Loans and Leases

3 Months Ended

Mar. 31, 2019

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.

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

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

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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