Investment Securities

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

The amortized cost and approximate fair value of investment securities as of September 30, 2019 and December 31, 2018 are summarized in the tables below:


	September 30, 2019
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale debt securities:
Agency-guaranteed residential mortgage-backed securities	$	288,829	$	3,514	$	—	$	292,343


Corporate notes ⁽¹⁾	284,663		12,535		—		297,198

Available-for-sale debt securities	$	573,492	$	16,049	$	—	589,541
Interest-only classes of agency-guaranteed home equity conversion mortgage-backed securities ⁽²⁾							17,078
Equity securities ⁽³⁾							2,095
Total investment securities, at fair value							$	608,714


	December 31, 2018
(amounts in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale debt securities:
Agency-guaranteed residential mortgage-backed securities	$	311,267	$	—	$	(5,893)	$	305,374

Corporate notes ⁽¹⁾	381,407		920		(24,407)		357,920
Available-for-sale debt securities	$	692,674	$	920	$	(30,300)	663,294
Equity securities ⁽³⁾							1,718
Total investment securities, at fair value							$	665,012

(1)At September 30, 2019, includes corporate securities issued by other domestic bank holding companies. At December 31, 2018, includes corporate securities issued by other domestic and foreign bank holding companies.

(2)Reported at fair value with fair value changes recorded in non-interest income based on a fair value option election.

(3)Includes equity securities issued by a foreign entity.

On June 28, 2019, Customers obtained ownership of certain interest-only GNMA securities that served as the primary collateral for loans made to one commercial mortgage warehouse customer through a Uniform Commercial Code private sale transaction. In connection with the acquisition of the interest-only GNMA securities, Customers recognized a pre-tax loss of $7.5 million for the nine months ended September 30, 2019 for the shortfall in the fair value of the interest-only GNMA securities compared to its credit exposure to this commercial mortgage warehouse customer. On June 28, 2019, Customers elected the fair value option for these interest-only GNMA securities acquired on such date. The fair value of these securities at September 30, 2019 was $17.1 million.

During the three and nine months ended September 30, 2019, Customers recognized unrealized gains of $1.3 million and $1.0 million, respectively, on its interest-only GNMA securities and equity securities. During the three and nine months ended September 30, 2018, Customers recognized unrealized losses of $1.2 million and $1.5 million, respectively, on its equity securities. These unrealized gains and losses are reported as unrealized gain (loss) on investment securities within non-interest income on the consolidated statements of income.

The following table presents proceeds from the sale of available-for-sale debt securities and gross gains and gross losses realized on those sales for the three and nine months ended September 30, 2019 and 2018.



	Three Months Ended September 30,						Nine Months Ended September 30,
(amounts in thousands)	2019		2018		2019		2018

Proceeds from sale of available-for-sale securities	$	97,555	$	476,182	$	97,555	$	476,182

Gross gains	$	1,936	$	—	$	1,936	$	—
Gross losses	(935)		(18,659)		(935)		(18,659)
Net gains / (losses)	$	1,001	$	(18,659)	$	1,001	$	(18,659)

These gains/(losses) were determined using the specific identification method and were reported as gain (loss) on sale of investment securities within non-interest income on the consolidated statements of income.

The following table shows debt securities by stated maturity. Debt securities backed by mortgages and interest-only GNMA securities have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay and, therefore, these debt securities are classified separately with no specific maturity date:


	September 30, 2019
(amounts in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	—	$	—
Due after one year through five years	5,000		5,238
Due after five years through ten years	277,662		289,862
Due after ten years	2,000		2,098
Agency-guaranteed residential mortgage-backed securities	288,830		292,343
Interest-only classes of agency-guaranteed home equity conversion mortgage-backed securities	—		17,078

Total debt securities	$	573,492	$	606,619

At September 30, 2019, there were no available-for-sale debt securities in an unrealized loss position. Gross unrealized losses and fair value of Customers' available-for-sale debt securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2018 were as follows:


	December 31, 2018
	Less Than 12 Months						12 Months or More						Total
(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-sale debt securities:
Agency-guaranteed residential mortgage-backed securities	$	305,374	$	(5,893)	$	—	$	—	$	305,374	$	(5,893)

Corporate notes	310,036		(24,407)		—		—		310,036		(24,407)

Total	$	615,410	$	(30,300)	$	—	$	—	$	615,410	$	(30,300)

At September 30, 2019 and December 31, 2018, Customers Bank had pledged investment securities aggregating $21.8 million and $23.0 million in fair value, respectively, as collateral against its borrowings primarily with the FHLB and an unused line of credit with another financial institution. These counterparties do not have the ability to sell or repledge these securities.

At September 30, 2019 and December 31, 2018, no securities holding of any one issuer, other than the U.S. Government and its agencies, amounted to greater than 10% of shareholders' equity.