CUBB

MKT CAP $690.9MP/E 2.5DIV YIELD —FCF YIELD 53.06%REV TTM —NET INCOME $291.4M +97.6%NET CASH $4.2B52W 20.45 – 23.88SEC XBRL · TTM TO Invalid Date

How CUBB rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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These risks are discussed in more detail following this summary and should be read together with this summary and considered along with other information contained in this report before investing in our securities. • Risks related to the Bancorp’s banking operations: ◦ Risks related to maintaining an appropriate level of ACL; ◦ Risks related to changes in the composition of our loan portfolio including our current emphasis on commercial and industrial, including specialized lending, mortgage finance, commercial real estate, multifamily and consumer loans; ◦ Risks related to the commercial real estate market; ◦ Risks related to the impacts of changes in legislation or regulation on our New York state multifamily loan portfolio; ◦ Risks associated with our investment securities portfolio including market and credit risks and the uncertainties surrounding macroeconomic conditions; ◦ Risks associated with our lending activities and effective management of credit risks in our loan and lease portfolio; ◦ Risks associated with maintaining sufficient liquidity including our ability to gather, grow and retain our lower cost deposits and our ability to maintain a favorable deposit composition; ◦ Risks and uncertainties associated with the effectiveness of our business strategies, operations, and technology in managing growth and maintaining profitability; ◦ Risks related to changes to estimates and assumptions made by management in preparing financial statements; ◦ Risks related to changes in accounting standards and policies which can be difficult to predict and can materially impact how we record and report our financial results; ◦ Risks related to our geographic concentration in the Northeast and Mid-Atlantic regions; ◦ Risks related to our concentration in certain business lines or product types; ◦ Risks related to our dependency on our executive officers and key personnel to implement our strategy and our ability to retain their services; ◦ Risks related to significant competition from other financial institutions and financial services providers; ◦ Risks related to inflation, interest rates, and securities market and monetary fluctuations; ◦ Risks related to our proprietary B2B instant payments platform, cubiX; ◦ Risks associated with our dependency on our information technology and telecommunications systems and third-party service providers including exposures to systems failures, interruptions or breaches of security; ◦ Risks associated with the evolving regulatory frameworks around the development and use of artificial intelligence; ◦ Risks associated with the loss of, or failure to adequately safeguard, confidential or proprietary information; ◦ Risks associated with negative public opinion regarding us; ◦ Risks related to increasing, complex and evolving regulatory, stakeholder, and other third party expectations on CSR matters; ◦ Risks related to our system of internal controls, including internal controls over financial reporting; ◦ Risks associated with the acquisitions of or investments in other businesses; • Risks related to macroeconomic conditions, climate change and geopolitical conflicts: ◦ Risks related to turmoil in the financial services industry, or our ability to adequately manage our liquidity, deposits, capital levels, interest rate risk or reputation risk, in light of recent bank failures; ◦ Risks related to worsening general business and economic conditions which could materially and adversely affect us; ◦ Risks related to the SBA’s PPP program and PPP loans remaining on our balance sheet; ◦ Risks related to climate change and related legislative and regulatory initiatives on our business; • Risks related to the regulation of our industry: ◦ Risks associated with the highly regulated environment in which we operate, including the effects of heightened regulatory and supervisory requirements, expectations and scrutiny in the U.S. leading to increased compliance, regulatory and other risks and costs and subject us to legal and regulatory examinations, investigations and enforcement actions; ◦ Risks related to maintaining adequate regulatory capital to support our business strategies including the long-term impact of the new regulatory capital standards and the capital rules on U.S. banks; ◦ Risks related to our use of third-party service providers and our other ongoing third-party business relationships, which are subject to increasing regulatory requirements and attention; ◦ Risks related to litigation and regulatory actions, including enforcement actions, which could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities; ◦ Risks related to the FDIC’s restoration plan and related increased assessment rates; ◦ Risks related to reviews performed by the IRS and state taxing authorities for the fiscal years that remain open for investigation and potential changes in U.S. federal, state or local tax laws; • Risks related to our securities: ◦ Risks related to our voting common stock; ◦ Risks related to our senior notes and subordinated notes; • General risk factors ◦ Risks related to downgrades in U.S. government and federal agency securities; and ◦ Risks related to our ability to maintain consistent earnings or profitability.
Management makes various assumptions and judgments about the collectability of our loan and lease portfolio, including the creditworthiness of our borrowers and the probability of our borrowers making payments, as well as the value of real estate and other assets serving as collateral for the repayment of many of our loans and leases.
At December 31, 2025, Customers’ ACL totaled $155.7 million, which represented 1.03% of total loans and leases held for investment.
If our assumptions are incorrect, our ACL may not be sufficient to cover losses inherent in our loan and lease portfolio, which can result in our being required to make additions to the ACL or incurring credit losses.
As of December 31, 2025, Customers had $1.4 billion in consumer loans outstanding, or 8.5% of the total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage finance, at fair value, and loans receivable, installment, at fair value, compared to $1.4 billion, or 9.9% of the total loan and lease portfolio, as of December 31, 2024.
The risk of fraud associated with this type of lending includes, but is not limited to, settlement process risks, the risk of financing nonexistent loans or fictitious mortgage loan transactions, the risk that collateral delivered is fraudulent or non-existent, or the risk that the value of such collateral is artificially inflated, creating a risk of loss of the full amount financed on the underlying residential mortgage loan, or in the settlement processes.
As of December 31, 2025, we had $15.4 billion in commercial loans outstanding, approximately 91.5% of our total loan and lease portfolio, which includes loans held for sale, loans receivable, mortgage finance, at fair value, and loans receivable, installment, at fair value, as compared to $13.2 billion, or 90.1% of the total loan and lease portfolio, as of December 31, 2024.
Many real estate loans currently at or approaching maturity were originated during times of historically low interest rates.
A borrower’s ability to make payments upon a rate reset, or to sell or refinance a property upon a loan’s maturity, may be adversely impacted if interest rates at the time of reset or maturity are significantly higher than at the time of the loan’s origination and the borrower’s cash flow is not sufficient to allow the borrower to make payments at the higher interest rate, which may increase the likelihood of borrower default.
In addition, the city council and the new mayor of New York City have proposed further restrictions on rent regulated apartments, including a complete freeze on rent increases.
As of December 31, 2025, our total multifamily exposure in New York State was approximately $1.2 billion, of which approximately $849.0 million, or 69% was provided for loans to properties with 50% or more rent-regulated units, primarily in New York City.
In 2026, there are $54.7 million, or 6.4% of these loans that will mature or have an interest rate reset.
Many multifamily loans currently at or approaching a rate reset or maturity were originated during times of historically low interest rates.
Higher rates at the time of interest rate reset or maturity and, where applicable, increased restrictions on the ability of landlords to increase rents, may increase the likelihood of borrower default.
As of December 31, 2025, the fair value of our available for sale investment securities portfolio was $1.9 billion.
Since 2020, we sought to increase yields through more aggressive strategies, which has included a greater percentage of corporate securities, non-agency mortgage-backed securities and other structured credit products.
Though in 2025, we began to increase the percentage of securities that were backed by government-sponsored enterprises, factors beyond our control significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
Nevertheless, as of December 31, 2025, our loan and deposit activities remained largely based in the Northeast and Mid-Atlantic regions.
Additionally, many of our largest deposit relationships are concentrated in the digital asset industry.
Consequently, an adverse development with respect to one credit relationship, industry, business line or product type may adversely affect us.
Additionally, the capabilities and sophistication of artificial intelligence is rapidly developing, and its effect on certain industries, such as software, legal, healthcare, finance or manufacturing, cannot be predicted.
If any industry in which our borrowers operate is adversely affected by developments in artificial intelligence, we may experience an increased rate of delinquencies in, and increased losses from, borrowers that operate in, or depend on others that operate in, that industry, which, accordingly, could have a material adverse effect on our business, results of operations and financial condition.
Additionally, certain of our deposit relationships, primarily in the digital asset industry, operate as ecosystems of related depositors that interact with each other on our proprietary B2B instant payments platform, cubiX.
We depend on our executive officers and key personnel, and our ability to recruit key personnel, to implement our strategy and could be harmed by the loss of their services or our inability to recruit such persons.
We believe that the implementation of our strategy will depend in large part on the skills of our executive management team, and our ability to recruit, motivate and retain these and other key personnel.
Accordingly, the loss of service of one or more of our executive officers or key personnel, or our inability to recruit and retain key personnel, could reduce our ability to successfully implement our growth strategy and materially and adversely affect us.
Although Executive Chairman and our President and CEO have entered into employment agreements with us, it is possible that they may not complete the term of their employment agreement or may choose not to renew it upon expiration.
Our strategic model is dependent upon relationship managers and private bankers who act as a customer’s single point of contact with us.
In addition, our ability to expand into new business lines or grow existing business lines, such as specialized lending, digital banking, including our proprietary B2B instant payments platform, cubiX, and Banking-as-a-Service offerings, are highly dependent upon our ability to identify, recruit and retain key personnel.
We cannot ensure that our recruiting or retention efforts for these positions will be successful or that they will enhance our business, results of operations or financial condition.
Our recruitment efforts, even if successful, may lead to operational disruption or additional costs and expenses, including from litigation, which can adversely affect our business, financial condition and results of operations.
The loss of key senior personnel, or the inability to identify, recruit and retain qualified personnel in the future, such as those in our compliance, finance, risk and legal departments, could have a material adverse effect on us.
Changes in market interest rates and pricing decisions by our loan and deposit competitors may adversely affect demand for our loan and deposit products and the revenue realized on the sale of loans, and ultimately reduce our net income.
We also face emerging competition for deposits from tokenized deposits and stablecoins.
Competitors may also have greater resources and access to capital and may possess other advantages such as operating more branches and ATMs and conducting extensive promotional and advertising campaigns or operating a more developed online presence.
We expect to drive organic growth by employing our single-point-of-contact strategy, which provides specific relationship managers or private bankers for all customers, and by focusing on our corporate and specialized banking verticals and our specialized product offerings, such as cubiX.
Increased competition among financial services companies due to the ongoing consolidation of certain competing financial institutions and relaxing of regulatory burden may adversely affect our ability to effectively market our products and services.
Our ability to compete successfully depends on a number of factors, including, among others: • the ability to develop, maintain and build upon long-term customer relationships based on high quality, personal service, effective and efficient products and services, high ethical standards and safe and sound assets; • the quality, scope, relevance and competitive pricing of products and services offered to meet customer needs and demands; • the ability to provide customers with maximum convenience of access to services and availability of banking representatives; • the ability to attract and retain highly qualified team members to operate our business; • the ability to expand our market position in current and new markets; • customer access to our decision makers and customer satisfaction with our level of service; • the ability to effectively manage our regulatory, compliance, legal, reputation and enterprise risk; and • the ability to operate our business effectively and efficiently.
In addition, the financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services including artificial intelligence, internet services, cryptocurrencies and payment systems.
When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period (i.e., liability sensitive), an increase in interest rates would reduce net interest income.

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Gone since FY2024

These risks are discussed in more detail following this summary and should be read together with this summary and considered along with other information contained in this report before investing in our securities. • Risks related to the Bancorp’s banking operations: ◦ Risks related to maintaining an appropriate level of ACL; ◦ Risks related to changes in the composition of our loan portfolio including our current emphasis on commercial and industrial, including specialized lending, mortgage finance, commercial real estate, multifamily and consumer loans; ◦ Risks related to the commercial real estate market; ◦ Risks related to the impacts of changes in legislation or regulation on our New York state multifamily loan portfolio; ◦ Risks associated with our investment securities portfolio including market and credit risks and the uncertainties surrounding macroeconomic conditions; ◦ Risks associated with our lending activities and effective management of credit risks in our loan and lease portfolio; ◦ Risks associated with maintaining sufficient liquidity including our ability to gather, grow and retain our lower cost deposits and our ability to maintain a favorable deposit composition; ◦ Risks and uncertainties associated with the effectiveness of our business strategies, operations, and technology in managing growth and maintaining profitability; ◦ Risks related to changes to estimates and assumptions made by management in preparing financial statements.
These changes could adversely affect our business, operating results, reported assets and liabilities, financial condition and capital levels; ◦ Risks related to changes in accounting standards and policies which can be difficult to predict and can materially impact how we record and report our financial results; ◦ Risks related to our geographic concentration in the Northeast and Mid-Atlantic regions; ◦ Risks related to our concentration in certain business lines or product types; ◦ Risks related to our dependency on our executive officers and key personnel to implement our strategy and our ability to retain their services; ◦ Risks related to significant competition from other financial institutions and financial services providers; ◦ Risks related to inflation, interest rates, and securities market and monetary fluctuations; ◦ Risks related to our proprietary B2B instant payments platform, cubiX; ◦ Risks associated with our dependency on our information technology and telecommunications systems and third-party service providers including exposures to systems failures, interruptions or breaches of security; ◦ Risks associated with the evolving regulatory frameworks around the development and use of artificial intelligence; ◦ Risks associated with the loss of, or failure to adequately safeguard, confidential or proprietary information; ◦ Risks associated with negative public opinion regarding us; ◦ Risks related to increasing, complex and evolving regulatory, stakeholder, and other third party expectations on CSR matters; ◦ Risks related to our system of internal controls, including internal controls over financial reporting; ◦ Risks associated with the acquisitions of or investments in other businesses; • Risks related to the divestiture of BMT: ◦ Risks associated with BM Technologies through our various service agreements with BM Technologies; • Risks related to macroeconomic conditions, climate change and geopolitical conflicts: ◦ Risks related to turmoil in the financial services industry, or our ability to adequately manage our liquidity, deposits, capital levels, interest rate risk or reputation risk, in light of recent bank failures; ◦ Risks related to worsening general business and economic conditions which could materially and adversely affect us; ◦ Risks related to the SBA’s PPP program and PPP loans remaining on our balance sheet; ◦ Risks related to climate change and related legislative and regulatory initiatives on our business; • Risks related to the regulation of our industry: ◦ Risks associated with the highly regulated environment in which we operate, including the effects of heightened regulatory and supervisory requirements, expectations and scrutiny in the U.S. leading to increased compliance, regulatory and other risks and costs and subject us to legal and regulatory examinations, investigations and enforcement actions; ◦ Risks related to maintaining adequate regulatory capital to support our business strategies including the long-term impact of the new regulatory capital standards and the capital rules on U.S. banks; ◦ Risks related to our use of third-party service providers and our other ongoing third-party business relationships, which are subject to increasing regulatory requirements and attention; ◦ Risks related to litigation and regulatory actions, including enforcement actions, which could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities; ◦ Risks associated to us being subject to numerous laws and governmental regulations and to regular examinations by our regulators of our business and compliance with laws and regulations, and the possible material and adverse effects that could result if we fail to comply with such laws and regulations or to adequately address any matters identified during these examinations could materially and adversely affect us; ◦ Risks related to the FDIC’s restoration plan and related increased assessment rates; ◦ Risks related to reviews performed by the IRS and state taxing authorities for the fiscal years that remain open for investigation and potential changes in U.S. federal, state or local tax laws; • Risks related to our securities: ◦ Risks related to our voting common stock; ◦ Risks related to our fixed-to-floating-rate non-cumulative perpetual preferred stock, Series E and Series F; ◦ Risks related to our senior notes and subordinated notes; • General risk factors ◦ Risks related to downgrades in U.S. government and federal agency securities; and ◦ Risks related to our ability to maintain consistent earnings or profitability.
Management makes various assumptions and judgments about the collectibility of our loan and lease portfolio, including the creditworthiness of our borrowers and the probability of our borrowers making payments, as well as the value of real estate and other assets serving as collateral for the repayment of many of our loans and leases.
At December 31, 2024, Customers’ ACL totaled $136.8 million, which represented 1.04% of total loans and leases held for investment.
If our assumptions are incorrect, our ACL may not be sufficient to cover losses inherent in our loan and lease portfolio, resulting in additions to the ACL.
In first quarter 2020, as part of its response to the impact of COVID-19, the U.S. federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period.
The interim final rule allows banking organizations to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL.
We elected to adopt the interim final rule.
The cumulative CECL capital transition impact as of December 31, 2021 which amounted to $61.6 million will be phased in at 25% per year beginning on January 1, 2022 through December 31, 2024.
As of December 31, 2024, our regulatory capital ratios reflected 25%, or $15.4 million, benefit associated with the CECL transition provisions.
As of December 31, 2024, Customers had $1.4 billion in consumer loans outstanding, or 9.9% of the total loan and lease portfolio, which includes loans held for sale and loans receivable, mortgage finance, at fair value, compared to $1.7 billion, or 13.2% of the total loan and lease portfolio, as of December 31, 2023.
The risk of fraud associated with this type of lending includes, but is not limited to, settlement process risks, the risk of financing nonexistent loans or fictitious mortgage loan transactions, or the risk that collateral delivered is fraudulent or non-existent, creating a risk of loss of the full amount financed on the underlying residential mortgage loan, or in the settlement processes.
As of December 31, 2024, we had $13.2 billion in commercial loans outstanding, approximately 90.1% of our total loan and lease portfolio, which includes loans held for sale and loans receivable, mortgage finance, at fair value, as compared to $11.5 billion, or 86.8% of the total loan and lease portfolio, as of December 31, 2023.
As of December 31, 2024, our total multifamily exposure in New York State was approximately $1.1 billion, of which approximately $714.0 million, or 68% was provided for loans to properties with 50% or more rent-regulated units, primarily in New York City.
In 2025, there are $54.8 million, or 7.7% of these loans that will mature or have an interest rate reset.
Higher rates at the time of interest rate reset or maturity may increase the likelihood of borrower default.
As of December 31, 2024, the fair value of our available for sale investment securities portfolio was $2.0 billion.
Since 2020, we have been seeking to increase yields through more aggressive strategies, which has included a greater percentage of corporate securities, non-agency mortgage-backed securities and other structured credit products.
Factors beyond our control significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
Nevertheless, as of December 31, 2024, our loan and deposit activities remained largely based in the Northeast and Mid-Atlantic regions.
Consequently, an adverse development with respect to one credit relationship, business line or product type may adversely affect us.
Additionally, certain of our deposit relationships operate as ecosystems of related depositors that interact with each other on our proprietary B2B instant payments platform, cubiX.
We depend on our executive officers and key personnel to implement our strategy and could be harmed by the loss of their services.
We believe that the implementation of our strategy will depend in large part on the skills of our executive management team, and our ability to motivate and retain these and other key personnel.
Accordingly, the loss of service of one or more of our executive officers or key personnel could reduce our ability to successfully implement our growth strategy and materially and adversely affect us.
Although our CEO and President have entered into employment agreements with us, it is possible that they may not complete the term of their employment agreement or may choose not to renew it upon expiration.
Our strategic model is dependent upon relationship managers and private bankers who act as a customer’s single point of contact to us.
In addition, our ability to expand into new business lines, such as specialized lending and digital banking including our proprietary B2B instant payments platform, cubiX, and Banking-as-a-Service offerings, are highly dependent upon our ability to attract and retain key personnel.
We cannot assure you that our recruiting efforts for these positions will be successful or that they will enhance our business, results of operations or financial condition.
The loss of key senior personnel, or the inability to recruit and retain qualified personnel in the future, such as those in our compliance, finance, risk and legal departments, could have a material adverse effect on us.
Changes in market interest rates and pricing decisions by our loan competitors may adversely affect demand for our loan products and the revenue realized on the sale of loans, and ultimately reduce our net income.
Competitors may also have greater resources and access to capital and may possess other advantages such as operating more branches and ATMs and conducting extensive promotional and advertising campaigns or operating a more developed Internet platform.
We expect to drive organic growth by employing our single-point-of-contact strategy, which provides specific relationship managers or private bankers for all customers, and by focusing on our corporate and specialized banking verticals.
Increased competition among financial services companies due to the ongoing consolidation of certain competing financial institutions may adversely affect our ability to market our products and services.
Our ability to compete successfully depends on a number of factors, including, among others: • the ability to develop, maintain and build upon long-term customer relationships based on high quality, personal service, effective and efficient products and services, high ethical standards and safe and sound assets; • the scope, relevance and competitive pricing of products and services offered to meet customer needs and demands; • the ability to provide customers with maximum convenience of access to services and availability of banking representatives; • the ability to attract and retain highly qualified team members to operate our business; • the ability to expand our market position in current and new markets; • customer access to our decision makers and customer satisfaction with our level of service; • the ability to effectively manage our regulatory, compliance, legal, reputation and enterprise risk; and • the ability to operate our business effectively and efficiently.
In addition, the financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services including internet services, cryptocurrencies and payment systems.
When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period, an increase in interest rates would reduce net interest income.
Similarly, when interest-earning assets mature or reprice more quickly, and because the magnitude of repricing of interest-earning assets is often greater than interest-bearing liabilities, falling interest rates would reduce net interest income.
We have incurred debt and may incur additional debt in the future, and that debt may also be sensitive to interest rates and any increase in interest rates could materially and adversely affect us.
Customers Bank has no loans to any customers in the digital currency industry.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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