Loans and Leases Receivable and Allowance for Credit Losses

9 Months Ended

Sep. 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 September 30, 2020 and December 31, 2019.


(amounts in thousands)	September 30, 2020		December 31, 2019
Loans and leases receivable, mortgage warehouse, at fair value	$	3,913,593	$	2,245,758
Loans receivable, PPP	4,964,105		—
Loans receivable:
Commercial:
Multi-family	1,950,300		1,907,331
Commercial and industrial (1)	2,220,715		1,891,152
Commercial real estate owner occupied	557,595		551,948
Commercial real estate non-owner occupied	1,215,516		1,222,772
Construction	122,963		117,617
Total commercial loans and leases receivable	6,067,089		5,690,820
Consumer:
Residential real estate	335,452		382,634
Manufactured housing	64,638		71,359
Installment	1,233,713		1,174,175
Total consumer loans receivable	1,633,803		1,628,168
Loans and leases receivable (2)	7,700,892		7,318,988

Allowance for credit losses	(155,561)		(56,379)
Total loans and leases receivable, net of allowance for credit losses	$	16,423,029	$	9,508,367

(1)Includes direct finance equipment leases of $106.5 million and $89.2 million at September 30, 2020 and December 31, 2019, respectively.

(2)Includes deferred (fees) costs and unamortized (discounts) premiums, net of $(74.7) million and $2.1 million at September 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 $61.9 million and $34.8 million at September 30, 2020

and December 31, 2019, respectively, and is presented in accrued interest receivable in the consolidated balance sheet. At September 30, 2020, there were $32.1 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 $5.0 billion of PPP loans outstanding as of September 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 $24.3 million and $36.0 million for the three and nine months ended September 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 September 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 September 30, 2020 and December 31, 2019:


	September 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	$	—	$	15,446	$	4,790	$	20,236	$	1,930,064	$	1,950,300
Commercial and industrial	—		2,072		7,695		9,767		2,210,948		2,220,715

Commercial real estate owner occupied	—		952		2,436		3,388		554,207		557,595
Commercial real estate non-owner occupied	—		—		2,356		2,356		1,213,160		1,215,516
Construction	—		—		—		—		122,963		122,963
Residential real estate	436		3,160		6,327		9,923		325,529		335,452
Manufactured housing	784		608		4,463		5,855		58,783		64,638
Installment	5,468		4,609		3,098		13,175		1,220,538		1,233,713
Total	$	6,688	$	26,847	$	31,165	$	64,700	$	7,636,192	$	7,700,892


	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
Installment	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 September 30, 2020 table excludes PPP loans of $5.0 billion which are all current as of September 30, 2020.

(3)Includes purchased credit deteriorated loans of $14.4 million at September 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 September 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 September 30, 2020 and December 31, 2019, the Bank had initiated foreclosure proceedings on $0.5 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.


	September 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	$	8,749	$	2,961	$	11,710	$	4,117	$	—	$	4,117
Commercial and industrial	8,749		884		9,633		3,083		1,448		4,531

Commercial real estate owner occupied	3,399		200		3,599		1,109		854		1,963
Commercial real estate non-owner occupied	2,408		—		2,408		76		—		76

Residential real estate	10,634		—		10,634		4,559		1,569		6,128
Manufactured housing	—		2,778		2,778		—		1,655		1,655
Installment	—		3,118		3,118		140		1,411		1,551
Total	$	33,939	$	9,941	$	43,880	$	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 recognized on nonaccrual loans was insignificant during the three and nine months ended September 30, 2020. Accrued interest of $1.2 million was reversed when the loans went to nonaccrual status during the nine months ended September 30, 2020.

Allowance for credit losses on loans and leases

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


Three Months Ended September 30, 2020	Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
(amounts in thousands)
Ending Balance, June 30, 2020	$	14,697	$	12,302	$	11,405	$	26,493	$	5,297	$	4,550	$	6,014	$	79,147	$	159,905


Charge-offs	—		(2,527)		(44)		(10,181)		—		—		—		(9,194)		(21,946)
Recoveries	—		2,582		—		1,258		6		17		—		784		4,647
Provision for credit loss expense	329		569		(1,809)		2,630		1,120		82		(389)		10,423		12,955
Ending Balance, September 30, 2020	$	15,026	$	12,926	$	9,552	$	20,200	$	6,423	$	4,649	$	5,625	$	81,160	$	155,561
Nine Months Ended September 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	—		(2,645)		(44)		(25,779)		—		—		—		(23,744)		(52,212)
Recoveries	—		2,661		5		1,258		122		72		—		1,759		5,877
Provision for loan and lease losses	6,698		(3,405)		1,583		30,560		5,137		(159)		763		24,511		65,688
Ending Balance, September 30, 2020	$	15,026	$	12,926	$	9,552	$	20,200	$	6,423	$	4,649	$	5,625	$	81,160	$	155,561


Three Months Ended September 30, 2019	Multi-family		Commercial and industrial		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Construction		Residential real estate		Manufactured housing		Installment		Total
(amounts in thousands)
Ending Balance, June 30, 2019	$	9,926	$	13,736	$	3,360	$	6,159	$	649	$	4,168	$	123	$	10,267	$	48,388
Charge-offs	—		(349)		(45)		—		—		—		—		(1,806)		(2,200)

Recoveries	—		369		10		—		8		5		—		47		439
Provision for loan and lease losses	(2,428)		2,119		(435)		281		1		(90)		904		4,074		4,426
Ending Balance, September 30, 2019	$	7,498	$	15,875	$	2,890	$	6,440	$	658	$	4,083	$	1,027	$	12,582	$	51,053
Nine Months Ended September 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)		(532)		(119)		—		—		(109)		—		(3,493)		(4,794)

Recoveries	7		826		235		—		128		20		—		120		1,336
Provision for loan and lease losses	(3,430)		3,436		(546)		347		(94)		518		882		13,426		14,539
Ending Balance, September 30, 2019	$	7,498	$	15,875	$	2,890	$	6,440	$	658	$	4,083	$	1,027	$	12,582	$	51,053

At September 30, 2020, the ACL was $155.6 million, an increase of $19.4 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 installment portfolios, and portfolio growth mainly in the installment portfolio. Commercial real estate non-owner occupied charge-offs are attributable to two collateral dependent loans. Installment charge-offs are attributable to delinquencies and defaults of originated and purchased unsecured consumer installment 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 September 30, 2020.

Troubled Debt Restructurings

At September 30, 2020 and December 31, 2019, there were $16.1 million and $13.3 million, respectively, in loans reported as TDRs. TDRs are reported as impaired loans in the quarter of their restructuring and are evaluated to determine whether they should be placed on non-accrual status. In subsequent quarters, 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 September 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 September 30, 2020, commercial and consumer deferments related to COVID-19 were $79.0 million and $25.0 million, respectively.

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


	Three Months Ended September 30,						Nine Months Ended September 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	—	$	—	—	$	—	6	$	385	2	$	514
Interest-rate reductions	2	88		7	196		34	1,461		19	628
Other (1)	65	1,385		—	—		65	1,385		—	—
Total	67	$	1,473	7	$	196	105	$	3,231	21	$	1,142

(1) Other includes covenant modifications, forbearance, loans discharged under Chapter 7 bankruptcy, or other concessions.

As of September 30, 2020 and 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:


	September 30, 2020			September 30, 2019
(dollars in thousands)	Number of loans	Recorded investment		Number of loans	Recorded investment
Manufactured housing	5	$	201	3	$	76

Commercial real estate owner occupied	1	952		—	—
Residential real estate	1	95		1	82
Installment	8	$	126	—	$	—
Total loans	15	$	1,374	4	$	158

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 September 30, 2020, the amortized cost basis of PCD assets amounted to $14.4 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 installment 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 September 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	$	139,734	$	23,396	$	305,351	$	626,402	$	271,981	$	485,023	$	—	$	—	$	1,851,887
Special mention	—		—		—		22,430		10,424		26,836		—		—		59,690
Substandard	—		—		—		17,859		13,799		7,065		—		—		38,723
Doubtful	—		—		—		—		—		—		—		—		—
Total multi-family loans	$	139,734	$	23,396	$	305,351	$	666,691	$	296,204	$	518,924	$	—	$	—	$	1,950,300
Commercial and industrial loans and leases:
Pass	$	564,313	$	418,961	$	153,659	$	118,548	$	48,470	$	81,179	$	739,151	$	—	$	2,124,281
Special mention	13,200		1,193		222		14,739		112		15,348		1,315		—		46,129
Substandard	6,421		9,037		14,343		1,611		8,084		2,925		7,884		—		50,305
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial loans and leases	$	583,934	$	429,191	$	168,224	$	134,898	$	56,666	$	99,452	$	748,350	$	—	$	2,220,715
Commercial real estate owner occupied loans:
Pass	$	46,303	$	185,921	$	88,291	$	71,438	$	48,202	$	93,679	$	741	$	—	$	534,575
Special mention	—		—		478		9,260		—		245		—		—		9,983
Substandard	—		—		—		347		2,243		10,447		—		—		13,037
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate owner occupied loans	$	46,303	$	185,921	$	88,769	$	81,045	$	50,445	$	104,371	$	741	$	—	$	557,595






Commercial real estate non-owner occupied:
Pass	$	135,589	$	113,247	$	116,794	$	225,952	$	197,116	$	346,107	$	—	$	—	$	1,134,805
Special mention	—		—		—		—		—		10,559		—		—		10,559
Substandard	—		—		—		20,611		2,419		47,122		—		—		70,152
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate non-owner occupied loans	$	135,589	$	113,247	$	116,794	$	246,563	$	199,535	$	403,788	$	—	$	—	$	1,215,516
Construction:
Pass	$	8,679	$	98,231	$	4,571	$	—	$	9,768	$	—	$	1,714	$	—	$	122,963
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total construction loans	$	8,679	$	98,231	$	4,571	$	—	$	9,768	$	—	$	1,714	$	—	$	122,963
Total commercial loans and leases receivable	$	914,239	$	849,986	$	683,709	$	1,129,197	$	612,618	$	1,126,535	$	750,805	$	—	$	6,067,089
Residential real estate loans:
Performing	$	7,514	$	15,252	$	7,647	$	12,246	$	42,883	$	78,365	$	161,575	$	—	$	325,482
Non-performing	—		—		160		785		1,350		4,395		3,280		—		9,970
Total residential real estate loans	$	7,514	$	15,252	$	7,807	$	13,031	$	44,233	$	82,760	$	164,855	$	—	$	335,452
Manufactured housing loans:
Performing	$	—	$	307	$	632	$	79	$	42	$	59,193	$	—	$	—	$	60,253
Non-performing	—		—		—		—		—		4,385		—		—		4,385
Total manufactured housing loans	$	—	$	307	$	632	$	79	$	42	$	63,578	$	—	$	—	$	64,638
Installment loans:
Performing	$	318,780	$	790,192	$	115,024	$	4,726	$	513	$	1,201	$	—	$	—	$	1,230,436
Non-performing	305		2,326		485		41		2		118		—		—		3,277
Total installment loans	$	319,085	$	792,518	$	115,509	$	4,767	$	515	$	1,319	$	—	$	—	$	1,233,713
Total consumer loans	$	326,599	$	808,077	$	123,948	$	17,877	$	44,790	$	147,657	$	164,855	$	—	$	1,633,803
Loans and leases receivable	$	1,240,838	$	1,658,063	$	807,657	$	1,147,074	$	657,408	$	1,274,192	$	915,660	$	—	$	7,700,892


	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		Installment		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 installment loans not assigned internal ratings.

(2)Includes residential real estate, manufactured housing, and installment 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 nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,				Nine Months Ended September 30,
(amounts in thousands)	2020		2019		2020		2019
Purchases (1)





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

Installment (2)	15,700		83,898		225,468		534,150
Total	$	15,700	$	83,898	$	225,963	$	640,008
Sales (3)

Commercial and industrial	$	3,968	$	—	$	3,968	$	—

Commercial real estate non-owner occupied	$	17,600	$	—	$	17,600	$	—



Installment	—		—		1,822		—
Total	$	21,568	$	—	$	23,390	$	—

(1)Amounts reported in the above table are the unpaid principal balance at time of purchase. The purchase price was 98.1% and 96.3% of loans outstanding for the three months ended September 30, 2020 and 2019, respectively. The purchase price was 100.2% and 99.4% of loans outstanding for the nine months ended September 30, 2020 and 2019, respectively.

(2)Installment loan purchases for the three and nine months ended September 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 nine months ended September 30, 2019.

During September 2020, Customers sold a collateral dependent loan secured by a Class A office building in northern New Jersey for $17.6 million equal to the loan's carrying value at the date of sale.

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 $8.9 billion and $4.6 billion at September 30, 2020 and December 31, 2019, respectively. The increase in loans pledged as collateral relates to $4.8 billion of PPP loans that were pledged to the FRB in accordance with borrowing from the PPPLF.