XML 25 R13.htm IDEA: XBRL DOCUMENT v3.19.2
Loans and Leases Receivable and Allowance for Loan and Lease Losses
 6 Months Ended
Jun. 30, 2019
Receivables [Abstract]  
Loans and Leases Receivable and Allowance for Loan and Lease Losses LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR LOAN AND LEASE LOSSES
The following table presents loans and leases receivable as of June 30, 2019 and December 31, 2018.
(amounts in thousands)
June 30, 2019
 
December 31, 2018
Loans receivable, mortgage warehouse, at fair value
$
2,001,540

 
$
1,405,420

Loans receivable:
 
 
 
Commercial:
 
 
 
Multi-family
3,017,531

 
3,285,297

Commercial and industrial (including owner occupied commercial real estate) (1)
2,184,556

 
1,951,277

Commercial real estate non-owner occupied
1,176,575

 
1,125,106

Construction
59,811

 
56,491

Total commercial loans and leases receivable
6,438,473

 
6,418,171

Consumer:
 
 
 
Residential real estate
648,860

 
566,561

Manufactured housing
75,597

 
79,731

Other consumer
552,839

 
74,035

Total consumer loans receivable
1,277,296

 
720,327

Loans and leases receivable
7,715,769

 
7,138,498

Deferred (fees) costs and unamortized (discounts) premiums, net
(1,663
)
 
(424
)
Allowance for loan and lease losses
(48,388
)
 
(39,972
)
Total loans and leases receivable, net of allowance for loan and lease losses
$
9,667,258

 
$
8,503,522


(1)
Includes direct finance equipment leases of $64.5 million and $54.5 million at June 30, 2019 and December 31, 2018, respectively.
Customers' total loans and leases receivable portfolio includes loans receivable which are reported at fair value based on an election made to account for these loans at fair value and loans and leases receivable which are predominately reported at their outstanding unpaid principal balance, net of charge-offs and deferred costs and fees and unamortized premiums and discounts and are evaluated for impairment.
Loans receivable, mortgage warehouse, at fair value:
Mortgage warehouse loans consist of commercial loans to mortgage companies. These mortgage warehouse lending transactions are subject to master repurchase agreements. As a result of the contractual provisions, for accounting purposes control of the underlying mortgage loan has not transferred and the rewards and risks of the mortgage loans are not assumed by Customers. The mortgage warehouse loans receivable are designated as loans held for investment and reported at fair value based on an election made to account for the loans at fair value. Pursuant to the agreements, Customers funds the pipelines for these mortgage lenders by sending payments directly to the closing agents for funded mortgage loans and receives proceeds directly from third party investors when the underlying mortgage loans are sold into the secondary market. The fair value of the mortgage warehouse loans is estimated as the amount of cash initially advanced to fund the mortgage, plus accrued interest and fees, as specified in the respective agreements. The interest rates on these loans are variable, and the lending transactions are short-term, with an average life under 30 days from purchase to sale. The primary goal of these lending transactions is to provide liquidity to mortgage companies.
At June 30, 2019 and December 31, 2018, all of Customers' commercial mortgage warehouse loans were current in terms of payment. As these loans are reported at their fair value, they do not have an allowance for loan and lease loss and are therefore excluded from ALLL-related disclosures.
Loans and leases receivable:
The following tables summarize loans receivable by loan type and performance status as of June 30, 2019 and December 31, 2018:
 
June 30, 2019
(amounts in thousands)
30-89 Days past due (1)
 
90 Days or more past due (1)
 
Total past due (1)
 
Non-accrual
 
Current (2)
 
Purchased-credit-impaired loans (3)
 
Total loans and leases (4)
Multi-family
$
—

 
$
—

 
$
—

 
$
—

 
$
3,015,935

 
$
1,596

 
$
3,017,531

Commercial and industrial
626

 
—

 
626

 
5,400

 
1,592,049

 
395

 
1,598,470

Commercial real estate owner occupied
801

 
—

 
801

 
927

 
576,692

 
7,666

 
586,086

Commercial real estate non-owner occupied
252

 
—

 
252

 
94

 
1,172,421

 
3,808

 
1,176,575

Construction
—

 
—

 
—

 
—

 
59,811

 
—

 
59,811

Residential real estate
2,611

 
—

 
2,611

 
5,083

 
637,309

 
3,857

 
648,860

Manufactured housing (5)
3,829

 
2,006

 
5,835

 
1,570

 
66,470

 
1,722

 
75,597

Other consumer
1,480

 
—

 
1,480

 
359

 
550,794

 
206

 
552,839

Total
$
9,599

 
$
2,006

 
$
11,605

 
$
13,433

 
$
7,671,481

 
$
19,250

 
$
7,715,769

 
 
 
 
 
 
 
 
 
 
 
 
 
 



December 31, 2018
(amounts in thousands)
30-89 Days past due (1)
 
90 Days or more past due (1)
 
Total past due (1)
 
Non-accrual
 
Current (2)
 
Purchased-credit-impaired loans (3)
 
Total loans and leases (4)
Multi-family
$
—

 
$
—

 
$
—

 
$
1,155

 
$
3,282,452

 
$
1,690

 
$
3,285,297

Commercial and industrial
1,914

 
—

 
1,914

 
17,764

 
1,353,586

 
536

 
1,373,800

Commercial real estate owner occupied
193

 
—

 
193

 
1,037

 
567,809

 
8,438

 
577,477

Commercial real estate non-owner occupied
1,190

 
—

 
1,190

 
129

 
1,119,443

 
4,344

 
1,125,106

Construction
—

 
—

 
—

 
—

 
56,491

 
—

 
56,491

Residential real estate
5,940

 
—

 
5,940

 
5,605

 
550,679

 
4,337

 
566,561

Manufactured housing (5)
3,926

 
2,188

 
6,114

 
1,693

 
69,916

 
2,008

 
79,731

Other consumer
200

 
—

 
200

 
111

 
73,503

 
221

 
74,035

Total
$
13,363

 
$
2,188

 
$
15,551

 
$
27,494

 
$
7,073,879

 
$
21,574

 
$
7,138,498

 
(1)
Includes past due loans and leases that are accruing interest because collection is considered probable.
(2)
Loans and leases where next payment due is less than 30 days from the report date.
(3)
Purchased-credit-impaired loans aggregated into a pool are accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, and the past due status of the pools, or that of the individual loans within the pools, is not meaningful. Due to the credit impaired nature of the loans, the loans are recorded at a discount reflecting estimated future cash flows and the Bank recognizes interest income on each pool of loans reflecting the estimated yield and passage of time. Such loans are considered to be performing. Purchased-credit-impaired loans that are not in pools accrete interest when the timing and amount of their expected cash flows are reasonably estimable, and are reported as performing loans.
(4)
Amounts exclude deferred costs and fees, unamortized premiums and discounts, and the ALLL.
(5)
Certain manufactured housing loans purchased in 2010 are supported by cash reserves held at the Bank of $0.4 million and $0.5 million at June 30, 2019 and December 31, 2018, respectively, which are used to fund past-due payments when the loan becomes 90 days or more delinquent. Each quarter, these funds are evaluated to determine if they would be sufficient to absorb the probable incurred losses within the manufactured housing portfolio.
As of June 30, 2019 and December 31, 2018, the Bank had $0.5 million and $0.2 million, respectively, of residential real estate held in OREO. As of June 30, 2019 and December 31, 2018, the Bank had initiated foreclosure proceedings on $0.7 million and $2.1 million, respectively, in loans secured by residential real estate.
Allowance for loan and lease losses
The changes in the ALLL for the three and six months ended June 30, 2019 and 2018, and the loans and leases and ALLL by loan and lease type based on impairment-evaluation method as of June 30, 2019 and December 31, 2018 are presented in the tables below.
Three Months Ended June 30, 2019
Multi-family
 
Commercial and industrial
 
Commercial real estate owner occupied
 
Commercial real estate non-owner occupied
 
Construction
 
Residential real estate
 
Manufactured housing
 
Other consumer
 
Total
(amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance,
March 31, 2019
$
10,630

 
$
12,647

 
$
3,425

 
$
6,015

 
$
584

 
$
6,572

 
$
117

 
$
3,689

 
$
43,679

Charge-offs
—

 
(183
)
 
(66
)
 
—

 
—

 
(69
)
 
—

 
(932
)
 
(1,250
)
Recoveries
7

 
338

 
97

 
—

 
114

 
8

 
—

 
49

 
613

Provision for loan and lease losses
(711
)
 
934

 
(96
)
 
144

 
(49
)
 
(2,343
)
 
6

 
7,461

 
5,346

Ending Balance,
June 30, 2019
$
9,926

 
$
13,736

 
$
3,360

 
$
6,159

 
$
649

 
$
4,168

 
$
123

 
$
10,267

 
$
48,388

Six Months Ended
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance,
December 31, 2018
$
11,462

 
$
12,145

 
$
3,320

 
$
6,093

 
$
624

 
$
3,654

 
$
145

 
$
2,529

 
$
39,972

Charge-offs
(541
)
 
(183
)
 
(74
)
 
—

 
—

 
(109
)
 
—

 
(1,687
)
 
(2,594
)
Recoveries
7

 
457

 
225

 
—

 
120

 
15

 
—

 
73

 
897

Provision for loan and lease losses
(1,002
)
 
1,317

 
(111
)
 
66

 
(95
)
 
608

 
(22
)
 
9,352

 
10,113

Ending Balance,
June 30, 2019
$
9,926

 
$
13,736

 
$
3,360

 
$
6,159

 
$
649

 
$
4,168

 
$
123

 
$
10,267

 
$
48,388

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans and leases receivable:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
—

 
$
10,605

 
$
950

 
$
94

 
$
—

 
$
8,107

 
$
10,126

 
$
359

 
$
30,241

Collectively evaluated for impairment
3,015,935

 
1,587,470

 
577,470

 
1,172,673

 
59,811

 
636,896

 
63,749

 
552,274

 
7,666,278

Loans acquired with credit deterioration
1,596

 
395

 
7,666

 
3,808

 
—

 
3,857

 
1,722

 
206

 
19,250

Total loans and leases receivable
$
3,017,531

 
$
1,598,470

 
$
586,086

 
$
1,176,575

 
$
59,811

 
$
648,860

 
$
75,597

 
$
552,839

 
$
7,715,769

Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
—

 
$
225

 
$
31

 
$
—

 
$
—

 
$
39

 
$
3

 
$
5

 
$
303

Collectively evaluated for impairment
9,926

 
13,250

 
3,321

 
4,249

 
649

 
3,789

 
91

 
10,108

 
45,383

Loans acquired with credit deterioration
—

 
261

 
8

 
1,910

 
—

 
340

 
29

 
154

 
2,702

Total allowance for loan and lease losses
$
9,926

 
$
13,736

 
$
3,360

 
$
6,159

 
$
649

 
$
4,168

 
$
123

 
$
10,267

 
$
48,388

Three Months Ended June 30, 2018
Multi-family
 
Commercial and industrial
 
Commercial real estate owner occupied
 
Commercial real estate non-owner occupied
 
Construction
 
Residential real estate
 
Manufactured housing
 
Other consumer
 
Total
(amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance,
March 31, 2018
$
12,545

 
$
11,737

 
$
3,525

 
$
7,233

 
$
921

 
$
3,179

 
$
176

 
$
183

 
$
39,499

Charge-offs
—

 
(174
)
 
(483
)
 
—

 
—

 
(42
)
 
—

 
(462
)
 
(1,161
)
Recoveries
—

 
140

 
326

 
—

 
209

 
56

 
—

 
3

 
734

Provision for loan and lease losses
(476
)
 
555

 
(380
)
 
(535
)
 
(138
)
 
(285
)
 
(27
)
 
502

 
(784
)
Ending Balance,
June 30, 2018
$
12,069

 
$
12,258

 
$
2,988

 
$
6,698

 
$
992

 
$
2,908

 
$
149

 
$
226

 
$
38,288

Six Months Ended
June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance,
December 31, 2017
$
12,168

 
$
10,918

 
$
3,232

 
$
7,437

 
$
979

 
$
2,929

 
$
180

 
$
172

 
$
38,015

Charge-offs
—

 
(224
)
 
(501
)
 
—

 
—

 
(407
)
 
—

 
(718
)
 
(1,850
)
Recoveries
—

 
175

 
326

 
—

 
220

 
63

 
—

 
6

 
790

Provision for loan and lease losses
(99
)
 
1,389

 
(69
)
 
(739
)
 
(207
)
 
323

 
(31
)
 
766

 
1,333

Ending Balance,
June 30, 2018
$
12,069

 
$
12,258

 
$
2,988

 
$
6,698

 
$
992

 
$
2,908

 
$
149

 
$
226

 
$
38,288

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans and leases receivable:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
1,155

 
$
17,828

 
$
1,069

 
$
129

 
$
—

 
$
8,631

 
$
10,195

 
$
111

 
$
39,118

Collectively evaluated for impairment
3,282,452

 
1,355,436

 
567,970

 
1,120,633

 
56,491

 
553,593

 
67,528

 
73,703

 
7,077,806

Loans acquired with credit deterioration
1,690

 
536

 
8,438

 
4,344

 
—

 
4,337

 
2,008

 
221

 
21,574

Total loans and leases receivable
$
3,285,297

 
$
1,373,800

 
$
577,477

 
$
1,125,106

 
$
56,491

 
$
566,561

 
$
79,731

 
$
74,035

 
$
7,138,498

Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
539

 
$
261

 
$
1

 
$
—

 
$
—

 
$
41

 
$
3

 
$
—

 
$
845

Collectively evaluated for impairment
10,923

 
11,516

 
3,319

 
4,161

 
624

 
3,227

 
89

 
2,390

 
36,249

Loans acquired with credit deterioration
—

 
368

 
—

 
1,932

 
—

 
386

 
53

 
139

 
2,878

Total allowance for loan and lease losses
$
11,462

 
$
12,145

 
$
3,320

 
$
6,093

 
$
624

 
$
3,654

 
$
145

 
$
2,529

 
$
39,972



Impaired Loans - Individually Evaluated for Impairment
The following tables present the recorded investment (net of charge-offs), unpaid principal balance, and related allowance by loan type for impaired loans that were individually evaluated for impairment as of June 30, 2019 and December 31, 2018 and the average recorded investment and interest income recognized for the three and six months ended June 30, 2019 and 2018. Customers had no impaired lease receivables as of June 30, 2019 and December 31, 2018, respectively. Purchased-credit-impaired loans are considered to be performing and are not included in the tables below.
 
June 30, 2019
 
Three Months Ended
June 30, 2019
 
Six Months Ended
June 30, 2019
(amounts in thousands)
Recorded investment net of charge-offs
 
Unpaid principal balance
 
Related allowance
 
Average recorded investment
 
Interest income recognized
 
Average recorded investment
 
Interest income recognized
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-family
$
—

 
$
534

 
$
—

 
$
998

 
$
—

 
$
665

 
$
—

Commercial and industrial
4,663

 
6,144

 
—

 
7,923

 
16

 
9,836

 
18

Commercial real estate owner occupied
784

 
1,555

 
—

 
669

 
—

 
792

 
21

Commercial real estate non-owner occupied
94

 
206

 
—

 
98

 
—

 
108

 
—

Residential real estate
4,365

 
4,684

 
—

 
4,544

 
61

 
4,643

 
61

Manufactured housing
9,961

 
9,961

 
—

 
10,051

 
123

 
10,043

 
238

Other consumer
132

 
132

 
—

 
120

 
8

 
117

 
8

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-family
—

 
—

 
—

 
—

 
—

 
385

 
—

Commercial and industrial
5,942

 
6,048

 
225

 
6,084

 
58

 
5,445

 
97

Commercial real estate owner occupied
166

 
166

 
31

 
239

 
—

 
170

 
1

Commercial real estate non-owner occupied
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential real estate
3,742

 
3,742

 
39

 
3,794

 
28

 
3,792

 
54

Manufactured housing
165

 
165

 
3

 
166

 
2

 
167

 
4

Other consumer
227

 
227

 
5

 
114

 
—

 
76

 
—

Total
$
30,241

 
$
33,564

 
$
303

 
$
34,800

 
$
296

 
$
36,239

 
$
502

 
December 31, 2018
 
Three Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2018
(amounts in thousands)
Recorded investment net of charge-offs
 
Unpaid principal balance
 
Related allowance
 
Average recorded investment
 
Interest income recognized
 
Average recorded investment
 
Interest income recognized
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-family
$
—

 
$
—

 
$
—

 
$
672

 
$
8

 
$
448

 
$
8

Commercial and industrial
13,660

 
15,263

 
—

 
5,736

 
2

 
6,870

 
2

Commercial real estate owner occupied
1,037

 
1,766

 
—

 
664

 
—

 
713

 
—

Commercial real estate non-owner occupied
129

 
241

 
—

 
1,390

 
8

 
980

 
8

Residential real estate
4,842

 
5,128

 
—

 
3,959

 
2

 
3,849

 
2

Manufactured housing
10,027

 
10,027

 
—

 
10,015

 
146

 
9,963

 
277

Other consumer
111

 
111

 
—

 
96

 
—

 
74

 
—

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
Multi-family
1,155

 
1,155

 
539

 
—

 
—

 
—

 
—

Commercial and industrial
4,168

 
4,351

 
261

 
8,283

 
11

 
8,296

 
12

Commercial real estate owner occupied
32

 
32

 
1

 
455

 
1

 
517

 
2

Residential real estate
3,789

 
3,789

 
41

 
4,550

 
38

 
4,906

 
63

Manufactured housing
168

 
168

 
3

 
225

 
6

 
225

 
6

Total
$
39,118

 
$
42,031

 
$
845

 
$
36,045

 
$
222

 
$
36,841

 
$
380


Troubled Debt Restructurings
At June 30, 2019 and December 31, 2018, there were $19.0 million and $19.2 million, respectively, in loans reported as TDRs. TDRs are reported as impaired loans in the calendar year of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent years, a TDR may be returned to accrual status if it satisfies a minimum performance requirement of six months, however, it will remain classified as impaired. Generally, the Bank requires sustained performance for nine months before returning a TDR to accrual status. Modifications of PCI loans that are accounted for within loan pools in accordance with the accounting standards for PCI loans do not result in the removal of these loans from the pool even if the modifications would otherwise be considered a TDR. Accordingly, as each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows, modifications of loans within such pools are not considered TDRs. Customers had no lease receivables that had been restructured as a TDR as of June 30, 2019 and December 31, 2018, respectively.
The following table presents total TDRs based on loan type and accrual status at June 30, 2019 and December 31, 2018. Nonaccrual TDRs are included in the reported amount of total non-accrual loans.
 
June 30, 2019
 
December 31, 2018
(amounts in thousands)
Accruing TDRs
 
Nonaccrual TDRs
 
Total
 
Accruing TDRs
 
Nonaccrual TDRs
 
Total
Commercial and industrial
$
5,205

 
$
35

 
$
5,240

 
$
64

 
$
5,273

 
$
5,337

Commercial real estate owner occupied
23

 
—

 
23

 
32

 
—

 
32

Residential real estate
3,024

 
646

 
3,670

 
3,026

 
667

 
3,693

Manufactured housing
8,556

 
1,498

 
10,054

 
8,502

 
1,620

 
10,122

Other consumer
—

 
11

 
11

 
—

 
12

 
12

Total TDRs
$
16,808

 
$
2,190

 
$
18,998

 
$
11,624

 
$
7,572

 
$
19,196


The following table presents loans modified in a TDR by type of concession for the three and six months ended June 30, 2019 and 2018. There were no modifications that involved forgiveness of debt for the three and six months ended June 30, 2019 and 2018.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
(dollars in thousands)
Number of loans
 
Recorded investment
 
Number of loans
 
Recorded investment
 
Number of loans
 
Recorded investment
 
Number of loans
 
Recorded investment
Extensions of maturity
—

 
$
—

 
1

 
$
56

 
2

 
$
514

 
1

 
$
56

Interest-rate reductions
2

 
47

 
15

 
607

 
12

 
432

 
24

 
929

Total
2

 
$
47

 
16

 
$
663

 
14

 
$
946

 
25

 
$
985


The following table provides, by loan type, the number of loans modified in TDRs and the related recorded investment for the three and six months ended June 30, 2019 and 2018.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
(dollars in thousands)
Number of loans
 
Recorded investment
 
Number of loans
 
Recorded investment
 
Number of loans
 
Recorded investment
 
Number of loans
 
Recorded investment
Commercial and industrial
—

 
$
—

 
—

 
$
—

 
1

 
$
431

 
—

 
$
—

Manufactured housing
2

 
47

 
14

 
450

 
12

 
432

 
23

 
772

Residential real estate
—

 
—

 
1

 
200

 
1

 
83

 
1

 
200

Other consumer
—

 
—

 
1

 
13

 
—

 
—

 
1

 
13

Total loans
2

 
$
47

 
16

 
$
663

 
14

 
$
946

 
25

 
$
985


As of both June 30, 2019 and December 31, 2018, except for one commercial and industrial loan with an outstanding commitment of $1.5 million, there were no other commitments to lend additional funds to debtors whose loans have been modified in TDRs.
The following table presents, by loan type, the number of loans modified in TDRs and the related recorded investment, for which there was a payment default within twelve months following the modification:
 
June 30, 2019
 
June 30, 2018
(dollars in thousands)
Number of loans
 
Recorded investment
 
Number of loans
 
Recorded investment
Manufactured housing
3

 
$
108

 
—

 
$
—

Commercial and industrial
1

 
—

 
—

 
—

Total loans
$
4

 
$
108

 
—

 
$
—


Loans modified in TDRs are evaluated for impairment. The nature and extent of impairment of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of ALLL. There were no allowances recorded as a result of TDR modifications during the three and six months ended June 30, 2019 and 2018.
Purchased-Credit-Impaired Loans
The changes in accretable yield related to PCI loans for the three and six months ended June 30, 2019 and 2018 were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(amounts in thousands)
2019
 
2018
 
2019
 
2018
Accretable yield balance, beginning of period
$
6,194

 
$
7,663

 
$
6,178

 
$
7,825

Accretion to interest income
(378
)
 
(516
)
 
(655
)
 
(854
)
Reclassification from nonaccretable difference and disposals, net
(9
)
 
256

 
284

 
432

Accretable yield balance, end of period
$
5,807

 
$
7,403

 
$
5,807

 
$
7,403


Credit Quality Indicators
The ALLL represents management's estimate of probable losses in Customers' loans and leases receivable portfolio, excluding commercial mortgage warehouse loans reported at fair value pursuant to a fair value option election. Multi-family, commercial and industrial, owner occupied commercial real estate, non-owner occupied commercial real estate, and construction loans are rated based on an internally assigned risk rating system which is assigned at the time of loan origination and reviewed on a periodic, or on an “as needed” basis. Residential real estate loans, manufactured housing and other consumer loans are evaluated based on the payment activity of the loan.
To facilitate the monitoring of credit quality within the multi-family, commercial and industrial, owner occupied commercial real estate, non-owner occupied commercial real estate, and construction loan portfolios, and for purposes of analyzing historical loss rates used in the determination of the ALLL for the respective loan portfolios, the Bank utilizes the following categories of risk ratings: pass/satisfactory (includes risk rating 1 through 6), special mention, substandard, doubtful, and loss. The risk rating categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass/satisfactory ratings, which are assigned to those borrowers who do not have identified potential or well-defined weaknesses and for whom there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on a quarterly basis during the month preceding the end of the calendar quarter.  While assigning risk ratings involves judgment, the risk-rating process allows management to identify riskier credits in a timely manner and allocate the appropriate resources to manage those loans and leases. The 2018 Form 10-K describes Customers Bancorp’s risk rating grades.
Risk ratings are not established for certain consumer loans, including residential real estate, other consumer loans, home equity, manufactured housing, and installment loans, mainly because these portfolios consist of a larger number of homogeneous loans with smaller balances. Instead, these portfolios are evaluated for risk mainly based upon aggregate payment history and through the monitoring of delinquency levels and trends and are classified as performing and non-performing. The following tables present the credit ratings of loans and leases receivable as of June 30, 2019 and December 31, 2018.
 
June 30, 2019
(amounts in thousands)
Multi-family
 
Commercial and industrial
 
Commercial real estate owner occupied
 
Commercial real estate non-owner occupied
 
Construction
 
Residential real estate
 
Manufactured housing
 
Other consumer
 
Total (3)
Pass/Satisfactory
$
2,969,263

 
$
1,545,879

 
$
568,720

 
$
1,108,632

 
$
59,811

 
$
—

 
$
—

 
$
—

 
$
6,252,305

Special Mention
43,147

 
29,473

 
11,853

 
30,051

 
—

 
—

 
—

 
—

 
114,524

Substandard
5,121

 
23,118

 
5,513

 
37,892

 
—

 
—

 
—

 
—

 
71,644

Performing (1)
—

 
—

 
—

 
—

 
—

 
641,166

 
68,192

 
551,000

 
1,260,358

Non-performing (2)
—

 
—

 
—

 
—

 
—

 
7,694

 
7,405

 
1,839

 
16,938

Total
$
3,017,531

 
$
1,598,470

 
$
586,086

 
$
1,176,575

 
$
59,811

 
$
648,860

 
$
75,597

 
$
552,839

 
$
7,715,769

 
December 31, 2018
(amounts in thousands)
Multi-family
 
Commercial and industrial
 
Commercial real estate owner occupied
 
Commercial real estate non-owner occupied
 
Construction
 
Residential real estate
 
Manufactured housing
 
Other consumer
 
Total (3)
Pass/Satisfactory
$
3,201,822

 
$
1,306,466

 
$
562,639

 
$
1,054,493

 
$
56,491

 
$
—

 
$
—

 
$
—

 
$
6,181,911

Special Mention
55,696

 
30,551

 
9,730

 
30,203

 
—

 
—

 
—

 
—

 
126,180

Substandard
27,779

 
36,783

 
5,108

 
40,410

 
—

 
—

 
—

 
—

 
110,080

Performing (1)
—

 
—

 
—

 
—

 
—

 
555,016

 
71,924

 
73,724

 
700,664

Non-performing (2)
—

 
—

 
—

 
—

 
—

 
11,545

 
7,807

 
311

 
19,663

Total
$
3,285,297

 
$
1,373,800

 
$
577,477

 
$
1,125,106

 
$
56,491

 
$
566,561

 
$
79,731

 
$
74,035

 
$
7,138,498

(1)
Includes residential real estate, manufactured housing, and other consumer loans not subject to risk ratings.
(2)
Includes residential real estate, manufactured housing, and other consumer loans that are past due and still accruing interest or on nonaccrual status.
(3)
Excludes commercial mortgage warehouse loans reported at fair value.
Loan Purchases and Sales
Purchases and sales of loans were as follows for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(amounts in thousands)
2019
 
2018
 
2019
 
2018
Purchases (1)
 
 
 
 
 
 
 
Residential real estate
$
39,474

 
$
277,374

 
$
105,858

 
$
277,374

Other consumer (2)
384,116

 
—

 
450,252

 
—

Total
$
423,590

 
$
277,374

 
$
556,110

 
$
277,374

Sales (3)
 
 
 
 
 
 
 
Commercial and industrial (4)
—

 
(10,307
)
 
—

 
(17,149
)
Commercial real estate owner occupied (4)
—

 
(1,430
)
 
—

 
(9,581
)
Total
$
—

 
$
(11,737
)
 
$
—

 
$
(26,730
)
(1)
Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 100.6% and 100.4% of loans outstanding for the three months ended June 30, 2019 and 2018, respectively. The purchase price was 99.9% and 100.4% of loans outstanding for the six months ended June 30, 2019 and 2018, respectively.
(2)
Other consumer loan purchases for the three and six months ended June 30, 2019 consist of third-party originated unsecured consumer loans. None of the loans are considered sub-prime. Customers considers sub-prime borrowers to be those with FICO scores below 660.
(3)
Amounts reported in the above table are the unpaid principal balance at time of sale. There were no loan sales for the three and six months ended June 30, 2019. For the three and six months ended June 30, 2018, loan sales resulted in gains of $0.9 million and $2.3 million, respectively.
(4)
Primarily sales of SBA loans.
Loans Pledged as Collateral
Customers has pledged eligible real estate loans as collateral for potential borrowings from the FHLB and FRB in the amount of $5.3 billion and $5.4 billion at June 30, 2019 and December 31, 2018, respectively.