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 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 local economic conditions; and any other factors deemed relevant.

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 non-accrual impaired loans as of period-end have already been partially charged-off to their estimated net realizable value, and are expected to be resolved over the coming quarters with no additional material loss, absent further decline in market prices.

The combination of the formula allowance component and the specific allowance component represents the allocated allowance for loan and lease losses. There is currently no unallocated allowance.

Management believes that the ALLL was adequate as of June 30, 2016. There is, however, no assurance that future loan and lease losses will not exceed the levels provided for in the ALLL and could possibly result in additional charges to the provision for loan and lease losses.

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 table summarizes activity related to the allowance for loan and lease losses by loan and lease portfolio segment for the three and six months ended June 30, 2016 and 2015:



(in thousands)	Three Months Ended June 30, 2016
	Commercial									Consumer
	Real Estate			Commercial			Residential			& Other			Total
Balance, beginning of period	$	51,450		$	50,781		$	20,897		$	7,115		$	130,243
Charge-offs	(564		)	(9,594		)	(294		)	(2,230		)	(12,682		)
Recoveries	220			1,274			293			1,105			2,892
(Recapture) Provision	(522		)	9,894			(750		)	1,967			10,589
Balance, end of period	$	50,584		$	52,355		$	20,146		$	7,957		$	131,042

	Three Months Ended June 30, 2015
	Commercial									Consumer
	Real Estate			Commercial			Residential			& Other			Total
Balance, beginning of period	$	55,340		$	44,042		$	16,221		$	4,501		$	120,104
Charge-offs	(2,102		)	(3,714		)	(138		)	(1,488		)	(7,442		)
Recoveries	1,265			1,113			108			669			3,155
Provision	3,840			4,077			1,773			1,564			11,254
Balance, end of period	$	58,343		$	45,518		$	17,964		$	5,246		$	127,071




(in thousands)	Six Months Ended June 30, 2016
	Commercial									Consumer
	Real Estate			Commercial			Residential			& Other			Total
Balance, beginning of period	$	54,293		$	47,487		$	22,017		$	6,525		$	130,322
Charge-offs	(1,066		)	(14,249		)	(631		)	(4,586		)	(20,532		)
Recoveries	720			2,447			524			2,149			5,840
(Recapture) Provision	(3,363		)	16,670			(1,764		)	3,869			15,412
Balance, end of period	$	50,584		$	52,355		$	20,146		$	7,957		$	131,042

	Six Months Ended June 30, 2015
	Commercial									Consumer
	Real Estate			Commercial			Residential			& Other			Total
Balance, beginning of period	$	55,184		$	41,216		$	15,922		$	3,845		$	116,167
Charge-offs	(3,431		)	(12,651		)	(536		)	(3,369		)	(19,987		)
Recoveries	1,488			2,184			139			3,189			7,000
Provision	5,102			14,769			2,439			1,581			23,891
Balance, end of period	$	58,343		$	45,518		$	17,964		$	5,246		$	127,071

The valuation allowance on purchased impaired loans was increased by provision expense, which includes amounts related to subsequent deterioration of purchased impaired loans of $1.4 million for both the three and six months ended June 30, 2016, respectively, and $0 and $1.6 million for the three and six months ended June 30, 2015, respectively. The increase due to the provision expense of the valuation allowance on purchased impaired loans was offset by recaptured provision of $71,000 and $847,000 for the three and six months ended June 30, 2016, respectively, and $0 and $185,000 for the three and six months ended June 30, 2015, respectively.

The following table presents the allowance and recorded investment in loans and leases by portfolio segment as of June 30, 2016 and 2015:



(in thousands)	June 30, 2016
	Commercial						Consumer
	Real Estate		Commercial		Residential		& Other		Total
Allowance for loans and leases:
Collectively evaluated for impairment	$	47,427	$	51,466	$	19,351	$	7,885	$	126,129
Individually evaluated for impairment	363		456		—		—		819
Loans acquired with deteriorated credit quality	2,794		433		795		72		4,094
Total	$	50,584	$	52,355	$	20,146	$	7,957	$	131,042
Loans and leases:
Collectively evaluated for impairment	$	9,139,255	$	3,412,760	$	3,821,080	$	596,460	$	16,969,555
Individually evaluated for impairment	34,906		19,929		—		—		54,835
Loans acquired with deteriorated credit quality	269,799		9,397		50,810		844		330,850
Total	$	9,443,960	$	3,442,086	$	3,871,890	$	597,304	$	17,355,240



(in thousands)	June 30, 2015
	Commercial						Consumer
	Real Estate		Commercial		Residential		& Other		Total
Allowance for loans and leases:
Collectively evaluated for impairment	$	53,018	$	42,665	$	17,294	$	5,176	$	118,153
Individually evaluated for impairment	774		377		—		—		1,151
Loans acquired with deteriorated credit quality	4,551		2,476		670		70		7,767
Total	$	58,343	$	45,518	$	17,964	$	5,246	$	127,071
Loans and leases:
Collectively evaluated for impairment	$	8,689,870	$	2,924,846	$	3,366,001	$	458,189	$	15,438,906
Individually evaluated for impairment	37,711		26,458		—		—		64,169
Loans acquired with deteriorated credit quality	400,925		19,535		64,097		1,120		485,677
Total	$	9,128,506	$	2,970,839	$	3,430,098	$	459,309	$	15,988,752

The loan and lease balances are net of deferred fees and costs of $63.3 million and $38.8 million at June 30, 2016 and June 30, 2015, respectively.

Summary of Reserve for Unfunded Commitments Activity

The following table presents a summary of activity in the RUC and unfunded commitments for the three and six months ended June 30, 2016 and 2015:



(in thousands)	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2016		2015			2016			2015
Balance, beginning of period	$	3,482	$	3,194		$	3,574		$	3,539
Net change to other expense	49		(330		)	(43		)	(675		)
Balance, end of period	$	3,531	$	2,864		$	3,531		$	2,864



(in thousands)
	Total
Unfunded loan and lease commitments:
June 30, 2016	$	4,006,031
June 30, 2015	$	3,216,725

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 table summarizes our non-accrual loans and leases and loans and leases past due, by loan and lease class, as of June 30, 2016 and December 31, 2015:



(in thousands)	June 30, 2016
	Greater than 30 to 59 Days Past Due		60 to 89 Days Past Due		Greater than 90 Days and Accruing		Total Past Due		Non-Accrual		Current & Other (1)		Total Loans and Leases
Commercial real estate
Non-owner occupied term, net	$	1,438	$	304	$	1,023	$	2,765	$	1,492	$	3,373,207	$	3,377,464
Owner occupied term, net	2,903		1,165		505		4,573		5,190		2,572,023		2,581,786
Multifamily, net	516		—		—		516		514		3,003,860		3,004,890
Construction & development, net	—		—		—		—		—		367,879		367,879
Residential development, net	—		—		—		—		—		111,941		111,941
Commercial
Term, net	11		252		317		580		10,748		1,429,376		1,440,704
LOC & other, net	918		945		—		1,863		817		1,114,196		1,116,876
Leases and equipment finance, net	4,402		3,923		933		9,258		6,375		868,873		884,506
Residential
Mortgage, net (2)	—		5,093		30,012		35,105		—		2,846,971		2,882,076
Home equity loans & lines, net	2,682		891		1,310		4,883		—		984,931		989,814
Consumer & other, net	3,082		1,115		271		4,468		—		592,836		597,304
Total, net of deferred fees and costs	$	15,952	$	13,688	$	34,371	$	64,011	$	25,136	$	17,266,093	$	17,355,240

(1) Other includes purchased credit impaired loans of $330.9 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 $11.3 million at June 30, 2016.



(in thousands)	December 31, 2015
	Greater than 30 to 59 Days Past Due		60 to 89 Days Past Due		Greater than 90 Days and Accruing		Total Past Due		Non-Accrual		Current & Other (1)		Total Loans and Leases



Commercial real estate
Non-owner occupied term, net	$	924	$	2,776	$	137	$	3,837	$	2,633	$	3,220,366	$	3,226,836
Owner occupied term, net	1,797		1,150		423		3,370		5,928		2,573,576		2,582,874
Multifamily, net	1,394		—		—		1,394		—		3,150,122		3,151,516
Construction & development, net	—		2,959		—		2,959		—		268,160		271,119
Residential development, net	—		—		—		—		—		99,459		99,459
Commercial
Term, net	297		333		—		630		15,185		1,392,861		1,408,676
LOC & other, net	1,907		92		8		2,007		664		1,034,062		1,036,733
Leases and equipment finance, net	2,933		3,499		822		7,254		4,801		717,106		729,161
Residential
Mortgage, net (2)	31		2,444		29,233		31,708		—		2,877,598		2,909,306
Home equity loans & lines, net	1,084		643		3,080		4,807		—		918,860		923,667
Consumer & other, net	3,271		889		642		4,802		4		522,383		527,189
Total, net of deferred fees and costs	$	13,638	$	14,785	$	34,345	$	62,768	$	29,215	$	16,774,553	$	16,866,536

(1) Other includes purchased credit impaired loans of $438.1 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 $19.2 million at December 31, 2015.

Impaired Loans

Loans with no related allowance reported generally represent non-accrual 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 June 30, 2016 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 market prices. 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.

The following table summarizes our impaired loans by loan class as of June 30, 2016 and December 31, 2015:



(in thousands)	June 30, 2016
	Unpaid		Recorded Investment
	Principal		Without		With		Related
	Balance		Allowance		Allowance		Allowance
Commercial real estate
Non-owner occupied term, net	$	16,231	$	1,020	$	14,934	$	180
Owner occupied term, net	5,585		2,920		2,428		12
Multifamily, net	4,025		514		3,519		86
Construction & development, net	1,929		—		1,926		38
Residential development, net	7,644		—		7,645		47
Commercial
Term, net	25,023		13,859		2,931		255
LOC & other, net	3,839		817		2,322		201
Residential
Mortgage, net	—		—		—		—
Home equity loans & lines, net	—		—		—		—
Consumer & other, net	—		—		—		—
Total, net of deferred fees and costs	$	64,276	$	19,130	$	35,705	$	819



(in thousands)	December 31, 2015
	Unpaid		Recorded Investment
	Principal		Without		With		Related
	Balance		Allowance		Allowance		Allowance
Commercial real estate
Non-owner occupied term, net	$	11,944	$	1,946	$	9,548	$	91
Owner occupied term, net	6,863		4,340		2,459		20
Multifamily, net	3,519		—		3,519		49
Construction & development, net	1,704		—		1,704		31
Residential development, net	7,889		—		7,891		90
Commercial
Term, net	22,795		14,788		2,932		283
LOC & other, net	3,470		664		2,322		224
Residential
Mortgage, net	—		—		—		—
Home equity loans & lines, net	—		—		—		—
Consumer & other, net	—		—		—		—
Total, net of deferred fees and costs	$	58,184	$	21,738	$	30,375	$	788

The following table summarizes our average recorded investment and interest income recognized on impaired loans by loan class for the three and six months ended June 30, 2016 and 2015:



(in thousands)	Three Months Ended				Three Months Ended
	June 30, 2016				June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Commercial real estate
Non-owner occupied term, net	$	12,361	$	132	$	27,044	$	225
Owner occupied term, net	6,451		33		12,660		76
Multifamily, net	3,904		30		3,519		30
Construction & development, net	1,701		21		1,722		34
Residential development, net	7,778		80		8,813		85
Commercial
Term, net	19,019		40		20,099		66
LOC & other, net	3,084		20		5,396		66
Residential
Mortgage, net	—		—		—		—
Home equity loans & lines, net	—		—		—		7
Consumer & other, net	—		—		—		—
Total, net of deferred fees and costs	$	54,298	$	356	$	79,253	$	589




(in thousands)	Six Months Ended				Six Months Ended
	June 30, 2016				June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Commercial real estate
Non-owner occupied term, net	$	10,935	$	195	$	31,065	$	593
Owner occupied term, net	9,137		86		13,542		133
Multifamily, net	3,673		60		3,619		61
Construction & development, net	1,335		40		1,725		53
Residential development, net	7,905		161		9,101		188
Commercial
Term, net	21,672		113		19,718		69
LOC & other, net	3,237		40		8,257		68
Leases, net	—		—		—		—
Residential
Mortgage, net	—		—		—		—
Home equity loans & lines, net	—		—		—		7
Consumer & other, net	—		—		—		—
Total, net of deferred fees and costs	$	57,894	$	695	$	87,027	$	1,172

The impaired loans for which these interest income amounts were recognized primarily relate to accruing restructured loans.

Credit Quality Indicators

As previously noted, the Bank's risk rating methodology assigns risk ratings ranging from 1 to 10, where a higher rating represents higher risk. The Bank differentiates its lending portfolios into homogeneous loans and leases and non-homogeneous loans and leases. The 10 risk rating categories can be generally described by the following groupings for non-homogeneous loans and leases:

Minimal Risk—A minimal risk loan or lease, risk rated 1, is to a borrower of the highest quality. The borrower has an unquestioned ability to produce consistent profits and service all obligations and can absorb severe market disturbances with little or no difficulty.

Low Risk—A low risk loan or lease, risk rated 2, is similar in characteristics to a minimal risk loan. Margins may be smaller or protective elements may be subject to greater fluctuation. The borrower will have a strong demonstrated ability to produce profits, provide ample debt service coverage and to absorb market disturbances.

Modest Risk—A modest risk loan or lease, risk rated 3, is a desirable loan or lease with excellent sources of repayment and no currently identifiable risk associated with collection. The borrower exhibits a very strong capacity to repay the credit in accordance with the repayment agreement. The borrower may be susceptible to economic cycles, but will have reserves to weather these cycles.

Average Risk—An average risk loan or lease, risk rated 4, is an attractive loan or lease with sound sources of repayment and no material collection or repayment weakness evident. The borrower has an acceptable capacity to pay in accordance with the agreement. The borrower is susceptible to economic cycles and more efficient competition, but should have modest reserves sufficient to survive all but the most severe downturns or major setbacks.

Acceptable Risk—An acceptable risk loan or lease, risk rated 5, is a loan or lease with lower than average, but still acceptable credit risk. These borrowers may have higher leverage, less certain but viable repayment sources, have limited financial reserves and may possess weaknesses that can be adequately mitigated through collateral, structural or credit enhancement. The borrower is susceptible to economic cycles and is less resilient to negative market forces or financial events. Reserves may be insufficient to survive a modest downturn.

Watch—A watch loan or lease, risk rated 6, is still pass-rated, but represents the lowest level of acceptable risk due to an emerging risk element or declining performance trend. Watch ratings are expected to be temporary, with issues resolved or manifested to the extent that a higher or lower rating would be appropriate. The borrower should have a plausible plan, with reasonable certainty of success, to correct the problems in a short period of time.

Special Mention—A special mention loan or lease, risk rated 7, has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or the institution's credit position at some future date. They contain unfavorable characteristics and are generally undesirable. Loans and leases in this category are currently protected but are potentially weak and constitute an undue and unwarranted credit risk, but not to the point of a substandard classification. A special mention loan or lease has potential weaknesses, which if not checked or corrected, weaken the asset or inadequately protect the Bank's position at some future date.

Substandard—A substandard asset, risk rated 8, is inadequately protected by the current worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. Loans and leases are classified as substandard when they have unsatisfactory characteristics causing unacceptable levels of risk. A substandard loan or lease normally has one or more well-defined weaknesses that could jeopardize repayment of the debt. The likely need to liquidate assets to correct the problem, rather than repayment from successful operations is the key distinction between special mention and substandard.

Doubtful—Loans or leases classified as doubtful, risk rated 9, have all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work towards strengthening of the asset, classification as a loss (and immediate charge-off) is deferred until more exact status may be determined. Pending factors include proposed merger, acquisition, liquidation procedures, capital injection, and perfection of liens on additional collateral and refinancing plans. In certain circumstances, a doubtful rating will be temporary, while the Bank is awaiting an updated collateral valuation. In these cases, once the collateral is valued and appropriate margin applied, the remaining un-collateralized portion will be charged-off. The remaining balance, properly margined, may then be upgraded to substandard, however must remain on non-accrual.

Loss—Loans or leases classified as loss, risk rated 10, are considered un-collectible and of such little value that the continuance as an active Bank asset is not warranted. This rating does not mean that the loan or lease has no recovery or salvage value, but rather that the loan or lease should be charged-off now, even though partial or full recovery may be possible in the future.

Impaired—Loans are classified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due, in accordance with the terms of the original loan agreement, without unreasonable delay. This generally includes all loans classified as non-accrual and troubled debt restructurings. Impaired loans are risk rated for internal and regulatory rating purposes, but presented separately for clarification.

Homogeneous loans and leases are not risk rated until they are greater than 30 days past due, and risk rating is based on the past due status of the loan or lease. The risk rating categories can be generally described by the following groupings for commercial and commercial real estate homogeneous loans and leases:

Special Mention—A homogeneous special mention loan or lease, risk rated 7, is greater than 30 to 59 days past due from the required payment date at month-end.

Substandard—A homogeneous substandard loan or lease, risk rated 8, is 60 to 89 days past due from the required payment date at month-end.

Doubtful—A homogeneous doubtful loan or lease, risk rated 9, is 90 to 179 days past due from the required payment date at month-end.

Loss—A homogeneous loss loan or lease, risk rated 10, is 180 days and more past due from the required payment date. These loans are generally charged-off in the month in which the 180 day time period elapses.

The risk rating categories can be generally described by the following groupings for residential and consumer and other homogeneous loans:

Special Mention—A homogeneous retail special mention loan, risk rated 7, is greater than 30 to 89 days past due from the required payment date at month-end.

Substandard—A homogeneous retail substandard loan, risk rated 8, is an open-end loan 90 to 180 days past due from the required payment date at month-end or a closed-end loan 90 to 120 days past due from the required payment date at month-end.

Loss—A homogeneous retail loss loan, risk rated 10, is a closed-end loan that becomes past due 120 cumulative days or an open-end retail loan that becomes past due 180 cumulative days from the contractual due date. These loans are generally charged-off in the month in which the 120 or 180 day period elapses.

The following table summarizes our internal risk rating by loan and lease class for the loan and lease portfolio as of June 30, 2016 and December 31, 2015:



(in thousands)	June 30, 2016
	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Impaired (1)		Total
Commercial real estate
Non-owner occupied term, net	$	3,214,630	$	78,546	$	68,090	$	107	$	137	$	15,954	$	3,377,464
Owner occupied term, net	2,455,731		62,793		56,245		368		1,301		5,348		2,581,786
Multifamily, net	2,974,155		8,728		17,974		—		—		4,033		3,004,890
Construction & development, net	360,878		2,969		2,106		—		—		1,926		367,879
Residential development, net	103,108		—		1,188		—		—		7,645		111,941
Commercial
Term, net	1,376,346		29,032		17,976		137		423		16,790		1,440,704
LOC & other, net	1,066,651		29,991		17,095		—		—		3,139		1,116,876
Leases and equipment finance, net	868,035		5,240		3,923		6,347		961		—		884,506
Residential
Mortgage, net (2)	2,829,847		5,020		44,236		—		2,973		—		2,882,076
Home equity loans & lines, net	983,513		3,521		1,998		—		782		—		989,814
Consumer & other, net	592,803		4,199		228		—		74		—		597,304
Total, net of deferred fees and costs	$	16,825,697	$	230,039	$	231,059	$	6,959	$	6,651	$	54,835	$	17,355,240

(1) The percentage of impaired loans classified as pass/watch, special mention and substandard was 1.9%, 13.0% and 85.1%, respectively, as of June 30, 2016.

(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 $11.3 million at June 30, 2016, which is included in the substandard category.



(in thousands)	December 31, 2015
	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Impaired (1)		Total
Commercial real estate
Non-owner occupied term, net	$	3,033,962	$	92,038	$	88,793	$	270	$	279	$	11,494	$	3,226,836
Owner occupied term, net	2,454,326		54,684		65,029		675		1,361		6,799		2,582,874
Multifamily, net	3,121,099		7,626		19,272		—		—		3,519		3,151,516
Construction & development, net	262,759		4,532		2,124		—		—		1,704		271,119
Residential development, net	89,706		507		1,355		—		—		7,891		99,459
Commercial
Term, net	1,356,675		13,620		20,463		36		162		17,720		1,408,676
LOC & other, net	998,603		19,183		15,959		1		1		2,986		1,036,733
Leases and equipment finance, net	716,190		3,849		3,499		4,889		734		—		729,161
Residential
Mortgage, net (2)	2,871,423		3,557		21,195		—		13,131		—		2,909,306
Home equity loans & lines, net	917,919		2,189		803		—		2,756		—		923,667
Consumer & other, net	522,339		4,174		458		—		218		—		527,189
Total, net of deferred fees and costs	$	16,345,001	$	205,959	$	238,950	$	5,871	$	18,642	$	52,113	$	16,866,536

(1) The percentage of impaired loans classified as pass/watch, special mention and substandard was 5.0%, 4.6%, and 90.4%, respectively, as of December 31, 2015.

(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 $19.2 million at December 31, 2015, which is included in the substandard category.

Troubled Debt Restructurings

At June 30, 2016 and December 31, 2015, impaired loans of $40.8 million and $31.4 million, respectively, were classified as accruing restructured loans. The restructurings were granted in response to borrower financial difficulty, and generally provide for a temporary modification of loan repayment terms. The restructured loans on accrual status represent the only impaired loans accruing interest. In order for a restructured loan to be considered for accrual status, the loan's collateral coverage generally will be greater than or equal to 100% of the loan balance, the loan is current on payments, and the borrower must either prefund an interest reserve or demonstrate the ability to make payments from a verified source of cash flow. Impaired restructured loans carry a specific allowance and the allowance on impaired restructured loans is calculated consistently across the portfolios.

There were no available commitments for troubled debt restructurings outstanding as of June 30, 2016 and December 31, 2015.

The following tables present troubled debt restructurings by accrual versus non-accrual status and by loan class as of June 30, 2016 and December 31, 2015:



(in thousands)	June 30, 2016
	Accrual		Non-Accrual		Total
	Status		Status		Modifications
Commercial real estate, net	$	26,710	$	—	$	26,710
Commercial, net	8,649		5,043		13,692
Residential, net	5,412		—		5,412
Consumer & other, net	77		—		77
Total, net of deferred fees and costs	$	40,848	$	5,043	$	45,891



(in thousands)	December 31, 2015
	Accrual		Non-Accrual		Total
	Status		Status		Modifications
Commercial real estate, net	$	21,185	$	1,324	$	22,509
Commercial, net	5,253		8,528		13,781
Residential, net	4,917		—		4,917
Total, net of deferred fees and costs	$	31,355	$	9,852	$	41,207

The Bank's policy is that loans placed on non-accrual will typically remain on non-accrual status until all principal and interest payments are brought current and the prospect for future payment in accordance with the loan agreement appears relatively certain. The Bank's policy generally refers to six months of payment performance as sufficient to warrant a return to accrual status.

The following table presents newly restructured loans that occurred during the three and six months ended June 30, 2016 and 2015:



(in thousands)	Three Months Ended June 30, 2016
	Rate		Term		Interest Only		Payment		Combination		Total
	Modifications		Modifications		Modifications		Modifications		Modifications		Modifications

Commercial real estate, net	$	—	$	—	$	—	$	—	$	5,450	$	5,450
Commercial, net	—		—		—		—		3,396		3,396
Residential, net	—		—		—		—		596		596
Consumer & other, net	—		—		—		—		77		77
Total, net of deferred fees and costs	$	—	$	—	$	—	$	—	$	9,519	$	9,519

	Three Months Ended June 30, 2015
	Rate		Term		Interest Only		Payment		Combination		Total
	Modifications		Modifications		Modifications		Modifications		Modifications		Modifications

Residential, net	$	—	$	—	$	—	$	—	$	112	$	112
Total, net of deferred fees and costs	$	—	$	—	$	—	$	—	$	112	$	112




	Six Months Ended June 30, 2016
	Rate		Term		Interest Only		Payment		Combination		Total
	Modifications		Modifications		Modifications		Modifications		Modifications		Modifications

Commercial real estate, net	$	—	$	—	$	—	$	—	$	5,659	$	5,659
Commercial, net	—		—		—		—		3,396		3,396
Residential, net	—				—		—		728		728
Consumer & other, net	—		—		—		—		77		77
Total, net of deferred fees and costs	$	—	$	—	$	—	$	—	$	9,860	$	9,860

(in thousands)	Six Months Ended June 30, 2015
	Rate		Term		Interest Only		Payment		Combination		Total
	Modifications		Modifications		Modifications		Modifications		Modifications		Modifications

Commercial real estate, net	$	—	$	—	$	—	$	—	$	3,349	$	3,349
Residential, net	—		74		—		—		3,056		3,130
Total, net of deferred fees and costs	$	—	$	74	$	—	$	—	$	6,405	$	6,479

For the periods presented in the tables above, the outstanding recorded investment was the same pre and post modification.

There were $227,000 in financing receivables modified as troubled debt restructurings within the previous 12 months for which there was a payment default during the three and six months ended June 30, 2016 and $253,000 for the three and six months ended June 30, 2015.