Loans and Leases

9 Months Ended

Sep. 30, 2019

The following table presents the major types of loans and leases, net of deferred fees and costs, as of September 30, 2019 and December 31, 2018:


(in thousands)	September 30, 2019		December 31, 2018
Commercial real estate
Non-owner occupied term, net	$	3,495,555	$	3,573,065
Owner occupied term, net	2,566,299		2,480,371
Multifamily, net	3,479,986		3,304,763
Construction & development, net	771,214		736,254
Residential development, net	191,500		196,890
Commercial
Term, net	2,310,759		2,232,923
Lines of credit & other, net	1,254,755		1,169,525
Leases & equipment finance, net	1,485,753		1,330,155
Residential
Mortgage, net	4,245,674		3,635,073
Home equity loans & lines, net	1,224,578		1,176,477
Consumer & other, net	494,721		587,170
Total loans, net of deferred fees and costs	$	21,520,794	$	20,422,666

The loan balances are net of deferred fees and costs of $73.6 million and $70.4 million as of September 30, 2019 and December 31, 2018, respectively. Net loans also include discounts on acquired loans of $37.0 million and $50.0 million as of September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019, loans totaling $13.4 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 $146.3 million and $183.7 million at September 30, 2019 and December 31, 2018, respectively. The carrying balance of purchased impaired loans was $104.8 million and $134.5 million at September 30, 2019 and December 31, 2018, respectively.

The following table presents the changes in the accretable yield for purchased impaired loans for the three and nine months ended September 30, 2019 and 2018:


(in thousands)	Three Months Ended						Nine Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Balance, beginning of period	$	46,019	$	62,966	$	56,564	$	74,268
Accretion to interest income	(6,982)		(3,793)		(17,300)		(19,694)
Disposals	(3,350)		(1,147)		(7,923)		(9,001)
Reclassifications from non-accretable difference	4,357		169		8,703		12,622
Balance, end of period	$	40,044	$	58,195	$	40,044	$	58,195

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. Direct finance leases are included within the lease and equipment finance segment within the loans and leases, net line item. All of these leases typically have terms of three to 5 years and are considered to be direct financing leases. Interest income recognized on these leases was $8.1 million and $24.6 million for the three and nine months ended September 30, 2019, respectively.

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 as of September 30, 2019 and December 31, 2018:


(in thousands)	September 30, 2019		December 31, 2018
Minimum lease payments receivable	$	463,834	$	450,258
Estimated guaranteed and unguaranteed residual values	85,360		79,455
Initial direct costs - net of accumulated amortization	9,806		10,950
Unearned income	(73,083)		(79,777)
Net investment in direct financing leases	$	485,917	$	460,886

The following table presents the scheduled minimum lease payments receivable as of September 30, 2019:


(in thousands)
Year	Amount
2019	$	41,122
2020	148,284
2021	117,687
2022	74,456
2023	38,675
Thereafter	43,610
	$	463,834

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 and nine months ended September 30, 2019 and 2018:


(in thousands)	Three Months Ended						Nine Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Commercial real estate
Non-owner occupied term, net	$	16,467	$	3,215	$	24,229	$	8,369
Owner occupied term, net	2,780		12,751		15,751		26,843
Multifamily, net	—		4,432		—		4,432


Commercial
Term, net	7,670		13,331		23,633		33,120
Lines of credit & other, net	1,619		—		1,619		—
Leases & equipment finance, net	—		—		17,571		—
Residential
Mortgage, net	—		41,669		109		41,669


Total	$	28,536	$	75,398	$	82,912	$	114,433