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.

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

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

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.



(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.

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

The following table summarizes our average recorded investment and interest income recognized on impaired loans by loan class for the three months ended March 31, 2019 and 2018:



(in thousands)	Three Months Ended				Three Months Ended
	March 31, 2019				March 31, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial real estate
Non-owner occupied term, net	$	12,765	$	32	$	14,608	$	102
Owner occupied term, net	6,414		9		11,459		10
Multifamily, net	3,462		—		3,868		30
Commercial
Term, net	13,558		51		21,212		89
Lines of credit & other, net	1,775		—		4,726		—
Leases & equipment finance, net	1,693		1		72		—
Total, net of deferred fees and costs	$	39,667	$	93	$	55,945	$	231

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. 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 10 risk rating categories can be generally described by the following groupings for 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. For commercial and commercial real estate homogeneous loans and leases to be classified as special mention, risk rated 7, the loan or lease is greater than 30 to 59 days past due from the required payment date at month-end. Residential and consumer and other homogeneous loans are risk rated 7, when the loan is greater than 30 to 89 days past due from the required payment date at month-end.

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. Commercial and commercial real estate homogeneous loans and leases are classified as a substandard loan or lease, risk rated 8, when the loan or lease is 60 to 89 days past due from the required payment date at month-end. Residential and consumer and other homogeneous loans are classified as a substandard loan, risk rated 8, when an open-end loan is 90 to 180 days past due from the required payment date at month-end or when a closed-end loan 90 to 120 days is past due from the required payment date at month-end.

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. Commercial and commercial real estate homogeneous doubtful loans or leases, risk rated 9, are 90 to 179 days past due from the required payment date at month-end.

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. For a commercial or commercial real estate homogeneous loss loan or lease to be risk rated 10, the loan or lease 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. Residential, consumer and other homogeneous loans are risk rated 10, when a loan becomes past due 120 cumulative days from the contractual due date. Residential and consumer loans secured by real estate are generally charged down to net realizable value in the month in which the loan becomes 180 days past due. All other residential, consumer, and other homogeneous loans are generally charged-off in the month in which the 120 day period elapses.

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.

The following tables summarize our internal risk rating by loan and lease class for the loan and lease portfolio, including purchased credit impaired loans, as of March 31, 2019 and December 31, 2018:



(in thousands)	March 31, 2019
	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Impaired ⁽¹⁾		Total
Commercial real estate
Non-owner occupied term, net	$	3,399,606	$	46,954	$	18,444	$	—	$	—	$	11,968	$	3,476,972
Owner occupied term, net	2,380,614		45,634		17,628		—		—		5,772		2,449,648
Multifamily, net	3,285,727		11,132		3,451		—		—		2,626		3,302,936
Construction & development, net	682,568		1,608		1,931		—		—		—		686,107
Residential development, net	205,963		—		—		—		—		—		205,963
Commercial
Term, net	2,122,335		41,568		8,838		319		4		12,258		2,185,322
Lines of credit & other, net	1,178,625		36,411		12,350		222		—		1,484		1,229,092
Leases & equipment finance, net	1,338,955		14,105		7,560		13,041		2,057		2,968		1,378,686
Residential
Mortgage, net ⁽²⁾	3,728,782		10,494		29,615		—		64		—		3,768,955
Home equity loans & lines, net	1,164,876		3,562		1,648		—		166		—		1,170,252
Consumer & other, net	548,013		3,433		584		—		34		—		552,064
Total, net of deferred fees and costs	$	20,036,064	$	214,901	$	102,049	$	13,582	$	2,325	$	37,076	$	20,405,997

⁽¹⁾The percentage of impaired loans classified as pass/watch, special mention and substandard was 5.5%, 10.2% and 84.3%, respectively, as of March 31, 2019.

⁽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, which is included in the substandard category.



(in thousands)	December 31, 2018
	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Impaired ⁽¹⁾		Total
Commercial real estate
Non-owner occupied term, net	$	3,497,801	$	38,346	$	23,234	$	—	$	122	$	13,562	$	3,573,065
Owner occupied term, net	2,422,351		28,447		22,136		54		327		7,056		2,480,371
Multifamily, net	3,284,445		11,481		4,539		—		—		4,298		3,304,763
Construction & development, net	734,318		—		1,936		—		—		—		736,254
Residential development, net	196,890		—		—		—		—		—		196,890
Commercial
Term, net	2,196,753		15,519		5,670		53		69		14,859		2,232,923
Lines of credit & other, net	1,103,677		42,831		20,639		313		—		2,065		1,169,525
Leases & equipment finance, net	1,296,235		8,571		8,754		14,247		1,931		417		1,330,155
Residential
Mortgage, net ⁽²⁾	3,588,976		5,169		38,766		—		2,162		—		3,635,073
Home equity loans & lines, net	1,172,040		1,878		1,418		—		1,141		—		1,176,477
Consumer & other, net	582,962		3,622		559		—		27		—		587,170
Total, net of deferred fees and costs	$	20,076,448	$	155,864	$	127,651	$	14,667	$	5,779	$	42,257	$	20,422,666

⁽¹⁾The percentage of impaired loans classified as pass/watch, special mention and substandard was 3.2%, 8.8% and 88.0%, respectively, as of December 31, 2018.

Troubled Debt Restructurings

At March 31, 2019 and December 31, 2018, impaired loans of $15.7 million and $13.9 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. In order for a newly 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 $1.1 million in available commitments for troubled debt restructurings outstanding as of March 31, 2019 and $338,000 as of December 31, 2018.

The following tables present troubled debt restructurings by accrual versus non-accrual status and by loan class as of March 31, 2019 and December 31, 2018:



(in thousands)	March 31, 2019
	Accrual Status		Non-Accrual Status		Total Modifications
Commercial real estate, net	$	4,509	$	6,716	$	11,225
Commercial, net	5,589		7,243		12,832
Residential, net	5,628		—		5,628
Total, net of deferred fees and costs	$	15,726	$	13,959	$	29,685



(in thousands)	December 31, 2018
	Accrual Status		Non-Accrual Status		Total Modifications
Commercial real estate, net	$	4,524	$	9,290	$	13,814
Commercial, net	3,696		8,736		12,432
Residential, net	5,704		—		5,704
Total, net of deferred fees and costs	$	13,924	$	18,026	$	31,950

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 tables present newly restructured loans that occurred during the three months ended March 31, 2019 and 2018:



(in thousands)	Three Months Ended March 31, 2019
	Rate Modifications		Term Modifications		Interest Only Modifications		Payment Modifications		Combination Modifications		Total Modifications
Commercial real estate, net	$	—	$	—	$	—	$	—	$	118	$	118
Commercial, net	—		—		—		—		1,842		1,842
Total, net of deferred fees and costs	$	—	$	—	$	—	$	—	$	1,960	$	1,960

(in thousands)	Three Months Ended March 31, 2018
	Rate Modifications		Term Modifications		Interest Only Modifications		Payment Modifications		Combination Modifications		Total Modifications
Residential, net	$	—	$	—	$	—	$	—	$	106	$	106
Total, net of deferred fees and costs	$	—	$	—	$	—	$	—	$	106	$	106

For the periods presented in the tables above, the outstanding recorded investment was the same pre and post modification. There were no financing receivables modified as troubled debt restructurings within the previous 12 months for which there was a payment default during the three months ended March 31, 2019. There were $10.2 million in financing receivables modified as troubled debt restructurings within the previous 12 months for which there was a payment default during the three months ended March 31, 2018.