Customers Bancorp (CUBB) risk factors, FY2024 10-K

Risks Related to the Bancorp’s Banking Operations

1. 01Our business is highly susceptible to credit risk. If our ACL is insufficient to absorb losses in our loan and lease portfolio, our earnings could decrease
2. 02Our credit standards, policies and procedures are designed to reduce the risk of credit losses but may not prevent us from incurring substantial credit losses
3. 03Changes in the composition of our loan portfolio may expose us to increased lending risks
4. 04Our emphasis on commercial, commercial real estate and mortgage finance may expose us to increased lending risks
5. 05This business is subject to seasonality of the mortgage lending business, and volumes are lower as a result of increased interest rates. A decline in the rate of growth, volume or profitability of this business unit, or a loss of its leadership could adversely affect our results of operations and financial condition
6. 06We are subject to risks arising from conditions in the commercial real estate market
7. 07Our New York State multifamily loan portfolio could be adversely impacted by changes in legislation or regulation
8. 08The fair value of our investment securities fluctuates due to market conditions. Adverse economic performance can lead to adverse security performance and potential impairment
9. 09Changes to estimates and assumptions made by management in preparing financial statements could adversely affect our business, operating results, reported assets and liabilities, financial condition and capital levels
10. 10Changes in accounting standards and policies can be difficult to predict and can materially impact how we record and report our financial results
11. 11Our geographic concentration in the Northeast and Mid-Atlantic regions makes our business susceptible to downturns in the local economies and depressed banking markets, which could materially and adversely affect us
12. 12Our loan and deposit portfolios contain concentrations in certain business lines or product types that have unique risk characteristics and may expose us to increased risks
13. 13We depend on our executive officers and key personnel to implement our strategy and could be harmed by the loss of their services
14. 14Our success also depends on the experience of our branch managers and lending officers and on their relationships with the customers and communities they serve. The loss of these key personnel could negatively impact our banking operations
15. 15We face significant competition from other financial institutions and financial services providers, which may materially and adversely affect us
16. 16Failure to perform in any of these areas could significantly weaken our competitive position, which could materially and adversely affect us
17. 17Like other financial services institutions, our asset and liability structures are monetary in nature. Such structures are affected by a variety of factors, including changes in interest rates, which can impact the value of financial instruments held by us
18. 18Prior to December 31, 2024, we offered a blockchain-based instant payments product, CBIT, on the TassatPay platform. CubiX does not operate on a blockchain and does not utilize tokens or other digital assets and therefore there is no omnibus account maintained in connection with cubiX
19. 19We are dependent on our information technology and telecommunications systems and third-party service providers, and systems failures, interruptions or breaches of security, or the failure of our third-party service providers to adequately perform their services, could have a material adverse effect on us
20. 20Any actual or perceived failure to comply with evolving regulatory frameworks around the development and use of artificial intelligence could adversely affect our business, results of operations, and financial condition
21. 21Loss of, or failure to adequately safeguard, confidential or proprietary information may adversely affect our operations, net income or reputation
22. 22Breaches of security measures, computer viruses or malware, fraudulent activity and infrastructure failures could materially and adversely affect our reputation or harm our business, including the unauthorized access to or disclosure of data relating to third-party serviced deposit account holders
23. 23Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures
24. 24Negative public opinion regarding us could adversely affect our business, results of operations, and financial condition
25. 25Increasing, complex and evolving regulatory, stakeholder, and other third party expectations on CSR matters could adversely affect our reputation, our access to capital and the market price of our securities
26. 26We intend to engage in acquisitions of other businesses from time to time. These acquisitions may not produce revenue or earnings enhancements or cost savings at levels, or within time frames, originally anticipated and may result in unforeseen integration difficulties
27. 27Our acquisitions generally will require regulatory approvals, and failure to obtain them would restrict our growth
28. 28To the extent that we are unable to increase loans through organic core loan growth, we may be unable to successfully implement our growth strategy, which could materially and adversely affect us
29. 29We may not be able to effectively manage our growth
30. 30If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses
31. 31We may not be able to meet the cash flow requirements of our loan funding obligations, deposit withdrawals, or other business needs and fund our asset growth unless we maintain sufficient liquidity
32. 32We may not be able to develop and retain a strong core deposit base and other low-cost, stable funding sources
33. 33Competitors’ technology-driven products and services and improvements to such products and services may adversely affect our ability to generate core deposits through mobile banking
34. 34We may incur losses due to minority investments in other financial institutions or related companies

Risks related to the divestiture of BMT

1. 35We continue to face the risks and challenges associated with BM Technologies following the merger of BMT with Megalith Financial Acquisition Corp

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

1. 36Worsening general business and economic conditions could materially and adversely affect us
2. 37We are a participating lender in SBA’s PPP program and have originated a significant number of loans under this program, which may result in some amount of PPP loans remaining on our consolidated balance sheets at a very low yield for an extended period of time
3. 38Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business
4. 39Severe weather, natural disasters, public health issues, acts of war or terrorism, and other external events could significantly impact our ability to conduct business

Risks Related to the Regulation of Our Industry

1. 40Our business, financial condition, results of operations and future prospects could be adversely affected by the highly regulated environment in which we operate, including the effects of heightened regulatory requirements applicable to banks with assets in excess of $10 billion
2. 41Significantly heightened regulatory and supervisory expectations and scrutiny in the U.S. have increased our compliance, regulatory and other risks and costs and subject us to legal and regulatory examinations, investigations and enforcement actions
3. 42Our use of third-party service providers and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention
4. 43Other litigation and regulatory actions, including enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities
5. 44The FDIC’s restoration plan and the related increased assessment rate could materially and adversely affect us
6. 45The Federal Reserve may require us to commit capital resources to support our subsidiary bank
7. 46We are subject to stringent capital requirements which may adversely impact return on equity, require additional capital raises, or limit the ability to pay dividends or repurchase shares
8. 47We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations
9. 48Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business
10. 49Loans that we make through certain federal programs are dependent on the Federal Government’s continuation and support of these programs and on our compliance with their requirements
11. 50We are subject to regulatory restrictions on transactions with our affiliates and related parties. Failure to comply with such regulations could materially and adversely affect us
12. 51Reviews performed by the Internal Revenue Service and state and local taxing authorities for the fiscal years that remain open for investigation may result in a change to income taxes recorded in our consolidated financial statements and adversely affect our results of operations
13. 52We are subject to changes in tax law that could increase Customers’ effective tax rates. These tax law changes may be retroactive to previous periods and as a result could negatively affect Customers’ current and future financial performance

Risks Related to Our Voting Common Stock

1. 53The trading volume in our common stock may generally be less than that of other larger financial services companies
2. 54We do not expect to pay cash dividends on our common stock in the near future, and our ability to pay dividends is subject to regulatory limitations
3. 55We may issue additional shares of our common stock in the future which could adversely affect the value or voting power of our outstanding common stock
4. 56Provisions in our articles of incorporation and bylaws may inhibit a takeover of us, which could discourage transactions that would otherwise be in the best interests of our shareholders and could entrench management
5. 57Shareholders may be deemed to be acting in concert or otherwise in control of us and our bank subsidiaries, which could impose prior approval requirements and result in adverse regulatory consequences for such holders
6. 58Our directors and executive officers can influence the outcome of shareholder votes and, in some cases, shareholders may not have the opportunity to evaluate and affect the investment decision regarding potential investment, acquisition or disposition transactions
7. 59The FDIC’s policy statement imposing restrictions and criteria on private investors in failed bank acquisitions will apply to us and our investors

Risks Related to Our Fixed-to-Floating-Rate Non-Cumulative Perpetual Preferred Stock, Series E and Series F

1. 60The shares of our Series E and Series F Preferred Stock are equity securities and are subordinate to our existing and future indebtedness
2. 61We may not pay dividends on the shares of Series E and Series F Preferred Stock
3. 62Dividends on the shares of Series E and Series F Preferred Stock are non-cumulative
4. 63Our ability to pay dividends on the shares of Series E and Series F Preferred Stock is dependent on dividends and distributions we receive from our subsidiaries, which are subject to regulatory and other limitations
5. 64Holders of Series E and Series F Preferred Stock should not expect us to redeem their shares when they first become redeemable at our option or on any particular date thereafter, and our ability to redeem the shares will be subject to the prior approval of the Federal Reserve
6. 65Holders of Series E and Series F Preferred stock have limited voting rights
7. 66General market conditions and unpredictable factors could adversely affect market prices for the Series E and Series F Preferred Stock
8. 67The Series E and Series F Preferred Stock may not have an active trading market
9. 68The Series E and Series F Preferred Stock may be junior or equal in rights and preferences to preferred stock we may issue in the future

Risks Related to Our Senior Notes and Subordinated Notes

1. 69Our 2.875% Senior Notes, 6.125% Subordinated Notes and 5.375% Subordinated Notes contain limited covenants
2. 70Our ability to make interest and principal payments on the Senior Notes and Subordinated Notes is dependent on dividends and distributions we receive from our subsidiaries, which are subject to regulatory and other limitations
3. 71We may not be able to generate sufficient cash to service our debt obligations, including our obligations under the Senior Notes and Subordinated Notes
4. 72The Senior Notes and Subordinated Notes may not have an active trading market
5. 73Downgrades in U.S. government and federal agency securities could adversely affect us
6. 74We may not be able to maintain consistent earnings or profitability