Document
United States  
Securities and Exchange Commission 
Washington, D.C. 20549 
 
FORM 10-Q
[X]
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
for the quarterly period ended: March 31, 2019
 
or
[  ]
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
for the transition period from                                        to                                       .
 
Commission File Number: 001-34624 
 
Umpqua Holdings Corporation 
(Exact Name of Registrant as Specified in Its Charter)
OREGON 
93-1261319 
(State or Other Jurisdiction
(I.R.S. Employer Identification Number)
of Incorporation or Organization)
 
 
One SW Columbia Street, Suite 1200 
Portland, Oregon 97258 
(Address of Principal Executive Offices)(Zip Code) 
 
(503) 727-4100 
(Registrant's Telephone Number, Including Area Code) 

Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS
TRADING SYMBOL
NAME OF EXCHANGE
Common Stock
UMPQ
The NASDAQ Global Select Market
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    [X]   Yes   [  ]   No 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    [X]   Yes   [  ]   No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
[X]   Large accelerated filer   [  ]   Accelerated filer   [ ]   Non-accelerated filer  
 [  ]   Smaller reporting company  [  ]  Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. [  ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ]   Yes   [X]   No 
 
Indicate the number of shares outstanding for each of the issuer's classes of common stock, as of the latest practical date:
Common stock, no par value: 220,483,700 shares outstanding as of April 30, 2019

Table of Contents

UMPQUA HOLDINGS CORPORATION 
FORM 10-Q 
Table of Contents 
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2
Table of Contents

PART I.        FINANCIAL INFORMATION
Item 1.        Financial Statements (unaudited) 

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(in thousands, except shares)
March 31, 2019
 
December 31, 2018
ASSETS
 
 
 
Cash and due from banks (restricted cash of $55,649 and $37,408)
$
296,967

 
$
335,419

Interest bearing cash and temporary investments (restricted cash of $2,630 and $1,232)
605,841

 
287,218

Total cash and cash equivalents
902,808

 
622,637

Investment securities
 
 
 
Equity and other, at fair value
63,327

 
61,841

Available for sale, at fair value
2,894,778

 
2,977,108

Held to maturity, at amortized cost
3,478

 
3,606

Loans held for sale, at fair value
240,302

 
166,461

Loans and leases
20,405,997

 
20,422,666

Allowance for loan and lease losses
(144,872
)
 
(144,871
)
Net loans and leases
20,261,125

 
20,277,795

Restricted equity securities
47,466

 
40,268

Premises and equipment, net
217,595

 
227,423

Operating lease right-of-use assets
109,807

 
—

Goodwill
1,787,651

 
1,787,651

Other intangible assets, net
22,560

 
23,964

Residential mortgage servicing rights, at fair value
158,946

 
169,025

Other real estate owned
10,488

 
10,958

Bank owned life insurance
314,303

 
313,626

Other assets
320,991

 
257,418

Total assets
$
27,355,625

 
$
26,939,781

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Deposits
 
 
 
Noninterest bearing
$
6,495,562

 
$
6,667,467

Interest bearing
14,748,332

 
14,470,019

Total deposits
21,243,894

 
21,137,486

Securities sold under agreements to repurchase
288,944

 
297,151

Term debt
932,420

 
751,788

Junior subordinated debentures, at fair value
294,121

 
300,870

Junior subordinated debentures, at amortized cost
88,667

 
88,724

Operating lease liabilities
118,520

 
—

Deferred tax liability, net
45,202

 
25,846

Other liabilities
231,531

 
281,474

Total liabilities
23,243,299

 
22,883,339

COMMITMENTS AND CONTINGENCIES (NOTE 6)

 

SHAREHOLDERS' EQUITY
 
 
 
Common stock, no par value, shares authorized: 400,000,000 in 2019 and 2018; issued and outstanding: 220,457,208 in 2019 and 220,255,039 in 2018
3,511,731

 
3,512,874

Retained earnings
629,877

 
602,482

Accumulated other comprehensive loss
(29,282
)
 
(58,914
)
Total shareholders' equity
4,112,326

 
4,056,442

Total liabilities and shareholders' equity
$
27,355,625

 
$
26,939,781


See notes to condensed consolidated financial statements

3
Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(UNAUDITED) 

(in thousands, except per share amounts)
Three Months Ended
 
March 31, 2019
 
March 31, 2018
INTEREST INCOME
 
 
 
Interest and fees on loans and leases
$
258,747

 
$
229,488

Interest and dividends on investment securities:
 
 
 
Taxable
19,956

 
15,699

Exempt from federal income tax
2,114

 
2,128

Dividends
517

 
468

Interest on temporary investments and interest bearing deposits
925

 
1,164

Total interest income
282,259

 
248,947

INTEREST EXPENSE
 
 
 
Interest on deposits
34,094

 
15,610

Interest on securities sold under agreement to repurchase and federal funds purchased
810

 
63

Interest on term debt
3,683

 
3,361

Interest on junior subordinated debentures
5,987

 
4,932

Total interest expense
44,574

 
23,966

Net interest income
237,685

 
224,981

PROVISION FOR LOAN AND LEASE LOSSES 
13,684

 
13,656

Net interest income after provision for loan and lease losses
224,001

 
211,325

NON-INTEREST INCOME
 
 
 
Service charges on deposits
15,278

 
14,995

Brokerage revenue
3,810

 
4,194

Residential mortgage banking revenue, net
11,231

 
38,438

Unrealized holding gains on equity securities
695

 
—

Gain on loan sales, net
769

 
1,230

BOLI income
2,168

 
2,070

Other income
11,789

 
17,640

Total non-interest income
45,740

 
78,567

NON-INTEREST EXPENSE
 
 
 
Salaries and employee benefits
100,658

 
106,551

Occupancy and equipment, net
36,245

 
38,661

Communications
4,220

 
4,433

Marketing
2,726

 
1,800

Services
12,210

 
15,061

FDIC assessments
2,942

 
4,480

Gain on other real estate owned, net
(51
)
 
(38
)
Intangible amortization
1,404

 
1,541

Other expenses
11,238

 
13,624

Total non-interest expense
171,592

 
186,113

Income before provision for income taxes
98,149

 
103,779

Provision for income taxes
24,116

 
24,807

Net income
$
74,033

 
$
78,972

Earnings per common share:
 
 
 
Basic
$0.34
 
$0.36
Diluted
$0.34
 
$0.36
Weighted average number of common shares outstanding:
 
 
 
Basic
220,366

 
220,370

Diluted
220,655

 
220,825




4
Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
(UNAUDITED) 
 
(in thousands)
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Net income
$
74,033

 
$
78,972

Available for sale securities:
 
 
 
Unrealized gains (losses) arising during the period
33,269

 
(42,190
)
Income tax (expense) benefit related to unrealized gains (losses)
(8,557
)
 
10,771

Net change in unrealized gains (losses) for available for sale securities
24,712

 
(31,419
)
 
 
 
 
Junior subordinated debentures, at fair value:
 
 
 
Unrealized gains (losses) arising during the period
6,564

 
(1,683
)
Income tax (expense) benefit related to unrealized gains (losses)
(1,644
)
 
430

Net change in unrealized gains (losses) for junior subordinated debentures, at fair value
4,920

 
(1,253
)
Other comprehensive income (loss), net of tax
29,632

 
(32,672
)
Comprehensive income
$
103,665

 
$
46,300


See notes to condensed consolidated financial statements

5
Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY  
(UNAUDITED)   

(in thousands, except shares)
Common Stock
 
 
 
Accumulated Other Comprehensive Income (Loss)
 
 
 
Shares
 
Amount
 
Retained Earnings
 
 
Total
Balance at January 1, 2018
220,148,824

 
$
3,517,258

 
$
477,101

 
$
(24,992
)
 
$
3,969,367

Net income
 

 
 

 
78,972

 
 

 
78,972

Other comprehensive loss, net of tax
 

 
 

 
 

 
(32,672
)
 
(32,672
)
Stock-based compensation
 

 
1,829

 
 

 
 

 
1,829

Stock repurchased and retired
(201,473
)
 
(4,340
)
 
 

 
 

 
(4,340
)
Issuances of common stock under stock plans
513,485

 
759

 
 

 
 

 
759

Cash dividends on common stock ($0.20 per share)
 

 
 

 
(44,149
)
 
 

 
(44,149
)
Junior subordinated debentures, at fair value, cumulative effect adjustment (1)
 
 
 
 
(9,710
)
 
9,710

 
—

Balance at March 31, 2018
220,460,836

 
$
3,515,506

 
$
502,214

 
$
(47,954
)
 
$
3,969,766

Net income
 

 
 

 
65,999

 
 

 
65,999

Other comprehensive loss, net of tax
 

 
 

 
 

 
(4,136
)
 
(4,136
)
Stock-based compensation
 

 
1,550

 
 

 
 

 
1,550

Stock repurchased and retired
(334,854
)
 
(8,167
)
 
 

 
 

 
(8,167
)
Issuances of common stock under stock plans
78,709

 
257

 
 

 
 

 
257

Cash dividends on common stock ($0.20 per share)
 

 
 

 
(44,182
)
 
 

 
(44,182
)
Balance at June 30, 2018
220,204,691

 
$
3,509,146

 
$
524,031

 
$
(52,090
)
 
$
3,981,087

Net income
 

 
 

 
90,981

 
 

 
90,981

Other comprehensive loss, net of tax
 

 
 

 
 

 
(23,585
)
 
(23,585
)
Stock-based compensation
 

 
2,140

 
 

 
 

 
2,140

Stock repurchased and retired
(17,784
)
 
(386
)
 
 

 
 

 
(386
)
Issuances of common stock under stock plans
51,324

 
49

 
 

 
 

 
49

Cash dividends on common stock ($0.21 per share)
 

 
 

 
(46,393
)
 
 

 
(46,393
)
Balance at September 30, 2018
220,238,231

 
$
3,510,949

 
$
568,619

 
$
(75,675
)
 
$
4,003,893

Net income
 
 
 
 
80,311

 
 
 
80,311

Other comprehensive income, net of tax
 
 
 
 
 
 
16,761

 
16,761

Stock-based compensation
 
 
1,994

 
 
 
 
 
1,994

Stock repurchased and retired
(3,537
)
 
(69
)
 
 
 
 
 
(69
)
Issuances of common stock under stock plans
20,345

 
—

 
 
 
 
 
—

Cash dividends on common stock ($0.21 per share)
 
 
 
 
(46,448
)
 
 
 
(46,448
)
Balance at December 31, 2018
220,255,039

 
$
3,512,874

 
$
602,482

 
$
(58,914
)
 
$
4,056,442















6
Table of Contents


UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Continued)
(UNAUDITED) 

(in thousands, except shares)
Common Stock
 
 
 
Accumulated Other Comprehensive Income (Loss)
 
 
 
Shares
 
Amount
 
Retained Earnings
 
 
Total
Balance at January 1, 2019
220,255,039

 
$
3,512,874

 
$
602,482

 
$
(58,914
)
 
$
4,056,442

Net income
 
 
 
 
74,033

 
 
 
74,033

Other comprehensive income, net of tax
 
 
 
 
 
 
29,632

 
29,632

Stock-based compensation
 
 
754

 
 
 
 
 
754

Stock repurchased and retired
(108,088
)
 
(1,918
)
 
 
 
 
 
(1,918
)
Issuances of common stock under stock plans
310,257

 
21

 
 
 
 
 
21

Cash dividends on common stock ($0.21 per share)
 
 
 
 
(46,394
)
 
 
 
(46,394
)
Leases, cumulative effect adjustment (2)
 
 
 
 
(244
)
 
 
 
(244
)
Balance at March 31, 2019
220,457,208

 
$
3,511,731

 
$
629,877

 
$
(29,282
)
 
$
4,112,326


(1) The cumulative effect adjustment from retained earnings to accumulated other comprehensive income (loss) relating to the implementation of new accounting guidance for the junior subordinated debentures that the Company previously elected to fair value on a recurring basis.

(2) The cumulative effect adjustment relates to the implementation of new accounting guidance for leases. Refer to Note 1 for discussion of the new accounting guidance.


See notes to condensed consolidated financial statements


7
Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(UNAUDITED) 
(in thousands)
Three Months Ended
 
March 31, 2019
 
March 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
74,033

 
$
78,972

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Amortization of investment premiums, net
1,829

 
5,907

Gain on sale of other real estate owned, net
(110
)
 
(43
)
Valuation adjustment on other real estate owned
59

 
5

Provision for loan and lease losses
13,684

 
13,656

Change in cash surrender value of bank owned life insurance
(2,135
)
 
(2,105
)
Depreciation, amortization and accretion
11,554

 
13,943

Gain on sale of premises and equipment
(195
)
 
(1,341
)
Gain on store divestiture
(1,225
)
 
—

Additions to residential mortgage servicing rights carried at fair value
(3,887
)
 
(6,530
)
Change in fair value of residential mortgage servicing rights carried at fair value
13,966

 
(5,079
)
Gain on redemption of junior subordinated debentures at amortized cost
—

 
(1,043
)
Stock-based compensation
754

 
1,829

Net increase in equity and other investments
(791
)
 
(107
)
Holding gains on equity securities
(695
)
 
—

Gain on sale of loans, net
(13,025
)
 
(14,508
)
Change in fair value of loans held for sale
(2,793
)
 
306

Origination of loans held for sale
(487,090
)
 
(687,226
)
Proceeds from sales of loans held for sale
428,298

 
659,977

Change in other assets and liabilities:
 
 
 
Net (increase) decrease in other assets
(56,976
)
 
10,116

Net (decrease) increase in other liabilities
(28,872
)
 
2,261

Net cash (used in) provided by operating activities
(53,617
)
 
68,990

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of investment securities available for sale
(5,953
)
 
(89,145
)
Proceeds from investment securities available for sale
119,381

 
107,908

Proceeds from investment securities held to maturity
174

 
172

Purchases of restricted equity securities
(205,400
)
 
—

Redemption of restricted equity securities
198,202

 
7

Net change in loans and leases
(23,868
)
 
(276,481
)
Proceeds from sales of loans
15,848

 
21,629

Change in premises and equipment
(2,365
)
 
(462
)
Proceeds from bank owned life insurance death benefits
1,550

 
—

Proceeds from sales of other real estate owned
616

 
161

Net cash paid in store divestiture
(44,646
)
 
—

Net cash provided by (used in) investing activities
$
53,539

 
$
(236,211
)
 
 
 
 

8
Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) 
(UNAUDITED)
(in thousands)
Three Months Ended
 
March 31, 2019
 
March 31, 2018
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Net increase in deposit liabilities
$
155,937

 
$
158,771

Net decrease in securities sold under agreements to repurchase
(8,207
)
 
(2,315
)
   Proceeds from term debt borrowings
230,670

 
50,000

Repayment of term debt borrowings
(50,000
)
 
(50,513
)
Repayment of junior subordinated debentures at amortized cost
—

 
(10,598
)
Dividends paid on common stock
(46,254
)
 
(39,634
)
Proceeds from stock options exercised
21

 
759

Repurchase and retirement of common stock
(1,918
)
 
(4,340
)
Net cash provided by financing activities
280,249

 
102,130

Net increase (decrease) in cash and cash equivalents
280,171

 
(65,091
)
Cash and cash equivalents, beginning of period
622,637

 
634,280

Cash and cash equivalents, end of period
$
902,808

 
$
569,189

 
 
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 

 
 

Cash paid during the period for:
 

 
 

Interest
$
44,026

 
$
23,489

Income taxes
$
34,383

 
$
11,440

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
Change in unrealized gains on investment securities available for sale, net of taxes
$
24,712

 
$
(31,419
)
Change in unrealized gains on junior subordinated debentures carried at fair value, net of taxes
$
4,920

 
$
(1,253
)
Junior subordinated debentures, at fair value, cumulative effect adjustment
$
—

 
$
9,710

Cash dividend declared on common stock and payable after period-end
$
46,297

 
$
44,016

Change in GNMA mortgage loans recognized due to repurchase option
$
(8,760
)
 
$
(6,152
)
Transfer of loans to other real estate owned
$
95

 
$
1,444

Change in receivable from BOLI death benefits
$
(92
)
 
$
1,224



See notes to condensed consolidated financial statements
 

9
Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Summary of Significant Accounting Policies 
 
The accounting and financial reporting policies of Umpqua Holdings Corporation conform to accounting principles generally accepted in the United States of America. The accompanying interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All inter-company balances and transactions have been eliminated. The condensed consolidated financial statements have not been audited. A more detailed description of our accounting policies is included in the 2018 Annual Report filed on Form 10-K. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the 2018 Annual Report filed on Form 10-K. All references in this report to "Umpqua," "we," "our," "us," the "Company" or similar references mean Umpqua Holdings Corporation and include our consolidated subsidiaries where the context so requires. References to "Bank" refer to our subsidiary Umpqua Bank, an Oregon state-chartered commercial bank, and references to "Umpqua Investments" refer to our subsidiary Umpqua Investments, Inc., a registered broker-dealer and investment adviser. The Bank also has a wholly-owned subsidiary, Financial Pacific Leasing Inc. ("FinPac"), a commercial equipment leasing company.
 
In preparing these condensed consolidated financial statements, the Company has evaluated events and transactions subsequent to March 31, 2019 for potential recognition or disclosure. In management's opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments include normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim period. 

Correction of Prior Period Balances

Subsequent to the issuance of the Company's March 31, 2018 condensed consolidated financial statements, the Company's management determined that the calculation and corresponding recognition of the accretion of the purchase accounting discount on the loans acquired from Sterling Financial Corporation (ASC 310-20 loans) that were not impaired was calculated in a manner that was considered to be inconsistent with accounting principles generally accepted in the United States of America as indicated in ASC 310-20. As a result, the financial statements have been restated to reflect the correction of the difference in accretion/amortization related to the loans acquired. Management believes that the effect of this restatement is not material to our previously issued consolidated financial statements. As a result, the condensed consolidated statement of income has been revised to reflect this change to the applicable line items as follows.

 (in thousands, except per share amounts)
Three Months Ended March 31, 2018
As Originally Reported
 
Adjustment
 
As Revised
Interest and fees on loans and leases
$
227,738

 
$
1,750

 
$
229,488

Total interest income
247,197

 
1,750

 
248,947

Net interest income
223,231

 
1,750

 
224,981

Net interest income after provision for loan and lease losses
209,575

 
1,750

 
211,325

Income before provision for income taxes
102,029

 
1,750

 
103,779

Provision for income taxes
24,360

 
447

 
24,807

Net income
$
77,669

 
$
1,303

 
$
78,972

Earnings per common share:
 
 
 
 
 
Basic
$0.35
 
$0.01
 
$0.36
Diluted
$0.35
 
$0.01
 
$0.36

The condensed consolidated statement of changes in stockholders' equity and condensed consolidated statement of comprehensive income have been updated to reflect the change in net income for the three months ended March 31, 2018. Comprehensive income increased by $1.3 million for the three months ended March 31, 2018 to $46.3 million. The condensed consolidated statement of cash flows has also been updated to reflect these changes, resulting in an increase in cash flows provided by operating activities for March 31, 2018 of $1.8 million to reflect the increase in net income and the change in other liabilities (deferred tax liability) and a corresponding increase in the cash flows used in investing activities of $1.8 million for March 31, 2018 as part of the net change in loans and leases.

10
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Application of new accounting guidance

As of January 1, 2019, Umpqua adopted the Financial Accounting Standard Board's ("FASB") Accounting Standard Update ("ASU") No. 2016-02, Leases (Topic 842) as well as additional ASUs for enhancement, clarification or transition of the new lease standard (collectively "ASC 842"). ASC 842 requires lessees, among other things, to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous authoritative guidance. This update also introduces new disclosure requirements for leasing arrangements. Refer to Note 11 - Leases for further discussion of Umpqua's accounting policies for leases within the scope of ASC 842.

ASC 842 provides for a number of practical expedients in transition. We have elected the package of practical expedients, which permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easement; the latter not being applicable to us. The Company also did not elect the practical expedient to not separate lease and non-lease components on our real estate leases where we are the lessee.

In addition, ASC 842 provides practical expedients for an entity's ongoing accounting. The Company has elected the short-term lease recognition exemption for certain leases. This means, for those leases that have a term of less than 12 months, we will not recognize right-of-use ("ROU") assets or lease liabilities.

Umpqua adopted ASC 842 using the prospective approach without corresponding changes in the comparable prior periods. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. Adoption of the new standard resulted in the recognition of new lease ROU assets of $109.8 million and lease liabilities of $118.5 million on the balance sheet for our operating leases as of March 31, 2019. The difference between the additional lease assets and lease liabilities, net of the deferred tax impact, was recorded as an adjustment to retained earnings. This standard did not materially impact our consolidated net income and had no impact on cash flows.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (A Consensus of the FASB Emerging Issues Task Force). This ASU reduces complexity for the accounting for costs of implementing a cloud computing service arrangement. This ASU aligns the requirements for capitalization of implementation costs incurred in a hosting arrangement that is a service contract with those incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The ASU requires an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Costs to develop or obtain internal use software that cannot be capitalized under subtopic 350-40, such as training costs and certain data conversion costs, also cannot be capitalized for a hosting arrangement that is a service contract. The capitalized costs will be amortized over the life of the service contract. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company early adopted the ASU as of January 1, 2019 and will apply the new standard prospectively. The guidance did not have a material impact on the Company's consolidated financial statements.


11
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Recent accounting pronouncements 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for certain financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates, but will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for specified periods. The Company has an established cross-functional team and project management governance process in place to manage implementation of this new guidance. The team continues to work on implementation and is finalizing model build and validation, documenting process flow and controls, and has begun parallel runs.  The new guidance may result in an increase in the allowance for loan and lease losses; however, the Company is still in the process of determining the magnitude of the change and its impact on the Company's consolidated financial statements.

Note 2 – Investment Securities 
 
The following tables present the amortized costs, unrealized gains, unrealized losses and approximate fair values of investment securities at March 31, 2019 and December 31, 2018: 
 (in thousands)
March 31, 2019
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
AVAILABLE FOR SALE:
 

 
 

 
 

 
 

U.S. Treasury and agencies
$
19,998

 
$
—

 
$
(209
)
 
$
19,789

Obligations of states and political subdivisions
300,704

 
5,630

 
(671
)
 
305,663

Residential mortgage-backed securities and collateralized mortgage obligations
2,609,586

 
7,082

 
(47,342
)
 
2,569,326

 
$
2,930,288

 
$
12,712

 
$
(48,222
)
 
$
2,894,778

HELD TO MATURITY:
 
 
 
 
 
 
 
Residential mortgage-backed securities and collateralized mortgage obligations
$
3,478

 
$
1,039

 
$
—

 
$
4,517

 
$
3,478

 
$
1,039

 
$
—

 
$
4,517


 (in thousands)
December 31, 2018
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
AVAILABLE FOR SALE:
 
 
 
 
 
 
 
U.S. Treasury and agencies
$
40,002

 
$
—

 
$
(346
)
 
$
39,656

Obligations of states and political subdivisions
308,972

 
2,785

 
(2,586
)
 
309,171

Residential mortgage-backed securities and collateralized mortgage obligations
2,696,913

 
3,590

 
(72,222
)
 
2,628,281

 
$
3,045,887

 
$
6,375

 
$
(75,154
)
 
$
2,977,108

HELD TO MATURITY:
 
 
 
 
 
 
 
Residential mortgage-backed securities and collateralized mortgage obligations
$
3,606

 
$
1,038

 
$
—

 
$
4,644

 
$
3,606

 
$
1,038

 
$
—

 
$
4,644



12
Table of Contents

Investment securities that were in an unrealized loss position as of March 31, 2019 and December 31, 2018 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position.
 (in thousands)
March 31, 2019
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
AVAILABLE FOR SALE:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agencies
$
—

 
$
—

 
$
19,789

 
$
209

 
$
19,789

 
$
209

Obligations of states and political subdivisions
—

 
—

 
35,434

 
671

 
35,434

 
671

Residential mortgage-backed securities and collateralized mortgage obligations
90,992

 
1,148

 
2,090,133

 
46,194

 
2,181,125

 
47,342

Total temporarily impaired securities
$
90,992

 
$
1,148

 
$
2,145,356

 
$
47,074

 
$
2,236,348

 
$
48,222


 (in thousands)
December 31, 2018
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
AVAILABLE FOR SALE:
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury and agencies
$
—

 
$
—

 
$
39,656

 
$
346

 
$
39,656

 
$
346

Obligations of states and political subdivisions
59,963

 
800

 
38,691

 
1,786

 
98,654

 
2,586

Residential mortgage-backed securities and collateralized mortgage obligations
332,103

 
5,432

 
1,992,546

 
66,790

 
2,324,649

 
72,222

Total temporarily impaired securities
$
392,066

 
$
6,232

 
$
2,070,893

 
$
68,922

 
$
2,462,959

 
$
75,154

 
The unrealized losses on U.S. treasury and agencies securities are due to increases in market interest rates and not due to the underlying credit of the issuers. The unrealized losses on obligations of states and political subdivisions were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities. Management monitors the published credit ratings of these securities for material rating or outlook changes. Substantially all of the Company's obligations of states and political subdivisions are general obligation issuances. All of the available for sale residential mortgage-backed securities and collateralized mortgage obligations portfolio in an unrealized loss position at March 31, 2019 are issued or guaranteed by government sponsored enterprises. The unrealized losses on residential mortgage-backed securities and collateralized mortgage obligations were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities, and not concerns regarding the underlying credit of the issuers or the underlying collateral. It is expected that these securities will be settled at a price at least equal to the amortized cost of each investment.

Because the unrealized loss is attributable to changes in interest rates or widening market spreads and not credit quality, and because the Bank does not intend to sell the securities and it is not more likely than not that the Bank will be required to sell these securities before recovery of their amortized cost basis, which may include holding each security until maturity, these investments are not considered other-than-temporarily impaired. 


13
Table of Contents

The following table presents the contractual maturities of investment securities at March 31, 2019:  
 (in thousands)
Available For Sale
 
Held To Maturity
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due within one year
$
1,414

 
$
1,426

 
$
—

 
$
—

Due after one year through five years
93,154

 
93,223

 
—

 
—

Due after five years through ten years
377,171

 
375,130

 
14

 
14

Due after ten years
2,458,549

 
2,424,999

 
3,464

 
4,503

 
$
2,930,288

 
$
2,894,778

 
$
3,478

 
$
4,517


The following table presents, as of March 31, 2019, investment securities which were pledged to secure borrowings, public deposits, and repurchase agreements as permitted or required by law: 
 (in thousands)
Amortized Cost
 
Fair Value
To state and local governments to secure public deposits
$
898,047

 
$
888,094

Other securities pledged principally to secure repurchase agreements
430,034

 
422,461

Total pledged securities
$
1,328,081

 
$
1,310,555



 
Note 3 – Loans and Leases  
 
The following table presents the major types of loans and leases, net of deferred fees and costs, as of March 31, 2019 and December 31, 2018: 
(in thousands)
March 31, 2019
 
December 31, 2018
Commercial real estate
 
 
 
Non-owner occupied term, net
$
3,476,972

 
$
3,573,065

Owner occupied term, net
2,449,648

 
2,480,371

Multifamily, net
3,302,936

 
3,304,763

Construction & development, net
686,107

 
736,254

Residential development, net
205,963

 
196,890

Commercial
 
 
 
Term, net
2,185,322

 
2,232,923

Lines of credit & other, net
1,229,092

 
1,169,525

Leases & equipment finance, net
1,378,686

 
1,330,155

Residential
 
 
 
Mortgage, net
3,768,955

 
3,635,073

Home equity loans & lines, net
1,170,252

 
1,176,477

Consumer & other, net
552,064

 
587,170

Total loans, net of deferred fees and costs
$
20,405,997

 
$
20,422,666

 
The loan balances are net of deferred fees and costs of $71.1 million and $70.4 million as of March 31, 2019 and December 31, 2018, respectively. Net loans also include discounts on acquired loans of $45.4 million and $50.0 million as of March 31, 2019 and December 31, 2018, respectively. As of March 31, 2019, loans totaling $13.2 billion were pledged to secure borrowings and available lines of credit.

The outstanding contractual unpaid principal balance of purchased impaired loans, excluding acquisition accounting adjustments, was $170.8 million and $183.7 million at March 31, 2019 and December 31, 2018, respectively. The carrying balance of purchased impaired loans was $123.8 million and $134.5 million at March 31, 2019 and December 31, 2018, respectively.


14
Table of Contents

The following table presents the changes in the accretable yield for purchased impaired loans for the three months ended March 31, 2019 and 2018:
(in thousands)
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Balance, beginning of period
$
56,564

 
$
74,268

Accretion to interest income
(4,885
)
 
(8,778
)
Disposals
(2,343
)
 
(5,016
)
Reclassifications from non-accretable difference
1,737

 
6,203

Balance, end of period
$
51,073

 
$
66,677


Umpqua, through its commercial equipment leasing subsidiary, FinPac, is a direct provider of commercial equipment leasing and financing throughout the United States, originating business through three distinct channels: small and mid-ticket third party originators, vendor finance, and Umpqua Bank Equipment Leasing & Finance. All of these leases typically have terms of three to five years and are considered to be direct financing leases. Interest income recognized on these leases is $8.4 million for the three-months ended March 31, 2019.

Residual values on leases are established at the time equipment is leased based on an estimate of the value of the leased equipment when the Company expects to dispose of the equipment, typically at the termination of the lease. An annual evaluation is also performed each fiscal year by an independent valuation specialist and equipment residuals are confirmed or adjusted in conjunction with such evaluation.

The following table presents the net investment in direct financing leases and loans as of March 31, 2019 and December 31, 2018: 

(in thousands)
March 31, 2019
 
December 31, 2018
Minimum lease payments receivable
$
443,586

 
$
450,258

Estimated guaranteed and unguaranteed residual values
79,934

 
79,455

Initial direct costs - net of accumulated amortization
10,280

 
10,950

Unearned income
(75,538
)
 
(79,777
)
Net investment in direct financing leases
$
458,262

 
$
460,886


The following table presents the scheduled minimum lease payments receivable as of March 31, 2019:
(in thousands)
 
Year
Amount
2019
$
112,781

2020
126,456

2021
95,508

2022
57,273

2023
25,810

Thereafter
25,758

 
$
443,586


15
Table of Contents


Loans and leases sold 
 
In the course of managing the loan and lease portfolio, at certain times, management may decide to sell loans and leases.  The following table summarizes the carrying value of loans and leases sold by major loan type during the three months ended March 31, 2019 and 2018: 
(in thousands)
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Commercial real estate
 
 
 
Non-owner occupied term, net
$
4,819

 
$
4,391

Owner occupied term, net
4,710

 
5,550

Commercial
 
 
 
Term, net
5,441

 
10,458

Residential
 
 
 
Mortgage, net
109

 
—

Total
$
15,079

 
$
20,399


Note 4 – Allowance for Loan and Lease Loss and Credit Quality 
 
The Bank's methodology for assessing the appropriateness of the Allowance for Loan and Lease Loss ("ALLL") consists of three key elements: 1) the formula allowance; 2) the specific allowance; and 3) the unallocated allowance. By incorporating these factors into a single allowance requirement analysis, we believe all risk-based activities within the loan and lease portfolios are simultaneously considered. 

Formula Allowance 
When loans and leases are originated or acquired, they are assigned a risk rating that is reassessed periodically during the term of the loan or lease through the credit review process.  The Bank's risk rating methodology assigns risk ratings ranging from 1 to 10, where a higher rating represents higher risk. The 10 risk rating categories are a primary factor in determining an appropriate amount for the formula allowance. 
 
The formula allowance is calculated by applying risk factors that represent our estimate of incurred losses to various segments of pools of outstanding loans and leases. Risk factors are assigned to each portfolio segment based on management's evaluation of the losses inherent within each segment. Segments with greater risk of loss will therefore be assigned a higher risk factor. 
 
Base risk – The portfolio is segmented into loan categories, and these categories are assigned a Base risk factor based on an evaluation of the loss inherent within each segment. 
 
Extra risk – Additional risk factors provide for an additional allocation of ALLL based on the loan and lease risk rating system and loan delinquency, and reflect the increased level of inherent losses associated with more adversely classified loans and leases. 

Risk factors may be changed periodically based on management's evaluation of the following factors: loss experience; changes in the level of non-performing loans and leases; regulatory exam results; changes in the level of adversely classified loans and leases; improvement or deterioration in economic conditions; and any other factors deemed relevant. Additionally, Financial Pacific Leasing Inc. considers additional quantitative and qualitative factors:  migration analysis; a static pool analysis of historic recoveries; and forecasting uncertainties. A migration analysis is a technique used to estimate the likelihood that an account will progress through the various delinquency states and ultimately be charged off.
 

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Table of Contents

Specific Allowance 
Regular credit reviews of the portfolio identify loans that are considered potentially impaired. Potentially impaired loans are referred to the ALLL Committee which reviews and approves designated loans as impaired. A loan is considered impaired when, based on current information and events, we determine that we will probably not be able to collect all amounts due according to the loan contract, including scheduled interest payments. When we identify a loan as impaired, we measure the impairment using discounted cash flows or estimated note sale price, except when the sole remaining source of the repayment for the loan is the liquidation of the collateral. In these cases, we use the current fair value of the collateral, less selling costs, instead of discounted cash flows. If we determine that the value of the impaired loan is less than the recorded investment in the loan, we either recognize an impairment reserve as a specific allowance to be provided for in the allowance for loan and lease losses or charge-off the impaired balance on collateral-dependent loans if it is determined that such amount represents a confirmed loss.  Loans determined to be impaired are excluded from the formula allowance so as not to double-count the loss exposure.
 
The combination of the formula allowance component and the specific allowance component represents the allocated allowance for loan and lease losses. There was no unallocated allowance as of March 31, 2019 and December 31, 2018.
 
The reserve for unfunded commitments ("RUC") is established to absorb inherent losses associated with our commitment to lend funds, such as with a letter or line of credit. The adequacy of the ALLL and RUC are monitored on a regular basis and are based on management's evaluation of numerous factors. These factors include the quality of the current loan portfolio; the trend in the loan portfolio's risk ratings; current economic conditions; loan concentrations; loan growth rates; past-due and non-performing trends; evaluation of specific loss estimates for all significant problem loans; historical charge-off and recovery experience; and other pertinent information.
 
There have been no significant changes to the Bank's ALLL methodology or policies in the periods presented. 
 
Activity in the Allowance for Loan and Lease Losses 
 
The following tables summarize activity related to the allowance for loan and lease losses by loan and lease portfolio segment for the three months ended March 31, 2019 and 2018: 
(in thousands)
Three Months Ended March 31, 2019
 
Commercial Real Estate
 
Commercial
 
Residential
 
Consumer & Other
 
Total 
Balance, beginning of period
$
47,904

 
$
63,957

 
$
22,034

 
$
10,976

 
$
144,871

Charge-offs
(2,151
)
 
(13,210
)
 
(135
)
 
(1,656
)
 
(17,152
)
Recoveries
337

 
2,354

 
155

 
623

 
3,469

  Provision
1,751

 
11,269

 
119

 
545

 
13,684

Balance, end of period
$
47,841

 
$
64,370

 
$
22,173

 
$
10,488

 
$
144,872

 
 
 
 
 
 
 
 
 
 
(in thousands)
Three Months Ended March 31, 2018
 
Commercial Real Estate
 
Commercial
 
Residential
 
Consumer & Other
 
Total 
Balance, beginning of period
$
45,765

 
$
63,305

 
$
19,360

 
$
12,178

 
$
140,608

Charge-offs
(311
)
 
(13,475
)
 
(246
)
 
(1,780
)
 
(15,812
)
Recoveries
217

 
2,453

 
203

 
608

 
3,481

   Provision
334

 
12,343

 
516

 
463

 
13,656

Balance, end of period
$
46,005

 
$
64,626

 
$
19,833

 
$
11,469

 
$
141,933

 
 
 
 
 
 
 
 
 
 

17
Table of Contents

The following tables present the allowance and recorded investment in loans and leases by portfolio segment and balances individually or collectively evaluated for impairment as of March 31, 2019 and 2018: 
 (in thousands)
March 31, 2019
 
Commercial Real Estate
 
Commercial
 
Residential
 
Consumer & Other
 
Total 
Allowance for loans and leases:
Collectively evaluated for impairment
$
46,107

 
$
64,157

 
$
21,819

 
$
10,445

 
$
142,528

Individually evaluated for impairment
136

 
3

 
—

 
—

 
139

Loans acquired with deteriorated credit quality
1,598

 
210

 
354

 
43

 
2,205

Total
$
47,841

 
$
64,370

 
$
22,173

 
$
10,488

 
$
144,872

Loans and leases:
 
 
 
 
 
 
 
 
 
Collectively evaluated for impairment
$
10,003,966

 
$
4,775,727

 
$
4,913,713

 
$
551,671

 
$
20,245,077

Individually evaluated for impairment
20,366

 
16,710

 
—

 
—

 
37,076

Loans acquired with deteriorated credit quality
97,294

 
663

 
25,494

 
393

 
123,844

Total
$
10,121,626

 
$
4,793,100

 
$
4,939,207

 
$
552,064

 
$
20,405,997

 
 (in thousands)
March 31, 2018
 
Commercial Real Estate
 
Commercial
 
Residential
 
Consumer & Other
 
Total 
Allowance for loans and leases:
Collectively evaluated for impairment
$
43,546

 
$
64,203

 
$
19,451

 
$
11,428

 
$
138,628

Individually evaluated for impairment
600

 
5

 
—

 
—

 
605

Loans acquired with deteriorated credit quality
1,859

 
418

 
382

 
41

 
2,700

Total
$
46,005

 
$
64,626

 
$
19,833

 
$
11,469

 
$
141,933

Loans and leases:
 
 
 
 
 
 
 
 
Collectively evaluated for impairment
$
9,626,236

 
$
4,372,758

 
$
4,345,522

 
$
685,424

 
$
19,029,940

Individually evaluated for impairment
27,872

 
24,043

 
—

 
—

 
51,915

Loans acquired with deteriorated credit quality
136,381

 
4,083

 
32,614

 
414

 
173,492

Total
$
9,790,489

 
$
4,400,884

 
$
4,378,136

 
$
685,838

 
$
19,255,347

 

Summary of Reserve for Unfunded Commitments Activity 

The following tables present a summary of activity in the RUC and unfunded commitments for the three months ended March 31, 2019 and 2018: 
(in thousands) 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Balance, beginning of period
$
4,523

 
$
3,963

Net charge to other expense
131

 
166

Balance, end of period
$
4,654

 
$
4,129


 (in thousands)
 
Total
Unfunded loan and lease commitments:
 
 
March 31, 2019
 
$
5,510,974

March 31, 2018
 
$
5,085,021


18
Table of Contents

 
Asset Quality and Non-Performing Loans and Leases
 
We manage asset quality and control credit risk through diversification of the loan and lease portfolio and the application of policies designed to promote sound underwriting and loan and lease monitoring practices. The Bank's Credit Quality Administration is charged with monitoring asset quality, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures across the Bank.  Reviews of non-performing, past due loans and leases and larger credits, designed to identify potential charges to the allowance for loan and lease losses, and to determine the adequacy of the allowance, are conducted on an ongoing basis. These reviews consider such factors as the financial strength of borrowers, the value of the applicable collateral, loan and lease loss experience, estimated loan and lease losses, growth in the loan and lease portfolio, prevailing economic conditions and other factors. 

Non-Accrual Loans and Leases and Loans and Leases Past Due  
 
The following tables summarize our non-accrual loans and leases and loans and leases past due, by loan and lease class, as of March 31, 2019 and December 31, 2018: 
(in thousands)
March 31, 2019
 
Greater than 30 to 59 Days Past Due
 
60 to 89 Days Past Due
 
90+ Days and Accruing
 
Total Past Due
 
 Non-Accrual
 
Current & Other (1)
 
Total Loans and Leases
Commercial real estate
 

 
 

 
 

 
 

 
 

 
 

 
 

Non-owner occupied term, net
$
2,044

 
$
3,972

 
$
—

 
$
6,016

 
$
8,438

 
$
3,462,518

 
$
3,476,972

Owner occupied term, net
2,853

 
1,299

 
1

 
4,153

 
7,231

 
2,438,264

 
2,449,648

Multifamily, net
290

 
—

 
—

 
290

 
2,626

 
3,300,020

 
3,302,936

Construction & development, net
—

 
—

 
—

 
—

 
—

 
686,107

 
686,107

Residential development, net
—

 
—

 
—

 
—

 
—

 
205,963

 
205,963

Commercial
 
 
 
 
 
 
 
 
 
 
 
 

Term, net
1,775

 
195

 
693

 
2,663

 
9,315

 
2,173,344

 
2,185,322

Lines of credit & other, net
1,625

 
420

 
22

 
2,067

 
1,684

 
1,225,341

 
1,229,092

Leases & equipment finance, net
14,105

 
7,560

 
—

 
21,665

 
15,292

 
1,341,729

 
1,378,686

Residential
 
 
 
 
 
 
 
 
 
 
 
 

Mortgage, net (2)
6,528

 
3,507

 
28,551

 
38,586

 
—

 
3,730,369

 
3,768,955

Home equity loans & lines, net
1,981

 
1,421

 
1,725

 
5,127

 
—

 
1,165,125

 
1,170,252

Consumer & other, net
2,588

 
846

 
590

 
4,024

 
—

 
548,040

 
552,064

Total, net of deferred fees and costs
$
33,789

 
$
19,220

 
$
31,582

 
$
84,591

 
$
44,586

 
$
20,276,820

 
$
20,405,997


(1) Other includes purchased credit impaired loans of $123.8 million.
(2) Includes government guaranteed GNMA mortgage loans that Umpqua has the right but not the obligation to repurchase that are past due 90 days or more, totaling $158,000 at March 31, 2019.

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Table of Contents

 (in thousands)
December 31, 2018
 
Greater than 30 to 59 Days Past Due
 
60 to 89 Days Past Due
 
90+ Days and Accruing
 
Total Past Due
 
 Non-Accrual
 
Current & Other (1)
 
Total Loans and Leases
Commercial real estate
 

 
 

 
 

 
 

 
 

 
 

 
 

Non-owner occupied term, net
$
1,192

 
$
1,042

 
$
—

 
$
2,234

 
$
10,033

 
$
3,560,798

 
$
3,573,065

Owner occupied term, net
3,920

 
1,372

 
1

 
5,293

 
8,682

 
2,466,396

 
2,480,371

Multifamily, net
107

 
—

 
—

 
107

 
4,298

 
3,300,358

 
3,304,763

Construction & development, net
—

 
—

 
—

 
—

 
—

 
736,254

 
736,254

Residential development, net
—

 
—

 
—

 
—

 
—

 
196,890

 
196,890

Commercial
 
 
 
 
 

 

 
 
 
 
 
 
Term, net
992

 
117

 
—

 
1,109

 
11,772

 
2,220,042

 
2,232,923

Lines of credit & other, net
1,286

 
143

 
83

 
1,512

 
2,275

 
1,165,738

 
1,169,525

Leases & equipment finance, net
8,571

 
8,754

 
3,016

 
20,341

 
13,763

 
1,296,051

 
1,330,155

Residential
 
 
 
 
 
 

 
 
 
 
 
 
Mortgage, net (2)
—

 
4,900

 
39,218

 
44,118

 
—

 
3,590,955

 
3,635,073

Home equity loans & lines, net
987

 
368

 
2,492

 
3,847

 
—

 
1,172,630

 
1,176,477

Consumer & other, net
2,711

 
911

 
551

 
4,173

 
—

 
582,997

 
587,170

Total, net of deferred fees and costs
$
19,766

 
$
17,607

 
$
45,361

 
$
82,734

 
$
50,823

 
$
20,289,109

 
$
20,422,666


(1) Other includes purchased credit impaired loans of $134.5 million.
(2) Includes government guaranteed GNMA mortgage loans that Umpqua has the right but not the obligation to repurchase that are past due 90 days or more, totaling $8.9 million at December 31, 2018.

Impaired Loans 

Loans with no related allowance reported generally represent non-accrual loans, which are also considered impaired loans. The Bank recognizes the charge-off on impaired loans in the period it arises for collateral-dependent loans.  Therefore, the non-accrual loans as of March 31, 2019 have already been written down to their estimated net realizable value and are expected to be resolved with no additional material loss, absent further decline in net realizable value.  The valuation allowance on impaired loans primarily represents the impairment reserves on performing restructured loans, and is measured by comparing the present value of expected future cash flows on the restructured loans discounted at the interest rate of the original loan agreement to the loan's carrying value. 


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The following tables summarize our impaired loans by loan class as of March 31, 2019 and December 31, 2018: 
(in thousands)
March 31, 2019
 

 
Recorded Investment
 
 
 
Unpaid Principal Balance
 
Without Allowance
 
With Allowance
 
Related Allowance
Commercial real estate
 
 
 
 
 
 
 
Non-owner occupied term, net
$
13,307

 
$
8,259

 
$
3,709

 
$
57

Owner occupied term, net
7,016

 
4,915

 
857

 
79

Multifamily, net
2,742

 
2,626

 
—

 
—

Commercial
 
 
 
 
 
 
 
Term, net
19,880

 
12,203

 
55

 
2

Lines of credit & other, net
6,618

 
1,484

 
—

 
—

Leases & equipment finance, net
2,968

 
1,126

 
1,842

 
1

Total, net of deferred fees and costs
$
52,531

 
$
30,613

 
$
6,463

 
$
139

 
(in thousands)
December 31, 2018
 
 
 
Recorded Investment
 
 
 
Unpaid Principal Balance
 
Without Allowance
 
With Allowance
 
Related Allowance
Commercial real estate
 
 
 
 
 
 
 
Non-owner occupied term, net
$
14,877

 
$
9,847

 
$
3,715

 
$
90

Owner occupied term, net
8,188

 
6,178

 
878

 
88

Multifamily, net
4,493

 
4,298

 
—

 
—

Commercial
 
 
 
 
 
 
 
Term, net
22,770

 
11,089

 
3,770

 
2

Lines of credit & other, net
7,145

 
2,065

 
—

 
—

Leases & equipment finance, net
417

 
417

 
—

 
—

Total, net of deferred fees and costs
$
57,890

 
$
33,894

 
$
8,363

 
$
180