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Loans and Leases Receivable and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2020

Loans and Leases Receivable and Allowance for Credit Losses

LOANS AND LEASES RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

The following table presents loans and leases receivable as of June 30, 2020 and December 31, 2019.


(amounts in thousands)	June 30, 2020		December 31, 2019
Loans and leases receivable, mortgage warehouse, at fair value	$	2,793,164	$	2,245,758
Loans receivable, PPP	4,760,427		—
Loans receivable:
Commercial:
Multi-family	1,581,839		1,907,331
Commercial and industrial ⁽¹⁾	2,099,442		1,891,152
Commercial real estate owner occupied	544,772		551,948
Commercial real estate non-owner occupied	1,244,773		1,222,772
Construction	128,834		117,617
Total commercial loans and leases receivable	5,599,660		5,690,820
Consumer:
Residential real estate	348,109		382,634
Manufactured housing	66,865		71,359
Other consumer	1,257,813		1,174,175
Total consumer loans receivable	1,672,787		1,628,168
Loans and leases receivable ⁽²⁾	7,272,447		7,318,988

Allowance for credit losses	(159,905)		(56,379)
Total loans and leases receivable, net of allowance for credit losses	$	14,666,133	$	9,508,367

(1)Includes direct finance equipment leases of $96.4 million and $89.2 million at June 30, 2020 and December 31, 2019, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(83.1) million and $2.1 million at June 30, 2020 and December 31, 2019, 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. The total amount of accrued interest recorded for total loans was $47.1 million and $34.8 million at June 30, 2020 and December 31, 2019, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At June 30, 2020, there were $55.9 million of individually evaluated loans that were collateral-dependent. Substantially all individually evaluated loans are collateral-dependent and consisted primarily of commercial and industrial, commercial real estate, and residential real estate loans.

Collateral-dependent commercial and industrial loans were secured by accounts receivable, inventory and equipment; collateral-dependent commercial real estate loans were secured by commercial real estate assets; and residential real estate loans were secured by residential real estate assets.

Loans receivable, PPP:

On March 27, 2020, the CARES Act was signed into law and created funding for a new product called the PPP. The PPP is administered by the SBA and is intended to assist organizations with payroll related expenses. Customers had $4.8 billion of PPP loans outstanding as of June 30, 2020, which are fully guaranteed by the SBA and earn a fixed interest rate of 1.00%. Customers recognized interest income, including origination fees, of $11.7 million for the three and six months ended June 30, 2020, respectively.

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 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, 2020 and December 31, 2019, 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 ACL and are therefore excluded from ACL-related disclosures.

Loans and leases receivable:

The following tables summarize loans and leases receivable by loan and lease type and performance status as of June 30, 2020 and December 31, 2019:


	June 30, 2020
(amounts in thousands)	30-59 Days past due		60-89 Days past due		90 Days or more past due		Total past due		Loans and leases not past due ⁽²⁾		Total loans and leases⁽³⁾
Multi-family	$	—	$	16,790	$	7,013	$	23,803	$	1,558,036	$	1,581,839
Commercial and industrial	523		123		9,974		10,620		2,088,822		2,099,442

Commercial real estate owner occupied	—		4,888		4,022		8,910		535,862		544,772
Commercial real estate non-owner occupied	97		—		30,257		30,354		1,214,419		1,244,773
Construction	—		—		—		—		128,834		128,834
Residential real estate	8,631		441		7,857		16,929		331,180		348,109
Manufactured housing ⁽⁵⁾	1,172		—		5,069		6,241		60,624		66,865
Other consumer	11,415		—		4,887		16,302		1,241,511		1,257,813
Total	$	21,838	$	22,242	$	69,079	$	113,159	$	7,159,288	$	7,272,447


	December 31, 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 ⁽⁴⁾		Total loans and leases ⁽⁵⁾
Multi-family	$	2,133	—		$	2,133	$	4,117	$	1,901,336	$	1,688	$	1,909,274
Commercial and industrial	2,395		—		2,395		4,531		1,882,700		354		1,889,980
Commercial real estate owner occupied	5,388		—		5,388		1,963		537,992		6,664		552,007
Commercial real estate non-owner occupied	8,034		—		8,034		76		1,211,892		3,527		1,223,529
Construction	—		—		—		—		118,418		—		118,418
Residential real estate	5,924		—		5,924		6,128		359,491		3,471		375,014
Manufactured housing	3,699		1,794		5,493		1,655		61,649		1,601		70,398
Other consumer	5,756		$	—	5,756		1,551		1,170,793		183		1,178,283
Total	$	33,329	$	1,794	$	35,123	$	20,021	$	7,244,271	$	17,488	$	7,316,903

(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. The June 30, 2020 table excludes PPP loans of $4.8 billion which are all current as of June 30, 2020.

(3)Includes purchased credit deteriorated loans of $15.7 million at June 30, 2020.

(4)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.

(5)Amounts exclude deferred costs and fees and unamortized premiums and discounts.

As of June 30, 2020 and December 31, 2019, the Bank had $0.1 million and $0.2 million, respectively, of residential real estate held in OREO. As of June 30, 2020 and December 31, 2019, the Bank had initiated foreclosure proceedings on $0.7 million and $0.9 million, respectively, in loans secured by residential real estate.

Nonaccrual Loans and Leases

The following table presents the amortized cost of loans and leases on nonaccrual status.


	June 30, 2020 ⁽¹⁾										December 31, 2019 ⁽²⁾
(amounts in thousands)	Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans		Nonaccrual loans with no related allowance		Nonaccrual loans with related allowance		Total nonaccrual loans
Multi-family	$	4,004	$	3,009	$	7,013	$	4,117	$	—	$	4,117
Commercial and industrial	9,000		974		9,974		3,083		1,448		4,531

Commercial real estate owner occupied	3,933		89		4,022		1,109		854		1,963
Commercial real estate non-owner occupied	30,257		—		30,257		76		—		76
Construction	—		—		—		—		—		—
Residential real estate	7,857		—		7,857		4,559		1,569		6,128
Manufactured housing	536		2,795		3,331		—		1,655		1,655
Other consumer	1,808		3,079		4,887		140		1,411		1,551
Total	$	57,395	$	9,946	$	67,341	$	13,084	$	6,937	$	20,021

(1) Presented at amortized cost basis.

(2) Amounts exclude deferred costs and fees and unamortized premiums and discounts.

Interest income of $0.6 million and $0.3 million was recognized on nonaccrual loans for the three months ended June 30, 2020 and 2019, respectively. Interest income of $0.7 million and $0.5 million was recognized on nonaccrual loans for the six months ended June 30, 2020 and 2019, respectively.

Allowance for credit losses on loans and leases

The changes in the allowance for credit losses on loans and leases for the three and six months ended June 30, 2020 and 2019 are presented in the tables below.


Three Months Ended June 30, 2020	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)
Beginning balance, at March 31, 2020	$	8,750	$	18,806	$	8,527	$	18,530	$	1,934	$	4,180	$	4,987	$	83,569	$	149,283


Charge-offs	—		(20)		—		(2,801)		—		—		—		(8,304)		(11,125)
Recoveries	—		25		2		—		113		26		—		635		801
Provision for credit loss expense	5,947		(6,509)		2,876		10,764		3,250		344		1,027		3,247		20,946
Ending Balance, June 30, 2020	$	14,697	$	12,302	$	11,405	$	26,493	$	5,297	$	4,550	$	6,014	$	79,147	$	159,905
Six Months Ended June 30, 2020
Ending Balance, December 31, 2019	$	6,157	$	15,556	$	2,235	$	6,243	$	1,262	$	3,218	$	1,060	$	20,648	$	56,379
Cumulative effect of change in accounting principle	2,171		759		5,773		7,918		(98)		1,518		3,802		57,986		79,829
Charge-offs	—		(117)		—		(15,598)		—		—		—		(14,550)		(30,265)
Recoveries	—		79		5		—		116		55		—		975		1,230
Provision for loan and lease losses	6,369		(3,975)		3,392		27,930		4,017		(241)		1,152		14,088		52,732
Ending Balance, June 30, 2020	$	14,697	$	12,302	$	11,405	$	26,493	$	5,297	$	4,550	$	6,014	$	79,147	$	159,905


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

At June 30, 2020, the ACL was $159.9 million, an increase of $23.7 million from the January 1, 2020 balance of $136.2 million. The increase resulted primarily from the impact of reserve build for the COVID-19 pandemic including the change in macroeconomic forecasts, an increase in net charge-offs, mostly attributed to the commercial real estate non-owner occupied and other consumer portfolios, and portfolio growth mainly in the other consumer portfolio. Commercial real estate non-owner occupied charge-offs are attributable to two collateral dependent loans. Other consumer charge-offs are attributable to delinquencies and defaults of originated and purchased unsecured other consumer loans through arrangements with fintech companies and other market place lenders.

PPP loans include an embedded credit enhancement guarantee from the SBA, which guarantees 100% of all principal and interest owed by the borrower. Therefore, Customers did not include an ACL for PPP loans as of June 30, 2020.

Troubled Debt Restructurings

At June 30, 2020 and December 31, 2019, there were $14.8 million and $13.3 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. Customers had no lease receivables that had been restructured as a TDR as of June 30, 2020 and December 31, 2019, respectively.

The CARES Act and certain regulatory agencies recently issued guidance stating certain loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by COVID-19 may not be required to be treated as TDRs under U.S GAAP. For COVID-19 related loan modifications which met the loan modification criteria under either the CARES Act or the criteria specified by the regulatory agencies, Customers elected to suspend TDR accounting for such loan modifications. At June 30, 2020, commercial and consumer deferments related to COVID-19 were $974.0 million and $81.1 million, respectively.

The following table presents loans modified in a TDR by type of concession for the three and six months ended June 30, 2020 and 2019. There were no modifications that involved forgiveness of debt for the three and six months ended June 30, 2020 and 2019.


	Three Months Ended June 30,										Six Months Ended June 30,
	2020				2019					2020			2019
(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	2	$	140	—	$	—	6	$	385	2	$	514
Interest-rate reductions	20	843		2	47		32	1,373		12	432
Total	22	$	983	2	$	47	38	$	1,758	14	$	946

As of June 30, 2020, there were no commitments to lend additional funds to debtors whose loans have been modified in TDRs. As of December 31, 2019, there were no 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, 2020				June 30, 2019
(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment
Manufactured housing	—	$	—	3	$	108
Commercial and industrial	—	—		1	—
Commercial real estate owner occupied	1	958		—	—
Residential real estate	4	313		—	—

Total loans	5	$	1,271	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 ACL.

Purchased Credit-Deteriorated Loans

Customers adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration that were previously classified as PCI and accounted for under ASC 310-30. In accordance with the standard, Customers did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $0.2 million of the allowance for credit losses on PCD loans and leases. The remaining noncredit discount of $0.3 million, based on the adjusted amortized cost basis, will be accreted into interest income at the effective interest rate as of January 1, 2020. As of June 30, 2020, the amortized cost basis of PCD assets amounted to $15.7 million.

Credit Quality Indicators

The ACL represents management's estimate of expected losses in Customers' loans and leases receivable portfolio, excluding commercial mortgage warehouse loans reported at fair value pursuant to a fair value option election and PPP loans receivable. 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 as an input in the ACL lifetime loss rate model for the C&I portfolio, 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 2019 Form 10-K describes Customers Bancorp’s risk rating grades.

Risk ratings are not established for certain consumer loans, including residential real estate, 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 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, 2020 and December 31, 2019. PPP loans are excluded in the tables below as these loans are fully guaranteed by the SBA.


	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total






Multi-family loans:
Pass	$	124,920	$	23,534	$	170,856	$	417,942	$	264,780	$	507,568	$	—	$	—	$	1,509,600
Special mention	—		—		—		19,509		1,960		17,753		—		—		39,222
Substandard	—		—		—		12,006		13,862		7,149		—		—		33,017
Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family loans	$	124,920	$	23,534	$	170,856	$	449,457	$	280,602	$	532,470	$	—	$	—	$	1,581,839
Commercial and industrial loans and leases:
Pass	$	439,083	$	462,717	$	152,557	$	109,701	$	52,470	$	94,383	$	698,721	$	—	$	2,009,632
Special mention	—		7,258		2,297		17,402		116		25		17,957		—		45,055
Substandard	6,360		5,327		12,776		1,663		7,530		3,042		8,057		—		44,755
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans and leases	$	445,443	$	475,302	$	167,630	$	128,766	$	60,116	$	97,450	$	724,735	$	—	$	2,099,442
Commercial real estate owner occupied loans:
Pass	$	31,240	$	184,684	$	86,611	$	72,708	$	48,643	$	95,921	$	1,628	$	—	$	521,435
Special mention	—		—		480		9,484		—		392		—		—		10,356
Substandard	—		—		—		350		2,255		10,376		—		—		12,981
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate owner occupied loans	$	31,240	$	184,684	$	87,091	$	82,542	$	50,898	$	106,689	$	1,628	$	—	$	544,772






Commercial real estate non-owner occupied:
Pass	$	117,101	$	117,140	$	117,600	$	249,173	$	199,822	$	376,641	$	—	$	—	$	1,177,477
Special mention	—		—		—		—		—		10,477		—		—		10,477
Substandard	—		—		—		—		2,437		26,461		—		—		28,898
Doubtful	—		—		27,921		—		—		—		—		—		27,921
Total commercial real estate non-owner occupied loans	$	117,101	$	117,140	$	145,521	$	249,173	$	202,259	$	413,579	$	—	$	—	$	1,244,773
Construction:
Pass	$	4,862	$	88,550	$	23,358	$	—	$	9,803	$	—	$	2,261	$	—	$	128,834
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total construction loans	$	4,862	$	88,550	$	23,358	$	—	$	9,803	$	—	$	2,261	$	—	$	128,834
Total commercial loans and leases receivable	$	723,566	$	889,210	$	594,456	$	909,938	$	603,678	$	1,150,188	$	728,624	$	—	$	5,599,660
Residential real estate loans:
Performing	$	2,349	$	54,663	$	64,362	$	67,128	$	46,654	$	83,669	$	21,803	$	—	$	340,628
Non-performing	66		—		857		823		865		4,441		429		—		7,481
Total residential real estate loans	$	2,415	$	54,663	$	65,219	$	67,951	$	47,519	$	88,110	$	22,232	$	—	$	348,109
Manufactured housing loans:
Performing	$	—	$	311	$	640	$	80	$	43	$	62,072	$	—	$	—	$	63,146
Non-performing	—		—		—		—		—		3,719		—		—		3,719
Total manufactured housing loans	$	—	$	311	$	640	$	80	$	43	$	65,791	$	—	$	—	$	66,865
Other consumer loans:
Performing	$	165,436	$	943,581	$	135,926	$	6,034	$	648	$	1,292	$	32	$	—	$	1,252,949
Non-performing	243		3,610		853		23		—		135		—		—		4,864
Total other consumer loans	$	165,679	$	947,191	$	136,779	$	6,057	$	648	$	1,427	$	32	$	—	$	1,257,813
Total consumer loans	$	168,094	$	1,002,165	$	202,638	$	74,088	$	48,210	$	155,328	$	22,264	$	—	$	1,672,787
Loans and leases receivable	$	891,660	$	1,891,375	$	797,094	$	984,026	$	651,888	$	1,305,516	$	750,888	$	—	$	7,272,447


	December 31, 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	$	1,816,200	$	1,841,074	$	536,777	$	1,129,838	$	118,418	$	—	$	—	$	—	$	5,442,307
Special Mention	69,637		26,285		8,286		6,949		—		—		—		—		111,157
Substandard	23,437		22,621		6,944		86,742		—		—		—		—		139,744
Performing ⁽¹⁾	—		—		—		—		—		362,962		63,250		1,170,976		1,597,188
Non-performing ⁽²⁾	—		—		—		—		—		12,052		7,148		7,307		26,507
Total	$	1,909,274	$	1,889,980	$	552,007	$	1,223,529	$	118,418	$	375,014	$	70,398	$	1,178,283	$	7,316,903

(1)Includes residential real estate, manufactured housing, and other consumer loans not assigned internal 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, 2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
(amounts in thousands)	2020		2019		2020		2019
Purchases ⁽¹⁾





Residential real estate	$	—	$	39,474	$	495	$	105,858

Other consumer ⁽²⁾	18,008		384,116		209,768		450,252
Total	$	18,008	$	423,590	$	210,263	$	556,110
Sales ⁽³⁾







Other consumer	—		—		1,822		—
Total	$	—	$	—	$	1,822	$	—

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 98.5% and 100.6% of loans outstanding for the three months ended June 30, 2020 and 2019, respectively. The purchase price was 100.4% and 99.9% of loans outstanding for the six months ended June 30, 2020 and 2019, respectively.

(2)Other consumer loan purchases for the three and six months ended June 30, 2020 and 2019 consist of third-party originated unsecured consumer loans. None of the loans are considered sub-prime at the time of origination. 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 in the three and six months ended June 30, 2019.

Loans Pledged as Collateral

Customers has pledged eligible real estate and commercial and industrial loans as collateral for borrowings from the FHLB and FRB in the amount of $8.5 billion and $4.6 billion at June 30, 2020 and December 31, 2019, respectively. The increase in loans pledged as collateral relates to $4.4 billion of PPP loans that were pledged to the FRB in accordance with borrowing from the PPPLF.