinconnectionwiththeacquisitionofBerkshireBankonSeptember17,2011.Thefollowingtable
presentschangestogoodwillasoriginallyestimatedatSeptember17,2011,andmeasurementperiodadjustmentstothefairvaluesofcertain
assetsacquiredasinformationaboutfactsandcircumstancesthatexistedasoftheacquisitiondatebecameavailable.

(inthousands)
BalanceatJanuary1,2011 $ 0
GoodwillresultingfromtheBerkshireacquisition,asoriginally
estimatedatSeptember17 2,465
Subsequentadjustmentsrelatingtodeferredincometaxes (867)
BalanceatDecember31,2011,asoriginallyreported

1,598
FinaladjustmentsrelatingtotheBerkshireacquisition:

Loansreceivable

1,147

1,668
Deferredincometaxes

(784)
BalanceatDecember31,2012and2013

$ 3,629
ThegoodwillacquiredintheBerkshireacquisitionisnotdeductibleforincometaxpurposes.
InaccordancewithASC35020,GoodwillandOtherIntangibles,goodwillandindefinitelivedintangibleassetsaretestedforimpairment
annuallyormorefrequentlyifimpairmentindicatorsarise.Aqualitativefactortestcanbeperformedtodeterminewhetheritisnecessaryto
performthetwostepquantitativegoodwillimpairmenttest.Ifthisqualitativetestdeterminesitisunlikely(lessthan50%probability)thatthe
carryingvalueofthereportingunitislessthanitsfairvalue,thentheBancorpdoesnothavetoperformasteponeimpairmenttest.TheBancorp
performeditsannualanalysisapplyingaqualitativefactortestasofOctober31,2013.InaccordancewiththerequirementsofASC35020,the
BancorpidentifiedqualitativefactorsthatwererelevanttothegeneralbankingindustryandspecificallytoCustomers.Aspartofitsassessment,
theBancorpreviewedregionalandnationaltrendsincurrentandexpectedeconomicconditions,examiningindicatorssuchasGDPgrowth,
interestratesandunemploymentrates.Customersalsoconsidereditsownhistoricalperformance,expectationsoffutureperformance,mergerand
acquisitiontrendsinthebankingindustryandothercurrentconditionsandtrendsspecifictothebankingindustry.Thequalitativeanalysiswas
constructedtodeterminewhethertheweightofevidenceindicatedwhetheritwasmorelikelythannotthatthecarryingvalueofthereporting
unitexceededitsfairvalue.Theresultingsummationofthequalitativeassessmentswerelessthan50%,thereforetheBancorpwasnotrequired
toproceedwithStepOneimpairmenttesting.
BasedontheresultsoftheQualitativeGoodwillImpairmentTest,theBancorpdeterminedthattherewasnoimpairmentonthecurrentgoodwill
balanceof$3.6million.
NOTE10DEPOSITS
Thecomponentsofdepositswereasfollows:

December31,
2013 2012
(inthousands)
Demand,noninterestbearing $ 478,103 $ 219,687
Demand,interestbearing 58,013 37,260
Savings,includingmoneymarketdepositaccounts 1,298,468 1,003,985
Time,$100,000andover 797,322 708,487
Time,other 328,016 471,399
Totaldeposits

$2,959,922
$2,440,818

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TimedepositsscheduledmaturitiesatDecember31,2013wereasfollows:

December31,2013
(inthousands)
2014 $ 719,643
2015 127,682
2016 211,541
2017 48,725
2018 17,747
Totaltimedeposits

$ 1,125,338
Theaggregateamountofdemanddepositoverdraftsthatwerereclassifiedasloanstotaled$1.0millionatDecember31,2013,comparedtoan
immaterialamountasofDecember31,2012.
Includedinthesavingsbalancesabovewere$277.7millionand$203.1millionofbrokeredmoneymarketdeposits,respectively,asof
December31,2013and2012.Also,includedintime,otherbalancesabovewere$36.0millionand$149.9millionofbrokeredtimedeposits,
respectively,asofDecember31,2013and2012.
NOTE11BORROWINGS
Shorttermdebt
Shorttermdebtwasasfollows:

December31,
2013 2012
FHLBadvances $611,500 0.26% $411,0000.25%
Federalfundspurchased 13,000 0.48% 5,0000.20%
Totalshorttermborrowings

$624,500

$416,000
ThefollowingisasummaryoftheBancorpsshorttermborrowings:

December31,
2013 2012 2011
FHLBadvances:
Maximumoutstandingatanymonthend $769,750 $411,000 $329,000
Averagebalanceduringtheyear 120,309 74,336 25,015
Weightedaverageinterestrateduringtheyear 0.55% 0.38% 0.34%
Federalfundspurchased:
Maximumoutstandingatanymonthend 125,000 55,000 8,000
Averagebalanceduringtheyear 32,351 4,336 1,415
Weightedaverageinterestrateduringtheyear 0.31% 0.24% 0.12%
AtDecember31,2013and2012,theBankhadaggregateavailabilityunderfederalfundslinestotaling$35.0millionand$135.0million,
respectively.

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Longtermdebt
FHLBadvances
ThecontractualmaturitiesoflongtermadvancesfromtheFHLBwereasfollows:

December31,
2013 2012
2014 $ 0 0.00% $15,0000.52%
2015 50,000 0.54 25,0000.61%
2016 35,000 0.66 10,0000.77
2017 5,000 3.08 5,0003.08
2018 5,000 3.31 5,0003.31
$95,000

$60,000
Ofthe$95.0millionoflongtermadvancesabove,$10.0millioninFHLBadvancesthatmaturein2017and2018areconvertibleselect
advances.One$5.0millionadvancemaybeconvertedduringanyquartertoafloatingrateadvancewitharateofthreemonthLIBORplus17
basispoints.Theremaining$5.0millionadvancemaybeconvertedinanyquartertoafloatingrateadvancewitharateofthreemonthLIBOR
plus18basispoints.IftheBancorpweretoconverttheseadvancestoafloatingrate,theBancorpwouldhavetherighttoprepaytheadvances
withnopenalty.
TheBankhadatotalborrowingcapacitywiththeFederalHomeLoanBankof$1.6billionandwiththeFederalReserveBankofPhiladelphiaof
$92.3millionatDecember31,2013.TheBankhadatotalborrowingcapacitywiththeFederalHomeLoanBankof$608.9millionandwiththe
FederalReserveBankofPhiladelphiaof$107.0millionatDecember31,2012.Amountscanbeborrowedasshorttermorlongterm.Asof
December31,2013,advancesunderthesearrangementsaresecuredbycertainassets,whichincludeablanketlienonsecuritiesof$0.4billion
andqualifyingloansofCustomersBankof$1.3billion.
Seniornotes
InJulyandAugust2013,theBancorpissued$63.3millioninaggregateprincipalamountofseniornotesdue2018.Thenotesbearinterestat
6.375%peryearwhichispayableonMarch15,June15,September15,andDecember15ofeachyear.Thenotesareunsecuredobligationsof
theBancorpandrankequallywithallofitssecuredandunsecuredseniorindebtedness.
Subordinateddebt
CustomersBankissuedasubordinatedtermnoteduringthesecondquarterof2004.Thenotewasissuedfor$2.0millionatafloatingratebased
uponthethreemonthLIBORrate,determinedquarterly,plus2.75%perannum.QuarterlyinterestpaymentsaremadeonthisnoteinJanuary,
April,JulyandOctober.AtDecember31,2013,thequarterlyaverageratewas2.99%,andtheaverageratefortheyearwas3.02%.Thenote
maturesinthefourthquarterof2014.
NOTE12SHAREHOLDERSEQUITY
InNovember2013,theBancorpannouncedthatitsBoardofDirectorshadauthorizedastockrepurchaseplaninwhichitcouldacquireupto5%
ofitscurrentoutstandingsharesatpricesnottoexceeda20%premiumoverthecurrentbookvalue.Therepurchaseprogrammaybesuspended,
modifiedordiscontinuedatanytime,andtheBancorphasnoobligationtorepurchaseanyamountofitscommonstockundertheprogram.
AtDecember31,2013,therewerewarrantsoutstandingtopurchase588,813sharesoftheBancorpscommonstock.AtDecember31,2012,there
werewarrantsoutstandingtopurchase670,041sharesoftheBancorpscommonstock.ThepurchasepricesatDecember31,2013and2012
rangedfrom$10.50pershareto$73.01pershare.
NOTE13EMPLOYEEBENEFITPLANS
401(k)Plan
CustomersBankhasa401(k)profitsharingplanwherebyeligibleemployeesmaycontributeupto15%oftheirsalarytothePlan.Customers
Bankprovidesamatchingcontributionequalto50%ofthefirst6%ofthecontributionmadebytheemployee.Employercontributionsforthe
yearsendedDecember31,2013,2012,and2011were$0.6million,$0.3million,and$0.2million,respectively.

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SupplementalExecutiveRetirementPlans
CustomersBankenteredintoasupplementalexecutiveretirementplan(SERP)withitsChairmanandChiefExecutiveOfficerthatprovides
annualretirementbenefitsfora15yearperioduponthelaterofhisreachingtheageof65orwhenheterminatesemployment.TheSERPisa
definedcontributiontypeofdeferredcompensationarrangementthatisdesignedtoprovideatargetannualretirementbenefitof$300,000per
yearfor15yearsstartingatage65,basedonanassumedconstantrateofreturnof7%peryear,butthatlevelofretirementbenefitisnot
guaranteedbytheBank,andtheultimateretirementbenefitcanbelessthanorgreaterthanthetarget.TheBankintendstofunditsobligations
undertheSERPwiththeincreaseincashsurrendervalueofalifeinsurancepolicyonthelifeoftheChairmanandChiefExecutiveOfficerwhich
isownedbytheBank.AsaresultoftheacquisitionofUSABankonJuly9,2010,theSERPbecameeffectiveandtheChairmanandChief
ExecutiveOfficerisentitledtoreceivethebalanceofhisaccountinaccordancewiththetermsoftheSERP.Thepresentvalueoftheamount
owedasofDecember31,2013was$3.5millionandwasincludedinotherliabilities.
NOTE14SHAREBASEDCOMPENSATIONPLANS
Summary
During2010,theshareholdersofCustomersBankapprovedthe2010StockOptionPlan(2010Plan),andduring2012,theshareholdersof
CustomersBancorpapprovedthe2012AmendmentandRestatementoftheCustomersBancorp,Inc.AmendedandRestated2004Incentive
EquityandDeferredCompensationPlan(2004Plan).Thepurposeoftheseplansistopromotethesuccessandenhancethevalueofthe
BancorpbylinkingthepersonalinterestsofthemembersoftheBoardofDirectorsandemployees,officers,andexecutivesofCustomersBankto
thoseoftheshareholdersoftheBancorpandbyprovidingsuchindividualswithanincentiveforoutstandingperformanceinordertogenerate
superiorreturnstoshareholdersoftheBancorp.The2010Planand2004PlanareintendedtoprovideflexibilitytotheBancorpinitsabilityto
motivate,attract,andretaintheservicesofmembersoftheBoardofDirectors,andemployees,officers,andexecutivesofCustomersBank.Stock
optionsandrestrictedstockunitsnormallyvestonthethirdorfifthanniversaryofthegrantdateprovidedthegranteeremainsemployedbythe
BancorporcontinuestoserveontheBoard.Withrespecttostockoptionsgrantedunderthe2010Plan,vestedoptionsshallbeexercisableonly
whentheBancorpsfullydilutedtangiblebookvaluewillhaveincreasedby50%fromthedateofgrant.Certainsharebasedawardsprovidefor
acceleratedvestingifthereisachangeincontrol(asdefinedinthePlans).Nostockoptionsmaybeexercisableformorethantenyearsfromthe
dateofgrant.
The2010and2004PlansareadministeredbytheCompensationCommitteeoftheBoardofDirectors.The2010Planprovidesexclusivelyfor
thegrantofstockoptions,someorallofwhichmaybestructuredtoqualifyasIncentiveStockOptions,toemployees,officersandexecutives.
Themaximumnumberofsharesofcommonstockwhichmaybeissuedunderthe2010Planis3,333,334shares.The2004Planprovidesforthe
grantofoptions,someorallofwhichmaybestructuredtoqualifyasIncentiveStockOptionsifgrantedtoemployees,stockappreciationrights
(SARS),restrictedstock,restrictedstockunits,andunrestrictedstocktoemployees,officers,executives,andmembersoftheBoardofDirectors.
Themaximumnumberofsharesofcommonstockwhichmaybeissuedunderthe2004Planis2,500,000shares.AtDecember31,2013,the
aggregatenumberofsharesofcommonstockavailableforgrantundertheseplanswas2,498,602shares.
OnJanuary1,2011,theBancorpinitiatedaBonusRecognitionandRetentionProgram(BRRP).Thisisarestrictedstockunitplan.Employees
eligibletoparticipateintheBRRPincludetheChiefExecutiveOfficerandothermanagementandhighlycompensatedemployeesasdetermined
bytheCompensationCommitteeinitssolediscretion.UndertheBRRP,aparticipantmayelecttodefernotlessthan25%,normorethan50%,
ofhisorherbonuspayablewithrespecttoeachyearofparticipation.SharesofVotingCommonStockhavingavalueequaltotheportionofthe
bonusdeferredbyaparticipantareallocatedtoanannualdeferralaccount,andamatchingamountequaltoanidenticalnumberofsharesof
commonstockisalsoallocatedtotheannualdeferralaccount.Aparticipantbecomes100%vestedintheannualdeferralaccountonthefifth
anniversarydateoftheinitialfundingoftheaccount,providedheorsheremainscontinuouslyemployedbytheBancorpfromthedateof
fundingtotheanniversarydate.
Vestingisacceleratedintheeventofinvoluntaryterminationotherthanforcause,retirementatorafterage65,death,terminationonaccountof
disability,orachangeincontroloftheBancorp.ParticipantswerefirsteligibletomakeelectionsundertheBRRPwithrespecttotheirbonuses
for2011whichwerepayableinthefirstquarterof2012.TheBRRPdoesnotprovideforaspecificnumberofsharestobereservedbyitsterms,
theawardofrestrictedstockunitsunderthisplanislimitedbytheamountofcashbonusespaidtotheparticipantsintheplan.AtDecember31,
2013,restrictedstockunitsoutstandingunderthisplantotaled107,172.
Sharebasedcompensationexpenseisrecognizedonastraightlinebasisoverthevestingperiodsoftheawardsandisacomponentofsalaries
andemployeebenefitsexpense.Totalsharebasedcompensationexpensefor2013,2012,and2011was$3.4million,$2.0million,and$0.7
million,respectively.AtDecember31,2013therewas$10.3millionofunrecognizedcompensationcostrelatedtoallnonvestedsharebased
compensationawards.ThiscostisexpectedtoberecognizedthroughDecember2018.

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StockOptions
Optionstopurchaseanaggregateof617,910and92,687sharesofvotingcommonstock,representing10%and1.5%ofthenumberofshares
issuedintheMay2013offeringofvotingcommonstock,weregrantedtotheChiefExecutiveOfficerandtheChiefOperatingOfficerin
connectionwiththecompletionoftheofferingpursuanttotheirexistingemploymentagreements,respectively.Theoptionswillvestoverfive
yearsfromthedateofgrant,subjecttoa50%increaseinthevalueoftheBancorpsVotingCommonStockandhaveatermof10years.
Inaddition,optionstopurchaseanaggregateof80,000sharesofVotingCommonStockweregrantedtocertainofficersin2013.
TheBancorpestimatedthefairvalueofeachoptiongrantonthedateofgrantusingtheBlackScholesoptionpricingmodel.Theriskfree
interestratewasbaseduponthezerocouponTreasuryratesineffectonthegrantdateoftheoptions.Expectedvolatilitywasbaseduponlimited
historicalinformationbecausetheBancorpscommonstockhasonlybeentradedsinceFebruary2012.Expectedlifewasmanagementsestimate
whichtookintoconsiderationthefiveyearvestingrequirementandthefactthattherehavebeennoexercisessince2010.Thefollowingtable
presentstheweightedaverageassumptionsusedandtheresultingweightedaveragefairvalueofanoption.

2013 2012 2011
Weightedaverageriskfreeinterestrate 1.42% 1.15% 2.00%
Expecteddividendyield 0.00% 0.00% 0.00%
Weightedaverageexpectedvolatility 13.77% 17.47% 20.00%
Weightedaverageexpectedlife(inyears) 7.00 6.98 7.00
Weightedaveragefairvalueofeachoptiongranted $ 3.17 $ 3.04 $ 4.14
ThefollowingsummarizesstockoptionactivityfortheyearendedDecember31,2013:

Number
ofshares
Weighted
average
exercise
price
Weighted
average
remaining
contractual
term
inyears
Aggregate
intrinsic
value
(dollarsinthousands,exceptWeightedaverageexerciseprice)
Outstanding,January1,2013 2,003,889 $ 12.49
Issued 790,597 16.68
Forfeited (15,000) 16.43
Outstanding,December31,2013

2,779,486
$ 13.66
7.91
$ 18,350
ExercisableatDecember31,2013

14,438
$ 20.06
3.32
$ 55
AsummaryofthestatusoftheBancorpsnonvestedoptionsatDecember31,2013andchangesduringtheyearendedDecember31,2013isas
follows:

Options
Weighted
average
exerciseprice
NonvestedatJanuary1,2013 1,999,451 $ 12.44
Granted 790,597 16.68
Vested (10,000) 14.94
Forfeited (15,000) 16.43
NonvestedatDecember31,2013

2,765,048
13.66
RestrictedStockUnits
Thefairvalueofrestrictedstockunitsgrantedunderthe2004PlanisdeterminedbasedonthemarketpriceoftheBancorpscommonstockon
thedateofgrant.ThefairvalueofrestrictedstockunitsgrantedundertheBRRPismeasuredasofthedateonwhichsuchportionofthebonus
wouldhavebeenpaidbutforthedeferral.
InFebruary2012,theCompensationCommitteerecommendedandtheboardofdirectorsapprovedarestrictedstockrewardprogramthathastwo
vestingrequirements.ThefirstrequirementisthattherecipientremainsanemployeeordirectorthroughDecember31,2016.Thesecond
requirementisthattheBancorpsVotingCommonStockwillhavetradedatapricegreaterthan$18.90pershare(adjustedforanystocksplitsor
stockdividends)foratleast5consecutivetradingdaysduringthefiveyearperiodendingDecember31,2016.Thissecondrequirementwas
satisfiedduringthefourthquarterof2013.

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ThetablebelowpresentsthestatusoftherestrictedstockunitsatDecember31,2013andchangesduringtheyearendedDecember31,2013:

Restricted
StockUnits
Weighted
averagegrant
datefairvalue
OutstandingandunvestedatJanuary1,2013 542,648 $ 12.74
Granted 72,126 14.94
Forfeited (1,310) 12.80
OutstandingandunvestedatDecember31,2013

613,464
$ 13.00
NOTE15INCOMETAXES
Thecomponentsofincometaxexpensewereasfollows:

2013 2012 2011
(inthousands)
Current $15,394 $16,003 $ 4,563
Deferred 2,210 (3,731) (2,728)

Total

$17,604
$12,272
$ 1,835

Effectivetaxratesdifferfromthefederalstatutoryrateof35%,whichisappliedtoincomebeforeincometaxexpense,duetothefollowing:

2013 2012 2011
Amount
%of
pretax
income Amount
%of
pretax
income Amount
%of
pretax
income
Federalincometaxatstatutoryrate $17,604 35.00% $12,631 35.00% $2,054 35.00%
Stateincometax 353 0.70 184 0.51 64 1.09
Taxexemptinterest (155) (0.31) (85) (0.24) (14) (0.23)
Interestdisallowance 7 0.01 4 0.01 3 0.05
Bankownedlifeinsurance (868) (1.73) (466) (1.29) (490) (8.35)
Other 663 1.33 4 0.01 218 3.71
Effectiveincometaxrate

$17,604
35.00%
$12,272
34.00%
$1,835
31.27%
Deferredincometaxesreflecttemporarydifferencesintherecognitionofrevenueandexpensesfortaxreportingandfinancialstatement
purposes,principallybecausecertainitems,suchastheallowanceforloanlossesandloanfeesarerecognizedindifferentperiodsforfinancial
reportingandtaxreturnpurposes.Avaluationallowancehasnotbeenestablishedfordeferredtaxassets.Realizationofthedeferredtaxassetsis
dependentongeneratingsufficienttaxableincome.Althoughrealizationisnotassured,managementbelievesitismorelikelythannotthatallof
thedeferredtaxassetwillberealized.Deferredtaxassetsarerecordedinotherassets.
TheBancorpaccountsforincometaxesundertheliabilitymethodofaccountingforincometaxes.Theincometaxaccountingguidanceresults
intwocomponentsofincometaxexpense:currentanddeferred.Currentincometaxexpensereflectstaxestobepaidorrefundedforthecurrent
periodbyapplyingtheprovisionsoftheenactedtaxlawtothetaxableincomeorexcessofdeductionsoverrevenues.TheBancorpdetermines
deferredincometaxesusingtheliability(orbalancesheet)method.Underthismethod,thenetdeferredtaxassetorliabilityisbasedonthetax
effectsofthedifferencesbetweenthebookandtaxbasesofassetsandliabilities,andenactedchangesintaxratesandlawsarerecognizedinthe
periodinwhichtheyoccur.
Ataxpositionisrecognizedifitismorelikelythannot,basedonthetechnicalmerits,thatthetaxpositionwillberealizedorsustainedupon
examination.Thetermmorelikelythannotmeansalikelihoodofmorethan50percentthetermsexaminedandupon

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examinationalsoincluderesolutionoftherelatedappealsorlitigationprocess,ifany.Ataxpositionthatmeetsthemorelikelythannot
recognitionthresholdisinitiallyandsubsequentlymeasuredasthelargestamountoftaxbenefitthathasagreaterthan50percentlikelihoodof
beingrealizeduponsettlementwithataxingauthoritythathasfullknowledgeofallrelevantinformation.Thedeterminationofwhetherornota
taxpositionhasmetthemorelikelythannotrecognitionthresholdconsidersthefacts,circumstances,andinformationavailableatthereporting
dateandissubjecttomanagementsjudgment.

December31,
2013 2012
(inthousands)
Deferredtaxassets:
Allowanceforloanlosses $ 8,399 $ 9,043
Netunrealizedlossesonsecurities 4,371 0
OREOexpenses 403 147
Nonaccrualinterest 1,236 3,153
Netoperatinglosses 2,003 2,274
Deferredcompensation 4,250 2,422
Fairvalueadjustmentsonacquisitions 2,063 2,119
Other 1,587 606
Totaldeferredtaxassets

24,312
19,764
Deferredtaxliabilities:

Taxbasisdiscountonacquisitions

(7,998)
(7,139)
Netunrealizedgainsonsecurities

(0)
(573)
Deferredloancosts

(2,438)
(1,502)
Bankpremisesandequipment

(1,182)
(1,003)
Other

(819)
(406)
Totaldeferredtaxliabilities

(12,437)
(10,623)
Netdeferredtaxasset

$ 11,875
$ 9,141
TheBancorphadapproximately$5.7millionoffederalnetoperatinglosscarryoversatDecember31,2013,thatexpirein2023through2031.
TheBancorpanditssubsidiariesaresubjecttoU.S.federalincometaxaswellasincometaxofvariousstatesprimarilyinthemidAtlanticregion
oftheU.S.YearsthatremainopenforpotentialreviewbytheInternalRevenueServiceare2010through2012andthestatetaxingauthoritiesare
2009through2012.
TheBancorpspolicyistorecordinterestandpenaltiesinotherexpense.
NOTE16TRANSACTIONSWITHEXECUTIVEOFFICERS,DIRECTORS,ANDPRINCIPALSHAREHOLDERS
TheBancorphashad,andmaybeexpectedtohaveinthefuture,bankingtransactionsintheordinarycourseofbusinesswithitsexecutive
officers,directors,principalshareholders,theirimmediatefamiliesandaffiliatedcompanies(commonlyreferredtoasrelatedparties),onthesame
terms,includinginterestratesandcollateral,asthoseprevailingatthetimeforcomparabletransactionswithothers.Theactivityrelatingtoloans
tosuchpersonswasasfollows:

FortheYearsEndedDecember31,
2013 2012 2011
(inthousands)
BalanceJanuary1 $ 3,272 $ 3,657 $ 0
Additions 9,280 14 3,660
Repayments (5,279) (399) (3)
BalanceDecember31

$ 7,273
$ 3,272
$ 3,657
Somecurrentdirectors,nomineesfordirectorandexecutiveofficersoftheBancorpandentitiesororganizationsinwhichtheywereexecutive
officersortheequivalentorownersofmorethan10%oftheequitywerecustomersofandhadtransactionswithorinvolvingtheBancorpinthe
ordinarycourseofbusinessduringthefiscalyearendedDecember31,2013.Noneofthesetransactions

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involvedamountsinexcessof5%oftheBancorpsgrossrevenuesduring2013norwastheBancorpindebtedtoanyoftheforegoingpersonsor
entitiesinanaggregateamountinexcessof5%oftheBancorpstotalconsolidatedassetsatDecember31,2013.Additionaltransactionswith
suchpersonsandentitiesmaybeexpectedtotakeplaceintheordinarycourseofbusinessinthefuture.
FortheyearsendedDecember31,2013,2012,and2011theBancorphaspaidapproximately$0.2million,$0.4million,and$0.3million,
respectivelytoClipperMagazineanditsdivision,SpencerAdvertisingMarketingaswellasJaxxonPromotions,Inc.AdirectoroftheBancorp
wastheChiefExecutiveOfficerofClipperMagazineuptoJune30,2013,anaffiliateofGannettCo.,Inc.,anda25%shareholderofJaxxon
Promotions,Inc.
FortheyearendedDecember31,2013,2012,and2011theBancorphaspaidapproximately$3,800,$6,400,and$11,000,respectivelyto
JastremPremiumLandscapes.AnimmediatefamilymemberofanExecutiveVicePresidentoftheBankisthesoleproprietorofJastremPremium
Landscapes.
NOTE17FINANCIALINSTRUMENTSWITHOFFBALANCESHEETRISK
TheBancorpisapartytofinancialinstrumentswithoffbalancesheetriskinthenormalcourseofbusinesstomeetthefinancingneedsofits
customers.Thesefinancialinstrumentsincludecommitmentstoextendcreditandlettersofcredit.Thoseinstrumentsinvolve,tovaryingdegrees,
elementsofcreditriskinexcessoftheamountrecognizedintheconsolidatedbalancesheets.
TheBancorpsexposuretocreditlossintheeventofnonperformancebytheotherpartytothefinancialinstrumentforcommitmentstoextend
creditisrepresentedbythecontractualamountofthoseinstruments.TheBancorpusesthesamecreditpoliciesinmakingcommitmentsand
conditionalobligationsasitdoesforonbalancesheetinstruments.
Thefollowingfinancialinstrumentswereoutstandingwhosecontractamountsrepresentcreditrisk:

December31,
2013 2012
(inthousands)
Commitmentstofundloans $202,809 $136,007
Unfundedcommitmentstofundmortgagewarehouseloans 905,442 428,400
Unfundedcommitmentsunderlinesofcredit 177,457 87,220
Lettersofcredit 29,116 3,064
Otherunusedcommitments 8,010 0
Commitmentstoextendcreditareagreementstolendtoacustomeraslongasthereisnoviolationofanyconditionestablishedinthe
contract.Sincemanyofthecommitmentsareexpectedtoexpirewithoutbeingdrawnupon,thetotalcommitmentamountsdonotnecessarily
representfuturecashrequirements.Mortgagewarehouseloancommitmentsareagreementstopurchasemortgageloansfrommortgagebankers
thatagreetopurchasetheloansbackinashortperiodoftime.Thesecommitmentsgenerallyfluctuatemonthlyasexistingloansarerepurchased
bythemortgagebankersandnewloansarepurchasedbytheBancorp.
Commitmentsgenerallyhavefixedexpirationdatesorotherterminationclausesandmayrequirepaymentofafee.TheBancorpevaluateseach
customerscreditworthinessonacasebycasebasis.Theamountofcollateralobtained,ifdeemednecessarybytheBancorpuponextensionof
credit,isbasedonmanagementscreditevaluation.Collateralheldvariesbutmayincludepersonalorcommercialrealestate,accounts
receivable,inventoryandequipment.
OutstandinglettersofcreditwrittenareconditionalcommitmentsissuedbytheBancorptoguaranteetheperformanceofacustomertoathird
party.Themajorityofthesestandbylettersofcreditexpirewithinthenextyear.Thecreditriskinvolvedinissuinglettersofcreditisessentially
thesameasthatinvolvedinextendingotherloancommitments.TheBancorprequirescollateralsupportingtheselettersofcreditasdeemed
necessary.Managementbelievesthattheproceedsobtainedthroughaliquidationofsuchcollateralwouldbesufficienttocoverthemaximum
potentialamountoffuturepaymentsrequiredunderthecorrespondingguarantees.ThecurrentamountoftheliabilitiesasofDecember31,2013
and2012forguaranteesunderstandbylettersofcreditissuedisnotmaterial.
NOTE18REGULATORYMATTERS
TheBankandtheBancorparesubjecttovariousregulatorycapitalrequirementsadministeredbythefederalbankingagencies.Failuretomeet
theminimumcapitalrequirementscanresultincertainmandatory,andpossiblyadditionaldiscretionary,actionsbyregulatorsthat,if
undertaken,couldhaveadirectmaterialeffectontheBancorpsfinancialstatements.Undercapitaladequacyguidelinesandtheregulatory
frameworkforpromptcorrectiveaction,theBankandBancorpmustmeetspecificcapitalguidelinesthatinvolvequantitativemeasuresoftheir
assets,liabilitiesandcertainoffbalancesheetitems,ascalculatedundertheregulatoryaccountingpractices.Thecapitalamountsand
classificationarealsosubjecttoqualitativejudgmentsbytheregulatorsaboutcomponents,riskweightingsandotherfactors.Promptcorrective
actionprovisionsarenotapplicabletobankholdingcompanies.

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QuantitativemeasuresestablishedbyregulationtoensurecapitaladequacyrequiretheBankandBancorptomaintainminimumamountsand
ratios(setforthinthefollowingtable)oftotalandTier1capitaltoriskweightedassetsandofTier1capitaltoaverageassets(asdefinedinthe
regulations).AtDecember31,2013and2012,theBankandBancorpmetallcapitaladequacyrequirementstowhichtheyweresubject.
TheBankexperiencedrapidloangrowthduringthefinaldaysof2012.DuringthestandardclosingprocessoftheBanksDecember2012
financialstatements,managementdeterminedonJanuary30,2013thattherapidloangrowthresultedinareductionintheBankscapitalratios,
causingtheBanktobecomeadequatelycapitalizedasofDecember31,2012.Managementimmediatelytransferredsufficientcapitalfromthe
BancorptotheBank,whichreturnedtheBanktowellcapitalizedstatus.SufficientcashismaintainedattheBancorptoensurethattheBank
remainswellcapitalized,andmanagementremainscommittedtotakingallstepsnecessarytoensurethatboththeBancorpandtheBankremain
wellcapitalizedgoingforward.SincetheBankwasthereforeadequatelycapitalizedatDecember31,2012,regulatoryapprovalwasrequiredto
accept,reneworrolloveranybrokereddeposits.EffectiveJanuary1,2013,theinterestratepaidfordepositsbyinstitutionsthatarelessthan
wellcapitalizedwaslimitedto75basispointsabovethenationalrateforsimilarproductsunlesstheinstitutioncansupporttotheFDICthat
prevailingratesinitsmarketareaexceedthenationalaverage.ThislimitationonratespaidfordepositswasremovedeffectivewiththeBanks
compliancewiththewellcapitalizedthresholds,andtheBankinnolongersubjecttoanylimitsoninterestratespaidfordeposits.
Tobecategorizedaswellcapitalized,aninstitutionmustmaintainminimumtotalriskbased,Tier1riskbasedandTier1leveragedratiosasset
forthinthefollowingtable:

Actual
ForCapitalAdequacy
Purposes
ToBeWellCapitalized
Under
PromptCorrectiveAction
Provisions
(dollarsinthousands) Amount Ratio Amount Ratio Amount Ratio
CustomersBank $435,432 14.11% $246,936 8.0% $ 308,670 10.0%
CustomersBank $411,434 13.33% $123,468 4.0% $ 185,202 6.0%
CustomersBank $411,434 10.81% $152,191 4.0% $ 190,239 5.0%
CustomersBank $244,710 9.53% $205,442 8.0% $ 256,802 10.0%
CustomersBank $218,394 8.50% $102,721 4.0% $ 154,081 6.0%
CustomersBank $218,394 7.74% $112,892 4.0% $ 141,115 5.0%
NOTE19DISCLOSURESABOUTFAIRVALUEOFFINANCIALINSTRUMENTS
TheBancorpusesfairvaluemeasurementstorecordfairvalueadjustmentstocertainassetsandtodisclosethefairvalueofitsfinancial
instruments.FASBASC825,FinancialInstruments,requiresdisclosureoftheestimatedfairvalueofanentitysassetsandliabilitiesconsidered
tobefinancialinstruments.FortheBancorp,asformostfinancialinstitutions,themajorityofitsassetsandliabilitiesareconsideredtobe
financialinstruments.However,manyoftheseinstrumentslackanavailabletradingmarketascharacterizedbyawillingbuyerandwillingseller
engaginginanexchangetransaction.Forfairvaluedisclosurepurposes,theBancorputilizedcertainfairvaluemeasurementcriteriaunderthe
FASBASC820,FairValueMeasurementsandDisclosures,asexplainedbelow.

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ThefollowingmethodsandassumptionswereusedtoestimatethefairvaluesoftheBancorpsfinancialinstrumentsatDecember31,2013and
2012:
Cashandcashequivalents:
Thecarryingamountsreportedinthebalancesheetforcashandshortterminstrumentsapproximatethoseassetsfairvalues.Theseassetsare
includedasLevel1fairvalues,baseduponthelowestlevelofinputthatissignificanttothefairvaluemeasurements.
Investmentsecurities:
Thefairvalueofinvestmentsecuritiesavailableforsaleandheldtomaturityaredeterminedbyobtainingquotedmarketpricesonnationally
recognizedandforeignsecuritiesexchanges(Level1),matrixpricing(Level2),whichisamathematicaltechniqueusedwidelyintheindustryto
valuedebtsecuritieswithoutrelyingexclusivelyonquotedmarketpricesforthespecificsecuritiesbutratherbyrelyingonthesecurities
relationshiptootherbenchmarkquotedprices,orexternallydevelopedmodelsthatuseunobservableinputsduetolimitedornomarketactivity
oftheinstrument(Level3).TheseassetsareincludedasLevel1,2,or3fairvalues,baseduponthelowestlevelofinputthatissignificanttothe
fairvaluemeasurements.
ThecarryingamountofFHLBandFederalReservestockapproximatesfairvalue,andconsidersthelimitedmarketabilityofsuchsecurities.
TheseassetsareincludedasLevel2fairvalues,baseduponthelowestlevelofinputthatissignificanttothefairvaluemeasurements.
LoansheldforsaleResidentialmortgageloans:
TheBancorpgenerallyestimatesthefairvaluesofloansheldforsalebasedoncommitmentsonhandfrominvestorswithinthesecondarymarket
forloanswithsimilarcharacteristics.TheseassetsareincludedasLevel2fairvalues,baseduponthelowestlevelofinputthatissignificantto
thefairvaluemeasurements.
LoansheldforsaleMortgagewarehouseloans:
Thefairvalueofmortgagewarehouseloansistheamountofcashinitiallyadvancedtofundthemortgage,plusaccruedinterestandfees,as
specifiedintherespectiveagreements.Theloanisusedbymortgagecompaniesasshorttermbridgefinancingbetweenthefundingofmortgage
loansandthefinalizationofthesaleoftheloanstoaninvestor.Changesinfairvaluearenotexpectedtoberecognizedsinceatinceptionofthe
transactiontheunderlyingloanshavealreadybeensoldtoanapprovedinvestorortheyhavebeenhedgedbythemortgagecompany.
Additionally,theinterestrateisvariable,andthetransactionisshortterm,withanaveragelifeof17daysfrompurchasetosale.Theseassetsare
includedasLevel2fairvalues,baseduponthelowestlevelofinputthatissignificanttothefairvaluemeasurements.
Loansreceivable,net:
Thefairvaluesofloansareestimatedusingdiscountedcashflowanalyses,usingmarketratesatthebalancesheetdatethatreflectthecreditand
interestrateriskinherentintheloans.Projectedfuturecashflowsarecalculatedbaseduponcontractualmaturityorcalldates,projected
repaymentsandprepaymentsofprincipal.Generally,forvariablerateloansthatrepricefrequentlyandwithnosignificantchangeincreditrisk,
fairvaluesarebasedoncarryingvalues.TheseassetsareincludedasLevel3fairvalues,baseduponthelowestlevelofinputthatissignificantto
thefairvaluemeasurements.
Impairedloans:
ImpairedloansarethosethatareaccountedforunderASC450,Contingencies,inwhichtheBancorphasmeasuredimpairmentgenerallybased
onthefairvalueoftheloanscollateral.Fairvalueisgenerallydeterminedbaseduponindependentthirdpartyappraisalsofthepropertiesthat
collateralizetheloans,ordiscountedcashflowsbasedupontheexpectedproceeds.TheseassetsareincludedasLevel3fairvalues,basedupon
thelowestlevelofinputthatissignificanttothefairvaluemeasurements.
FDIClosssharingreceivable:
TheFDIClosssharingreceivableismeasuredseparatelyfromtherelatedcoveredassets,asitisnotcontractuallyembeddedintheassetsandis
nottransferablewiththeassetsshouldtheassetsbesold.Fairvalueisestimatedusingprojectedcashflowsrelatedtothelosssharingagreements
basedontheestimatedlossestobeincurredontheloansandtheexpectedreimbursementsforlossesusingtheapplicablelosssharepercentages.
ThesecashflowsarediscountedtoreflecttheestimatedtimingofthereceiptofthelosssharereimbursementfromtheFDIC.Thisassetis
includedasLevel3fairvalue,baseduponthelowestlevelofinputthatissignificanttothefairvaluemeasurements.

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Otherrealestateowned:
ThefairvalueofOREOisdeterminedusingappraisals,whichmaybediscountedbasedonmanagementsreviewandchangesinmarket
conditions(Level3Inputs).AllappraisalsmustbeperformedinaccordancewiththeUniformStandardsofProfessionalAppraisalPractice
(USPAP).AppraisalsarecertifiedtotheBancorpandperformedbyappraisersontheBancorpsapprovedlistofappraisers.Evaluationsare
completedbyapersonindependentofmanagement.Thecontentoftheappraisaldependsonthecomplexityoftheproperty.Appraisalsare
completedonaretailvalueandanasisvalue.TheseassetsareincludedasLevel3fairvalues,baseduponthelowestlevelofinputthatis
significanttothefairvaluemeasurements.
Accruedinterestreceivableandpayable:
Thecarryingamountofaccruedinterestreceivableandaccruedinterestpayableapproximatesitsfairvalue.TheseassetsareincludedasLevel2
fairvalues,baseduponthelowestlevelofinputthatissignificanttothefairvaluemeasurements.
Depositliabilities:
Thefairvaluesdisclosedfordeposits(e.g.,interestandnoninterestchecking,passbooksavingsandmoneymarketdepositaccounts)are,by
definition,equaltotheamountpayableondemandatthereportingdate(i.e.,theircarryingamounts).Fairvaluesforfixedratecertificatesof
depositareestimatedusingadiscountedcashflowcalculationthatappliesinterestratescurrentlybeingofferedinthemarketoncertificatestoa
scheduleofaggregatedexpectedmonthlymaturitiesontimedeposits.TheseassetsareincludedasLevel2fairvalues,baseduponthelowest
levelofinputthatissignificanttothefairvaluemeasurements.
Federalfundspurchased:
Fortheseshortterminstruments,thecarryingamountisconsideredareasonableestimateoffairvalue.TheseassetsareincludedasLevel2fair
values,baseduponthelowestlevelofinputthatissignificanttothefairvaluemeasurements.
Borrowings:
BorrowingsconsistoflongtermandshorttermFHLBadvances,fiveyearseniorunsecurednotes,andsubordinateddebt.Fortheshortterm
borrowings,thecarryingamountisconsideredareasonableestimateoffairvalue.FairvaluesoflongtermFHLBadvancesareestimatedusing
discountedcashflowanalysis,basedonquotedpricesfornewFHLBadvanceswithsimilarcreditriskcharacteristics,termsandremaining
maturity.Thesepricesobtainedfromthisactivemarketrepresentamarketvaluethatisdeemedtorepresentthetransferpriceiftheliabilitywere
assumedbyathirdparty.Thefiveyearseniorunsecurednotesaretradedonrecognizedexchanges,andtheirpricecanbeobtaineddaily.Fair
valuesofsubordinateddebtareestimatedusingdiscountedcashflowanalysis,basedonmarketratescurrentlyofferedonsuchdebtwithsimilar
creditriskcharacteristics,termsandremainingmaturity.TheseliabilitiesareincludedasLevel2fairvalues,baseduponthelowestlevelofinput
thatissignificanttothefairvaluemeasurements.
Derivatives(AssetsandLiabilities):
Thefairvaluesofinterestrateswapsaredeterminedusingmodelsthatincorporatereadilyobservablemarketdataintoamarketstandard
methodology.Thismethodologynetsthediscountedfuturefixedcashreceiptsandthediscountedexpectedvariablecashpayments.The
discountedvariablecashpaymentsarebasedonexpectationsoffutureinterestratesderivedfromobservablemarketinterestratecurves.In
addition,fairvalueisadjustedfortheeffectofnonperformanceriskbyincorporatingcreditvaluationadjustmentsfortheBancorpandits
counterparties.TheseassetsandliabilitiesareincludedasLevel2fairvalues,baseduponthelowestlevelofinputthatissignificanttothefair
valuemeasurements.
Thefairvaluesoftheresidentialmortgageloancommitmentsarederivedfromtheestimatedfairvaluesthatcanbegeneratedwhenthe
underlyingmortgageloanissoldinthesecondarymarket.TheBancorpusescommitmentsonhandfromthirdpartyinvestorstoestimateanexit
price,andadjustsfortheprobabilityofthecommitmentbeingexercisedbasedontheBancorpsinternalexperience.Theseassetsandliabilities
areincludedasLevel3fairvalues,baseduponthelowestlevelofinputthatissignificanttothefairvaluemeasurements.
Offbalancesheetfinancialinstruments:
FairvaluesfortheBancorpsoffbalancesheetfinancialinstruments(lendingcommitmentsandlettersofcredit)arebasedonfeescurrently
chargedinthemarkettoenterintosimilaragreements,takingintoaccounttheremainingtermsoftheagreementsandthecounterpartiescredit
standing.ThesefinancialinstrumentsareincludedasLevel2fairvalues,baseduponthelowestlevelofinputthatissignificanttothefairvalue
measurements.AtDecember31,2013and2012,therewerenooffbalancesheetfinancialinstrumentsinexcessoftheircontractvalue.

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ThefollowinginformationshouldnotbeinterpretedasanestimateofthefairvalueoftheentireBancorpsinceafairvaluecalculationisonly
providedforalimitedportionoftheBancorpsassetsandliabilities.Duetoawiderangeofvaluationtechniquesandthedegreeofsubjectivity
usedinmakingtheseestimates,comparisonsbetweentheBancorpsdisclosuresandthoseofothercompaniesmaynotbemeaningful.
TheestimatedfairvaluesoftheBancorpsfinancialinstrumentswereasfollowsatDecember31,2013and2012.

Carrying
Amount
Estimated
FairValue
FairValueMeasurementsatDecember31,2013

Quoted
Pricesin
Active
Marketsfor
Identical
Assets
(Level1)
Significant
Other
Observable
Inputs
(Level2)
Significant
Unobservable
Inputs
(Level3)
(inthousands)
Assets:
Cashandcashequivalents $ 233,068 $ 233,068 $ 233,068 $ 0 $ 0
Investmentsecurities,availableforsale 497,573 497,573 20,714 476,859 0
Loansheldforsale 747,593 747,593 0 747,593 0
Loansreceivable,net 2,441,080 2,444,900 0 0 2,444,900
FHLBandFederalReserveBankstock 42,424 42,424 0 42,424 0
Accruedinterestreceivable 8,362 8,362 0 8,362 0
FDIClosssharingreceivable 10,046 10,046 0 0 10,046
Derivativesnotdesignatedashedginginstruments 3,763 3,763 0 3,523 240
Liabilities:
Deposits $2,959,922 $2,919,935 $ 478,103 $ 2,441,832 $ 0
Federalfundspurchased 13,000 13,000 13,000 0 0
Borrowings 771,750 774,793 0 774,793 0
Derivativesnotdesignatedashedginginstruments 3,537 3,537 0 3,537 0
Accruedinterestpayable 1,675 1,675 0 1,675 0

Carrying
Amount
Estimated
FairValue
FairValueMeasurementsatDecember31,2012

Quoted
Pricesin
Active
Marketsfor
Identical
Assets
(Level1)
Significant
Other
Observable
Inputs
(Level2)
Significant
Unobservable
Inputs
(Level3)
(inthousands)
Assets:
Cashandcashequivalents $ 186,016 $ 186,016 $ 186,016 $ 0 $ 0
Investmentsecurities,availableforsale 129,093 129,093 6 129,087 0
Loansheldforsale 1,439,889 1,439,889 0 1,439,889 0
Loansreceivable,net 1,298,630 1,307,049 0 0 1,307,049
FHLBandFederalReservestock 30,163 30,163 0 30,163 0
Accruedinterestreceivable 5,790 5,790 0 5,790 0
FDIClosssharingreceivable 12,343 12,343 0 0 12,343
Liabilities:
Deposits $2,440,818 $2,674,765 $ 219,687 $ 2,455,078 $ 0
Federalfundspurchased 5,000 5,000 5,000 0 0
Borrowings 473,000 473,432 0 473,432 0
Accruedinterestpayable 1,530 1,530 0 1,530 0
InaccordancewithFASBASC820,FairValueMeasurementsandDisclosures,thefairvalueofafinancialinstrumentisthepricethatwouldbe
receivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Fairvalueis
bestdeterminedbaseduponquotedmarketprices.However,inmanyinstances,therearenoquoted

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marketpricesfortheBancorpsvariousfinancialinstruments.Incaseswherequotedmarketpricesarenotavailable,fairvaluesarebasedon
estimatesusingpresentvalueorothervaluationtechniques.Thosetechniquesaresignificantlyaffectedbytheassumptionsused,includingthe
discountrateandestimatesoffuturecashflows.Accordingly,thefairvalueestimatesmaynotberealizedinanimmediatesettlementofthe
instrument.
Thefairvalueguidanceprovidesaconsistentdefinitionoffairvalue,focusingonanexitpriceinanorderlytransaction(thatis,notaforced
liquidationordistressedsale)betweenmarketparticipantsatthemeasurementdateundercurrentmarketconditions.Iftherehasbeena
significantdecreaseinthevolumeandlevelofactivityfortheassetorliability,achangeinvaluationtechniqueortheuseofmultiplevaluation
techniquesmaybeappropriate.Insuchinstances,determiningthepriceatwhichwillingmarketparticipantswouldtransactatthemeasurement
dateundercurrentmarketconditionsdependsonthefactsandcircumstancesandrequirestheuseofsignificantjudgment.Thefairvalueisa
reasonablepointwithintherangethatismostrepresentativeoffairvalueundercurrentmarketconditions.

Level1:
Unadjustedquotedpricesinactivemarketsthatareaccessibleatthemeasurementdateforidentical,unrestrictedassetsor
liabilities.
Level2:
Quotedpricesinmarketsthatarenotactive,orinputsthatareobservableeitherdirectlyorindirectly,forsubstantiallythefull
termoftheassetorliability.
Level3:
Pricesorvaluationtechniquesthatrequireinputsthatarebothsignificanttothefairvaluemeasurementandunobservable(i.e.,
supportedwithlittleornomarketactivity).
Afinancialinstrumentslevelwithinthefairvaluehierarchyisbasedonthelowestlevelofinputthatissignificanttothefairvalue
measurement.
Forfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringandnonrecurringbasis,thefairvaluemeasurementsbylevelwithinthe
fairvaluehierarchyusedatDecember31,2013and2012wereasfollows:

December31,2013
FairValueMeasurementsattheEndoftheReportingPeriodUsing

QuotedPricesin
ActiveMarketsfor
IdenticalAssets
(Level1)
SignificantOther
ObservableInputs
(Level2)
Significant
Unobservable
Inputs
(Level3) Total
(inthousands)
MeasuredatFairValueonaRecurringBasis:
Assets
Availableforsalesecurities:
Mortgagebackedsecurities $ 0 $ 451,536 $ 0 $ 451,536
Corporatenotes 0 25,323 0 25,323
Equitysecurities 20,714 0 0 20,714
Derivativesnotdesignatedashedging
instruments(1) 0 3,523 240 3,763
Loansheldforsalefairvalueoption 0 747,593 0 747,593
Totalassetsrecurringfairvalue
measurements

$ 20,714
$ 1,227,975
$ 240
$1,248,929
Liabilities

instruments(2)

$ 0
$ 3,537
$ 0
$ 3,537
MeasuredatFairValueonaNonrecurring
Basis:

Assets

Impairedloans,netofspecific
reservesof$2,342

$ 0
$ 0
$ 3,836
$ 3,836

0
335
335
Totalassetsnonrecurringfairvalue
measurements

$ 0
$ 0
$ 4,171
$ 4,171

(1) IncludedinOtherAssets
(2) IncludedinOtherLiabilities

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December31,2012
FairValueMeasurementsattheEndoftheReportingPeriodUsing

QuotedPricesin
ActiveMarketsfor
IdenticalAssets
(Level1)
SignificantOther
ObservableInputs
(Level2)
Significant
Unobservable
Inputs
(Level3) Total
(inthousands)
MeasuredatFairValueonaRecurringBasis:
Assets
Availableforsalesecurities:
Mortgagebackedsecurities $ 0 $ 104,135 $ 0 $ 104,135
Corporatenotes 0 24,952 0 24,952
Equitysecurities 6 0 0 6
Mortgagewarehouseloansheldforsale 0 1,248,935 0 1,248,935
Totalassetsrecurringfairvaluemeasurements

$ 6
$ 1,378,022
$ 0
$1,378,028
MeasuredatFairValueonaNonrecurringBasis:

Assets

Impairedloans,netofspecificreservesof
$4,625

$ 0
$ 0
$ 11,004
$ 11,004

0
5,737
5,737
Totalassetsnonrecurringfairvalue
measurements

$ 0
$ 0
$ 16,741
$ 16,741
ThechangesinLevel3assetsandliabilitiesmeasuredatfairvalueonarecurringbasisaresummarizedasfollows:

Loans
Heldfor
Sale(1)
Residential
MortgageLoan
Commitments Total
(inthousands)
BalanceatJanuary1,2013 $ 0 $ 0 $ 0
TransferfromLevel2toLevel3(1) 3,173 0 3,173
Recoveries (1,463) 0 (1,463)
Sales (1,013) 0 (1,013)
Transferfromloansheldforsaletootherassets(1) (697) 0 (697)
Issuances 0 240 240

BalanceatDecember31,2013

$ 0
$ 240
$ 240

(1) Foradditionalinformation,refertoNOTE21LOSSCONTINGENCY.

December31,2012

Mortgage
backed
securities
Corporate
notes Total
(inthousands)
BalanceatJanuary1,2012 $ 2,894 $ 19,217 $ 22,111
Totalgainsincludedinothercomprehensiveincome(beforetaxes) 0 735 735
Amortizationincludedininterestincome (291) 0 (291)
Settlements (2,603) 0 (2,603)
Purchases 0 5,000 5,000
TransfersoutofLevel3 0 (24,952) (24,952)
BalanceatDecember31,2012

$ 0
$ 0
$ 0

The Bancorpspolicyistorecognizetransfersbetweenlevelswheneventsorcircumstanceswarranttransfers.

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ThefollowingtablesummarizesfinancialassetsandfinancialliabilitiesmeasuredatfairvalueasofDecember31,2013and2012forwhichthe
BancorputilizedLevel3inputstomeasurefairvalue:

QuantitativeInformationaboutLevel3FairValueMeasurements
December31,2013
FairValue
Estimate ValuationTechnique UnobservableInput
Range(Weighted
Average)(3)
Impairedloans $ 3,836 Collateralappraisal(1) Liquidationexpenses(2) 3%to8%(5.5%)
Otherrealestateowned 335 Collateralappraisal(1) Liquidationexpenses(2) 3%to8%(5.5%)

QuantitativeInformationaboutLevel3FairValueMeasurements
December31,2012
FairValue
Estimate ValuationTechnique UnobservableInput
Range(Weighted
Average)(3)
Impairedloans $ 11,004 Collateralappraisal(1) Liquidationexpenses(2) 3%to8%(5.5%)
Otherrealestateowned 5,737 Collateralappraisal(1) Liquidationexpenses(2) 3%to8%(5.5%)

(1) Obtainedfromapprovedindependentappraisers.Appraisalsarecurrentandincompliancewithcreditpolicy.TheBancorpdoesnot
discountappraisals.
(2) Fairvalueisadjustedforcoststosell.
(3) Presentedasapercentageofthevaluedeterminedbyappraisal.
NOTE20DERIVATIVEINSTRUMENTSANDHEDGINGACTIVITIES
AccountingPolicyforDerivativeInstrumentsandHedgingActivities
TheBancorprecordsallderivativesonthebalancesheetatfairvalue.Currently,noneofthederivativesaredesignatedinqualifyinghedging
relationships.Assuch,allchangesinfairvalueofthederivativesarerecognizeddirectlyinearnings.
InaccordancewithU.S.GAAP,theBancorpmadeanaccountingpolicyelectiontomeasurecreditriskofitsderivativefinancialinstrumentsthat
aresubjecttomasternettingagreementsonagrossbasis.
RiskManagementObjectivesofUsingDerivatives
TheBancorpisexposedtocertainrisksarisingfrombothitsbusinessoperationsandeconomicconditions.TheBancorpmanageseconomic
risks,includinginterestrate,liquidity,andcreditrisk,primarilybymanagingtheamount,sources,anddurationsofitsassetsandliabilities.The
Bankalsoentersintointerestratederivativeswithcertainqualifyingcustomerstofacilitatetheirriskmanagementactivities.
DerivativesNotDesignatedasHedgingInstruments
NoneoftheBancorpsderivativesaredesignatedinqualifyinghedgingrelationshipsunderU.S.GAAP.TheBanksderivativesarenot
speculativeandresultfromaserviceimplementedinthefirstquarterof2013thattheBankprovidestocertaincustomersandotherbanking
activitieswithmortgagecompanies.
TheBankexecutesinterestrateswapswithcommercialbankingcustomerstofacilitatetheirrespectiveriskmanagementstrategies(typicallythe
loancustomerswillswapafloatingrateloantofixedrateloan).Thecustomerinterestrateswapsaresimultaneouslyoffsetbyinterestrateswaps
thattheBankexecuteswithathirdpartyinordertominimizeriskexposureresultingfromsuchtransactions.Sincetheinterestrateswaps
associatedwiththisprogramdonotmeetthehedgeaccountingrequirements,changesinthefairvalueofboththecustomerswapsandthe
offsettingthirdpartymarketswapsarerecognizeddirectlyinearnings.AtDecember31,2013,theBancorphad28interestrateswapswithan
aggregatenotionalamountof$150.3millionrelatedtothisprogram.
TheBankentersintoresidentialmortgageloancommitmentsinconnectionwithitsmortgagebankingactivitiestofundmortgageloansat
specifiedratesandtimesinthefuture.Thesecommitmentsareshortterminnatureandgenerallyexpirein30to60days.Theresidential
mortgageloancommitmentsthatrelatetotheoriginationofmortgageloansthatwillbeheldforsaleareconsideredderivativeinstrumentsunder
applicableaccountingguidanceandarereportedatfairvalue,withchangesinfairvaluerecordeddirectlytoearnings.AtDecember31,2013,the
Bankhadanoutstandingnotionalbalanceofresidentialmortgageloancommitmentsof$7.1million.

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FairValueofDerivativeInstrumentsontheBalanceSheet
ThefollowingtablepresentsthefairvalueoftheBancorpsderivativefinancialinstrumentsaswellastheclassificationonthebalancesheet.

December31,2013
DerivativeAssets DerivativeLiabilities

BalanceSheet
Location FairValue
BalanceSheet
Location FairValue
(inthousands)
Derivativesnotdesignatedashedginginstruments:
Interestrateswaps Otherassets $ 3,523 Otherliabilities $ 3,537
Residentialmortgageloancommitments Otherassets 240 Otherliabilities 0
Total

$ 3,763

$ 3,537
EffectofDerivativeInstrumentsonComprehensiveIncome
ThefollowingtablepresentstheeffectoftheBancorpsderivativefinancialinstrumentsoncomprehensiveincomefortheyearended
December31,2013.

YearEndedDecember31,2013
IncomeStatementLocation
Amountofincome(loss)
recognizedinearnings
(inthousands)
instruments:
Interestrateswaps Othernoninterestincome $ (14)
Residentialmortgageloancommitments Mortgagebankingincome 240
Total

$ 226
CreditriskrelatedContingentFeatures
Byenteringintoderivativecontracts,theBankisexposedtocreditrisk.ThecreditriskassociatedwithderivativesexecutedwithBank
customersisthesameasthatinvolvedinextendingtherelatedloansandissubjecttothesamestandardcreditpolicies.Tomitigatethecredit
riskexposuretomajorderivativedealercounterparties,theBancorponlyentersintoagreementswiththosethatmaintaincreditratingsofhigh
quality.
AgreementswithmajorderivativedealercounterpartiescontainprovisionswherebydefaultonanyoftheBancorpsindebtednesswouldbe
consideredadefaultonitsderivativeobligations.TheBancorpalsohasenteredintoagreementsthatcontainprovisionsunderwhichthe
counterpartycouldrequiretheBancorptosettleitsobligationsiftheBancorpfailstomaintainitsstatusasawell/adequatelycapitalized
institution.AsofDecember31,2013,theterminationvalueofderivativesinanetliabilityposition(whichincludesaccruedinterestbut
excludesanyadjustmentfornonperformancerisk)relatedtotheseagreementswas$3.0million.Inaddition,theBancorphasminimumcollateral
postingthresholdswithcertainofthesecounterparties,andatDecember31,2013hadposted$3.8millionofcashascollateral.TheBancorp
recordspostedcashasareductionintheoutstandingbalanceofcashandcashequivalentsandanincreaseinthebalanceofotherassets.

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DisclosuresaboutOffsettingAssetsandLiabilities
Thefollowingtablespresentderivativeinstrumentsthataresubjecttoenforceablemasternettingarrangements.TheBancorpsinterestrateswaps
withinstitutionalcounterpartiesaresubjecttomasternettingarrangementsandareincludedinthetablebelow.Interestrateswapswith
commercialbankingcustomersandresidentialmortgageloancommitmentsarenotsubjecttomasternettingarrangementsandareexcludedfrom
thetablebelow.TheBancorphasnotmadeapolicyelectiontooffsetitsderivativepositions.

OffsettingofFinancialAssetsandDerivativeAssets
FortheYearEndedDecember31,2013

Grossamountsnotoffsetin
theconsolidatedbalancesheet

Grossamountof
recognizedassets
Gross
amounts
offsetinthe
consolidated
balance
sheet
Net
amountsof
assets
presented
inthe
consolidated
balance
sheet
Financial
instruments
Cash
collateral
received Netamount
(inthousands)
Description
Interestrateswapderivativeswithinstitutional
counterparties $ 392 $ 0 $ 392 $ 392 $ 0 $ 0
OffsettingofFinancialLiabilitiesandDerivativeLiabilities
FortheYearEndedDecember31,2013

Grossamountsnotoffsetin
theconsolidatedbalancesheet

Grossamountof
recognizedliabilities
Gross
amounts
offsetinthe
consolidated
balance
sheet
Net
amountsof
liabilities
presented
inthe
consolidated
balance
sheet
Financial
instruments
Cash
collateral
pledged Netamount
(inthousands)
Description
Interestrateswapderivativeswithinstitutional
counterparties $ 3,191 $ 0 $ 3,191 $ 392 $ 2,799 $ 0
NOTE21LOSSCONTINGENCY
Duringthefirstquarterof2013,asuspectedfraudwasdiscoveredintheBanksloansheldforsaleportfolio.Totalloansinvolvedinthisfraud
initiallyappearedtobe$5.2million,andmanagementbelievedtherangeofpossiblelosstohavebeenbetween$1.5millionand$3.2million.
Accordingly,managementprovidedalosscontingencyof$2.0millionatMarch31,2013.Duringthesecondquarterof2013,theBank
determinedthatanaggregateof$1.0millionoftheloanswerenotinvolvedinthefraud,andtheseloansweresubsequentlysold.Inaddition,the
Bankrecovered$1.5millionincashfromtheallegedperpetrator.Sinceitwasresolvedthattheloansnolongermetthedefinitionofaloan,
andsincetheBankispursuingrestitutionthroughtheinvolvedparties,theBankdeterminedthistobeareceivable.Asaresult,theremaining
aggregateof$2.7millionofloansandtherelated$2.0millionreserveweretransferredtootherassets.
NOTE22CONDENSEDFINANCIALSTATEMENTSOFPARENTCOMPANY
OnSeptember17,2011,CustomersBankandCustomersBancorp,Inc.completedaPlanofMergerandreorganizationpursuanttowhichallof
theissuedandoutstandingcommonstockoftheBankwasexchangedonaoneforthreebasisforsharesofcommonstockandnonvoting
commonstockoftheBancorp.FollowingisthecondensedbalancesheetofCustomersBancorp,Inc.asofDecember31,2013and2012andthe
incomestatementandstatementofcashflowsforeachofthethreeyearsendingDecember31,2013,2012and2011:
8/26/2014 Form 10-K
BalanceSheets

December31,
2013 2012
(inthousands)
Assets
Cashinsubsidiarybank $ 13,254 $ 44,679
Investmentsecuritiesavailableforsale,atfairvalue 5 6
Investmentsinandreceivablesduefromsubsidiaries 432,064 225,150
Otherassets 5,044 12
Totalassets

$450,367
$269,847

LiabilitiesandShareholdersequity

Otherliabilities

63,744
372
Totalliabilities

63,744
372
Shareholdersequity

386,623
269,475

TotalLiabilitiesandShareholdersEquity

$450,367
$269,847

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IncomeStatements

2013 2012 2011
(inthousands)
Operatingincome:
Other $ 758 $ 0 $ 0
Totaloperatingincome

758
0
Operatingexpense:

Interest

1,923
0
Other

3,395
2,708
0
Totaloperatingexpense

5,318
2,708
0
Lossbeforetaxesandundistributedincomeofsubsidiaries

(4,560)
(2,708)
0
Incometaxbenefit

1,596
948
0
Lossbeforeundistributedincomeofsubsidiaries

(2,964)
(1,760)
0
Equityinundistributedincomeofsubsidiaries

35,658
25,578
4,034
Netincome

32,694
23,818
4,034
Dividendsonpreferredstock

0
44

$32,694
$23,818
$3,990
StatementsofCashFlows

2013 2012 2011
(inthousands)
CashFlowsfromOperatingActivities:
Netincome $ 32,694 $ 23,818 $ 4,034
Adjustmentstoreconcilenetincometonetcashusedinoperatingactivities:
Equityinundistributedearningsofsubsidiaries (35,658) (25,578) (4,034)
Increaseinotherassets (1,465) (12) 0
(Decrease)increaseinotherliabilities (281) 372 0
NetCashUsedinOperatingActivities

(4,710)
(1,400)
CashFlowsfromInvestingActivities:

Purchasesofinvestmentsecuritiesavailableforsale

0
(6)
0
Paymentsforinvestmentsinandadvancestosubsidiaries

(177,068)
(53,500)
(4,420)
NetCashUsedinInvestingActivities

(177,068)
(53,506)
(4,420)
CashFlowsfromFinancingActivities:

Proceedsfromissuanceofcommonstock

97,507
94,586
13,000
Proceedsfromissuanceoflongtermdebt

60,336
0
RepaymentofTARP

0
(3,037)
Paymentofpreferreddividends

0
(44)

264
0
Purchaseoftreasurystock

(7,754)
(500)
NetCashProvidedbyFinancingActivities

150,353
94,586
9,419
Net(Decrease)IncreaseinCashandCashEquivalents

(31,425)
39,680
4,999
CashandCashEquivalentsBeginning

44,679
4,999
CashandCashEquivalentsEnding

$ 13,254
$ 44,679
$ 4,999

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NOTE23SELECTEDQUARTERLYFINANCIALDATA(UNAUDITED)

2013
QuarterEnded December31 September30 June30 March31
Interestincome $ 34,497 $ 33,551 $31,549 $ 27,920
Interestexpense 6,803 6,547 5,557 5,395
Netinterestincome

27,694
27,004
25,992
22,525

(512)
750
4,620
1,100
Noninterestincome

7,915
4,855
8,178
6,115
Noninterestexpenses

22,301
18,347
16,895
16,480
Incomebeforeincometaxes

13,820
12,762
12,655
11,060
Provisionforincometaxes

4,810
4,494
4,429
3,871

$ 9,010
$ 8,268
$ 8,226
$ 7,189
Earningspercommonshare:

Basic

$ 0.37
$ 0.34
$ 0.39
$ 0.39
Diluted

0.36
0.33
0.38
0.38

2012
QuarterEnded December31 September30 June30 March31
Interestincome $ 27,245 $ 27,962 $19,700 $ 18,636
Interestexpense 5,580 5,407 5,548 5,226
Netinterestincome

21,665
22,555
14,152
13,410

1,617
10,116
2,738
1,800
Noninterestincome

4,482
9,778
13,238
3,732
Noninterestexpenses

13,443
12,007
14,574
10,627
Incomebeforeincometaxes

11,087
10,210
10,078
4,715
Provisionforincometaxes

3,521
3,574
3,574
1,603

$ 7,566
$ 6,636
$ 6,504
$ 3,112
Earningspercommonshare:

Basic

$ 0.41
$ 0.53
$ 0.57
$ 0.27
Diluted

0.40
0.51
0.56
0.27

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MANAGEMENTSRESPONSIBILITYFORFINANCIALSTATEMENTSANDREPORTONINTERNALCONTROLOVERFINANCIAL
REPORTING
ManagementofCustomersBancorp,Inc.(theCustomersBancorp)isresponsiblefortheintegrityandobjectivityofallinformation
presentedinthisreport.TheconsolidatedfinancialstatementswerepreparedinconformitywithUnitedStatesgenerallyacceptedaccounting
principles.ManagementbelievesthattheconsolidatedfinancialstatementsofCustomersBancorp,Inc.fairlyreflecttheformandsubstanceof
transactionsandthatthefinancialstatementsfairlyrepresentCustomersBancorpsfinancialpositionandresultsofoperations.Managementhas
includedinCustomersBancorpsfinancialstatementsamountsthatarebasedonestimatesandjudgmentswhichitbelievesarereasonableunder
thecircumstances.
TheindependentregisteredpublicaccountingfirmofBDOUSA,LLPauditsCustomersBancorpsconsolidatedfinancialstatementsin
accordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).
TheBoardofDirectorsofCustomersBancorphasanAuditCommitteecomposedofthreeindependentDirectors.TheCommitteemeets
periodicallywithfinancialmanagement,theinternalauditorsandtheindependentregisteredpublicaccountingfirmtoreviewaccounting,
internalcontrol,auditing,corporategovernanceandfinancialreportingmatters.TheAuditCommitteeisresponsiblefortheengagementofthe
independentauditors.TheindependentauditorsandinternalauditorshaveaccesstotheAuditCommittee.
ManagementofCustomersBancorp,Inc.isresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreporting,
assuchtermisdefinedinExchangeActRule13a15(f).Underthesupervisionandwiththeparticipationofmanagement,includingtheChief
ExecutiveOfficerandChiefFinancialOfficer,weconductedanevaluationoftheeffectivenessofourinternalcontroloverfinancialreporting
basedontheframeworkinInternalControlIntegratedFramework(1992)issuedbytheCommitteeofSponsoringOrganizationsofthe
TreadwayCommission.BasedonourevaluationundertheframeworkinInternalControlIntegratedFramework,managementconcludedthat
ourinternalcontroloverfinancialreportingwaseffectiveasofDecember31,2013.Theeffectivenessofourinternalcontroloverfinancial
reportingasofDecember31,2013hasbeenauditedbyBDOUSA,LLP,anindependentregisteredpublicaccountingfirm,asstatedintheir
reportwhichisincludedherein.

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Item9. ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure
None.

Item9A. ControlsandProcedures
EvaluationofDisclosureControlsandProcedures.Wehaveestablisheddisclosurecontrolsandprocedurestoensurethatmaterialinformation
relatingtous,includingourconsolidatedsubsidiaries,ismadeknowntotheofficerswhocertifyourfinancialreportsandtoothermembersof
seniormanagementandtheBoardofDirectors.
Wecarriedoutanevaluation,underthesupervisionandwiththeparticipationofourmanagement,includingourChiefExecutiveOfficerand
ChiefFinancialOfficer,ofthedesignandoperatingeffectivenessofourdisclosurecontrolsandprocedures,asdefinedinExchangeActRule
13a15.Baseduponthatevaluation,ourChiefExecutiveOfficerandChiefFinancialOfficerconcludedthat,asofDecember31,2013,our
disclosurecontrolsandproceduresareeffective.
ManagementsResponsibilityforFinancialStatementsandReportonInternalControloverFinancialReportingareincludedinPartII,Item8,
FinancialStatementsandSupplementaryData,andareincorporatedbyreferenceherein.
Ourindependentregisteredpublicaccountingfirm,BDOUSA,LLP,alsoattestedto,andreportedon,theeffectivenessofinternalcontrolover
financialreportingasofDecember31,2013.BDOUSA,LLPsattestationreportisincorporatedhereinbyreference.
ChangesinInternalControloverFinancialReporting
AsofthedateofthisReport,therehavebeennochangesintheBancorpsinternalcontroloverfinancialreportingthathavemateriallyaffected
orarereasonablylikelytomateriallyaffecttheBancorpsinternalcontroloverfinancialreporting.

Item9B. OtherInformation
None

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PARTIII
Item10.Directors,ExecutiveOfficersandCorporateGovernance
TheinformationrequiredbythisItemwillbeincludedintheProxyStatementforthe2014annualmeetinginthesectionstitledOurBoardof
DirectorsandManagement,andBoardGovernance,andisincorporatedhereinbyreference.
Item11.ExecutiveCompensation
TheinformationrequiredbythisItemwillbeincludedintheProxyStatementforthe2014annualmeetinginthesectionstitledDirector
Compensation,ExecutiveOfficerCompensation,andBoardGovernance,andisincorporatedhereinbyreference.
Item12.SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedShareholderMatters
TheinformationrequiredbythisItemwillbeincludedintheProxyStatementforthe2014annualmeetinginthesectionstitledSecurity
OwnershipofCertainBeneficialOwnersandManagementandEquityCompensationPlanInformationandisincorporatedhereinby
reference.
Item13.CertainRelationshipsandRelatedTransactions,andDirectorIndependence
TheinformationrequiredbythisItemwillbeincludedintheProxyStatementforthe2014annualmeetinginthesectionstitledCertain
RelationshipsandRelatedTransactionsandBoardGovernanceandisincorporatedhereinbyreference.
Item14.PrincipalAccountantFeesandServices
TheinformationrequiredbythisItemwillbeincludedintheProxyStatementforthe2014annualmeetinginthesectiontitledProposal2
RatificationofAppointmentofIndependentRegisteredPublicAccountingFirm,andisincorporatedhereinbyreference.

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PARTIV

Item15. ExhibitsandFinancialStatementSchedules

(a) 1.FinancialStatements
ConsolidatedfinancialstatementsareincludedunderItem8ofPartIIofthisForm10K.

(b) 2.FinancialStatementsSchedules
Financialstatementsschedulesareomittedbecausetherequiredinformationiseithernotapplicable,notrequiredorisshowninthe
respectivefinancialstatementsorinthenotesthereto.

(c) Exhibits

Exhibit
No. Description
1.1
UnderwritingAgreement,datedasofJuly24,2013,byandamongCustomersBancorp,Inc.,CustomersBankandJanney
MontgomeryScottLLC,asrepresentativeoftheunderwritersnamedtherein,incorporatedbyreferencetoExhibit1.1tothe
CustomersBancorp8KfiledwiththeSEConJuly26,2013
1.2
UnderwritingAgreement,datedasofMay15,2013,byandamongCustomersBancorp,Inc.,CustomersBankandFBRCapital
Markets&Co.,asrepresentativeoftheunderwritersnamedtherein,incorporatedbyreferencetoExhibit1.1totheCustomers
Bancorp8KfiledwiththeSEConMay16,2013
2.1
PlanofMergerandReorganization,datedSeptember15,2011,incorporatedbyreferencetoExhibit2.1totheCustomersBancorp
Form8KfiledwiththeSEConSeptember22,2011
2.2
AgreementandPlanofMerger,datedasofAugust23,2010,byandamongCustomersBank,CustomersBancorp,Inc.,Berkshire
BankandBerkshireBancorp,Inc.,incorporatedbyreferencetoExhibit2.2totheCustomersBancorpFormS1/AfiledwiththeSEC
onJanuary13,2011
2.3
PurchaseandAssumptionAgreement,datedasofJuly9,2010,byandamongCustomersBank,theFDICasReceiverofUSABank,
andtheFDICactinginitscorporatecapacity,incorporatedbyreferencetoExhibit2.3totheCustomersBancorpFormS1/Afiled
withtheSEConJanuary13,2011
2.4
PurchaseandAssumptionAgreement,datedasofSeptember17,2010,byandamongCustomersBank,theFDICasReceiverofISN
Bank,andtheFDICactinginitscorporatecapacity,incorporatedbyreferencetoExhibit2.4totheCustomersBancorpFormS1/A
filedwiththeSEConJanuary13,2011
2.5
AmendmenttoAgreementandPlanofMerger,datedasofApril27,2011,byandamongBerkshireBancorp,Inc.,BerkshireBank,
CustomersBancorp,Inc.,andCustomersBank,incorporatedbyreferencetoExhibit2.5totheCustomersBancorpFormS1/Afiled
withtheSEConJune13,2011
2.6
AmendmenttoAgreementandPlanofMerger,datedasofSeptember16,2011,byandamongBerkshireBancorp,Inc.,Berkshire
Bank,CustomersBancorp,Inc.,andCustomersBank,incorporatedbyreferencetoExhibit2.2totheCustomersBancorpForm8K
filedwiththeSEConSeptember22,2011

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Exhibit
No. Description
2.7
StockPurchaseAgreement,datedasofJune20,2012,byandamongCustomersBancorp,Inc.,AcaciaLifeInsuranceCompany,and
AmeritasLifeInsuranceCorp.,incorporatedbyreferencetoExhibit2.1totheCustomersBancorpForm8KfiledwiththeSECon
June21,2012
2.8
AgreementandPlanofMerger,datedasofAugust10,2012,byandbetweenCustomersBancorp,Inc.andCMSBancorp,Inc.,
incorporatedbyreferencetoExhibit2.1totheCustomersBancorpForm8KfiledwiththeSEConAugust10,2012
2.9
AmendmenttoStockPurchaseAgreement,datedasofDecember18,2012,byandamongCustomersBancorp,Inc.,AcaciaLife
InsuranceCompany,andAmeritasLifeInsuranceCorp.,incorporatedbyreferencetoExhibit2.1totheCustomersBancorpForm8K
filedwiththeSEConDecember20,2012
2.10
AmendmentNo.2toStockPurchaseAgreement,datedasofJanuary30,2013,byandamongCustomersBancorp,Inc.,AcaciaLife
filedwiththeSEConJanuary31,2013
2.11
AmendmentNo.3toStockPurchaseAgreement,datedasofFebruary28,2013,byandamongCustomersBancorp,Inc.,AcaciaLife
filedwiththeSEConMarch4,2013
2.12
AmendmenttoAgreementandPlanofMerger,datedasofApril22,2013,byandamongCustomersBancorp,Inc.andCMSBancorp,
Inc.,incorporatedbyreferencetoExhibit2.1totheCustomersBancorpForm8KfiledwiththeSEConApril24,2013
2.13
AmendmentNo.3toStockPurchaseAgreement,datedasofFebruary28,2013,byandamongCustomersBancorp,Inc.,AcaciaLife
filedwiththeSEConMarch4,2013
2.14
AmendmenttoAgreementandPlanofMerger,datedasofApril22,2013,byandamongCustomersBancorp,Inc.andCMSBancorp,
Inc.,incorporatedbyreferencetoExhibit2.1totheCustomersBancorpForm8KfiledwiththeSEConApril24,2013
3.1
AmendedandRestatedArticlesofIncorporationofCustomersBancorp,Inc.,incorporatedbyreferencetoExhibit3.1tothe
CustomersBancorpForm8KfiledwiththeSEConApril30,2012
3.2
AmendedandRestatedBylawsofCustomersBancorp,Inc.,incorporatedbyreferencetoExhibit3.2totheCustomersBancorpForm
8KfiledwiththeSEConApril30,2012
3.3
ArticlesofAmendmenttotheAmendedandRestatedArticlesofIncorporationofCustomersBancorp,Inc.,incorporatedbyreference
toExhibit3.1totheCustomersBancorpForm8KfiledwiththeSEConJuly2,2012
4.1
AmendedandRestatedArticlesofIncorporationofCustomersBancorp,Inc.,incorporatedbyreferencetoExhibit3.1tothe
CustomersBancorpForm8KfiledwiththeSEConApril30,2012

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Exhibit
No. Description
4.2
AmendedandRestatedBylawsofCustomersBancorp,Inc.,incorporatedbyreferencetoExhibit3.2totheCustomersBancorpForm
8KfiledwiththeSEConApril30,2012
4.3
ArticlesofAmendmenttotheAmendedandRestatedArticlesofIncorporationofCustomersBancorp,Inc.,incorporatedbyreference
toExhibit3.1totheCustomersBancorpForm8KfiledwiththeSEConJuly2,2012
4.4
SpecimenstockcertificateofCustomersBancorp,Inc.VotingCommonStockandClassBNonVotingCommonStock,incorporated
byreferencetoExhibit4.1totheCustomersBancorpFormS1/AfiledwiththeSEConMay1,2012
4.5
Indenture,datedasofJune29,2004,byandbetweenNewCenturyBankandWilmingtonTrustCompany,relatingtoFloatingRate
SubordinatedDebtSecuritiesDue2014,incorporatedbyreferencetoExhibit4.3totheCustomersBancorpFormS1filedwiththe
SEConApril22,2010
4.6
FormofWarrantissuedtoinvestorsinNewCenturyBanksMarchandFebruary2010privateofferings,2009privateoffering,andin
partialexchangeforNewCenturyBankssharesof10%SeriesANonCumulativePerpetualConvertiblePreferredStockinJune
2009,incorporatedbyreferencetoExhibit4.8totheCustomersBancorpFormS1filedwiththeSEConApril22,2010
4.7
WarrantsissuedtoJayS.Sidhu,June30,2009,incorporatedbyreferencetoExhibit4.9totheCustomersBancorpFormS1filed
withtheSEConApril22,2010
4.8
Indenture,datedasofJuly30,2013,byandbetweenCustomersBancorp,Inc.,asIssuer,andWilmingtonTrust,NationalAssociation,
asTrustee,incorporatedbyreferencetoExhibit4.1totheCustomersBancorp8KfiledwiththeSEConJuly31,2013
4.9
FirstSupplementalIndenture,datedasofJuly30,2013,byandbetweenCustomersBancorp,Inc.,asIssuer,andWilmingtonTrust,
NationalAssociation,asTrustee,incorporatedbyreferencetoExhibit4.2totheCustomersBancorp8KfiledwiththeSECon
July31,2013
4.10
6.375%GlobalNoteinaggregateprincipalamountof$55,000,000,incorporatedbyreferencetoExhibit4.3totheCustomers
Bancorp8KfiledwiththeSEConJuly31,2013
4.11
AmendmenttoFirstSupplementalIndenture,datedAugust27,2013,byandbetweenCustomersBancorp,Inc.andWilmingtonTrust
Company,NationalAssociation,astrustee,incorporatedbyreferencetoExhibit4.1totheCustomersBancorp8KfiledwiththeSEC
onAugust29,2013
4.12
6.375%GlobalNoteinaggregateprincipalamountof$8,250,000,incorporatedbyreferencetoExhibit4.2totheCustomersBancorp
8KfiledwiththeSEConAugust29,2013
10.1+
NewCenturyBankManagementStockPurchasePlan,incorporatedbyreferencetoExhibit10.1totheCustomersBancorpFormS1
filedwiththeSEConApril22,2010
10.2+
AmendedandRestatedCustomersBancorp,Inc.2010StockOptionPlan,incorporatedbyreferencetoExhibit10.2totheCustomers
BancorpForm10KfiledwiththeSEConMarch21,2012

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Exhibit
No. Description
10.3+
AmendedandRestatedEmploymentAgreement,datedasofMarch26,2012,byandbetweenCustomersBancorp,Inc.andJayS.
Sidhu,incorporatedbyreferencetoExhibit10.3totheCustomersBancorpFormS1filedwiththeSEConMarch28,2012
10.4+
AmendedandRestatedEmploymentAgreement,datedasofMarch26,2012,byandbetweenCustomersBancorp,Inc.andRichard
Ehst,incorporatedbyreferencetoExhibit10.4totheCustomersBancorpFormS1filedwiththeSEConMarch28,2012
10.5+
AmendedandRestatedEmploymentAgreement,datedasofMarch26,2012,byandbetweenCustomersBancorp,Inc.andThomas
Brugger,incorporatedbyreferencetoExhibit10.5totheCustomersBancorpFormS1filedwiththeSEConMarch28,2012
10.6
Agreement,datedasofMay19,2009,byandbetweenNewCenturyBankandJaySidhu,incorporatedbyreferencetoExhibit10.6
totheCustomersBancorpFormS1filedwiththeSEConApril22,2010
10.7+
AmendedandRestatedCustomersBancorp,Inc.2004IncentiveEquityandDeferredCompensationPlan,incorporatedbyreference
toExhibit10.7totheCustomersBancorpForm10KfiledwiththeSEConMarch21,2012
10.8
LeaseAgreement,datedJanuary5,2007,byandbetweenNewCenturyBankandGatewayPartnershipLLC,incorporatedby
referencetoExhibit10.10totheCustomersBancorpFormS1filedwiththeSEConApril22,2010
10.9
AmendmenttoLease,datedMay4,2007,byandbetweenNewCenturyBankandGatewayPartnershipLLC,incorporatedby
10.10+
FormofRestrictedStockUnitAwardAgreementforEmployeesrelatingtothe2012SpecialStockRewardProgram,incorporatedby
referencetoExhibit10.25totheCustomersBancorpFormS1/AfiledwiththeSEConMay1,2012
10.11
StockPurchaseAgreement,datedasofSeptember30,2011,byandbetweenCustomersBancorp,Inc.andRobertTambur,
incorporatedbyreferencetoExhibit10.24totheCustomersBancorpFormS1/AfiledwiththeSEConApril25,2012
10.12
SubscriptionAgreement,datedMay19,2009,byandbetweenNewCenturyBankandJayS.Sidhu,incorporatedbyreferenceto
Exhibit10.13totheCustomersBancorpFormS1filedwiththeSEConApril22,2010
10.13
AmendmenttoSubscriptionAgreement,datedJune29,2009,byandbetweenNewCenturyBankandJayS.Sidhu,incorporatedby
10.14
Amendment#2toSubscriptionAgreement,datedasofJune30,2009,byandbetweenNewCenturyBankandJayS.Sidhu,
incorporatedbyreferencetoExhibit10.15totheCustomersBancorpFormS1filedwiththeSEConApril22,2010
10.15+
AmendedandRestatedCustomersBancorp,Inc.BonusRecognitionandRetentionPlan,incorporatedbyreferencetoExhibit10.15
totheCustomersBancorpForm10KfiledwiththeSEConMarch21,2012

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Exhibit
No. Description
10.16+
SupplementalExecutiveRetirementPlanofJayS.Sidhu,incorporatedbyreferencetoExhibit10.15totheCustomersBancorp
FormS1/AfiledwiththeSEConApril18,2011
10.18
FormofVotingandLockUpAgreemententeredintowiththevariousdirectorsandexecutiveofficersofCMSBancorp,Inc.,
incorporatedbyreferencetoExhibit10.1totheCustomersBancorpForm8KfiledwiththeSEConAugust10,2012
10.19
FormofStockPurchaseAgreementusedintheJulyandAugust2012privateplacementofvotingcommonstock,incorporatedby
referencetoExhibit4.3totheCustomersBancorpFormS3filedwiththeSEConOctober22,2012
10.20
StockPurchaseAgreement,datedasofAugust17,2012,byandbetweenCustomersBancorp,Inc.andS.J.FinanceInvestment
Fund,L.P.,incorporatedbyreferencetoExhibit4.4totheCustomersBancorpFormS3filedwiththeSEConOctober22,2012
10.21
SecuritiesPurchaseAgreement,datedasofSeptember14,2012,byandamongtheCorporationandthepurchaserspartythereto,
incorporatedbyreferencetoExhibit10.1totheCustomersBancorpForm8KfiledwiththeSEConSeptember17,2012
10.22
RegistrationRightsAgreement,datedasofSeptember14,2012,byandamongtheCorporationandthepurchaserspartythereto,
incorporatedbyreferencetoExhibit10.2totheCustomersBancorpForm8KfiledwiththeSEConSeptember17,2012
10.23+
FormofRestrictedStockUnitAwardAgreementforDirectorsrelatingtothe2012SpecialStockRewardProgram,incorporatedby
referencetoExhibit10.26totheCustomersBancorpFormS1/AfiledwiththeSEConMay1,2012
10.24+
FormofStockOptionAgreement,incorporatedbyreferencetoExhibit10.18totheCustomersBancorpForm10Kfiledwiththe
SEConMarch21,2012
10.25+
FormofRestrictedStockUnitAgreement,incorporatedbyreferencetoExhibit10.17totheCustomersBancorpForm10Kfiled
withtheSEConMarch21,2012
10.26
TARPLetterAgreement,datedasofSeptember16,2011,byandamongCustomersBancorp,BerkshireBancorp,Inc.and
Treasury,incorporatedbyreferencetoExhibit10.1toCustomersBancorpsForm8KfiledwiththeSEConSeptember22,2011
10.27
ARRALetterAgreement,datedasofSeptember17,2011,byandamongCustomersBancorpandTreasury,incorporatedby
referencetoExhibit10.2toCustomerBancorpsForm8KfiledwiththeSEConSeptember22,2011
10.28
LetterAgreementdatedasofDecember28,2011byandamongCustomersBancorpandTreasury,incorporatedbyreferenceto
Exhibit10.1toCustomersBancorpsForm8KfiledwiththeSEConJanuary4,2012
10.29+
ChangeofControlAgreement,datedasofJanuary30,2013,byandbetweenCustomersBancorp,Inc.andGlennHedde,
incorporatedbyreferencetoExhibit10.29toCustomersBancorpsForm10KfiledwiththeSEConMarch18,2013

138
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Exhibit
No. Description
10.30+
ChangeofControlAgreement,datedasofJanuary30,2013,byandbetweenCustomersBancorp,Inc.andWarrenTaylor,
incorporatedbyreferencetoExhibit10.30toCustomersBancorpsForm10KfiledwiththeSEConMarch18,2013
10.31
TerminationandNonRenewalAgreement,datedasofApril4,2013,byandamongCustomersBancorp,Inc.,AcaciaLifeInsurance
Company,andAmeritasLifeInsuranceCorp.,incorporatedbyreferencetoExhibit10.1totheCustomersBancorpForm8Kfiled
withtheSEConApril10,2013
16.1
LetterdatedJuly2,2013fromParenteBeardLCCtotheSecuritiesandExchangeCommission,incorporatedbyreferencetoExhibit
16.1totheCustomersBancorpForm8KfiledwiththeSEConJuly3,2013
21.1 ListofSubsidiariesofCustomersBancorp,Inc.
23.1 ConsentofBDOUSA,LLP,filedherewith
23.2 ConsentofParenteBeardLLC,filedherewith
31.1 CertificationoftheChiefExecutiveOfficerPursuanttoExchangeActRule13a14(a)orRule15d14(a)
31.2 CertificationoftheChiefFinancialOfficerPursuanttoExchangeActRule13a14(a)orRule15d14(a)
32.1
CertificationoftheChiefExecutiveOfficerPursuantto18U.S.C.Section1350,adAdoptedPursuanttoSection906ofthe
SarbanesOxleyActof2002
32.2
CertificationoftheChiefFinancialOfficerPursuantto18U.S.C.Section1350,adAdoptedPursuanttoSection906oftheSarbanes
OxleyActof2002
101
InteractiveDataFilesregarding(a)BalanceSheetsasofDecember31,2013and2012,(b)StatementsofIncomefortheyearsended
December31,2013,2012and2011,(c)StatementsofComprehensiveIncomefortheyearsendedDecember31,2013,2012and
2011,(d)StatementsofCashFlowsfortheyearsendedDecember31,2013,2012and2011,(e)StatementsofChangesin
ShareholdersEquityfortheyearsendedDecember31,2013,2012and2011and(f)NotestoFinancialStatementsfortheyears
endedDecember31,2013,2012and2011.

+ ManagementContractorcompensatoryplanorarrangement

139
8/26/2014 Form 10-K
Table of Contents
SIGNATURES
PursuanttotherequirementsoftheSection13or15(d)oftheSecuritiesExchangeActof1934,theregistranthasdulycausedthis
reporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized.

March12,2014

By:

/s/JayS.Sidhu
Name: JayS.Sidhu
Title: ChairmanandChiefExecutiveOfficer
March12,2014

By:

/s/RobertE.Wahlman
Name: RobertE.Wahlman
Title: ChiefFinancialOfficer
PursuanttotherequirementsoftheSecuritiesExchangeActof1934,thisreporthasbeensignedbelowbythefollowingpersonsonbehalfofthe
Registrantandinthecapacitiesandonthedatesindicated.

Signature: Title(s): Date:
/s/JayS.Sidhu

Chairman,ChiefExecutiveOfficerandDirector(principal
executiveofficer)
March12,2014
JayS.Sidhu
/s/RobertE.Wahlman

ExecutiveVicePresidentandChiefFinancialOfficer(principal
financialandprincipalaccountingofficer)
March12,2014
RobertE.Wahlman
/s/DanielK.Rothermel

Director

DanielK.Rothermel March12,2014
/s/BhanuChoudhrie

Director

BhanuChoudhrie March12,2014
/s/JohnR.Miller

Director

JohnR.Miller March12,2014
/s/T.LawrenceWay

Director

T.LawrenceWay March12,2014
/s/StevenJ.Zuckerman

Director

StevenJ.Zuckerman March12,2014

140

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8/26/2014 Form 10-K

Totalinterestearningassets 1,465,004 116,745 201,656 665,184 634,327 866,030 3,948,946

Totalassets 1,465,004 116,745 201,656 665,184 634,334 1,037,592 $4,120,515

Totalinterestbearingliabilities 2,208,479 184,153 246,772 414,998 57,248 91,667 3,203,317

Totalliabilitiesandshareholdersequity 2,208,479 184,153 246,772 415,005 57,350 1,008,756 $4,120,515

Interestsensitivitygap $ (743,475) $ (67,408) $ (45,116) $ 250,179 $576,984 $ 28,836

8/26/2014 Form 10-K

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