United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	for the quarterly period ended:	September 30, ~~2020~~2021
	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~~97204

(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. ☒ 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). ☒ 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.

☒ 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 ☒ 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: ~~220,225,383~~216,621,803 shares outstanding as of October 31, ~~2020~~2021

Table of Contents

UMPQUA HOLDINGS CORPORATION

FORM 10-Q

Table of Contents


GLOSSARY OF DEFINED TERMS
ACL						Allowance for credit losses
ASU						Accounting Standards Update
ATM						Automated teller machine
Bank						Umpqua Bank
Basel III						Basel capital framework (third accord)


CECL						Current Expected Credit Losses
Columbia						Columbia Banking System, Inc.
Company						Umpqua Holdings Corporation and its subsidiaries

CVA						Credit valuation adjustments
DCF						Discounted cash flow
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
Federal Reserve						Board of Governors of the Federal Reserve System
FHLB						Federal Home Loan Bank
FinPac						Financial Pacific Leasing, Inc.


GAAP						Generally accepted accounting principles
GDP						Gross Domestic Product
GNMA						Government National Mortgage Association
HELOC						Home equity line of credit
LGD						Loss given default
LIBOR						London Inter-Bank Offered Rate
Merger						Merger Sub will merge with and into Umpqua, with Umpqua surviving
Merger Agreement						Agreement dated as of October 11, 2021, by and among Umpqua, Columbia, and Cascade Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Columbia
Merger Sub						Cascade Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Columbia
MSR						Mortgage servicing rights
NOL						Net operating loss
N/M						Not meaningful
PD						Probability of default
PPP						Paycheck Protection Program
SBA						Small Business Administration
SEC						Securities and Exchange Commission
Surviving Entity						Merger Sub will merge with and into Umpqua, with Umpqua surviving the Merger
TDR						Troubled debt restructuring
USDA						United States Department of Agriculture

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) September 30, 2020 December 31, 2019
ASSETS
Cash and due from banks (restricted cash of $103,482 and $86,507) $ 370,595 $ 382,598
Interest bearing cash and temporary investments (restricted cash of $1,359 and $590) 1,849,132 980,158
Total cash and cash equivalents 2,219,727 1,362,756
Investment securities
Equity and other, at fair value 82,769 80,165
Available for sale, at fair value 2,898,700 2,814,682
Held to maturity, at amortized cost 3,088 3,260
Loans held for sale, at fair value 683,960 513,431
Loans and leases 22,426,473 21,195,684
Allowance for credit losses on loans and leases (345,049) (157,629)
Net loans and leases 22,081,424 21,038,055
Restricted equity securities 50,062 46,463
Premises and equipment, net 185,104 201,460
Operating lease right-of-use assets 107,321 110,718
Goodwill 2,715 1,787,651
Other intangible assets, net 14,606 18,346
Residential mortgage servicing rights, at fair value 93,248 115,010
Bank owned life insurance 326,120 320,611
Other assets 688,597 434,201
Total assets $ 29,437,441 $ 28,846,809
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest bearing $ 9,475,244 $ 6,913,375
Interest bearing 15,194,539 15,568,129
Total deposits 24,669,783 22,481,504
Securities sold under agreements to repurchase 388,028 311,308
Borrowings 996,520 906,635
Junior subordinated debentures, at fair value 247,045 274,812
Junior subordinated debentures, at amortized cost 88,325 88,496
Operating lease liabilities 115,790 119,429
Deferred tax liability, net 13,239 52,928
Other liabilities 308,467 297,782
Total liabilities 26,827,197 24,532,894
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SHAREHOLDERS' EQUITY
Common stock, 0 par value, shares authorized: 400,000,000 in 2020 and 2019; issued and outstanding: 220,222,198 in 2020 and 220,229,282 in 2019 3,512,153 3,514,000
(Accumulated deficit) retained earnings (1,036,931) 770,366
Accumulated other comprehensive income 135,022 29,549
Total shareholders' equity 2,610,244 4,313,915
Total liabilities and shareholders' equity $ 29,437,441 $ 28,846,809


(in thousands, except shares)	September 30, 2021		December 31, 2020
ASSETS
Cash and due from banks (restricted cash of $89,006 and $92,955)	$	395,555	$	370,219
Interest bearing cash and temporary investments (restricted cash of $357 and $2,574)	3,349,034		2,202,962
Total cash and cash equivalents	3,744,589		2,573,181
Investment securities
Equity and other, at fair value	81,575		83,077
Available for sale, at fair value	3,723,171		2,932,558
Held to maturity, at amortized cost	2,795		3,034
Loans held for sale (at fair value: $352,466 and $688,079)	352,466		766,225
Loans and leases (at fair value: $353,912 and $0)	21,969,940		21,779,367
Allowance for credit losses on loans and leases	(257,560)		(328,401)
Net loans and leases	21,712,380		21,450,966
Restricted equity securities	10,946		41,666
Premises and equipment, net	172,624		178,050
Operating lease right-of-use assets	88,379		104,937
Goodwill	—		2,715
Other intangible assets, net	9,970		13,360
Residential mortgage servicing rights, at fair value	105,834		92,907
Bank owned life insurance	325,646		323,470
Deferred tax asset, net	8,402		—
Other assets	552,702		669,029
Total assets	$	30,891,479	$	29,235,175
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing	$	11,121,127	$	9,632,773
Interest bearing	15,787,270		14,989,428
Total deposits	26,908,397		24,622,201
Securities sold under agreements to repurchase	467,760		375,384
Borrowings	6,367		771,482
Junior subordinated debentures, at fair value	299,508		255,217
Junior subordinated debentures, at amortized cost	88,098		88,268
Operating lease liabilities	100,557		113,593
Deferred tax liability, net	—		5,441
Other liabilities	298,413		299,012
Total liabilities	28,169,100		26,530,598
COMMITMENTS AND CONTINGENCIES (NOTE 6)	0		0
SHAREHOLDERS' EQUITY
Common stock, no par value, shares authorized: 400,000,000 in 2021 and 2020; issued and outstanding: 216,621,803 in 2021 and 220,226,335 in 2020	3,442,085		3,514,599
Accumulated deficit	(739,915)		(932,767)
Accumulated other comprehensive income	20,209		122,745
Total shareholders' equity	2,722,379		2,704,577
Total liabilities and shareholders' equity	$	30,891,479	$	29,235,175

See notes to condensed consolidated financial statements

Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended Nine Months Ended
(in thousands, except per share amounts) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
INTEREST INCOME
Interest and fees on loans and leases $ 229,457 $ 266,111 $ 710,624 $ 788,968
Interest and dividends on investment securities:
Taxable 10,168 12,546 35,788 42,789
Exempt from federal income tax 1,490 1,727 4,572 5,762
Dividends 710 599 1,956 1,690
Interest on temporary investments and interest bearing deposits 474 4,204 4,208 9,837
Total interest income 242,299 285,187 757,148 849,046
INTEREST EXPENSE
Interest on deposits 19,121 45,876 85,633 123,561
Interest on securities sold under agreement to repurchase and federal funds purchased 84 448 673 1,661
Interest on borrowings 3,271 4,238 11,156 12,484
Interest on junior subordinated debentures 3,249 5,652 12,074 17,520
Total interest expense 25,725 56,214 109,536 155,226
Net interest income 216,574 228,973 647,612 693,820
(RECAPTURE) PROVISION FOR CREDIT LOSSES (338) 23,227 204,832 56,263
Net interest income after provision for credit losses 216,912 205,746 442,780 637,557
NON-INTEREST INCOME
Service charges on deposits 14,438 16,627 41,907 47,858
Brokerage revenue 3,686 4,060 11,506 11,850
Residential mortgage banking revenue, net 90,377 47,000 191,794 67,760
Gain (loss) on sale of debt securities, net 0 0 190 (7,186)
(Loss) gain on equity securities, net (112) 257 942 83,559
Gain on loan and lease sales, net 1,092 1,762 3,333 5,864
BOLI income 2,087 2,067 6,332 6,328
Other income 20,356 16,739 32,045 40,042
Total non-interest income 131,924 88,512 288,049 256,075
NON-INTEREST EXPENSE
Salaries and employee benefits 120,337 106,819 346,787 311,526
Occupancy and equipment, net 36,720 35,446 109,892 107,723
Communications 2,943 3,617 9,010 11,743
Marketing 1,859 3,804 6,148 10,842
Services 13,193 15,326 34,319 40,763
FDIC assessments 2,989 2,587 9,502 8,366
Intangible amortization 1,247 1,405 3,740 4,214
Goodwill impairment 0 0 1,784,936 0
Other expenses 10,919 14,586 30,441 40,420
Total non-interest expense 190,207 183,590 2,334,775 535,597
Income (loss) before provision for income taxes 158,629 110,668 (1,603,946) 358,035
Provision for income taxes 33,758 26,166 70,204 87,690
Net income (loss) $ 124,871 $ 84,502 $ (1,674,150) $ 270,345
Earnings (loss) per common share:
Basic $0.57 $0.38 ($7.60) $1.23
Diluted $0.57 $0.38 ($7.60) $1.23
Weighted average number of common shares outstanding:
Basic 220,221 220,285 220,216 220,379
Diluted 220,418 220,583 220,216 220,642


	Three Months Ended				Nine Months Ended
(in thousands, except per share amounts)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
INTEREST INCOME
Interest and fees on loans and leases	$	224,403	$	229,457	$	669,014	$	710,624
Interest and dividends on investment securities:
Taxable	16,102		10,168		43,833		35,788
Exempt from federal income tax	1,470		1,490		4,491		4,572
Dividends	213		710		1,216		1,956
Interest on temporary investments and interest bearing deposits	1,237		474		2,635		4,208
Total interest income	243,425		242,299		721,189		757,148
INTEREST EXPENSE
Interest on deposits	5,100		19,121		22,794		85,633
Interest on securities sold under agreement to repurchase and federal funds purchased	88		84		232		673
Interest on borrowings	149		3,271		2,787		11,156
Interest on junior subordinated debentures	3,014		3,249		9,108		12,074
Total interest expense	8,351		25,725		34,921		109,536
Net interest income	235,074		216,574		686,268		647,612
(RECAPTURE) PROVISION FOR CREDIT LOSSES	(18,919)		(338)		(41,915)		204,832
Net interest income after (recapture) provision for credit losses	253,993		216,912		728,183		442,780
NON-INTEREST INCOME
Service charges on deposits	10,941		10,405		30,898		30,635
Card-based fees	9,111		7,118		26,759		20,436
Brokerage revenue	31		3,686		5,081		11,506
Residential mortgage banking revenue, net	34,150		90,377		143,626		191,794
Gain on sale of debt securities, net	—		—		4		190
(Loss) gain on equity securities, net	(343)		(112)		(1,045)		942
Gain on loan and lease sales, net	4,208		1,092		10,899		3,333
Bank owned life insurance income	2,038		2,087		6,201		6,332
Other income	13,569		17,271		51,157		22,881
Total non-interest income	73,705		131,924		273,580		288,049
NON-INTEREST EXPENSE
Salaries and employee benefits	117,636		120,337		363,343		346,787
Occupancy and equipment, net	33,944		36,720		103,236		109,892
Communications	2,866		2,943		8,633		9,010
Marketing	1,651		1,859		5,077		6,148
Services	12,017		13,193		36,279		34,319
FDIC assessments	2,136		2,989		6,342		9,502
Intangible amortization	1,130		1,247		3,390		3,740

Goodwill impairment	—		—		—		1,784,936
Other expenses	12,373		10,919		34,445		30,441
Total non-interest expense	183,753		190,207		560,745		2,334,775
Income (loss) before provision for income taxes	143,945		158,629		441,018		(1,603,946)
Provision for income taxes	35,879		33,758		109,072		70,204
Net income (loss)	$	108,066	$	124,871	$	331,946	$	(1,674,150)
Earnings (loss) per common share:
Basic	$0.49		$0.57		$1.51		($7.60)
Diluted	$0.49		$0.57		$1.51		($7.60)
Weighted average number of common shares outstanding:
Basic	218,416		220,221		219,791		220,216
Diluted	218,978		220,418		220,278		220,216

Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended Nine Months Ended
(in thousands) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Net income (loss) $ 124,871 $ 84,502 $ (1,674,150) $ 270,345
Available for sale securities:
Unrealized gains arising during the period 2,996 26,352 115,327 100,381
Income tax expense related to unrealized gains (771) (6,778) (29,663) (25,819)
Reclassification adjustment for net realized (gains) losses in earnings 0 0 (190) 7,186
Income tax expense (benefit) related to realized losses 0 0 49 (1,848)
Net change in unrealized gains for available for sale securities 2,225 19,574 85,523 79,900
Junior subordinated debentures, at fair value:
Unrealized (losses) gains arising during the period (14,555) 8,450 26,857 32,254
Income tax benefit (expense) related to unrealized gains 3,744 (2,173) (6,907) (8,276)
Net change in unrealized (losses) gains for junior subordinated debentures, at fair value (10,811) 6,277 19,950 23,978
Other comprehensive (loss) income, net of tax (8,586) 25,851 105,473 103,878
Comprehensive income (loss) $ 116,285 $ 110,353 $ (1,568,677) $ 374,223


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net income (loss)	$	108,066	$	124,871	$	331,946	$	(1,674,150)
Available for sale securities:
Unrealized (losses) gains arising during the period	(29,009)		2,996		(93,533)		115,327
Income tax benefit (expense) related to unrealized (losses) gains	7,463		(771)		24,058		(29,663)

Reclassification adjustment for net realized gains in earnings	—		—		(4)		(190)
Income tax expense related to realized gains	—		—		1		49
Net change in unrealized (losses) gains for available for sale securities	(21,546)		2,225		(69,478)		85,523






Junior subordinated debentures, at fair value:
Unrealized (losses) gains arising during the period	(11,946)		(14,555)		(44,504)		26,857
Income tax benefit (expense) related to unrealized gains	3,072		3,744		11,446		(6,907)
Net change in unrealized (losses) gains for junior subordinated debentures, at fair value	(8,874)		(10,811)		(33,058)		19,950
Other comprehensive (loss) income, net of tax	(30,420)		(8,586)		(102,536)		105,473
Comprehensive income (loss)	$	77,646	$	116,285	$	229,410	$	(1,568,677)

See notes to condensed consolidated financial statements

Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(UNAUDITED)

Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss)
(in thousands, except shares) Shares Amount 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)
Cumulative effect adjustment (1)
(244) (244)
Balance at March 31, 2019 220,457,208 $ 3,511,731 $ 629,877 $ (29,282) $ 4,112,326
Net income 111,810 111,810
Other comprehensive income, net of tax 48,395 48,395
Stock-based compensation 2,722 2,722
Stock repurchased and retired (4,113) (62) (62)
Issuances of common stock under stock plans 45,589 0 0
Cash dividends on common stock ($0.21 per share) (46,684) (46,684)
Balance at June 30, 2019 220,498,684 $ 3,514,391 $ 695,003 $ 19,113 $ 4,228,507
Net income 84,502 84,502
Other comprehensive income, net of tax 25,851 25,851
Stock-based compensation 2,350 2,350
Stock repurchased and retired (300,719) (5,248) (5,248)
Issuances of common stock under stock plans 14,169 0 0
Cash dividends on common stock ($0.21 per share) (46,446) (46,446)
Balance at September 30, 2019 220,212,134 $ 3,511,493 $ 733,059 $ 44,964 $ 4,289,516
Net income 83,750 83,750
Other comprehensive loss, net of tax (15,415) (15,415)
Stock-based compensation 2,547 2,547
Stock repurchased and retired (2,483) (40) (40)
Issuances of common stock under stock plans 19,631 0 0
Cash dividends on common stock ($0.21 per share) (46,443) (46,443)
Balance at December 31, 2019 220,229,282 $ 3,514,000 $ 770,366 $ 29,549 $ 4,313,915


	Common Stock			Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income
(in thousands, except shares)	Shares	Amount						Total
Balance at January 1, 2020	220,229,282	$	3,514,000	$	770,366	$	29,549	$	4,313,915
Net loss				(1,851,947)				(1,851,947)
Other comprehensive income, net of tax						138,722		138,722
Stock-based compensation		2,253						2,253
Stock repurchased and retired	(486,757)	(8,573)						(8,573)
Issuances of common stock under stock plans	432,595	—						—
Cash dividends on common stock ($0.21 per share)				(46,578)				(46,578)
Cumulative effect adjustment (1)				(40,181)				(40,181)
Balance at March 31, 2020	220,175,120	$	3,507,680	$	(1,168,340)	$	168,271	$	2,507,611
Net income				52,926				52,926
Other comprehensive loss, net of tax						(24,663)		(24,663)
Stock-based compensation		2,503						2,503
Stock repurchased and retired	(3,707)	(38)						(38)
Issuances of common stock under stock plans	47,694	—						—

Balance at June 30, 2020	220,219,107	$	3,510,145	$	(1,115,414)	$	143,608	$	2,538,339
Net income				124,871				124,871
Other comprehensive loss, net of tax						(8,586)		(8,586)
Stock-based compensation		2,025						2,025
Stock repurchased and retired	(1,523)	(17)						(17)
Issuances of common stock under stock plans	4,614	—						—
Cash dividends on common stock ($0.21 per share)				(46,388)				(46,388)
Balance at September 30, 2020	220,222,198	$	3,512,153	$	(1,036,931)	$	135,022	$	2,610,244
Net income				150,730				150,730
Other comprehensive loss, net of tax						(12,277)		(12,277)
Stock-based compensation		2,473						2,473
Stock repurchased and retired	(2,022)	(27)						(27)
Issuances of common stock under stock plans	6,159	—						—
Cash dividends on common stock ($0.21 per share)				(46,566)				(46,566)
Balance at December 31, 2020	220,226,335	$	3,514,599	$	(932,767)	$	122,745	$	2,704,577

Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Continued)

(UNAUDITED)


		Common Stock			Retained Earnings (Accumulated Deficit)				Accumulated Other Comprehensive Income (Loss)									Common Stock				Retained Earnings (Accumulated Deficit)				Accumulated Other Comprehensive Income (Loss)
(in thousands, except shares)	(in thousands, except shares)	Shares	Amount								Total		(in thousands, except shares)		Shares				Amount					Total
Balance at January 1, 2020		220,229,282	$	3,514,000			$	770,366			$	29,549				$	4,313,915
Net loss					(1,851,947)								(1,851,947)
Other comprehensive income, net of tax									138,722				138,722
Stock-based compensation			2,253										2,253
Stock repurchased and retired		(486,757)	(8,573)										(8,573)
Issuances of common stock under stock plans		432,595	0										0
Cash dividends on common stock ($0.21 per share)					(46,578)								(46,578)
Cumulative effect adjustment (2)					(40,181)								(40,181)
Balance at March 31, 2020		220,175,120	$	3,507,680	$	(1,168,340)			$	168,271			$	2,507,611
Net income					52,926								52,926
Other comprehensive loss, net of tax									(24,663)				(24,663)
Stock-based compensation			2,503										2,503
Stock repurchased and retired		(3,707)	(38)										(38)
Issuances of common stock under stock plans		47,694	0										0

Balance at June 30, 2020		220,219,107	$	3,510,145	$	(1,115,414)			$	143,608			$	2,538,339
Balance at January 1, 2021																Balance at January 1, 2021		220,226,335		$	3,514,599			$	(932,767)			$	122,745			$	2,704,577
Net income	Net income				124,871								124,871			Net income						107,737								107,737
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax								(8,586)				(8,586)			Other comprehensive loss, net of tax										(84,613)				(84,613)
Stock-based compensation	Stock-based compensation		2,025										2,025			Stock-based compensation				2,964										2,964
Stock repurchased and retired	Stock repurchased and retired	(1,523)	(17)										(17)			Stock repurchased and retired		(143,832)		(2,315)										(2,315)
Issuances of common stock under stock plans	Issuances of common stock under stock plans	4,614	0										0			Issuances of common stock under stock plans		408,700		—										—
Cash dividends on common stock ($0.21 per share)	Cash dividends on common stock ($0.21 per share)				(46,388)								(46,388)			Cash dividends on common stock ($0.21 per share)						(46,481)								(46,481)
Balance at September 30, 2020		220,222,198	$	3,512,153	$	(1,036,931)			$	135,022			$	2,610,244
Balance at March 31, 2021																Balance at March 31, 2021		220,491,203		$	3,515,248	$	(871,511)			$	38,132			$	2,681,869
Net income																Net income						116,143								116,143
Other comprehensive income, net of tax																Other comprehensive income, net of tax										12,497				12,497
Stock-based compensation																Stock-based compensation				2,377										2,377
Stock repurchased and retired																Stock repurchased and retired		(957)		(18)										(18)
Issuances of common stock under stock plans																Issuances of common stock under stock plans		136,206		34										34
Cash dividends on common stock ($0.21 per share)																Cash dividends on common stock ($0.21 per share)						(46,586)								(46,586)
Balance at June 30, 2021																Balance at June 30, 2021		220,626,452		$	3,517,641	$	(801,954)			$	50,629			$	2,766,316
Net income																Net income						108,066								108,066
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax										(30,420)				(30,420)
Stock-based compensation																Stock-based compensation				2,765										2,765
Stock repurchased and retired																Stock repurchased and retired		(4,011,808)		(78,321)										(78,321)
Issuances of common stock under stock plans																Issuances of common stock under stock plans		7,159		—										—
Cash dividends on common stock ($0.21 per share)																Cash dividends on common stock ($0.21 per share)						(46,027)								(46,027)
Balance at September 30, 2021																Balance at September 30, 2021		216,621,803		$	3,442,085	$	(739,915)			$	20,209			$	2,722,379

(1) ~~The cumulative effect adjustment relates to the implementation of new accounting guidance for leases on January 1, 2019~~.

~~(2)~~ The cumulative effect adjustment relates to the implementation of new accounting guidance for the allowance for credit losses on January 1, 2020. ~~Refer to Note 1 for discussion of the new accounting guidance.~~

See notes to condensed consolidated financial statements

Table of Contents

UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended					Nine Months Ended
(in thousands)	(in thousands)	September 30, 2020		September 30, 2019		(in thousands)	September 30, 2021		September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(1,674,150)	$	270,345
Net income (loss)						Net income (loss)	$	331,946	$	(1,674,150)
Adjustments to reconcile net income to net cash used in operating activities:	Adjustments to reconcile net income to net cash used in operating activities:					Adjustments to reconcile net income to net cash used in operating activities:
Goodwill impairment	Goodwill impairment	1,784,936		0		Goodwill impairment	—		1,784,936
Amortization of investment premiums, net	Amortization of investment premiums, net	20,911		19,592		Amortization of investment premiums, net	10,934		20,911
(Gain) loss on sale of investment securities, net		(190)		7,186
Gain on sale of investment securities, net						Gain on sale of investment securities, net	(4)		(190)

Provision for credit losses		204,832		56,263
(Recapture) provision for credit losses						(Recapture) provision for credit losses	(41,915)		204,832
Change in cash surrender value of bank owned life insurance	Change in cash surrender value of bank owned life insurance	(6,433)		(6,365)		Change in cash surrender value of bank owned life insurance	(6,302)		(6,433)
Depreciation, amortization and accretion	Depreciation, amortization and accretion	28,494		33,126		Depreciation, amortization and accretion	23,492		28,494
Gain on sale of premises and equipment		(369)		(1,568)
Loss (gain) on sale of premises and equipment						Loss (gain) on sale of premises and equipment	436		(369)
Gain on store divestiture	Gain on store divestiture	(5,945)		(1,225)		Gain on store divestiture	—		(5,945)
Additions to residential mortgage servicing rights carried at fair value	Additions to residential mortgage servicing rights carried at fair value	(37,484)		(16,772)		Additions to residential mortgage servicing rights carried at fair value	(30,845)		(37,484)
Change in fair value of residential mortgage servicing rights carried at fair value	Change in fair value of residential mortgage servicing rights carried at fair value	59,246		34,414		Change in fair value of residential mortgage servicing rights carried at fair value	17,918		59,246

Stock-based compensation	Stock-based compensation	6,781		5,826		Stock-based compensation	8,106		6,781
Net increase in equity and other investments		(1,662)		(1,217)
Gain on equity securities, net		(942)		(83,559)
Net decrease (increase) in equity and other investments						Net decrease (increase) in equity and other investments	457		(1,662)
Loss (gain) on equity securities, net						Loss (gain) on equity securities, net	1,045		(942)
Gain on sale of loans and leases, net	Gain on sale of loans and leases, net	(212,353)		(65,707)		Gain on sale of loans and leases, net	(124,764)		(212,353)
Change in fair value of loans held for sale	Change in fair value of loans held for sale	(16,519)		(5,758)		Change in fair value of loans held for sale	21,727		(16,519)
Origination of loans held for sale	Origination of loans held for sale	(4,897,068)		(2,029,682)		Origination of loans held for sale	(3,875,836)		(4,897,068)
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	4,958,265		1,906,722		Proceeds from sales of loans held for sale	4,065,846		4,958,265
Change in other assets and liabilities:	Change in other assets and liabilities:					Change in other assets and liabilities:
Net increase in other assets		(231,781)		(179,316)
Net decrease (increase) in other assets						Net decrease (increase) in other assets	161,119		(232,499)
Net decrease in other liabilities	Net decrease in other liabilities	(59,519)		(20,180)		Net decrease in other liabilities	(21,816)		(59,519)
Net cash used in operating activities		(80,950)		(77,875)
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	541,544		(81,668)
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities available for sale	Purchases of investment securities available for sale	(595,396)		(563,606)		Purchases of investment securities available for sale	(1,473,840)		(595,396)

Proceeds from investment securities available for sale	Proceeds from investment securities available for sale	604,553		778,259		Proceeds from investment securities available for sale	578,240		604,553
Proceeds from investment securities held to maturity		319		432
Proceeds from sale of equity securities		0		81,853

Purchases of restricted equity securities	Purchases of restricted equity securities	(20,001)		(220,200)		Purchases of restricted equity securities	(34)		(20,001)
Redemption of restricted equity securities	Redemption of restricted equity securities	16,402		206,005		Redemption of restricted equity securities	30,754		16,402
Net change in loans and leases	Net change in loans and leases	(1,343,715)		(1,229,379)		Net change in loans and leases	(85,539)		(1,343,715)
Proceeds from sales of loans and leases	Proceeds from sales of loans and leases	60,777		88,776		Proceeds from sales of loans and leases	182,605		60,777
Change in premises and equipment	Change in premises and equipment	(11,526)		(8,230)		Change in premises and equipment	(13,121)		(11,526)
Proceeds from bank owned life insurance death benefits	Proceeds from bank owned life insurance death benefits	57		1,869		Proceeds from bank owned life insurance death benefits	3,401		57

Net cash received from sale of Umpqua Investments, Inc.						Net cash received from sale of Umpqua Investments, Inc.	10,781		—
Net cash paid in store divestiture	Net cash paid in store divestiture	(81,172)		(44,646)		Net cash paid in store divestiture	—		(81,172)

Other						Other	1,879		1,037
Net cash used in investing activities	Net cash used in investing activities	$	(1,369,702)	$	(908,867)	Net cash used in investing activities	$	(764,874)	$	(1,368,984)

Table of Contents


UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (UNAUDITED)	UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (UNAUDITED)					UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (UNAUDITED)
		Nine Months Ended					Nine Months Ended
(in thousands)	(in thousands)	September 30, 2020		September 30, 2019		(in thousands)	September 30, 2021		September 30, 2020
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit liabilities	Net increase in deposit liabilities	$	2,288,262	$	1,347,046	Net increase in deposit liabilities	$	2,286,225	$	2,288,262
Net increase in securities sold under agreements to repurchase	Net increase in securities sold under agreements to repurchase	76,720		(434)		Net increase in securities sold under agreements to repurchase	92,376		76,720
Proceeds from borrowings	Proceeds from borrowings	600,000		810,670		Proceeds from borrowings	—		600,000
Repayment of borrowings	Repayment of borrowings	(510,000)		(455,670)		Repayment of borrowings	(765,000)		(510,000)

Net proceeds from issuance of common stock						Net proceeds from issuance of common stock	34		—
Dividends paid on common stock	Dividends paid on common stock	(138,731)		(138,856)		Dividends paid on common stock	(138,243)		(138,731)
Proceeds from stock options exercised		0		21

Repurchase and retirement of common stock	Repurchase and retirement of common stock	(8,628)		(7,228)		Repurchase and retirement of common stock	(80,654)		(8,628)
Net cash provided by financing activities	Net cash provided by financing activities	2,307,623		1,555,549		Net cash provided by financing activities	1,394,738		2,307,623
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	856,971		568,807		Net increase in cash and cash equivalents	1,171,408		856,971
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	1,362,756		622,637		Cash and cash equivalents, beginning of period	2,573,181		1,362,756
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	2,219,727	$	1,191,444	Cash and cash equivalents, end of period	$	3,744,589	$	2,219,727

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	115,016	$	155,232	Interest	$	35,085	$	115,016
Income taxes	Income taxes	$	105,579	$	107,933	Income taxes	$	81,482	$	105,579
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:	SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:					SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Changes in unrealized gains and losses on investment securities available for sale, net of taxes	Changes in unrealized gains and losses on investment securities available for sale, net of taxes	$	85,523	$	79,900	Changes in unrealized gains and losses on investment securities available for sale, net of taxes	$	(69,478)	$	85,523

Changes in unrealized gains and losses on junior subordinated debentures carried at fair value, net of taxes	Changes in unrealized gains and losses on junior subordinated debentures carried at fair value, net of taxes	$	19,950	$	23,978	Changes in unrealized gains and losses on junior subordinated debentures carried at fair value, net of taxes	$	(33,058)	$	19,950
Cumulative effect adjustment to retained earnings	Cumulative effect adjustment to retained earnings	$	40,181	$	244	Cumulative effect adjustment to retained earnings	$	—	$	40,181
Cash dividend declared on common stock and payable after period-end		$	0	$	46,245

Transfer of loans to loans held for sale	Transfer of loans to loans held for sale	$	6,187	$	0	Transfer of loans to loans held for sale	$	—	$	6,187
Transfer of loans held for sale to loans						Transfer of loans held for sale to loans	$	315,887	$	—
Change in GNMA mortgage loans recognized due to repurchase option	Change in GNMA mortgage loans recognized due to repurchase option	$	15,617	$	(3,690)	Change in GNMA mortgage loans recognized due to repurchase option	$	—	$	15,617

See notes to condensed consolidated financial statements

910

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 ("GAAP").~~America. All references in this report to "Umpqua," "we," "our," ~~"us," the "Company"~~or "us" or similar references mean ~~Umpqua Holdings Corporation~~the Company 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~~bank. FinPac is the Bank's wholly-owned subsidiary, ~~Financial Pacific Leasing, Inc. ("FinPac"),~~ a commercial equipment leasing company. The accompanying interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and the Bank's 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 the Company's accounting policies is included in the ~~2019~~2020 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 ~~2019~~2020 Annual Report filed on Form 10-K.

The results for interim periods are not necessarily indicative of results for the full year or any other interim period. As of September 30, 2020, the impact of the novel coronavirus ("COVID-19") continues to unfold and many of the Company's estimates and assumptions require increased judgment and carry a higher degree of variability and volatility, including the provision for credit losses which has been materially impacted. The Company is unable to fully predict the impact that COVID-19 will have on its financial position and results of operations due to numerous uncertainties and will continue to assess the potential impacts on its financial position and results of operations. As events continue to evolve and additional information becomes available, estimates may change materially in future periods.

In preparing these condensed consolidated financial statements, the Company has evaluated events and transactions subsequent to September 30, ~~2020~~2021, 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. Certain reclassifications of prior period amounts have been made to conform to current ~~classifications.~~

~~Application~~classifications, including the reclassification of ~~new accounting guidance~~

~~In June 2016,~~ the ~~Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13,~~ ~~Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("CECL" or "ASC 326"). CECL is intended~~line items within non-interest income to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. 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. ASC 326 requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses,add the card-based fees line item, 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, ASC 326 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The adoption date for the Company was January 1, 2020. The guidance was applied on a modified retrospective basis with the cumulative effect of initially applying the amendments recognized in retained earnings at January 1, 2020. However, certain provisions of the guidance are only required to be applied on a prospective basis.

The Bank has elected to not include accrued interest when determining the amortized cost basis of an asset. Instead, the amortized cost basis of an asset is the combination of the balance, deferred fees and costs, and premium or discount. In addition, the Bank has elected to continue to present accrued interest as part of ~~Other Assets~~ on the consolidated balance sheets. The Bank has calculated an allowance for credit losses on accrued interest that is included with the accrued interest balance. The policies related to income recognition on non-accrual loans are outlined below.

~~Table of Contents~~

Upon adoption of CECL, the Company did not reassess whether loans previously accounted for as purchased credit impaired ("PCI") met the definition of a Purchased Credit-Deteriorated ("PCD") loan and therefore accounts for all such assets as PCD. The Company has elected not to retain the PCI pools previously established. Instead, the loans will now be included within the appropriate class of financing receivables which have been established based on shared risk characteristics. Changeschanges to the ~~allowance after adoption are recorded through provision expense.~~

Based on the Bank's portfolio composition as of January 1, 2020, and the economic environment at that time, management recorded an initial estimate of the allowance for credit losses ("ACL") under CECL, which includes the allowance for credit losses on loans and leases ("ACLLL") of $207.6 million and the reserve for unfunded commitments ("RUC") of $8.3 million. The implementation of CECL resulted in a cumulative effect of an accounting change adjustment to retained earnings of $40.2 million.

The Company analyzed the portfolio segments and classes of financing receivables based on the implementation of CECL. There were no necessary changes in the portfolio segments or classes of financing receivables. The increase in the allowance by portfolio segment ~~was as follows:~~

December 31, 2019 January 1, 2020
(in thousands) Allowance for Loan and Lease Losses Reserve for Unfunded Commitments Allowance for Credit Losses on Loans and Leases Reserve for Unfunded Commitments $ Increase (decrease) % Increase (decrease)
Commercial real estate, net $ 50,847 $ 534 $ 55,924 $ 4,564 $ 9,107 18 %
Commercial, net 73,820 2,539 117,829 2,052 43,522 57 %
Residential, net 24,714 149 26,813 1,416 3,366 14 %
Consumer & other, net 8,248 1,884 7,062 312 (2,758) (27) %
Total $ 157,629 $ 5,106 $ 207,628 $ 8,344 $ 53,237 33 %

Due to the significance of the implementation of CECL on the Company, the following significant accounting policies have been updated from the policies described in the 2019 Annual Report filed on Form 10-K.

~~Allowance for Credit Losses Policy-~~ The Bank has established an Allowance for Credit Loss Committee, which is responsible for, among other things, regularly reviewing the ACL methodology, including allowance levels and ensuring that it is designed and applied in accordance with generally accepted accounting principles. The Bank's Audit and Compliance Committee provides board oversight of the ACL process and reviews and approves the ACL methodology on a quarterly basis. CECL is not prescriptive in the methodology used to determine the expected credit loss estimate. Instead, management has flexibility in selecting the methodology. The expected credit losses must be estimated over a financial asset's contractual term, adjusted for prepayments utilizing quantitative and qualitative factors. There are also specific considerations for PCD, Troubled Debt Restructured ("TDR"), and Collateral Dependent Loans ("CDL").

The estimate of current expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is the starting point for estimating expected credit losses. Adjustments are made to historical loss experience to reflect differences in asset-specific risk characteristics, such as underwriting standards, portfolio mix or asset terms, and differences in economic conditions – both current conditions and reasonable and supportable forecasts. When the Company is not able to make or obtain reasonable and supportable forecasts for the entire life of the financial asset, it has estimated expected credit losses for the remaining life using an approach that reverts to historical credit loss information for the longer-term portion of the asset's life.

The Company utilizes complex models to obtain reasonable and supportable forecasts; most of the models calculate two predictive metrics: the probability of default ("PD") and loss given default ("LGD"). The PD measures the probability that a loan will default within a given time horizon and primarily measures the adequacy of the debtor's cash flow as the primary source of repayment of the loan or lease. The LGD is the expected loss which would be realized presuming a default has occurred and primarily measures the value of the collateral or other secondary source of repayment related to the collateral.

The combination of the current expected credit loss, PCD, CDL, TDR, and the RUC components represent the ACL. Management believes that the ACL was adequate as of September 30, 2020. There is, however, no assurance that future loan losses will not exceed the levels provided for in the ACL and could possibly result in additional charges to the provision for credit losses.

~~Table of Contents~~

~~Acquired Loans and Leases~~- Loans and leases purchased without more-than-insignificant credit deterioration, are recorded at their fair value at the acquisition date. However, loans and leases purchased with more-than-insignificant credit deterioration will be recorded with their applicable allowance for credit loss to determine the amortized cost basis.

~~Originated Loans and Leases~~- Loans are stated at the amount of unpaid principal, net of unearned income and any deferred fees or costs. All discounts and premiums are recognized over the contractual life of the loan as yield adjustments. Leases are recorded at the amount of minimum future lease payments receivable and estimated residual value of the leased equipment, net of unearned income and any deferred fees. Initial direct costs related to lease originations are deferred as part of the investment in direct financing leases and amortized over their term using the effective interest method. Unearned lease income is amortized over the term using the effective interest method.

~~Income Recognition on Non-Accrual Loans~~- Loans are classified as non-accrual if the collection of principal and interest is doubtful. Generally, this occurs when a commercial or commercial real estate loan is past due beyond its maturity or principal or interest payment due date by 90 days or more, unless such loans are well-secured and in the process of collection. Loans that are less than 90 days past due may also be classified as non-accrual if repayment in full of principal and/or interest is in doubt.

Generally, when a loan is classified as non-accrual, all uncollected accrued interest is reversed from interest income and the accrual of interest income is terminated. In addition, any cash payments subsequently received are applied as a reduction of principal outstanding. In cases where the future collectability of the principal balance in full is expected, interest income may be recognized on a cash basis. A loan may be restored to accrual status when the borrower's financial condition improves so that full collection of future contractual payments is considered likely. For those loans placed on non-accrual status due to payment delinquency, return to accrual status will typically not occur until the borrower demonstrates repayment ability over a period of not less than six months.

~~Collateral Dependent Loans and Troubled Debt Restructurings~~-A loan or lease is considered collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty. The Company's classification of CDLs includes: non-homogeneous non-accrual loans and leases; non-homogeneous loans determined by individual credit review; homogeneous non-accrual leases and equipment finance agreements; and homogeneous real estate secured loans that have been charged down to net realizable value or the government guaranteed balance. Except for homogeneous leases and equipment finance agreements, the expected credit losses for CDLs will be measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. The Company may also use the loan's observable market price, if available. If the value of the CDL is determined to be less than the recorded amount of the loan, a charge-off will be taken. To determine the expected credit loss for homogeneous leases or equipment finance agreements, the LGD calculated by the CECL model will be utilized. When a homogeneous lease or equipment finance agreement becomes 181 days past due, it is fully charged-off.

Loans are reported as TDR loans when, due to borrower financial difficulties, the Bank grants a concession it would not otherwise be willing to offer for a loan. Once a loan has been classified as a TDR, it continues in the classification until it has paid in full or it has demonstrated six months of payment performance and was determined to have been modified at a market rate terms. TDRs, including reasonably expected TDRs, are individually recognized and measured for expected credit loss in one of two ways: when a TDR meets the definition of a CDL, it is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable; otherwise, a discounted cash flow analysis is utilized to measure the expected credit loss for a TDR. The expected cash flow for a TDR is discounted based on the pre-modification rate and the expected remaining life.

In March 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was passed, which, among other things, provided relief for Banks related to loan modifications for accounting purposes. Specifically, section 4013 of the CARES Act gives entities temporary relief from the accounting and disclosure requirements for TDRs. In addition to the CARES Act, bank regulatory agencies issued interagency guidance indicating that a lender could conclude that the modifications under section 4013 of the CARES Act or the interagency guidance are not a TDR if certain criteria are met. The guidance also provides that loans generally will not be adversely classified if the short-term modification is related to COVID-19 relief programs. The Company has followed the guidance under the CARES Act and the interagency guidance related to these loan modifications. Loans modified under section 4013 of the CARES Act or the interagency guidance generally maintain their pre-COVID-19 delinquency status and are classified as performing loans. If it is deemed the modification is not short-term, not COVID-19 related or the customer does not meet the criteria under the guidance to be scoped out of troubled debt restructuring classification, the Company evaluates the loan modifications under its existing framework which requires modifications that result in a concession without appropriate compensation to a borrower experiencing financial difficulty to be accounted for as a TDR.

~~Table of Contents~~

~~Reserve for Unfunded Commitments~~- A reserve for unfunded commitments is maintained at a level that, in the opinion of management, is adequate to absorb expected losses associated with the Bank's commitment to lend funds under existing agreements, such as letters or lines of credit. The RUC calculation utilizes the allowance for credit loss on loans and leases rates, probability of default risk ratings, and utilization rates based on the economic expectations over the contractual life of the commitment. The reserve is based on estimates and ultimate losses may vary from the current estimates. These estimates are evaluated on a regular basis and adjustments are reported in earnings in the periods in which they become known. Draws on unfunded commitments that are considered uncollectible at the time funds are advanced are charged to the allowance for credit losses on loans and leases. Provisions for unfunded commitment losses are added to the reserve for unfunded commitments, which is included in the ~~Other Liabilities~~ ~~section of the consolidated balance sheets.~~

~~Investment Securities Available for Sale-~~ Debt securities are classified as available for sale if the Company intends and has the ability to hold those securities for an indefinite period of time, but not necessarily to maturity. Any decision to sell a debt security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Premiums and discounts are amortized or accreted over the life of the related investment security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned.

Securities available for sale are carried at fair value. Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. Unrealized holding gains or losses are included in other comprehensive income ("OCI") as a separate component of shareholders' equity, net of tax. When the fair value of an available-for-sale debt security falls below the amortized cost basis it is evaluated to determine if any of the decline in value is attributable to credit loss. Decreases in fair value attributable to credit loss would be recorded directly to earnings with a corresponding allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis. If the credit quality subsequently improves the allowance would be reversed up to a maximum of the previously recorded credit losses. If the Company intends to sell an impaired available-for-sale debt security, or if it is more likely than not that the Company will be required to sell the security prior to recovering the amortized cost basis, the entire fair value adjustment would be immediately recognized in earnings with no corresponding allowance for credit losses.

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement~~. This ASU was issued to improve the effectiveness of disclosures surrounding fair value measurements. The ASU removes numerous disclosures from Topic 820 including: transfers between level 1 and 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for level 3 fair value measurements. The ASU also modified and added disclosure requirements in regards to changes in unrealized gains and losses included in other comprehensive income, as well as the range and weighted average of unobservable inputs for level 3 fair value measurements. The Company adopted this ASU as of January 1, 2020, on a retrospective basis except certain provisions of the guidance which are only required to be applied on a prospective basis.reporting structure.

Recent accounting pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU was issued to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference ~~London Inter-Bank Offered Rate ("LIBOR")~~LIBOR or another reference rate expected to be discontinued. The last expedient is a one-time election to sell or transfer debt securities classified as held to maturity. The expedients are in effect from March 12, 2020, through December 31, 2022. The Company ~~is currently evaluating~~will be able to use the ~~impact of~~expedients in this guidance to manage through the transition away from LIBOR, specifically for our loan portfolio.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this ASU are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments clarify certain optional expedients and exceptions in Topic 848. The amendments are in effect from March 12, 2020, through December 31, 2022. This ASU does not have a material impact on the Company's consolidated financial statements.

1311

Table of Contents

Note 2 – Investment Securities

The following tables present the amortized cost, unrealized gains, unrealized losses and approximate fair values of debt securities at September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


		September 30, 2020									September 30, 2021
(in thousands)	(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale:	Available for sale:									Available for sale:
U.S. Treasury and agencies	U.S. Treasury and agencies	$	689,137	$	68,877	$	(61)	$	757,953	U.S. Treasury and agencies	$	806,469	$	35,304	$	(2,796)	$	838,977
Obligations of states and political subdivisions	Obligations of states and political subdivisions	249,423		15,121		(57)		264,487		Obligations of states and political subdivisions	272,275		11,851		(717)		283,409
Residential mortgage-backed securities and collateralized mortgage obligations	Residential mortgage-backed securities and collateralized mortgage obligations	1,820,569		56,121		(430)		1,876,260		Residential mortgage-backed securities and collateralized mortgage obligations	2,606,906		29,272		(35,393)		2,600,785

Total available for sale securities	Total available for sale securities	$	2,759,129	$	140,119	$	(548)	$	2,898,700	Total available for sale securities	$	3,685,650	$	76,427	$	(38,906)	$	3,723,171
Held to maturity:	Held to maturity:									Held to maturity:

Residential mortgage-backed securities and collateralized mortgage obligations	Residential mortgage-backed securities and collateralized mortgage obligations	$	3,088	$	862	$	0	$	3,950	Residential mortgage-backed securities and collateralized mortgage obligations	$	2,795	$	786	$	—	$	3,581

Total held to maturity securities	Total held to maturity securities	$	3,088	$	862	$	0	$	3,950	Total held to maturity securities	$	2,795	$	786	$	—	$	3,581


		December 31, 2019									December 31, 2020
(in thousands)	(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale:	Available for sale:									Available for sale:
U.S. Treasury and agencies	U.S. Treasury and agencies	$	642,009	$	5,919	$	(4,324)	$	643,604	U.S. Treasury and agencies	$	698,243	$	64,271	$	(312)	$	762,202
Obligations of states and political subdivisions	Obligations of states and political subdivisions	251,531		9,600		(37)		261,094		Obligations of states and political subdivisions	263,546		15,996		(31)		279,511
Residential mortgage-backed securities and collateralized mortgage obligations	Residential mortgage-backed securities and collateralized mortgage obligations	1,896,708		18,962		(5,686)		1,909,984		Residential mortgage-backed securities and collateralized mortgage obligations	1,839,711		51,583		(449)		1,890,845

Total available for sale securities	Total available for sale securities	$	2,790,248	$	34,481	$	(10,047)	$	2,814,682	Total available for sale securities	$	2,801,500	$	131,850	$	(792)	$	2,932,558
Held to maturity:	Held to maturity:									Held to maturity:

Residential mortgage-backed securities and collateralized mortgage obligations	Residential mortgage-backed securities and collateralized mortgage obligations	$	3,260	$	1,003	$	0	$	4,263	Residential mortgage-backed securities and collateralized mortgage obligations	$	3,034	$	849	$	—	$	3,883

Total held to maturity securities	Total held to maturity securities	$	3,260	$	1,003	$	0	$	4,263	Total held to maturity securities	$	3,034	$	849	$	—	$	3,883

The Company elected to exclude accrued interest receivable from the amortized cost basis of debt securities disclosed throughout this note. Interest accrued on investment securities totaled ~~$11.4~~$12.2 million and ~~$9.8~~$8.9 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is included in Other Assets.

Table of Contents

Debt securities that were in an unrealized loss position as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position.


	September 30, 2021
	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:
U.S. Treasury and agencies	$	119,093	$	1,773	$	18,805	$	1,023	$	137,898	$	2,796
Obligations of states and political subdivisions	53,099		717		—		—		53,099		717
Residential mortgage-backed securities and collateralized mortgage obligations	1,500,804		34,346		23,561		1,047		1,524,365		35,393
Total temporarily impaired securities	$	1,672,996	$	36,836	$	42,366	$	2,070	$	1,715,362	$	38,906

September 30, 2020
Less than 12 Months 12 Months or Longer Total
(in thousands)
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Available for sale:
U.S. Treasury and agencies $ 19,748 $ 61 $ 0 $ 0 $ 19,748 $ 61
Obligations of states and political subdivisions 2,028 57 0 0 2,028 57
Residential mortgage-backed securities and collateralized mortgage obligations 214,879 430 0 0 214,879 430
Total $ 236,655 $ 548 $ 0 $ 0 $ 236,655 $ 548

~~Table of Contents~~


		December 31, 2019													December 31, 2020
		Less than 12 Months				12 Months or Longer				Total					Less than 12 Months				12 Months or Longer				Total
(in thousands)	(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:	Available for sale:													Available for sale:
U.S. Treasury and agencies	U.S. Treasury and agencies	$	313,169	$	4,324	$	0	$	0	$	313,169	$	4,324	U.S. Treasury and agencies	$	29,493	$	312	$	—	$	—	$	29,493	$	312
Obligations of states and political subdivisions	Obligations of states and political subdivisions	4,611		30		1,906		7		6,517		37		Obligations of states and political subdivisions	4,357		31		—		—		4,357		31
Residential mortgage-backed securities and collateralized mortgage obligations	Residential mortgage-backed securities and collateralized mortgage obligations	288,866		1,628		402,802		4,058		691,668		5,686		Residential mortgage-backed securities and collateralized mortgage obligations	215,165		449		—		—		215,165		449

Total		$	606,646	$	5,982	$	404,708	$	4,065	$	1,011,354	$	10,047
Total temporarily impaired securities														Total temporarily impaired securities	$	249,015	$	792	$	—	$	—	$	249,015	$	792

These unrealized losses on the ~~Company's~~ debt securities held by the Company were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities and are not due to the underlying credit of the issuers. Management monitors the published credit ratings of the ~~Company's~~issuers of the debt 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 September 30, ~~2020~~2021 are issued or guaranteed by government sponsored enterprises. Because the decline in fair value of the ~~Company's~~ debt securities is attributable to changes in interest rates or widening market spreads and not credit quality, these investments do not have an allowance for credit losses at September 30, ~~2020.~~2021.

The following table presents the contractual maturities of debt securities at September 30, ~~2020:~~2021:


		Available For Sale				Held To Maturity					Available For Sale				Held To Maturity
(in thousands)	(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	Due within one year	$	3,264	$	3,298	$	0	$	0	Due within one year	$	16,913	$	17,150	$	—	$	—
Due after one year through five years	Due after one year through five years	71,383		73,499		3		3		Due after one year through five years	122,809		128,548		2		2
Due after five years through ten years	Due after five years through ten years	904,677		979,854		10		10		Due after five years through ten years	967,343		1,004,037		8		8
Due after ten years	Due after ten years	1,779,805		1,842,049		3,075		3,937		Due after ten years	2,578,585		2,573,436		2,785		3,571
Total securities	Total securities	$	2,759,129	$	2,898,700	$	3,088	$	3,950	Total securities	$	3,685,650	$	3,723,171	$	2,795	$	3,581

The following table presents, as of September 30, ~~2020,~~2021, investment securities that 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 $ 275,686 $ 286,052
Other securities pledged principally to secure repurchase agreements 604,045 643,522
Total pledged securities $ 879,731 $ 929,574


(in thousands)	Amortized Cost		Fair Value

To state and local governments to secure public deposits	$	293,931	$	301,370
Other securities pledged principally to secure repurchase agreements	746,122		770,020
Total pledged securities	$	1,040,053	$	1,071,390

1513

Table of Contents

Note 3 – Loans and Leases

The following table presents the major types of loans and leases, net of deferred fees and costs, as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


(in thousands)	(in thousands)	September 30, 2020		December 31, 2019		(in thousands)	September 30, 2021		December 31, 2020
Commercial real estate	Commercial real estate					Commercial real estate
Non-owner occupied term, net	Non-owner occupied term, net	$	3,533,776	$	3,545,566	Non-owner occupied term, net	$	3,561,764	$	3,505,802
Owner occupied term, net	Owner occupied term, net	2,411,098		2,496,088		Owner occupied term, net	2,330,338		2,333,945
Multifamily, net	Multifamily, net	3,389,034		3,514,774		Multifamily, net	3,813,024		3,349,196
Construction & development, net	Construction & development, net	757,462		678,740		Construction & development, net	882,778		828,478
Residential development, net	Residential development, net	163,400		189,010		Residential development, net	177,148		192,761
Commercial	Commercial					Commercial
Term, net	Term, net	4,246,229		2,232,817		Term, net	3,159,466		4,024,467
Lines of credit & other, net	Lines of credit & other, net	894,782		1,212,393		Lines of credit & other, net	930,350		862,760
Leases & equipment finance, net	Leases & equipment finance, net	1,496,650		1,465,489		Leases & equipment finance, net	1,457,248		1,456,630
Residential	Residential					Residential
Mortgage, net	Mortgage, net	4,042,416		4,215,424		Mortgage, net	4,330,860		3,871,906
Home equity loans & lines, net	Home equity loans & lines, net	1,172,697		1,237,512		Home equity loans & lines, net	1,133,823		1,136,064
Consumer & other, net	Consumer & other, net	318,929		407,871		Consumer & other, net	193,141		217,358
Total loans and leases, net of deferred fees and costs	Total loans and leases, net of deferred fees and costs	$	22,426,473	$	21,195,684	Total loans and leases, net of deferred fees and costs	$	21,969,940	$	21,779,367

~~The loan balances above include deferred costs, net of deferred fees, of $19.4 million and $71.9 million as~~As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the net deferred costs were $47.7 million and $38.6 million, respectively. ~~In response to the COVID-19 crisis, the federal government created the Paycheck Protection Program ("PPP"), sponsored by the Small Business Administration ("SBA"), under the CARES Act.~~ The Bank participated in the PPP to originate SBA loans designated to help businesses maintain their workforce and cover other working capital needs during the COVID-19 ~~pandemic by funding 16,900~~pandemic. As of September 30, 2021, the Bank had approximately 7,500 PPP loans, totaling ~~$2.0 billion~~$726.7 million in net loans, which are classified as commercial term loans in the table above. As of December 31, 2020, the Bank had approximately 15,000 PPP loans totaling $1.8 billion in net loans. Net deferred costs ~~are offset by $51.2~~for the loan portfolio include the net deferred fees for the origination of PPP loans of $21.2 million inand $26.9 million as of September 30, 2021 and December 31, 2020, respectively. The PPP ~~loan related~~net deferred fees ~~net of~~and costs ~~which will be~~are a yield adjustment over the remaining term of these loans. The loans are fully guaranteed by the SBA and the maximum term of the loans is either two or five years; however, the majority of the loan balances are expected to be forgiven by the ~~SBA.~~SBA, which will accelerate the recognition of these net deferred fees at the forgiveness date.

~~Net~~Total loans and leases also include discounts on acquired loans of ~~$20.7~~$11.4 million and ~~$30.2~~$17.9 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. As of September 30, ~~2020,~~2021, loans totaling ~~$12.7~~$14.4 billion were pledged to secure borrowings and available lines of credit. The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. Interest accrued on loans totaled ~~$70.9~~$63.3 million and ~~$58.5~~$74.8 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is included in Other Assets.

The Bank, through its commercial equipment leasing subsidiary, FinPac, is a provider of commercial equipment leasing and financing. Direct finance leases are included within the lease and equipment finance segment within the loans and leases, net line item. These leases typically have terms of three to five years and are considered to be direct financing leases. Interest income recognized on these leases was $6.1 million and $17.3 million for the three and nine months ended September 30, 2021, respectively, as compared to $6.7 million and $20.5 million for the three and nine months ended September 30, 2020, ~~respectively, as compared to $8.1 million and $24.6 million for the three and nine months ended September 30, 2019,~~ respectively.

1614

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 and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(in thousands)	(in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Commercial real estate	Commercial real estate									Commercial real estate
Non-owner occupied term, net	Non-owner occupied term, net	$	3,009	$	16,467	$	12,767	$	24,229	Non-owner occupied term, net	$	14,828	$	3,009	$	38,124	$	12,767
Owner occupied term, net	Owner occupied term, net	6,138		2,780		15,330		15,751		Owner occupied term, net	12,692		6,138		25,115		15,330

Multifamily, net										Multifamily, net	—		—		3,776		—

Commercial	Commercial									Commercial
Term, net	Term, net	8,628		7,670		28,780		23,633		Term, net	10,866		8,628		39,180		28,780
Lines of credit & other, net	Lines of credit & other, net	159		1,619		159		1,619		Lines of credit & other, net	—		159		—		159
Leases & equipment finance, net	Leases & equipment finance, net	0		0		43		17,571		Leases & equipment finance, net	—		—		—		43
Residential	Residential									Residential
Mortgage, net	Mortgage, net	365		0		365		109		Mortgage, net	—		365		1,712		365

Consumer & other										Consumer & other	—		—		63,799		—
Total loans and leases sold, net	Total loans and leases sold, net	$	18,299	$	28,536	$	57,444	$	82,912	Total loans and leases sold, net	$	38,386	$	18,299	$	171,706	$	57,444

Note 4 – Allowance for Credit Losses

Allowance for Credit Losses Methodology

~~The Allowance for Credit Losses is an important element in the Bank's financial statements.~~ In accordance with CECL, the ACL represents management's estimate of lifetime credit losses for assets within its scope, specifically loans and leases and unfunded commitments. To calculate the ACL, management uses models to estimate the PD and LGD for loans utilizing inputs that include forecasted future economic conditions and that are dependent upon specific macroeconomic variables relevant to each of the Bank's loan and lease portfolios. Moody's Analytics, a third party, provided the historical and forward-looking macroeconomic data ~~used~~utilized in ~~the development of~~ the models used to calculate the ACL.

For ACL calculation purposes, the Bank considered the financial and economic environment at the time of assessment and economic scenarios that differed in the levels of severity and sensitivity to the ACL results. At each measurement date, the Bank selects the scenario that reflects its view of future economic conditions and is determined to be the most probable outcome.

All forecasts are updated for each variable where applicable and incorporated as relevant into the ACL calculation. Actual credit loss results and the timing thereof will differ from the estimate of credit losses, either in a strong economy or a recession, as ~~our~~the portfolio will change through time due to growth, risk mitigation actions and other factors. In addition, the scenarios used will differ and change through time as economic conditions change. Economic scenarios might not capture deterioration or improvement in the economy timely enough for the Bank to be able to adequately ~~assess~~address the impact to the ACL.

Select macroeconomic variables are projected over the forecast period, and they could have a material impact in determining the ACL. As the length of the forecast period increases, information about the future becomes less readily available and projections are inherently less certain.

Table of Contents

The following is a discussion of the changes in the factors that influenced management's current estimate of expected credit losses. The changes in the ACL estimate for all portfolio segments, during the three and nine months ended September 30, ~~2020,~~2021, were primarily related to changes in the economic assumptions.The Bank opted to use Moody's ~~Analytics~~Analytics' August consensus economic forecast for estimating the ACL as of September 30, ~~2020.~~2021. This scenario is based on Moody's ~~Analytics~~Analytics' review of a variety of surveys of baseline forecasts of the U.S. economy. These surveys vary in date of latest vintage, number of updates per year, list of variables forecast, duration of forecast, frequency of data (quarterly or annual), and the number of ~~respondents to a survey.~~respondents. In the preparation of the Moody's Analytics consensus forecast, the focus is on the next three to five years, since that is the most typical duration in the surveyed results. Moody's ~~Analytics~~Analytics' approach is to give greater consideration to ~~whatever forecasts were produced~~the most recently produced forecasts, since they will include the most up-to-date historical information, and to those variables for which the number of surveyed responses is largest.

~~Table of Contents~~

In the consensus scenario selected, the probability that the economy will perform better than this consensus is equal to the probability that it will perform worse and included the following factors:

•U.S. real GDP average annualized growth ~~begins to decrease after the strong recovery but continues to be positive over both the short and long-term;~~of 4.9% through 2022;

•U.S. unemployment rate average for 2021 of ~~10.7%~~5.5%, dropping to 4.2% in ~~the third quarter of 2020 and is expected to be 9.3% in the fourth quarter of 2020;~~2022;

•~~very strong recovery with sustained growth~~COVID infections abate in ~~the fourth quarter of 2020, and continued slow growth thereafter;~~November 2021;

•~~return~~Federal Reserve to ~~less than 5% unemployment by 2024.~~keep the target range for the Fed Funds rate at 0% to 0.25% until early 2023.

The Bank uses an additional scenario that differs in terms of severity within the variables, both favorable and unfavorable, to assess the sensitivity in the ACL results and to inform qualitative adjustments. The Bank selected the Moody's ~~Analytics~~Analytics' August S2 scenario for this analysis. In the scenario selected, there is a 75% probability that the economy will perform better, broadly speaking, and a 25% probability that it will perform worse; and the scenario includes the following factors:

•~~rising business bankruptcies~~The stimulus is less effective than expected because of slower consumer spending. More of the funds end up in savings, and ~~reduced consumer and business sentiment cause~~thus fiscal multipliers are smaller than assumed in the ~~economy to stall over the next several quarters;~~consensus scenario;

•~~slow~~New cases, hospitalizations and deaths from COVID-19 rise again and then diminish more slowly than anticipated, with fewer people than expected receiving vaccines;

•U.S. real GDP average annualized growth of 3.5% through ~~2021 with increases thereafter;~~2022;

•U.S. unemployment rate average for 2021 of ~~10.2% in the third quarter of 2020 and is expected to be 10.4% in the fourth quarter of 2020;~~

•~~very strong recovery in the current quarter of 2020,~~5.9% with ~~substantially slower growth after the current quarter through the second quarter of 2021, then gradually increasing growth thereafter;~~

•return to less than 5%5.0% unemployment ~~by 2025.~~in 2023;

•COVID infections abate in January 2022;

•Federal Reserve to keep target range for the Fed Funds rate near 0% until mid-2024.

The results using the comparison scenario for sensitivity analysis were reviewed by management ~~but management believes~~and were considered when evaluating the ~~consensus scenario better reflects the estimated economic environment.~~qualitative factor adjustments.

The ACL is measured on a collective (pool) basis when similar characteristics exist. The Company has selected models at the portfolio level using a risk-based approach, with larger, more complex portfolios having more complex models. Except as noted below, the macroeconomic variables that are inputs to the models are reasonable and supportable over the life of the loans in that they reasonably project the key economic variables in the near term and then converge to a long run equilibrium trend. These models produce reasonable and supportable estimates of loss over the life of the loans as the projected credit losses will also converge to a steady state in line with the variables applied. The Company measures the ACL using the following methods:

Commercial Real ~~Estate ("CRE"):~~Estate: Non-owner occupied commercial real estate, multifamily, and construction loans are analyzed using a model that uses four primary property variables: ~~Net Operating Income ("NOI"), Property Value, Property Type,~~net operating income, property value, property type, and ~~Location.~~location. For PD estimation, the model simulates potential future paths of ~~NOI~~net operating income given commercial real estate market factors determined from macroeconomic and regional commercial real estate forecasts. Using the resulting expected debt service coverage ratios, together with predicted loan-to-values and other variables, the model estimates PD from the range of conditional possibilities. In addition, the model estimates maturity PD capturing refinance default risk to produce a total PD for the loan. The model estimates LGD, inclusive of principal loss and liquidation expenses, empirically using predicted loan-to-value as well as certain market and other factors. The LGD calculation also includes a separate maturity risk component. The primary economic drivers in the model are GDP ~~Growth,~~growth, U.S. unemployment rate, and 10-Year Treasury yield. These economic drivers are translated into a forecast provided by Moody's Analytics' REIS of real estate metrics, such as rental rates, vacancies and cap rates. The model produces PD and LGD on a quarter-by-quarter basis for the life of loan.

The owner-occupied commercial real-estate portfolio utilizes a ~~top down~~top-down macroeconomic model using linear regression. This model produces portfolio level quarterly net charge-off rates for 10 ~~years.~~years and carries forward the last quarter's projected expected loss percentage to remaining periods. The primary economic drivers for this model are the 7-year A vs Aa corporate bond spread and S&P 500 corporate after-tax profits.

Table of Contents

Commercial: Non-homogeneous commercial loans and leases and residential development loans are analyzed in a multi-step process. An initial PD is estimated using a model driven by an obligor's selected financial statement ratios, together with cycle-adjusting information based on the obligor's state and industry. An initial LGD is derived separately based on collateral type using collateral value and a haircut to reflect the loss in liquidation. Another model then applies an auto-regression technique to the initial PD and LGD metrics to estimate the PD and LGD curves according to the macroeconomic scenario over a one-year reasonable and supportable forecast. The primary economic drivers in the model are the S&P 500 Stock Price Index, S&P 500 Market Volatility Index, U.S. unemployment rate, as well as appropriate yield curves and credit spreads. This model utilizes output reversion methodology, which, after one year, reverts on a straight-line basis over two years to long-term PD estimated using financial statement ratios of each obligor.

~~Table of Contents~~

The model for the homogeneous lease and equipment finance agreement portfolio uses lease and equipment finance agreement information, such as origination and performance, as well as macroeconomic variables to calculate PD and LGD values. The PD calculation is based on survival analysis while LGD is calculated using a two-step regression. The model calculates LGD using an estimate of the probability that a defaulted lease or equipment finance agreement will have a loss, and an estimate of the loss amount. The primary economic drivers for the model are GDP, U.S. unemployment rate, and a home price growth index. The model produces PD and LGD curves at the lease or equipment finance agreement level for each month in the forecast horizon.

Residential: The models for residential real estate and ~~Home Equity Lines~~home equity lines of ~~Credit ("HELOC")~~credit utilize loan level variables, such as origination and performance, as well as macroeconomic variables to calculate PD and LGD. The U.S. unemployment rate and home price growth rate indexes are primary economic drivers in both the residential real estate and HELOC models. In addition, the prime rate is also a primary driver in the HELOC model. The models focus on establishing an empirical relationship between default probabilities and a set of loan-level, borrower, and macroeconomic credit risk drivers. The LGD calculation for residential real estate is based on an estimate of the probability that a defaulted loan will have a loss, and then an estimate of the loss amount. HELOCs utilize the same model using residential real estate LGD values to assign loans to cohorts based on FICO scores and loan age. The model produces PD and LGD curves at the loan level for each quarter in the forecast horizon.

Consumer: Historical net charge-off information as well as economic forecast assumptions are used to project loss rates for the Consumer segment.

All loans and leases that have not been modeled receive a loss rate via an extrapolated rate methodology. The loans and leases receiving an extrapolated rate are typically newly originated loans and leases or loans and leases without the granularity of data necessary to be modeled. Based on the vintage year, credit classification, and reporting category of the modeled loans and leases, a loss factor is calculated and applied to the non-modeled loans and leases.

Along with the quantitative factors produced by the above models, management also considers prepayment speeds and qualitative factors when determining the ACL. The Company uses a prepayment model that forecasts the constant prepayment rates based on institution specific ~~data.~~data for the commercial real estate, commercial and consumer portfolios and a forward curve approach that changes with macro-economic input variables for the residential portfolio. Below are the nine qualitative factors considered where applicable:

•Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.

•Changes in national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments.

•Changes in the nature and volume of the portfolio and in the terms of loans and leases.

•Changes in the experience, ability, and depth of lending management and other relevant staff.

•Changes in the volume and severity of past due loans and leases, the volume of non-accrual loans and leases, and the volume and severity of adversely classified or graded loans and leases.

•Changes in the quality of the Bank's credit review system.

•Changes in the value of the underlying collateral for collateral-dependent loans and leases.

•The existence and effect of any concentrations of credit, and changes in the level of such concentrations.

•The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Bank's existing portfolio.

Table of Contents

The Company evaluated each qualitative factor as of September 30, ~~2020,~~2021, and ~~concluded that a $40.6~~made qualitative overlay adjustments of approximately $16.9 million to increase the amounts indicated by the models as considered necessary to adequately reflect the ~~model results was appropriate for the allowance for~~significant changes in credit ~~losses on loans~~conditions and ~~leases, due to model limitations in the current economic environment. The Company also determined that a $5.0~~overall portfolio risk, including $13.8 million qualitative overlay increase ~~to the calculated results was appropriate for the RUC~~ related to ~~construction loans. Models were deemed to be under predicting losses, because certain economic variables were lagging indicators~~loans collateralized by hotel, retail, and ~~had not yet shown the effects of the current recession, and models were not appropriately capturing elevated risk associated with payment deferral programs offered by the Bank.~~office properties.

Loss factors from the models, prepayment speeds, and qualitative factors are input into the Company's CECL accounting application which aggregates the information. The Company then uses two methods to calculate the current expected credit loss: 1) the discounted cash flow ~~("DCF")~~ method, which is used for all loans except lines of credit and 2) the non-discounted cash flow method which is used for lines of credit due to difficulty of calculating an effective interest rate when lines have yet to be drawn on. The DCF method utilizes the effective interest rate of individual assets to discount the expected credit losses adjusted for prepayments. The difference in the net present value and the amortized cost of the asset will result in the required allowance. The non-discounted cash flow method uses the exposure at default, along with the expected credit losses adjusted for prepayments to calculate the required allowance.

~~Table of Contents~~

The following tables summarize activity related to the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, 2020
(in thousands) Commercial Real Estate Commercial Residential Consumer & Other Total
Allowance for credit losses on loans and leases
Balance, beginning of period $ 152,828 $ 152,615 $ 40,548 $ 10,754 $ 356,745
(Recapture) provision for credit losses for loans and leases (1)
(18,834) 25,603 (5,641) 657 1,785
Charge-offs 0 (15,426) (120) (1,100) (16,646)
Recoveries 61 2,044 407 653 3,165
Net recoveries (charge-offs) 61 (13,382) 287 (447) (13,481)
Balance, end of period $ 134,055 $ 164,836 $ 35,194 $ 10,964 $ 345,049
Reserve for unfunded commitments
Balance, beginning of period $ 20,808 $ 2,921 $ 2,061 $ 578 $ 26,368
(Recapture) provision for credit losses on unfunded commitments (1)
(380) (1,198) (542) 58 (2,062)
Balance, end of period 20,428 1,723 1,519 636 24,306
Total allowance for credit losses $ 154,483 $ 166,559 $ 36,713 $ 11,600 $ 369,355

~~(1)~~ The total provision for credit losses as disclosed on the income statement includes a recapture of $61,000 for the three months ended September 30, 2020, related to an allowance for accrued interest on loans deferred due to COVID-19.

Nine Months Ended September 30, 2020
(in thousands) Commercial Real Estate Commercial Residential Consumer & Other Total
Allowance for credit losses on loans and leases
Balance, beginning of period $ 50,847 $ 73,820 $ 24,714 $ 8,248 $ 157,629
Impact of adoption CECL 5,077 44,009 2,099 (1,186) 49,999
Adjusted balance, beginning of period 55,924 117,829 26,813 7,062 207,628
Provision for credit losses for loans and leases (1)
77,664 96,577 7,701 6,829 188,771
Charge-offs 0 (55,583) (274) (4,697) (60,554)
Recoveries 467 6,013 954 1,770 9,204
Net recoveries (charge-offs) 467 (49,570) 680 (2,927) (51,350)
Balance, end of period $ 134,055 $ 164,836 $ 35,194 $ 10,964 $ 345,049
Reserve for unfunded commitments
Balance, beginning of period $ 534 $ 2,539 $ 149 $ 1,884 $ 5,106
Impact of adoption CECL 4,030 (487) 1,267 (1,572) 3,238
Adjusted balance, beginning of period 4,564 2,052 1,416 312 8,344
Provision (recapture) for credit losses on unfunded commitments (1)
15,864 (329) 103 324 15,962
Balance, end of period 20,428 1,723 1,519 636 24,306
Total allowance for credit losses $ 154,483 $ 166,559 $ 36,713 $ 11,600 $ 369,355

~~(1)~~ The total provision for credit losses as disclosed on the income statement includes a provision of $99,000 for the nine months ended September 30, 2020, related to an allowance for accrued interest on loans deferred due to COVID-19.


	Three Months Ended September 30, 2021
(in thousands)	Commercial Real Estate		Commercial		Residential		Consumer & Other		Total
Allowance for credit losses on loans and leases
Balance, beginning of period	$	128,951	$	121,390	$	25,296	$	4,250	$	279,887

(Recapture) provision for credit losses for loans and leases	(20,141)		2,719		1,703		(413)		(16,132)

Charge-offs	(916)		(8,521)		—		(936)		(10,373)
Recoveries	120		3,346		281		431		4,178
Net (charge-offs) recoveries	(796)		(5,175)		281		(505)		(6,195)
Balance, end of period	$	108,014	$	118,934	$	27,280	$	3,332	$	257,560
Reserve for unfunded commitments
Balance, beginning of period	$	10,094	$	2,145	$	1,710	$	590	$	14,539

(Recapture) provision for credit losses on unfunded commitments	(3,273)		440		247		(201)		(2,787)
Balance, end of period	6,821		2,585		1,957		389		11,752
Total allowance for credit losses	$	114,835	$	121,519	$	29,237	$	3,721	$	269,312

	Nine Months Ended September 30, 2021
(in thousands)	Commercial Real Estate		Commercial		Residential		Consumer & Other		Total
Allowance for credit losses on loans and leases
Balance, beginning of period	$	141,710	$	150,864	$	27,964	$	7,863	$	328,401
(Recapture) provision for credit losses for loans and leases	(33,199)		4,180		(1,212)		(3,150)		(33,381)

Charge-offs	(1,086)		(44,228)		(70)		(2,983)		(48,367)
Recoveries	589		8,118		598		1,602		10,907
Net (charge-offs) recoveries	(497)		(36,110)		528		(1,381)		(37,460)
Balance, end of period	$	108,014	$	118,934	$	27,280	$	3,332	$	257,560
Reserve for unfunded commitments
Balance, beginning of period	15,360		2,190		1,661		1,075		20,286
(Recapture) provision for credit losses on unfunded commitments	(8,539)		395		296		(686)		(8,534)
Balance, end of period	6,821		2,585		1,957		389		11,752
Total allowance for credit losses	$	114,835	$	121,519	$	29,237	$	3,721	$	269,312

2018

Table of Contents

The following tables summarize activity related to the allowance for loan and lease losses by loan and lease portfolio segment and the reserve for unfunded commitments for the three and nine months ended September 30, 2019:


		Three Months Ended September 30, 2019											Three Months Ended September 30, 2020
(in thousands)	(in thousands)	Commercial Real Estate		Commercial		Residential		Consumer & Other		Total		(in thousands)	Commercial Real Estate		Commercial		Residential		Consumer & Other		Total
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases											Allowance for credit losses on loans and leases
Balance, beginning of period	Balance, beginning of period	$	48,997	$	68,353	$	23,654	$	10,065	$	151,069	Balance, beginning of period	$	152,828	$	152,615	$	40,548	$	10,754	$	356,745
Provision		2,524		18,797		1,113		793		23,227
(Recapture) provision for credit losses for loans and leases												(Recapture) provision for credit losses for loans and leases	(18,834)		25,603		(5,641)		657		1,785
Charge-offs	Charge-offs	(497)		(20,457)		(305)		(1,853)		(23,112)		Charge-offs	—		(15,426)		(120)		(1,100)		(16,646)
Recoveries	Recoveries	177		4,263		94		570		5,104		Recoveries	61		2,044		407		653		3,165
Net charge-offs		(320)		(16,194)		(211)		(1,283)		(18,008)
Net recoveries (charge-offs)												Net recoveries (charge-offs)	61		(13,382)		287		(447)		(13,481)
Balance, end of period	Balance, end of period	$	51,201	$	70,956	$	24,556	$	9,575	$	156,288	Balance, end of period	$	134,055	$	164,836	$	35,194	$	10,964	$	345,049
Reserve for unfunded commitments	Reserve for unfunded commitments											Reserve for unfunded commitments
Balance, beginning of period	Balance, beginning of period	$	561	$	2,595	$	157	$	1,544	$	4,857	Balance, beginning of period	$	20,808	$	2,921	$	2,061	$	578	$	26,368
Provision (recapture) for credit losses on unfunded commitments		43		189		(55)		51		228
(Recapture) provision for credit losses on unfunded commitments												(Recapture) provision for credit losses on unfunded commitments	(380)		(1,198)		(542)		58		(2,062)
Balance, end of period	Balance, end of period	604		2,784		102		1,595		5,085		Balance, end of period	20,428		1,723		1,519		636		24,306
Total allowance for credit losses	Total allowance for credit losses	$	51,805	$	73,740	$	24,658	$	11,170	$	161,373	Total allowance for credit losses	$	154,483	$	166,559	$	36,713	$	11,600	$	369,355

		Nine Months Ended September 30, 2019											Nine Months Ended September 30, 2020
(in thousands)	(in thousands)	Commercial Real Estate		Commercial		Residential		Consumer & Other		Total		(in thousands)	Commercial Real Estate		Commercial		Residential		Consumer & Other		Total
Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases											Allowance for credit losses on loans and leases
Balance, beginning of period	Balance, beginning of period	$	47,904	$	63,957	$	22,034	$	10,976	$	144,871	Balance, beginning of period	$	50,847	$	73,820	$	24,714	$	8,248	$	157,629
Provision		5,599		46,135		2,630		1,899		56,263
Impact of CECL adoption												Impact of CECL adoption	5,077		44,009		2,099		(1,186)		49,999
Adjusted balance, beginning of period												Adjusted balance, beginning of period	55,924		117,829		26,813		7,062		207,628
Provision for credit losses for loans and leases												Provision for credit losses for loans and leases	77,664		96,577		7,701		6,829		188,771
Charge-offs	Charge-offs	(3,035)		(48,364)		(507)		(5,065)		(56,971)		Charge-offs	—		(55,583)		(274)		(4,697)		(60,554)
Recoveries	Recoveries	733		9,228		399		1,765		12,125		Recoveries	467		6,013		954		1,770		9,204
Net charge-offs		(2,302)		(39,136)		(108)		(3,300)		(44,846)
Net recoveries (charge-offs)												Net recoveries (charge-offs)	467		(49,570)		680		(2,927)		(51,350)
Balance, end of period	Balance, end of period	$	51,201	$	70,956	$	24,556	$	9,575	$	156,288	Balance, end of period	$	134,055	$	164,836	$	35,194	$	10,964	$	345,049
Reserve for unfunded commitments	Reserve for unfunded commitments											Reserve for unfunded commitments
Balance, beginning of period	Balance, beginning of period	$	628	$	2,250	$	160	$	1,485	$	4,523	Balance, beginning of period	$	534	$	2,539	$	149	$	1,884	$	5,106
(Recapture) provision for credit losses on unfunded commitments		(24)		534		(58)		110		562
Impact of CECL adoption												Impact of CECL adoption	4,030		(487)		1,267		(1,572)		3,238
Adjusted balance, beginning of period												Adjusted balance, beginning of period	4,564		2,052		1,416		312		8,344
Provision (recapture) for credit losses on unfunded commitments												Provision (recapture) for credit losses on unfunded commitments	15,864		(329)		103		324		15,962
Balance, end of period	Balance, end of period	604		2,784		102		1,595		5,085		Balance, end of period	20,428		1,723		1,519		636		24,306
Total allowance for credit losses	Total allowance for credit losses	$	51,805	$	73,740	$	24,658	$	11,170	$	161,373	Total allowance for credit losses	$	154,483	$	166,559	$	36,713	$	11,600	$	369,355

The following table presents the unfunded commitments for the period ended September 30, ~~2020~~2021 and ~~2019:~~

2020:


(in thousands)	Total
Unfunded loan and lease commitments
September 30, 2021	$	6,302,898
September 30, 2020	$	5,887,887
~~September 30, 2019~~	$	~~5,744,307~~

2119

Table of Contents

Asset Quality and Non-Performing Loans and Leases

The Bank manages asset quality and ~~control~~controls 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 department 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 credit 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.

Loans and Leases Past Due and Non-Accrual Loans and Leases

Due to the deterioration of the U.S. economy resulting from the COVID-19 pandemic, the Company had an increase in loan payment deferral and forbearance requests. Once a deferral or forbearance request is received, a late charge waiver is put in place and payments are suspended for an agreed-upon period. Accrued and unpaid interest during the deferral period will be collected upon the expiration of the deferral or on a regular repayment schedule at the end of the deferral period. For certain loan types, the maturity date may be extended to allow for full amortization. In accordance with various government-mandated programs, these loans are generally classified based on their past due status prior to their deferral period; as such, they are classified as performing loans that accrue interest. As of September 30, ~~2020,~~2021, loans of approximately ~~$782.3~~$132.5 million are currently deferred under ~~the CARES Act or interagency guidance~~various federal and state guidelines and are classified as current as their contractual payments have been deferred. These deferred loans do not include deferrals of delinquent repurchased GNMA loans as the credit risk of these loans are guaranteed by government programs such as Federal Housing Agency, Veterans Affairs, and USDA Rural Development. At September 30, 2021, approximately $121.0 million of GNMA repurchased loans were on deferral. At December 31, 2020, the Bank had $355.5 million in deferred loans under various federal and state guidelines, excluding GNMA repurchased loans on deferral of $177.7 million.

Table of Contents

The following tables present the ~~amortized cost basis~~carrying value of the loans and leases past due, by loan and lease class, as of September 30, ~~2020~~2021 and December 31, ~~2019:~~

September 30, 2020
(in thousands) 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 (1)
Current Total Loans and Leases
Commercial real estate
Non-owner occupied term, net $ 3,069 $ 8,959 $ 1,154 $ 13,182 $ 8,030 $ 3,512,564 $ 3,533,776
Owner occupied term, net 3,432 414 1 3,847 4,385 2,402,866 2,411,098
Multifamily, net 1,868 0 0 1,868 0 3,387,166 3,389,034
Construction & development, net 0 0 0 0 0 757,462 757,462
Residential development, net 0 0 0 0 0 163,400 163,400
Commercial
Term, net 389 57 0 446 10,103 4,235,680 4,246,229
Lines of credit & other, net 2,960 3,080 3 6,043 143 888,596 894,782
Leases & equipment finance, net 8,454 24,057 18,063 50,574 3,764 1,442,312 1,496,650
Residential
Mortgage, net (2)
1,190 3,386 29,593 34,169 0 4,008,247 4,042,416
Home equity loans & lines, net 1,411 1,443 1,769 4,623 0 1,168,074 1,172,697
Consumer & other, net 1,511 475 346 2,332 0 316,597 318,929
Total, net of deferred fees and costs $ 24,284 $ 41,871 $ 50,929 $ 117,084 $ 26,425 $ 22,282,964 $ 22,426,473
2020:


	September 30, 2021
(in thousands)	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 (1)		Current		Total Loans and Leases
Commercial real estate
Non-owner occupied term, net	$	1,750	$	—	$	—	$	1,750	$	3,417	$	3,556,597	$	3,561,764
Owner occupied term, net	1,416		343		1		1,760		2,535		2,326,043		2,330,338
Multifamily, net	9,389		—		—		9,389		—		3,803,635		3,813,024
Construction & development, net	—		—		—		—		—		882,778		882,778
Residential development, net	—		—		—		—		—		177,148		177,148
Commercial
Term, net	211		82		2		295		5,511		3,153,660		3,159,466
Lines of credit & other, net	501		5,820		3		6,324		930		923,096		930,350
Leases & equipment finance, net	8,502		7,347		2,449		18,298		11,759		1,427,191		1,457,248
Residential
Mortgage, net	943		2,728		23,957		27,628		—		4,303,232		4,330,860
Home equity loans & lines, net	1,182		414		962		2,558		—		1,131,265		1,133,823
Consumer & other, net	455		243		116		814		—		192,327		193,141
Total, net of deferred fees and costs	$	24,349	$	16,977	$	27,490	$	68,816	$	24,152	$	21,876,972	$	21,969,940

(1) Loans and leases on non-accrual with an ~~unamortized~~amortized cost basis of ~~$26.4~~$24.2 million had a related allowance for credit losses of ~~$3.3~~$7.3 million at September 30, ~~2020.~~

~~(2)~~ Includes government guaranteed GNMA mortgage loans that the Bank has the right but not the obligation to repurchase that are past due 90 days or more in relation to their original term, of which $19.3 million are classified as current as a result of COVID-19 related payment forbearance or deferral while $660,000 are classified as greater than 90 days past due.

2021.

2221

Table of Contents


		December 31, 2019															December 31, 2020
(in thousands)	(in thousands)	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 and Other (1)		Total Loans and Leases		(in thousands)	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 (1)		Current and Other		Total Loans and Leases
Commercial real estate	Commercial real estate															Commercial real estate
Non-owner occupied term, net	Non-owner occupied term, net	$	0	$	0	$	121	$	121	$	2,920	$	3,542,525	$	3,545,566	Non-owner occupied term, net	$	1,214	$	21,309	$	815	$	23,338	$	3,809	$	3,478,655	$	3,505,802
Owner occupied term, net	Owner occupied term, net	975		470		1		1,446		4,600		2,490,042		2,496,088		Owner occupied term, net	182		103		208		493		5,984		2,327,468		2,333,945
Multifamily, net	Multifamily, net	0		0		0		0		0		3,514,774		3,514,774		Multifamily, net	—		215		—		215		—		3,348,981		3,349,196
Construction & development, net	Construction & development, net	0		0		0		0		0		678,740		678,740		Construction & development, net	3,991		—		—		3,991		—		824,487		828,478
Residential development, net	Residential development, net	0		0		0		0		0		189,010		189,010		Residential development, net	—		—		—		—		—		192,761		192,761
Commercial	Commercial															Commercial
Term, net	Term, net	136		381		0		517		3,458		2,228,842		2,232,817		Term, net	562		—		4		566		2,205		4,021,696		4,024,467
Lines of credit & other, net	Lines of credit & other, net	3,548		376		36		3,960		767		1,207,666		1,212,393		Lines of credit & other, net	1,491		2,667		7		4,165		336		858,259		862,760
Leases & equipment finance, net	Leases & equipment finance, net	10,685		11,176		3,086		24,947		14,499		1,426,043		1,465,489		Leases & equipment finance, net	14,242		18,220		4,796		37,258		18,742		1,400,630		1,456,630
Residential	Residential															Residential
Mortgage, net ~~(2)~~	Mortgage, net ~~(2)~~	0		8,104		36,642		44,746		0		4,170,678		4,215,424		Mortgage, net ~~(2)~~	1,587		3,912		27,713		33,212		—		3,838,694		3,871,906
Home equity loans & lines, net	Home equity loans & lines, net	2,173		867		1,804		4,844		0		1,232,668		1,237,512		Home equity loans & lines, net	844		544		2,463		3,851		—		1,132,213		1,136,064
Consumer & other, net	Consumer & other, net	2,043		948		615		3,606		0		404,265		407,871		Consumer & other, net	678		286		355		1,319		—		216,039		217,358
Total, net of deferred fees and costs	Total, net of deferred fees and costs	$	19,560	$	22,322	$	42,305	$	84,187	$	26,244	$	21,085,253	$	21,195,684	Total, net of deferred fees and costs	$	24,791	$	47,256	$	36,361	$	108,408	$	31,076	$	21,639,883	$	21,779,367

(1) ~~Other includes purchased~~Loans and leases on non-accrual with an amortized cost basis of $31.1 million had a related allowance for credit ~~impaired loans~~losses of ~~$89.5 million.~~

~~(2)~~ ~~Includes government guaranteed GNMA mortgage loans that the Bank has the right but not the obligation to repurchase that are past due 90 days or more, totaling $4.3~~$16.7 million at December 31, ~~2019.~~2020.

Collateral Dependent Loans and Leases

Loans are classified as collateral dependent when it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due, and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes the amortized cost basis of the collateral dependent loans and leases by the type of collateral securing the assets as of September 30, ~~2020.~~2021. There have been no significant changes in the level of collateralization from the prior periods.


(in thousands)	(in thousands)	Residential Real Estate		Commercial Real Estate		General Business Assets		Other		Total		(in thousands)	Residential Real Estate		Commercial Real Estate		General Business Assets		Other		Total
Commercial real estate	Commercial real estate											Commercial real estate
Non-owner occupied term, net	Non-owner occupied term, net	$	0	$	7,786	$	0	$	0	$	7,786	Non-owner occupied term, net	$	—	$	3,121	$	—	$	—	$	3,121
Owner occupied term, net	Owner occupied term, net	0		3,627		0		0		3,627		Owner occupied term, net	—		2,123		—		—		2,123

Commercial	Commercial											Commercial
Term, net	Term, net	940		59		7,963		1,227		10,189		Term, net	1,356		536		779		2,454		5,125
Line of credit & other, net	Line of credit & other, net	0		0		143		—		143		Line of credit & other, net	—		—		930		1		931
Leases & equipment finance, net	Leases & equipment finance, net	0		0		3,764		0		3,764		Leases & equipment finance, net	—		—		11,759		—		11,759
Residential	Residential											Residential
Mortgage, net	Mortgage, net	207,199		0		0		0		207,199		Mortgage, net	27,988		—		—		—		27,988
Home equity loans & lines, net	Home equity loans & lines, net	2,359		0		0		0		2,359		Home equity loans & lines, net	2,937		—		—		—		2,937

Total net of deferred fees and costs	Total net of deferred fees and costs	$	210,498	$	11,472	$	11,870	$	1,227	$	235,067	Total net of deferred fees and costs	$	32,281	$	5,780	$	13,468	$	2,455	$	53,984

2322

Table of Contents

Troubled Debt ~~Restructurings~~Restructuring

At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, troubled debt restructured loans of ~~$15.8~~$9.8 million and ~~$18.6~~$15.0 million, respectively, were classified as accruing TDR loans. The TDRs were granted in response to borrower financial difficulties, and generally provide for a temporary modification of loan repayment terms. In order for a new TDR 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.

The following tables present TDR loans by accrual versus non-accrual status and by portfolio segment as of September 30, ~~2020~~2021 and December 31, ~~2019:~~

September 30, 2020
(in thousands) Accrual Status Non-Accrual Status Total Modification # of Contracts
Commercial real estate, net $ 1,356 $ 3,946 $ 5,302 8
Commercial, net 1,258 7,954 9,212 2
Residential, net 13,100 0 13,100 78
Consumer & other, net 105 0 105 5
Total, net of deferred fees and costs $ 15,819 $ 11,900 $ 27,719 93
December 31, 2019
(in thousands) Accrual Status Non-Accrual Status Total Modification # of Contracts
Commercial real estate, net $ 3,968 $ 0 $ 3,968 3
Commercial, net 4,105 0 4,105 2
Residential, net 10,460 0 10,460 54
Consumer & other, net 43 0 43 3
Total, net of deferred fees and costs $ 18,576 $ 0 $ 18,576 62
2020:


	September 30, 2021
(in thousands)	Accrual Status		Non-Accrual Status		Total Modification		# of Contracts
Commercial real estate, net	$	1,061	$	70	$	1,131	5

Residential, net	8,762		—		8,762		45
Consumer & other, net	26		—		26		3
Total, net of deferred fees and costs	$	9,849	$	70	$	9,919	53

	December 31, 2020
(in thousands)	Accrual Status		Non-Accrual Status		Total Modification		# of Contracts
Commercial real estate, net	$	1,345	$	289	$	1,634	7
Commercial, net	1,231		—		1,231		1
Residential, net	12,415		—		12,415		75

Total, net of deferred fees and costs	$	14,991	$	289	$	15,280	83

The following table presents loans that were determined to be TDRs during the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~

Three Months Ended Nine Months Ended
(in thousands) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Commercial real estate, net $ 0 $ 0 $ 0 $ 118
Commercial, net 0 0 8,508 1,842
Residential, net 7,029 0 13,463 7
Consumer & other, net 0 0 74 0
Total, net of deferred fees and costs $ 7,029 $ 0 $ 22,045 $ 1,967

2020:

For the periods presented in the table above, the outstanding recorded investment was the same pre and post modification and all modifications were combination modifications. There were $132,000 and $9.6 million in financing receivables modified as troubled debt restructurings within the previous 12 months for which there was a payment default during the three and nine months ended September 30, 2020. There were 0 financing receivables modified as troubled debt restructurings within the previous 12 months for which there was a payment default during the three and nine months ended September 30, 2019.

~~Table of Contents~~

~~COVID-19 Related Payment Deferral and Forbearance~~

Due to the deterioration of the US economy resulting from the COVID-19 pandemic, the Company has had an increase in loan payment deferral and forbearance requests. Once a deferral or forbearance request is received, a late charge waiver is put in place and payments are suspended for an agreed-upon period. Accrued and unpaid interest during the deferral period will be collected upon the expiration of the deferral or on a regular repayment schedule at the end of the deferral period. For certain loan types, the maturity date may be extended ~~one~~ to six months to allow for full amortization. In accordance with the CARES Act and interagency guidance, these loans are generally classified based on their past due status prior to their deferral period, so they are classified as performing loans that accrue interest.


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020

Commercial, net	$	—	$	—	$	—	$	8,508
Residential, net	1,661		7,029		5,903		13,463
Consumer & other, net	—		—		36		74
Total, net of deferred fees and costs	$	1,661	$	7,029	$	5,939	$	22,045

Credit Quality Indicators

Management regularly reviews loans and leases in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading. In addition, the board reviews and approves the credit quality indicators each year. The Bank differentiates its lending portfolios into homogeneous and non-homogeneous loans and leases. Homogeneous loans and leases are risk rated on a single risk rating scale based on the past due status of the loan or lease.

Table of Contents

The Bank's risk rating methodology for its non-homogeneous loans and leases uses a dual risk rating approach to assess the credit risk. This approach uses two scales to provide a comprehensive assessment of credit default risk and recovery risk. The probability of default scale measures a borrower's credit default risk using risk ratings ranging from 1 to 16, where a higher rating represents higher risk. For non-homogeneous loans and leases, PD ratings of 1 through 9 are "pass" grades, while PD ratings of 10 and 11 are "watch" grades. PD ratings of 12-16 correspond to the regulatory-defined categories of special mention (12), substandard (13-14), doubtful (15), and loss (16). The loss given default scale measures the amount of loss that may not be recovered in the event of a default, using six alphabetic ratings from A-F, where a higher rating represents higher risk. The LGD scale quantifies recovery risk associated with an event of default and predicts the amount of loss that would be incurred on a loan or lease if a borrower were to experience a major default and includes variables that may be external to the borrower, such as industry, geographic location, and credit cycle stage. It could also include variables specific to the borrower such as their probability of default and bankruptcies as well as variables specific to the loan or lease, including collateral valuation, covenant structure and debt type. The product of the borrower's PD and a loan or lease LGD is the loan or lease expected loss, expressed as a percentage. This provides a common language of credit risk across different loans.

The PD scale estimates the likelihood that a borrower will experience a major default on any of its debt obligations within a specified time period. Examples of major defaults include payments 90 days or more past due, non-accrual classification, bankruptcy filing, or a full or partial charge-off of a loan or lease. As such, the PD scale represents the credit quality indicator for non-homogeneous loans and leases.

The credit quality indicator rating categories follow regulatory classification and can be generally described by the following groupings for loans and leases:

~~Pass~~Pass/Watch—A pass loan or lease is a loan or lease with a credit risk level acceptable to the Bank for extending credit and maintaining normal credit monitoring.

~~Watch—~~A watch loan or lease is considered pass rated but has a heightened level of unacceptable default 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 risk rating would be appropriate within a short period of time.

Special Mention—A special mention loan or lease 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 in the institution's credit position at some future date. These borrowers have an elevated probability of default but not to the point of a substandard classification.

Substandard—A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard ~~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.

~~Table of Contents~~

Doubtful—Loans or leases classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable.

Loss—Loans or leases classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.

Table of Contents

The following ~~table represents~~tables represent the amortized costs basis of the loans and leases by credit classification and vintage year by loan and lease class of financing receivable as of September 30, 2021 and December 31, 2020:


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	September 30, 2021	2021		2020		2019		2018		2017		Prior						Total
Commercial real estate:
Non-owner occupied term, net
Credit quality indicator:
	Pass/Watch	$	526,979	$	452,318	$	626,217	$	451,713	$	323,746	$	1,017,904	$	1,853	$	4,060	$	3,404,790
	Special mention	10,693		933		5,791		36,676		—		48,995		—		—		103,088
	Substandard	829		2,020		2,616		20,787		3,008		24,296		—		—		53,556
	Doubtful	—		—		—		—		—		86		—		—		86
	Loss	—		—		—		—		—		244		—		—		244
Total non-owner occupied term, net		$	538,501	$	455,271	$	634,624	$	509,176	$	326,754	$	1,091,525	$	1,853	$	4,060	$	3,561,764
Owner occupied term, net
Credit quality indicator:
	Pass/Watch	$	375,653	$	254,143	$	390,432	$	283,285	$	282,030	$	674,773	$	5,187	$	748	$	2,266,251
	Special mention	550		897		7,977		11,685		9,322		19,095		—		—		49,526
	Substandard	—		—		703		968		—		12,393		—		—		14,064
	Doubtful	—		—		—		—		—		67		—		—		67
	Loss	—		—		—		—		—		430		—		—		430
Total owner occupied term, net		$	376,203	$	255,040	$	399,112	$	295,938	$	291,352	$	706,758	$	5,187	$	748	$	2,330,338
Multifamily, net
Credit quality indicator:
	Pass/Watch	$	1,124,021	$	386,911	$	794,320	$	427,943	$	421,530	$	621,542	$	23,182	$	2,936	$	3,802,385
	Special mention	—		—		—		—		—		1,250		—		—		1,250
	Substandard	—		—		—		—		9,389		—		—		—		9,389
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total multifamily, net		$	1,124,021	$	386,911	$	794,320	$	427,943	$	430,919	$	622,792	$	23,182	$	2,936	$	3,813,024
Construction & development, net
Credit quality indicator:
	Pass/Watch	$	132,710	$	321,591	$	275,301	$	105,270	$	27,688	$	172	$	2,380	$	—	$	865,112
	Special mention	—		1,635		—		7,600		—		—		—		—		9,235
	Substandard	—		—		—		8,431		—		—		—		—		8,431
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total construction & development, net		$	132,710	$	323,226	$	275,301	$	121,301	$	27,688	$	172	$	2,380	$	—	$	882,778
Residential development, net
Credit quality indicator:
	Pass/Watch	$	15,260	$	15,391	$	—	$	—	$	—	$	—	$	136,948	$	9,549	$	177,148
	Special mention	—		—		—		—		—		—		—		—		—
	Substandard	—		—		—		—		—		—		—		—		—
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total residential development, net		$	15,260	$	15,391	$	—	$	—	$	—	$	—	$	136,948	$	9,549	$	177,148

Total commercial real estate		$	2,186,695	$	1,435,839	$	2,103,357	$	1,354,358	$	1,076,713	$	2,421,247	$	169,550	$	17,293	$	10,765,052

(in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans Amortized Cost Basis Revolving to Non-Revolving Loans Amortized Cost
September 30, 2020 2020 2019 2018 2017 2016 Prior Total
Commercial real estate:
Non-owner occupied term, net
Credit quality indicator:
Pass $ 391,145 $ 689,391 $ 498,018 $ 386,182 $ 363,588 $ 1,040,039 $ 3,166 $ 4,165 $ 3,375,694
Special mention 2,531 6,687 41,037 7,937 43,589 9,579 0 0 111,360
Substandard 859 6,322 19,997 3,079 2,564 13,559 0 0 46,380
Doubtful 0 0 0 0 0 0 0 0 0
Loss 0 0 0 0 0 342 0 0 342
Total non-owner occupied term, net $ 394,535 $ 702,400 $ 559,052 $ 397,198 $ 409,741 $ 1,063,519 $ 3,166 $ 4,165 $ 3,533,776
Owner occupied term, net
Credit quality indicator:
Pass $ 250,333 $ 426,560 $ 310,809 $ 343,877 $ 270,519 $ 677,020 $ 5,541 $ 795 $ 2,285,454
Special mention 3,670 10,898 40,098 15,996 3,450 9,024 0 0 83,136
Substandard 4,564 3,691 7,965 2,849 5,316 17,473 0 0 41,858
Doubtful 0 0 0 0 0 220 0 0 220
Loss 0 0 0 0 0 430 0 0 430
Total owner occupied term, net $ 258,567 $ 441,149 $ 358,872 $ 362,722 $ 279,285 $ 704,167 $ 5,541 $ 795 $ 2,411,098
Multifamily, net
Credit quality indicator:
Pass $ 211,471 $ 881,877 $ 625,317 $ 649,637 $ 301,816 $ 654,444 $ 28,110 $ 2,962 $ 3,355,634
Special mention 0 0 0 0 0 33,400 0 0 33,400
Substandard 0 0 0 0 0 0 0 0 0
Doubtful 0 0 0 0 0 0 0 0 0
Loss 0 0 0 0 0 0 0 0 0
Total multifamily, net $ 211,471 $ 881,877 $ 625,317 $ 649,637 $ 301,816 $ 687,844 $ 28,110 $ 2,962 $ 3,389,034
Construction & development, net
Credit quality indicator:
Pass $ 61,200 $ 238,868 $ 282,156 $ 166,146 $ 6,901 $ 554 $ 0 $ 0 $ 755,825
Special mention 1,637 0 0 0 0 0 0 0 1,637
Substandard 0 0 0 0 0 0 0 0 0
Doubtful 0 0 0 0 0 0 0 0 0
Loss 0 0 0 0 0 0 0 0 0
Total construction & development, net $ 62,837 $ 238,868 $ 282,156 $ 166,146 $ 6,901 $ 554 $ 0 $ 0 $ 757,462

Table of Contents


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	September 30, 2021	2021		2020		2019		2018		2017		Prior						Total
Commercial:
Term, net
Credit quality indicator:
	Pass/Watch	$	1,024,743	$	511,451	$	237,257	$	238,367	$	186,079	$	238,496	$	594,949	$	15,062	$	3,046,404
	Special mention	15,000		7,501		122		29,182		642		1,181		26,795		239		80,662
	Substandard	16,469		650		1,772		1,379		3,647		1,648		—		5,548		31,113
	Doubtful	—		—		—		—		869		1		—		—		870
	Loss	—		—		—		417		—		—		—		—		417
Total term, net		$	1,056,212	$	519,602	$	239,151	$	269,345	$	191,237	$	241,326	$	621,744	$	20,849	$	3,159,466
Lines of credit & other, net
Credit quality indicator:
	Pass/Watch	$	33,823	$	11,766	$	16,996	$	17,615	$	357	$	1,888	$	772,450	$	2,997	$	857,892
	Special mention	496		—		—		134		—		224		15,364		2,009		18,227
	Substandard	—		476		—		—		—		1,118		47,428		5,205		54,227
	Doubtful	—		—		—		—		—		—		2		—		2
	Loss	—		—		—		—		—		—		1		1		2
Total lines of credit & other, net		$	34,319	$	12,242	$	16,996	$	17,749	$	357	$	3,230	$	835,245	$	10,212	$	930,350
Leases & equipment finance, net
Credit quality indicator:
	Pass/Watch	$	468,180	$	366,626	$	322,365	$	161,696	$	58,870	$	44,112	$	—	$	—	$	1,421,849
	Special mention	2,193		1,980		2,349		1,869		706		170		—		—		9,267
	Substandard	1,650		6,179		2,279		4,380		741		263		—		—		15,492
	Doubtful	2,273		2,494		2,373		1,506		748		70		—		—		9,464
	Loss	—		446		454		104		158		14		—		—		1,176
Total leases & equipment finance, net		$	474,296	$	377,725	$	329,820	$	169,555	$	61,223	$	44,629	$	—	$	—	$	1,457,248

Total commercial		$	1,564,827	$	909,569	$	585,967	$	456,649	$	252,817	$	289,185	$	1,456,989	$	31,061	$	5,547,064

Residential:
Mortgage, net
Credit quality indicator:
	Pass/Watch	$	1,700,114	$	722,986	$	702,425	$	220,512	$	246,799	$	710,397	$	—	$	—	$	4,303,233
	Special mention	—		—		780		81		488		2,321		—		—		3,670
	Substandard	431		597		2,046		1,064		3,105		15,070		—		—		22,313
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		907		—		—		737		—		—		1,644
Total mortgage, net		$	1,700,545	$	723,583	$	706,158	$	221,657	$	250,392	$	728,525	$	—	$	—	$	4,330,860

Home equity loans & lines, net
Credit quality indicator:
	Pass/Watch	$	135	$	2	$	—	$	19	$	—	$	12,476	$	1,086,719	$	31,913	$	1,131,264
	Special mention	—		—		—		—		—		60		1,285		251		1,596
	Substandard	—		—		—		—		—		134		321		152		607
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		36		93		227		356
Total home equity loans & lines, net		$	135	$	2	$	—	$	19	$	—	$	12,706	$	1,088,418	$	32,543	$	1,133,823

Total residential		$	1,700,680	$	723,585	$	706,158	$	221,676	$	250,392	$	741,231	$	1,088,418	$	32,543	$	5,464,683

Table of Contents

(in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans Amortized Cost Basis Revolving to Non-Revolving Loans Amortized Cost
September 30, 2020 2020 2019 2018 2017 2016 Prior Total
Residential development, net
Credit quality indicator:
Pass $ 14,489 $ 8,244 $ 2,770 $ 0 $ 0 $ 0 $ 135,377 $ 2,520 $ 163,400
Special mention 0 0 0 0 0 0 0 0 0
Substandard 0 0 0 0 0 0 0 0 0
Doubtful 0 0 0 0 0 0 0 0 0
Loss 0 0 0 0 0 0 0 0 0
Total residential development, net $ 14,489 $ 8,244 $ 2,770 $ 0 $ 0 $ 0 $ 135,377 $ 2,520 $ 163,400
Total commercial real estate $ 941,899 $ 2,272,538 $ 1,828,167 $ 1,575,703 $ 997,743 $ 2,456,084 $ 172,194 $ 10,442 $ 10,254,770
Commercial:
Term, net
Credit quality indicator:
Pass $ 2,314,701 $ 352,092 $ 351,231 $ 254,727 $ 71,041 $ 235,495 $ 594,893 $ 28,230 $ 4,202,410
Special mention 2,985 307 1,427 786 2,993 3,596 585 435 13,114
Substandard 995 1,038 4,441 5,038 1,414 1,320 0 15,884 30,130
Doubtful 0 0 0 0 0 575 0 0 575
Loss 0 0 0 0 0 0 0 0 0
Total term, net $ 2,318,681 $ 353,437 $ 357,099 $ 260,551 $ 75,448 $ 240,986 $ 595,478 $ 44,549 $ 4,246,229
Lines of credit & other, net
Credit quality indicator:
Pass $ 17,429 $ 22,326 $ 25,574 $ 791 $ 2,558 $ 594 $ 734,015 $ 6,303 $ 809,590
Special mention 4,037 0 0 0 77 324 38,772 4,089 47,299
Substandard 573 517 0 0 252 940 29,218 6,390 37,890
Doubtful 0 0 0 0 0 0 1 1 2
Loss 0 0 0 0 0 0 1 0 1
Total lines of credit & other, net $ 22,039 $ 22,843 $ 25,574 $ 791 $ 2,887 $ 1,858 $ 802,007 $ 16,783 $ 894,782
Leases & equipment finance, net
Credit quality indicator:
Pass $ 409,148 $ 499,778 $ 275,149 $ 149,288 $ 77,733 $ 13,758 $ 0 $ 0 $ 1,424,854
Special mention 1,232 3,555 7,808 4,066 702 45 0 0 17,408
Substandard 2,181 9,466 14,242 4,588 2,419 5,384 0 0 38,280
Doubtful 892 5,194 4,809 2,937 1,205 169 0 0 15,206
Loss 228 100 298 62 157 57 0 0 902
Total leases & equipment finance, net $ 413,681 $ 518,093 $ 302,306 $ 160,941 $ 82,216 $ 19,413 $ 0 $ 0 $ 1,496,650
Total commercial $ 2,754,401 $ 894,373 $ 684,979 $ 422,283 $ 160,551 $ 262,257 $ 1,397,485 $ 61,332 $ 6,637,661
Residential:
Mortgage, net
Credit quality indicator:
Pass $ 580,651 $ 1,281,752 $ 449,023 $ 462,024 $ 490,798 $ 744,660 $ 0 $ 0 $ 4,008,908
Special mention 0 0 197 1,206 142 3,030 0 0 4,575
Substandard 0 1,405 2,911 5,287 6,951 10,488 0 0 27,042
Doubtful 0 0 0 0 0 0 0 0 0
Loss 0 1,269 0 190 0 432 0 0 1,891
Total mortgage, net $ 580,651 $ 1,284,426 $ 452,131 $ 468,707 $ 497,891 $ 758,610 $ 0 $ 0 $ 4,042,416


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	September 30, 2021	2021		2020		2019		2018		2017		Prior						Total
Consumer & other, net:
Credit quality indicator:
	Pass/Watch	$	13,616	$	12,411	$	14,605	$	6,621	$	4,589	$	5,729	$	132,063	$	2,692	$	192,326
	Special mention	—		39		58		—		175		186		203		38		699
	Substandard	—		—		22		—		—		15		10		59		106
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		7		3		—		10
Total consumer & other, net		$	13,616	$	12,450	$	14,685	$	6,621	$	4,764	$	5,937	$	132,279	$	2,789	$	193,141

Grand total		$	5,465,818	$	3,081,443	$	3,410,167	$	2,039,304	$	1,584,686	$	3,457,600	$	2,847,236	$	83,686	$	21,969,940


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	December 31, 2020	2020		2019		2018		2017		2016		Prior						Total
Commercial real estate:
Non-owner occupied term, net
Credit quality indicator:
	Pass/Watch	$	496,412	$	677,975	$	489,350	$	379,691	$	338,257	$	932,207	$	2,855	$	4,139	$	3,320,886
	Special mention	13,281		1,432		40,899		2,800		31,699		27,167		—		—		117,278
	Substandard	3,129		2,668		19,951		3,062		19,806		18,586		—		—		67,202
	Doubtful	—		—		—		—		—		103		—		—		103
	Loss	—		—		—		—		—		333		—		—		333
Total non-owner occupied term, net		$	512,822	$	682,075	$	550,200	$	385,553	$	389,762	$	978,396	$	2,855	$	4,139	$	3,505,802
Owner occupied term, net
Credit quality indicator:
	Pass/Watch	$	284,698	$	414,715	$	321,900	$	344,606	$	257,969	$	610,893	$	6,270	$	783	$	2,241,834
	Special mention	3,641		8,373		13,143		7,365		3,425		18,386		—		—		54,333
	Substandard	2,657		1,694		9,868		2,846		4,356		14,609		282		975		37,287
	Doubtful	—		—		—		—		—		61		—		—		61
	Loss	—		—		—		—		—		430		—		—		430
Total owner occupied term, net		$	290,996	$	424,782	$	344,911	$	354,817	$	265,750	$	644,379	$	6,552	$	1,758	$	2,333,945
Multifamily, net
Credit quality indicator:
	Pass/Watch	$	383,871	$	870,871	$	593,076	$	574,185	$	276,108	$	618,031	$	23,282	$	2,956	$	3,342,380
	Special mention	—		—		—		—		—		6,601		—		—		6,601
	Substandard	—		—		—		215		—		—		—		—		215
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total multifamily, net		$	383,871	$	870,871	$	593,076	$	574,400	$	276,108	$	624,632	$	23,282	$	2,956	$	3,349,196

Table of Contents


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	December 31, 2020	2020		2019		2018		2017		2016		Prior						Total
Construction & development, net
Credit quality indicator:
	Pass/Watch	$	146,012	$	283,052	$	255,449	$	127,564	$	—	$	372	$	—	$	—	$	812,449
	Special mention	1,637		—		14,392		—		—		—		—		—		16,029
	Substandard	—		—		—		—		—		—		—		—		—
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total construction & development, net		$	147,649	$	283,052	$	269,841	$	127,564	$	—	$	372	$	—	$	—	$	828,478
Residential development, net
Credit quality indicator:
	Pass/Watch	$	17,188	$	2,571	$	2,151	$	—	$	—	$	—	$	163,320	$	2,507	$	187,737
	Special mention	—		—		—		—		—		—		5,024		—		5,024
	Substandard	—		—		—		—		—		—		—		—		—
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		—		—		—		—
Total residential development, net		$	17,188	$	2,571	$	2,151	$	—	$	—	$	—	$	168,344	$	2,507	$	192,761

Total commercial real estate		$	1,352,526	$	2,263,351	$	1,760,179	$	1,442,334	$	931,620	$	2,247,779	$	201,033	$	11,360	$	10,210,182

Commercial:
Term, net
Credit quality indicator:
	Pass/Watch	$	2,146,758	$	294,576	$	323,744	$	240,458	$	67,502	$	226,137	$	626,878	$	29,598	$	3,955,651
	Special mention	4,859		548		13,395		1,265		273		1,416		1,036		2,259		25,051
	Substandard	251		1,105		24,845		7,259		1,137		561		—		8,029		43,187
	Doubtful	—		—		—		—		—		578		—		—		578
	Loss	—		—		—		—		—		—		—		—		—
Total term, net		$	2,151,868	$	296,229	$	361,984	$	248,982	$	68,912	$	228,692	$	627,914	$	39,886	$	4,024,467
Lines of credit & other, net
Credit quality indicator:
	Pass/Watch	$	27,503	$	27,395	$	26,731	$	548	$	1,679	$	531	$	709,606	$	5,578	$	799,571
	Special mention	4,033		—		—		1		77		299		42,882		271		47,563
	Substandard	501		472		—		195		377		940		6,958		6,177		15,620
	Doubtful	—		—		—		—		—		—		4		—		4
	Loss	—		—		—		—		—		—		1		1		2
Total lines of credit & other, net		$	32,037	$	27,867	$	26,731	$	744	$	2,133	$	1,770	$	759,451	$	12,027	$	862,760
Leases & equipment finance, net
Credit quality indicator:
	Pass/Watch	$	502,305	$	442,692	$	239,551	$	125,619	$	64,400	$	7,619	$	—	$	—	$	1,382,186
	Special mention	2,321		4,918		7,765		3,797		1,983		99		—		—		20,883
	Substandard	6,999		7,193		11,617		1,945		2,081		157		—		—		29,992
	Doubtful	2,615		8,255		4,834		2,880		1,343		79		—		—		20,006
	Loss	101		1,481		1,015		635		309		22		—		—		3,563
Total leases & equipment finance, net		$	514,341	$	464,539	$	264,782	$	134,876	$	70,116	$	7,976	$	—	$	—	$	1,456,630

Total commercial		$	2,698,246	$	788,635	$	653,497	$	384,602	$	141,161	$	238,438	$	1,387,365	$	51,913	$	6,343,857

Table of Contents


(in thousands)		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving to Non-Revolving Loans Amortized Cost
	December 31, 2020	2020		2019		2018		2017		2016		Prior						Total
Residential:
Mortgage, net
Credit quality indicator:
	Pass/Watch	$	809,232	$	1,136,220	$	393,041	$	406,069	$	424,270	$	669,862	$	—	$	—	$	3,838,694
	Special mention	—		397		286		688		946		3,183		—		—		5,500
	Substandard	335		1,398		1,822		4,133		6,381		11,113		—		—		25,182
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		1,314		—		—		—		1,216		—		—		2,530
Total mortgage, net		$	809,567	$	1,139,329	$	395,149	$	410,890	$	431,597	$	685,374	$	—	$	—	$	3,871,906

Home equity loans & lines, net
Credit quality indicator:
	Pass/Watch	$	40	$	—	$	20	$	—	$	259	$	16,575	$	1,077,753	$	37,008	$	1,131,655
	Special mention	—		—		—		—		—		211		1,537		198		1,946
	Substandard	—		—		—		—		—		43		254		233		530
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		182		1,107		644		1,933
Total home equity loans & lines, net		$	40	$	—	$	20	$	—	$	259	$	17,011	$	1,080,651	$	38,083	$	1,136,064

Total residential		$	809,607	$	1,139,329	$	395,169	$	410,890	$	431,856	$	702,385	$	1,080,651	$	38,083	$	5,007,970

Consumer & other, net:
Credit quality indicator:
	Pass/Watch	$	24,408	$	22,802	$	11,372	$	4,170	$	2,582	$	4,101	$	143,813	$	2,789	$	216,037
	Special mention	—		95		79		27		28		3		660		74		966
	Substandard	—		25		—		—		2		—		205		110		342
	Doubtful	—		—		—		—		—		—		—		—		—
	Loss	—		—		—		—		—		10		3		—		13
Total consumer & other, net		$	24,408	$	22,922	$	11,451	$	4,197	$	2,612	$	4,114	$	144,681	$	2,973	$	217,358

Grand total		$	4,884,787	$	4,214,237	$	2,820,296	$	2,242,023	$	1,507,249	$	3,192,716	$	2,813,730	$	104,329	$	21,779,367

Note 5 – Residential Mortgage Servicing Rights

The Company measures its ~~residential~~ mortgage servicing rights ~~("MSR")~~ at fair value with changes in fair value reported in residential mortgage banking ~~revenue.~~revenue, net. The following table presents the changes in the Company's residential mortgage servicing rights for the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(in thousands)	(in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Balance, beginning of period	Balance, beginning of period	$	96,356	$	139,780	$	115,010	$	169,025	Balance, beginning of period	$	102,699	$	96,356	$	92,907	$	115,010
Additions for new MSR capitalized	Additions for new MSR capitalized	14,014		7,393		37,484		16,772		Additions for new MSR capitalized	8,450		14,014		30,845		37,484
Changes in fair value:	Changes in fair value:									Changes in fair value:
Changes due to collection/realization of expected cash flows over time	Changes due to collection/realization of expected cash flows over time	(4,878)		(6,835)		(15,249)		(20,171)		Changes due to collection/realization of expected cash flows over time	(4,681)		(4,878)		(13,592)		(15,249)
Changes due to valuation inputs or assumptions (1)	Changes due to valuation inputs or assumptions (1)	(12,244)		11,045		(43,997)		(14,243)		Changes due to valuation inputs or assumptions (1)	(634)		(12,244)		(4,326)		(43,997)
Balance, end of period	Balance, end of period	$	93,248	$	151,383	$	93,248	$	151,383	Balance, end of period	$	105,834	$	93,248	$	105,834	$	93,248

(1) The changes in valuation inputs and assumptions principally reflect changes in discount rates and prepayment speeds, which are primarily affected by changes in interest rates.

Table of Contents

Information related to the Bank's serviced loan portfolio as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 is as follows:


(dollars in thousands)	(dollars in thousands)	September 30, 2020			December 31, 2019			(dollars in thousands)	September 30, 2021			December 31, 2020
Balance of loans serviced for others	Balance of loans serviced for others	$	12,964,361		$	12,276,943		Balance of loans serviced for others	$	12,853,291		$	13,026,720
MSR as a percentage of serviced loans	MSR as a percentage of serviced loans	0.72		%	0.94		%	MSR as a percentage of serviced loans	0.82		%	0.71		%

~~Table of Contents~~

The amount of contractually specified servicing fees, late fees and ancillary fees earned, recorded in residential mortgage banking revenue, onwas $9.2 million and $27.4 million for the ~~Condensed Consolidated Statements of Income, was~~three and nine months ended September 30, 2021, respectively, as compared to $8.8 million and $26.2 million for the three and nine months ended September 30, 2020, ~~respectively, as compared to $11.3 million and $33.2 million for the three and nine months ended September 30, 2019,~~ respectively.

Note 6 – Commitments and Contingencies

Financial Instruments with Off-Balance-Sheet Risk — The Company's financial statements do not reflect various commitments and contingent liabilities that arise in the normal course of the Bank's business and involve elements of credit, liquidity, and interest rate risk.

The following table presents a summary of the Bank's commitments and contingent liabilities:


(in thousands)	September 30, ~~2020~~2021
Commitments to extend credit	$	~~5,785,909~~6,180,820
Forward sales commitments	$	~~1,029,734~~555,170
Commitments to originate residential mortgage loans held for sale	$	~~950,570~~432,659
Standby letters of credit	$	~~101,978~~122,078

The Bank is a party to financial instruments with off-balance-sheet credit risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. Those instruments involve elements of credit and interest-rate risk similar to the risk involved in on-balance sheet items. The contract or notional amounts of those instruments reflect the extent of the Bank's involvement in particular classes of financial instruments.

The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

There were 0no financial guarantees in connection with standby letters of credit that the Bank was required to perform on during the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020. At September 30, ~~2020,~~2021, approximately ~~$91.5~~$113.4 million of standby letters of credit expire within one year, and ~~$10.5~~$8.7 million expire thereafter.

Residential mortgage loans sold into the secondary market are sold with limited recourse against the Company, meaning that the Company may be obligated to repurchase or otherwise reimburse the investor for incurred losses on any loans that suffer an early payment default, are not underwritten in accordance with investor guidelines or are determined to have pre-closing borrower misrepresentations. As of September 30, ~~2020,~~2021, the Company had a residential mortgage loan repurchase reserve liability of $1.6 million. For loans sold to GNMA, the Bank has a unilateral right, but not the obligation, to repurchase loans that are past due 90 days or more. As of September 30, 2020, the Bank has recorded a liability for the loans subject to this repurchase right of $20.0 million, and has recorded these loans as part of the loan portfolio as if the Bank had repurchased these loans.

~~Commitments~~ — In September 2020, the Company and its wholly-owned subsidiary Umpqua Investments, entered into an agreement to sell substantially all of the assets of Umpqua Investments to Steward Partners. Umpqua Investments is included within the Company's Wealth Management segment. The acquisition is expected to close in the first quarter of 2021, subject to customary closing conditions.$545,000.

Legal Proceedings—~~Umpqua~~The Company is involved in legal proceedings occurring in the ordinary course of business. Based on information currently available, advice of counsel and available insurance coverage, management believes that the eventual outcome of actions against the Company or its subsidiaries will not, individually or in the aggregate, have a material adverse effect on its consolidated financial condition. However, it is possible that the ultimate resolution of a matter, if unfavorable, may be material to results of operations for any particular period.

Contingencies—In 2020, the Company launched "Next Gen 2.0," an initiative designed to continue to modernize the Bank, advance technology initiatives, and improve operating leverage. As part of this initiative, management continues to evaluate all aspects of the Company's operations. The Company consolidated 12 store locations in April 2021 and consolidated an additional 15 store locations in October and November 2021. Costs associated with these consolidations will be included in exit and disposal costs within other expenses in non-interest expense. The Next Gen 2.0 strategy involves evaluation of these consolidations and possible future consolidations.

Table of Contents

On October 12, 2021, Umpqua and Columbia announced that their boards of directors unanimously approved a Merger Agreement under which the two companies will combine in an all-stock transaction. Under the terms of the Merger Agreement, Umpqua shareholders will receive 0.5958 of a share of Columbia stock for each Umpqua share they own. Upon completion of the transaction, Umpqua shareholders will own approximately 62% and Columbia shareholders will own approximately 38% of the combined company. The merger is expected to close in mid-2022, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals and approvals from each company's shareholders. Refer to the subsequent event footnote for additional information.

Concentrations of Credit Risk— The Bank grants real estate mortgage, real estate construction, commercial, agricultural and installment loans and leases to customers throughout Oregon, Washington, California, Idaho, and Nevada. In management's judgment, a concentration exists in real estate-related loans, which represented approximately ~~71%~~75% and ~~76%~~71% of the Bank's loan and lease portfolio at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. ~~The decrease is related to PPP loans which are not real estate secured and will likely be short-term in duration.~~ Commercial real estate concentrations are managed to ensure geographic and business diversity, primarily in our footprint. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general or caused by the COVID-19 pandemic, material increases in interest rates, changes in tax policies, tightening credit or refinancing markets, or a decline in real estate values in the Bank's primary market areas in particular, could have an adverse impact on the repayment of these loans. Personal and business incomes, proceeds from the sale of real property, or proceeds from refinancing represent the primary sources of repayment for a majority of these loans.

The Bank recognizes the credit risks inherent in dealing with other depository institutions. Accordingly, to prevent excessive exposure to any single correspondent, the Bank has established general standards for selecting correspondent banks as well as internal limits for allowable exposure to any single correspondent. In addition, the Bank has an investment policy that sets forth limitations that apply to all investments with respect to credit rating and concentrations with an issuer.

Note 7 – Derivatives

The Bank may use derivatives to hedge the risk of changes in the fair values of interest rate lock commitments and residential mortgage loans held for sale. None of the Company's derivatives are designated as hedging instruments. Rather, they are accounted for as free-standing derivatives, or economic hedges, with changes in the fair value of the derivatives reported in income. The Company primarily utilizes forward interest rate contracts in its derivative risk management strategy.

The Bank enters into forward delivery contracts to sell residential mortgage loans or mortgage-backed securities to ~~broker/dealers~~broker-dealers at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage interest rate lock commitments. Credit risk associated with forward contracts is limited to the replacement cost of those forward contracts in a gain position. There were 0no counterparty default losses on forward contracts in the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020. Market risk with respect to forward contracts arises principally from changes in the value of contractual positions due to changes in interest rates. The Bank limits its exposure to market risk by monitoring differences between commitments to customers and forward contracts with ~~broker/dealers.~~broker-dealers. In the event the Company has forward delivery contract commitments in excess of available mortgage loans, the Company completes the transaction by either paying or receiving a fee to or from the ~~broker/dealer~~broker-dealer equal to the increase or decrease in the market value of the forward contract. At September 30, ~~2020,~~2021, the Bank had commitments to originate mortgage loans held for sale totaling ~~$950.6~~$432.7 million and forward sales commitments of ~~$1.0 billion,~~$555.2 million, which are used to hedge both on-balance sheet and off-balance sheet exposures.

The Bank executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting the interest rate swaps that the Bank executes with a third party, such that the Bank minimizes its net risk exposure. As of September 30, 2021, the Bank had 914 interest rate swaps with an aggregate notional amount of $6.6 billion related to this program. As of December 31, 2020, the Bank had ~~884~~886 interest rate swaps with an aggregate notional amount of $6.2 billion related to this program. ~~As of December 31, 2019, the Bank had 846 interest rate swaps with an aggregate notional amount of $5.7 billion related to this program.~~

~~At both~~As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the termination value of interest rate swaps in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was ~~$65,000~~$8.9 million and ~~$7.0 million,~~$370,000, respectively. The Bank has collateral posting requirements for initial margins with its clearing members and clearing houses and has been required to post collateral against its obligations under these agreements of ~~$103.1~~$89.0 million and ~~$86.2~~$92.6 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Table of Contents

The Bank's interest rate swap derivatives are cleared through the Chicago Mercantile Exchange and London Clearing House. These clearing houses characterize the variation margin payments, for derivative contracts that are referred to as settled-to-market, as settlements of the derivative's mark-to-market exposure and not collateral. The Company accounts for the variation margin as an adjustment to cash collateral, as well as a corresponding adjustment to the derivative asset and liability. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the variation margin adjustments were negative adjustments of ~~$374.8~~$198.7 million and ~~$144.8~~$330.5 million, respectively.

~~Table of Contents~~

The Bank incorporates credit valuation adjustments ~~("CVA")~~ to appropriately reflect nonperformance risk in the fair value measurement of its derivatives. The net CVA reduced the settlement values of the Bank's net derivative assets by ~~$22.5~~$9.7 million and ~~$9.1~~$18.5 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Various factors impact changes in the CVA over time, including changes in the credit spreads of the parties to the contracts, as well as changes in market rates and volatilities, which affect the total expected exposure of the derivative instruments.

The Bank also executes foreign currency hedges as a service for customers. These foreign currency hedges are then offset with hedges with other third-party banks to limit the Bank's risk exposure.

The Bank's derivative assets are included in other assets, while the derivative liabilities are included in other ~~liabilities on the condensed consolidated balance sheet.~~liabilities. The following table summarizes the types of derivatives, separately by assets and liabilities, and the fair values of such derivatives as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

(in thousands) Asset Derivatives Liability Derivatives
Derivatives not designated as hedging instrument September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019
Interest rate lock commitments $ 28,839 $ 7,056 $ 0 $ 0
Interest rate forward sales commitments 814 105 2,843 1,351
Interest rate swaps 352,956 142,787 65 7,001
Foreign currency derivatives 562 626 525 456
Total derivative assets and liabilities $ 383,171 $ 150,574 $ 3,433 $ 8,808

~~The following table summarizes the types of derivatives and the gains (losses) recorded during the three and nine months ended September 30, 2020 and 2019:~~


(in thousands)	(in thousands)	Three Months Ended				Nine Months Ended				(in thousands)	Asset Derivatives				Liability Derivatives
Derivatives not designated as hedging instrument	Derivatives not designated as hedging instrument	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		Derivatives not designated as hedging instrument	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Interest rate lock commitments	Interest rate lock commitments	$	3,303	$	922	$	21,784	$	2,313	Interest rate lock commitments	$	8,258	$	28,144	$	—	$	—
Interest rate forward sales commitments	Interest rate forward sales commitments	(11,650)		(2,467)		(51,952)		(11,875)		Interest rate forward sales commitments	3,367		7		374		7,257
Interest rate swaps	Interest rate swaps	1,765		(2,281)		(13,364)		(8,712)		Interest rate swaps	198,607		313,090		8,944		370
Foreign currency derivatives	Foreign currency derivatives	585		527		1,567		1,522		Foreign currency derivatives	456		1,269		343		1,155
Total derivative losses		$	(5,997)	$	(3,299)	$	(41,965)	$	(16,752)
Total derivative assets and liabilities										Total derivative assets and liabilities	$	210,688	$	342,510	$	9,661	$	8,782

The gains and losses on the Company's mortgage banking derivatives are included in mortgage banking revenue. The gains and losses on the Company's interest rate swaps and foreign currency derivatives are included in other income. The following table summarizes the types of derivatives and the gains (losses) recorded during the three and nine months ended September 30, 2021 and 2020:


(in thousands)	Three Months Ended				Nine Months Ended
Derivatives not designated as hedging instrument	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Interest rate lock commitments	$	(4,952)	$	3,303	$	(19,886)	$	21,784
Interest rate forward sales commitments	(2,550)		(11,650)		15,336		(51,952)
Interest rate swaps	1,429		1,765		8,698		(13,364)
Foreign currency derivatives	718		585		1,985		1,567
Total derivative gains (losses)	$	(5,355)	$	(5,997)	$	6,133	$	(41,965)

Table of Contents

Note 8 – Earnings (Loss) Per Common Share

The following is a computation of basic and diluted earnings (loss) per common share for the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		(in thousands, except per share data)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net income (loss)	Net income (loss)	$	124,871	$	84,502	$	(1,674,150)	$	270,345	Net income (loss)	$	108,066	$	124,871	$	331,946	$	(1,674,150)

Weighted average number of common shares outstanding - basic	Weighted average number of common shares outstanding - basic	220,221		220,285		220,216		220,379		Weighted average number of common shares outstanding - basic	218,416		220,221		219,791		220,216
Effect of potentially dilutive common shares (1)	Effect of potentially dilutive common shares (1)	197		298		0		263		Effect of potentially dilutive common shares (1)	562		197		487		—
Weighted average number of common shares outstanding - diluted	Weighted average number of common shares outstanding - diluted	220,418		220,583		220,216		220,642		Weighted average number of common shares outstanding - diluted	218,978		220,418		220,278		220,216
EARNINGS (LOSS) PER COMMON SHARE:
Earnings (loss) per common share:										Earnings (loss) per common share:
Basic	Basic	$	0.57	$	0.38	$	(7.60)	$	1.23	Basic	$	0.49	$	0.57	$	1.51	$	(7.60)
Diluted	Diluted	$	0.57	$	0.38	$	(7.60)	$	1.23	Diluted	$	0.49	$	0.57	$	1.51	$	(7.60)

(1)Represents the effect of the assumed vesting of non-participating restricted shares based on the treasury stock method.

~~Table of Contents~~

~~There were 763,000 and 1.2 million~~The following table represents the weighted average outstanding restricted shares that were not included in the computation of diluted earnings (loss) per ~~common~~ share because their effect would be anti-dilutive for the three and nine months ended September 30, ~~2020, respectively.~~2021 and 2020:

Three Months Ended

Nine Months Ended

(in thousands)

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Restricted stock awards

—

763

1,164

Note 9 – Segment Information

In the first quarter of 2021, the Company realigned its operating segments based on changes in management's focus and its internal reporting structure. The Company now reports ~~4 primary~~2 segments: ~~Wholesale Bank, Wealth Management, Retail Bank,~~Core Banking and ~~Home Lending with the remainder as Corporate and other.~~

The Wholesale Bank segment includes lending, treasury and cash management services and customer risk management products to middle market corporate, commercial and business banking customers and includes the operations of FinPac, a commercial leasing company. The Wealth Management segment consists of the operations of Umpqua Investments, which offers a full range of retail brokerage and investment advisory services and products to its clients who consist primarily of individual investors, and Umpqua Private Bank, which serves high net worth individuals with liquid investable assets and provides customized financial solutions and offerings. The Retail Bank segment includes retail and small business lending and deposit services for customers served through the Bank's store network. The Home Lending segment originates, sells and services residential mortgage loans. The Corporate and other segment includes activities that are not directly attributable to one of the 4 principal lines of business and includes the operations of the parent company, eliminations and the economic impact of certain assets, capital and support functions not specifically identifiable within the other lines of business.

Management monitors the Company's results using an internal performance measurement accounting system, which provides line of business results and key performance measures. The application and development of these management reporting methodologies is a dynamic process and is subject to periodic enhancements. As these enhancements are made, financial results presented by each reportable segment may be periodically revised retrospectively. In the current period, certain business banking related departments were moved from Retail Bank to Wholesale Bank to realign with Umpqua's strategic goals.Mortgage Banking. The prior periods have been ~~revised accordingly.~~restated to reflect these two segments. Management periodically updates the allocation methods and assumptions within the current segment structure.

The ~~provision~~Core Banking segment includes all lines of business, except Mortgage Banking, including wholesale, retail, and private banking, as well as the operations, technology, and administrative functions of the Bank and Holding Company. The Mortgage Banking segment includes the revenue earned from the production and sale of residential real estate loans, the servicing income from the serviced loan portfolio, the quarterly changes to the MSR, and the specific expenses that are related to mortgage banking activities including variable commission expenses. Revenue and related expenses related to residential real estate loans held for ~~income taxes is typically allocated to business segments using~~investment are included in the Core Banking segment as portfolio loans are an anchor product for the consumer channels and are originated through a ~~25% effective tax rate. The residual income tax expense or benefit arising from tax planning strategies or other tax attributes to arrive at~~variety of channels throughout the ~~consolidated effective tax rate is retained in Corporate and Other.~~Company.

Table of Contents

Summarized financial information concerning the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables:

Three Months Ended September 30, 2020
(in thousands) Wholesale Bank Wealth Management Retail Bank Home Lending
Corporate & Other (2)
Consolidated
Net interest income $ 118,913 $ 5,777 $ 57,938 $ 17,937 $ 16,009 $ 216,574
Provision (recapture) for credit losses 5,999 (572) (78) (5,753) 66 (338)
Non-interest income 15,298 4,007 18,481 90,593 3,545 131,924
Non-interest expense 60,935 8,050 58,666 49,014 13,542 190,207
Income before income taxes 67,277 2,306 17,831 65,269 5,946 158,629
Provision (benefit) for income taxes (1)
14,317 577 3,795 16,317 (1,248) 33,758
Net income $ 52,960 $ 1,729 $ 14,036 $ 48,952 $ 7,194 $ 124,871
Notable fair value adjustments included in non-interest income:
Residential mortgage servicing rights $ 0 $ 0 $ 0 $ (17,122) $ 0 $ (17,122)
Interest rate swaps 1,765 0 0 0 0 1,765

~~(1)~~ ~~The Wholesale Bank and Retail Bank do not have the standard tax rate of 25% allocated in 2020 due to the impact of the goodwill impairment on these reporting units.~~

~~(2)~~ The Corporate & Other segment reflects the recording of the deferred fees and costs on loans originated during the period, as the loan fees and costs are reflected within net interest income and non-interest expense, respectively, upon loan origination for the Wholesale Bank, Retail Bank, Home Lending, and Wealth Management segments.

~~Table of Contents~~

Nine Months Ended September 30, 2020
(in thousands) Wholesale Bank Wealth Management Retail Bank Home Lending
Corporate & Other (2)
Consolidated
Net interest income (loss) $ 422,622 $ 16,837 $ 208,453 $ 49,465 $ (49,765) $ 647,612
Provision for credit losses 187,766 3,917 7,715 5,294 140 204,832
Non-interest income 29,635 12,865 43,566 192,323 9,660 288,049
Goodwill impairment 1,033,744 0 751,192 0 0 1,784,936
Non-interest expense (excluding goodwill impairment) 179,762 24,374 178,333 133,373 33,997 549,839
(Loss) income before income taxes (949,015) 1,411 (685,221) 103,121 (74,242) (1,603,946)
Provision (benefit) for income taxes (1)
41,538 353 29,992 25,780 (27,459) 70,204
Net (loss) income $ (990,553) $ 1,058 $ (715,213) $ 77,341 $ (46,783) $ (1,674,150)
Notable fair value adjustments included in non-interest income:
Residential mortgage servicing rights $ 0 $ 0 $ 0 $ (59,246) $ 0 $ (59,246)
Interest rate swaps (13,364) 0 0 0 0 (13,364)

~~(1)~~ ~~The Wholesale Bank and Retail Bank do not have the standard tax rate of 25% allocated in 2020 due to the impact of the goodwill impairment on these reporting units.~~

Three Months Ended September 30, 2019
(in thousands) Wholesale Bank Wealth Management Retail Bank Home Lending Corporate & Other Consolidated
Net interest income $ 113,151 $ 5,491 $ 82,130 $ 13,039 $ 15,162 $ 228,973
Provision for loan and lease losses 20,807 5 1,242 904 269 23,227
Non-interest income 16,275 4,713 15,974 47,161 4,389 88,512
Non-interest expense 60,663 10,003 64,586 36,750 11,588 183,590
Income before income taxes 47,956 196 32,276 22,546 7,694 110,668
Provision for income taxes 11,989 49 8,069 5,637 422 26,166
Net income $ 35,967 $ 147 $ 24,207 $ 16,909 $ 7,272 $ 84,502
Notable fair value adjustments included in non-interest income:
Residential mortgage servicing rights $ 0 $ 0 $ 0 $ 4,210 $ 0 $ 4,210
Interest rate swaps (2,281) 0 0 0 0 (2,281)

~~Table of Contents~~

Nine Months Ended September 30, 2019
(in thousands) Wholesale Bank Wealth Management Retail Bank Home Lending Corporate & Other Consolidated
Net interest income $ 333,953 $ 17,964 $ 254,985 $ 33,793 $ 53,125 $ 693,820
Provision for loan and lease losses 50,190 826 2,584 1,953 710 56,263
Non-interest income 39,287 13,953 47,036 68,067 87,732 256,075
Non-interest expense 172,852 28,496 193,568 98,496 42,185 535,597
Income before income taxes 150,198 2,595 105,869 1,411 97,962 358,035
Provision for income taxes 37,549 649 26,467 353 22,672 87,690
Net income $ 112,649 $ 1,946 $ 79,402 $ 1,058 $ 75,290 $ 270,345
Notable fair value adjustments included in non-interest income:
Residential mortgage servicing rights $ 0 $ 0 $ 0 $ (34,414) $ 0 $ (34,414)
Interest rate swaps (8,712) 0 0 0 0 (8,712)

September 30, 2020
(in thousands) Wholesale Bank Wealth Management Retail Bank Home Lending Corporate & Other Consolidated
Total assets $ 17,009,192 $ 776,171 $ 1,596,435 $ 4,356,884 $ 5,698,759 $ 29,437,441
Total loans and leases $ 16,675,987 $ 756,715 $ 1,510,440 $ 3,533,990 $ (50,659) $ 22,426,473
Total deposits $ 5,375,438 $ 1,281,811 $ 15,461,369 $ 576,003 $ 1,975,162 $ 24,669,783

December 31, 2019
(in thousands) Wholesale Bank Wealth Management Retail Bank Home Lending Corporate & Other Consolidated
Total assets $ 15,404,164 $ 710,873 $ 1,753,682 $ 4,423,869 $ 6,554,221 $ 28,846,809
Total loans and leases $ 15,119,857 $ 693,569 $ 1,671,472 $ 3,768,584 $ (57,798) $ 21,195,684
Total deposits $ 4,462,630 $ 1,221,869 $ 13,548,089 $ 279,226 $ 2,969,690 $ 22,481,504


		Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
(in thousands)		Core Banking		Mortgage Banking		Consolidated		Core Banking		Mortgage Banking		Consolidated
Net interest income		$	232,348	$	2,726	$	235,074	$	212,215	$	4,359	$	216,574
(Recapture) provision for credit losses		(18,919)		—		(18,919)		(338)		—		(338)
Non-interest income
	Residential mortgage banking revenue:
	Origination and sale	—		30,293		30,293		—		98,703		98,703
	Servicing	—		9,172		9,172		—		8,796		8,796
	Change in fair value of MSR asset:
	Changes due to collection/realization of expected cash flows over time	—		(4,681)		(4,681)		—		(4,878)		(4,878)
	Changes due to valuation inputs or assumptions	—		(634)		(634)		—		(12,244)		(12,244)

	Loss on equity securities, net	(343)		—		(343)		(112)		—		(112)
	Gain on swap derivatives, net	1,429		—		1,429		1,765		—		1,765
	Non-interest income (excluding above items)	38,281		188		38,469		39,678		216		39,894
	Total non-interest income	39,367		34,338		73,705		41,331		90,593		131,924
Non-interest expense

	Exit and disposal costs	3,813		—		3,813		792		—		792
	Non-interest expense (excluding above items)	146,931		33,009		179,940		148,519		40,896		189,415
	Allocated expenses, net (1)	3,680		(3,680)		—		(2,976)		2,976		—
	Total non-interest expense	154,424		29,329		183,753		146,335		43,872		190,207
Income before income taxes		136,210		7,735		143,945		107,549		51,080		158,629
Provision for income taxes		33,945		1,934		35,879		20,988		12,770		33,758
Net income		$	102,265	$	5,801	$	108,066	$	86,561	$	38,310	$	124,871
(1) Represents the internal charge of centrally provided support services and other corporate overhead to the Mortgage Banking segment, partially offset by allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs.

Table of Contents


		Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
(in thousands)		Core Banking		Mortgage Banking		Consolidated		Core Banking		Mortgage Banking		Consolidated
Net interest income		$	676,837	$	9,431	$	686,268	$	636,566	$	11,046	$	647,612
(Recapture) provision for credit losses		(41,915)		—		(41,915)		204,832		—		204,832
Non-interest income
	Residential mortgage banking revenue:
	Origination and sale	—		134,165		134,165		—		224,831		224,831
	Servicing	—		27,379		27,379		—		26,209		26,209
	Change in fair value of MSR asset:
	Changes due to collection/realization of expected cash flows over time	—		(13,592)		(13,592)		—		(15,249)		(15,249)
	Changes due to valuation inputs or assumptions	—		(4,326)		(4,326)		—		(43,997)		(43,997)
	Gain on sale of debt securities, net	4		—		4		190		—		190
	(Loss) gain on equity securities, net	(1,045)		—		(1,045)		942		—		942
	Gain (loss) on swap derivatives, net	8,698		—		8,698		(13,364)		—		(13,364)
	Non-interest income (excluding above items)	121,617		680		122,297		107,963		524		108,487
	Total non-interest income	129,274		144,306		273,580		95,731		192,318		288,049
Non-interest expense
	Goodwill impairment	—		—		—		1,784,936		—		1,784,936
	Exit and disposal costs	9,741		—		9,741		1,864		—		1,864
	Non-interest expense (excluding above items)	438,969		112,035		551,004		437,863		110,112		547,975
	Allocated expenses, net (1)	3,860		(3,860)		—		(7,992)		7,992		—
	Total non-interest expense	452,570		108,175		560,745		2,216,671		118,104		2,334,775
Income (loss) before income taxes		395,456		45,562		441,018		(1,689,206)		85,260		(1,603,946)
Provision for income taxes		97,681		11,391		109,072		48,889		21,315		70,204
Net income (loss)		$	297,775	$	34,171	$	331,946	$	(1,738,095)	$	63,945	$	(1,674,150)
(1) Represents the internal charge of centrally provided support services and other corporate overhead to the Mortgage Banking segment, partially offset by allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs.


	September 30, 2021						December 31, 2020
(in thousands)	Core Banking		Mortgage Banking		Consolidated		Core Banking		Mortgage Banking		Consolidated
Total assets	$	30,419,108	$	472,371	$	30,891,479	$	28,438,813	$	796,362	$	29,235,175
Loans held for sale	$	—	$	352,466	$	352,466	$	78,146	$	688,079	$	766,225
Total loans and leases	$	21,969,940	$	—	$	21,969,940	$	21,779,367	$	—	$	21,779,367
Total deposits	$	26,510,938	$	397,459	$	26,908,397	$	24,200,012	$	422,189	$	24,622,201

Table of Contents

Note 10 – Fair Value Measurement

The following table presents estimated fair values of the Company's financial instruments as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, whether or not recognized or recorded at fair value in the Condensed Consolidated Balance Sheets:


			September 30, 2020				December 31, 2019						September 30, 2021				December 31, 2020
(in thousands)	(in thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value		(in thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:	Financial assets:										Financial assets:
Cash and cash equivalents	Cash and cash equivalents	1	$	2,219,727	$	2,219,727	$	1,362,756	$	1,362,756	Cash and cash equivalents	1	$	3,744,589	$	3,744,589	$	2,573,181	$	2,573,181
Equity and other investment securities	Equity and other investment securities	1,2	82,769		82,769		80,165		80,165		Equity and other investment securities	1,2	81,575		81,575		83,077		83,077
Investment securities available for sale	Investment securities available for sale	2	2,898,700		2,898,700		2,814,682		2,814,682		Investment securities available for sale	2	3,723,171		3,723,171		2,932,558		2,932,558
Investment securities held to maturity	Investment securities held to maturity	3	3,088		3,950		3,260		4,263		Investment securities held to maturity	3	2,795		3,581		3,034		3,883
Loans held for sale, at fair value		2	683,960		683,960		513,431		513,431
Loans held for sale											Loans held for sale	2	352,466		352,466		766,225		766,225
Loans and leases, net	Loans and leases, net	3	22,081,424		22,458,575		21,038,055		21,274,319		Loans and leases, net	2,3	21,712,380		21,853,775		21,450,966		21,904,189
Restricted equity securities	Restricted equity securities	1	50,062		50,062		46,463		46,463		Restricted equity securities	1	10,946		10,946		41,666		41,666
Residential mortgage servicing rights	Residential mortgage servicing rights	3	93,248		93,248		115,010		115,010		Residential mortgage servicing rights	3	105,834		105,834		92,907		92,907
Bank owned life insurance	Bank owned life insurance	1	326,120		326,120		320,611		320,611		Bank owned life insurance	1	325,646		325,646		323,470		323,470
Derivatives	Derivatives	2,3	383,171		383,171		150,574		150,574		Derivatives	2,3	210,688		210,688		342,510		342,510
Financial liabilities:	Financial liabilities:										Financial liabilities:
Deposits	Deposits	1,2	$	24,669,783	$	24,699,587	$	22,481,504	$	22,503,916	Deposits	1,2	$	26,908,397	$	26,911,910	$	24,622,201	$	24,641,876
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	2	388,028		388,028		311,308		311,308		Securities sold under agreements to repurchase	2	467,760		467,760		375,384		375,384
Borrowings	Borrowings	2	996,520		1,001,504		906,635		906,160		Borrowings	2	6,367		7,160		771,482		774,586
Junior subordinated debentures, at fair value	Junior subordinated debentures, at fair value	3	247,045		247,045		274,812		274,812		Junior subordinated debentures, at fair value	3	299,508		299,508		255,217		255,217
Junior subordinated debentures, at amortized cost	Junior subordinated debentures, at amortized cost	3	88,325		65,833		88,496		70,909		Junior subordinated debentures, at amortized cost	3	88,098		76,686		88,268		67,425
Derivatives	Derivatives	2	3,433		3,433		8,808		8,808		Derivatives	2	9,661		9,661		8,782		8,782

3536

Table of Contents

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

(in thousands)
September 30, 2020
Description Total Level 1 Level 2 Level 3
Financial assets:
Equity and other investment securities
Investments in mutual funds and other securities $ 70,376 $ 53,039 $ 17,337 $ 0
Equity securities held in rabbi trusts 11,721 11,721 0 0
Other investments securities (1)
672 0 672 0
Investment securities available for sale
U.S. Treasury and agencies 757,953 0 757,953 0
Obligations of states and political subdivisions 264,487 0 264,487 0
Residential mortgage-backed securities and collateralized mortgage obligations 1,876,260 0 1,876,260 0
Loans held for sale, at fair value 683,960 0 683,960 0
Residential mortgage servicing rights, at fair value 93,248 0 0 93,248
Derivatives
Interest rate lock commitments 28,839 0 0 28,839
Interest rate forward sales commitments 814 0 814 0
Interest rate swaps 352,956 0 352,956 0
Foreign currency derivative 562 0 562 0
Total assets measured at fair value $ 4,141,848 $ 64,760 $ 3,955,001 $ 122,087
Financial liabilities:
Junior subordinated debentures, at fair value $ 247,045 $ 0 $ 0 $ 247,045
Derivatives
Interest rate forward sales commitments 2,843 0 2,843 0
Interest rate swaps 65 0 65 0
Foreign currency derivative 525 0 525 0
Total liabilities measured at fair value $ 250,478 $ 0 $ 3,433 $ 247,045

~~(1)~~ ~~Other investment securities includes securities held by Umpqua Investments as trading debt securities.~~


(in thousands)	September 30, 2021
Description	Total		Level 1		Level 2		Level 3
Financial assets:
Equity and other investment securities

Investments in mutual funds and other securities	$	69,157	$	51,820	$	17,337	$	—
Equity securities held in rabbi trusts	12,418		12,418		—		—

Investment securities available for sale
U.S. Treasury and agencies	838,977		—		838,977		—
Obligations of states and political subdivisions	283,409		—		283,409		—
Residential mortgage-backed securities and collateralized mortgage obligations	2,600,785		—		2,600,785		—

Loans held for sale, at fair value	352,466		—		352,466		—
Loans and leases, at fair value	353,912		—		353,912		—
Residential mortgage servicing rights, at fair value	105,834		—		—		105,834
Derivatives
Interest rate lock commitments	8,258		—		—		8,258
Interest rate forward sales commitments	3,367		—		3,367		—
Interest rate swaps	198,607		—		198,607		—
Foreign currency derivative	456		—		456		—
Total assets measured at fair value	$	4,827,646	$	64,238	$	4,649,316	$	114,092
Financial liabilities:
Junior subordinated debentures, at fair value	$	299,508	$	—	$	—	$	299,508
Derivatives
Interest rate forward sales commitments	374		—		374		—
Interest rate swaps	8,944		—		8,944		—
Foreign currency derivative	343		—		343		—
Total liabilities measured at fair value	$	309,169	$	—	$	9,661	$	299,508

3637

Table of Contents


(in thousands)	(in thousands)	December 31, 2019								(in thousands)	December 31, 2020
Description	Description	Total		Level 1		Level 2		Level 3		Description	Total		Level 1		Level 2		Level 3
Financial assets:	Financial assets:									Financial assets:
Equity and other investment securities	Equity and other investment securities									Equity and other investment securities

Investments in mutual funds and other securities	Investments in mutual funds and other securities	$	67,133	$	52,096	$	15,037	$	0	Investments in mutual funds and other securities	$	70,203	$	52,866	$	17,337	$	—
Equity securities held in rabbi trusts	Equity securities held in rabbi trusts	12,147		12,147		0		0		Equity securities held in rabbi trusts	12,814		12,814		—		—
Other investments securities (1)	Other investments securities (1)	885		0		885		0		Other investments securities (1)	60		—		60		—
Investment securities available for sale	Investment securities available for sale									Investment securities available for sale
U.S. Treasury and agencies	U.S. Treasury and agencies	643,604		0		643,604		0		U.S. Treasury and agencies	762,202		—		762,202		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	261,094		0		261,094		0		Obligations of states and political subdivisions	279,511		—		279,511		—
Residential mortgage-backed securities and collateralized mortgage obligations	Residential mortgage-backed securities and collateralized mortgage obligations	1,909,984		0		1,909,984		0		Residential mortgage-backed securities and collateralized mortgage obligations	1,890,845		—		1,890,845		—

Loans held for sale, at fair value	Loans held for sale, at fair value	513,431		0		513,431		0		Loans held for sale, at fair value	688,079		—		688,079		—
Residential mortgage servicing rights, at fair value	Residential mortgage servicing rights, at fair value	115,010		0		0		115,010		Residential mortgage servicing rights, at fair value	92,907		—		—		92,907
Derivatives	Derivatives									Derivatives
Interest rate lock commitments	Interest rate lock commitments	7,056		0		0		7,056		Interest rate lock commitments	28,144		—		—		28,144
Interest rate forward sales commitments	Interest rate forward sales commitments	105		0		105		0		Interest rate forward sales commitments	7		—		7		—
Interest rate swaps	Interest rate swaps	142,787		0		142,787		0		Interest rate swaps	313,090		—		313,090		—
Foreign currency derivative	Foreign currency derivative	626		0		626		0		Foreign currency derivative	1,269		—		1,269		—
Total assets measured at fair value	Total assets measured at fair value	$	3,673,862	$	64,243	$	3,487,553	$	122,066	Total assets measured at fair value	$	4,139,131	$	65,680	$	3,952,400	$	121,051
Financial liabilities:	Financial liabilities:									Financial liabilities:
Junior subordinated debentures, at fair value	Junior subordinated debentures, at fair value	$	274,812	$	0	$	0	$	274,812	Junior subordinated debentures, at fair value	$	255,217	$	—	$	—	$	255,217
Derivatives	Derivatives									Derivatives
Interest rate forward sales commitments	Interest rate forward sales commitments	1,351		0		1,351		0		Interest rate forward sales commitments	7,257		—		7,257		—
Interest rate swaps	Interest rate swaps	7,001		0		7,001		0		Interest rate swaps	370		—		370		—
Foreign currency derivative	Foreign currency derivative	456		0		456		0		Foreign currency derivative	1,155		—		1,155		—
Total liabilities measured at fair value	Total liabilities measured at fair value	$	283,620	$	0	$	8,808	$	274,812	Total liabilities measured at fair value	$	263,999	$	—	$	8,782	$	255,217

(1) Other investment securities includes securities held by Umpqua Investments as trading debt securities.

The following methods were used to estimate the fair value of each class of financial instrument that is carried at fair value in the tables above:

Securities— Fair values for investment securities are based on quoted market prices when available or through the use of alternative approaches, such as matrix or model pricing, or broker indicative bids, when market quotes are not readily accessible or available. Management periodically reviews the pricing information received from the third-party pricing service and compares it to a secondary pricing service, evaluating significant price variances between services to determine an appropriate estimate of fair value to report.

Loans Held for Sale— Fair value for residential mortgage loans originated as held for sale is determined based on quoted secondary market prices for similar loans, including the implicit fair value of embedded servicing rights.

Loans and leases— Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, including commercial, real estate and consumer loans. Each loan category is further segregated by fixed and adjustable rate loans. The fair value of loans is calculated by discounting expected cash flows at rates at which similar loans are currently being made. These amounts are discounted further by embedded probable losses expected to be realized in the portfolio. For loans originated as held for sale and transferred into loans held for investment, the fair value is determined based on quoted secondary market prices for similar loans. As of September 30, 2021, there were $353.9 million in mortgage loans recorded at fair value as they were previous transferred from held for sale to loans held for investment.

Table of Contents

Residential Mortgage Servicing Rights— The fair value of the MSRs is estimated using a discounted cash flow model. Assumptions used include market discount rates, anticipated prepayment speeds, delinquency and foreclosure rates, and ancillary fee income net of servicing costs. This model is periodically validated by an independent model validation group. The model assumptions and the MSR fair value estimates are also compared to observable trades of similar portfolios as well as to MSR broker valuations and industry surveys, as available. Management believes the significant inputs utilized are indicative of those that would be used by market participants.

~~Table of Contents~~

Junior Subordinated Debentures— The fair value of junior subordinated debentures is estimated using an income approach valuation technique. The significant ~~inputs~~unobservable input utilized in the estimation of fair value of these instruments ~~are~~is the credit risk adjusted ~~spread and three-month LIBOR.~~spread. The credit risk adjusted spread represents the nonperformance risk of the liability, contemplating the inherent risk of the obligation. The Company periodically utilizes a valuation firm to determine or validate the reasonableness of inputs and factors that are used to determine the fair value. The ending carrying (fair) value of the junior subordinated debentures measured at fair value represents the estimated amount that would be paid to transfer these liabilities in an orderly transaction amongst market participants. Due to credit concerns in the capital markets and inactivity in the trust preferred markets that have limited the observability of market spreads, the Company has classified this as a Level 3 fair value measurement.

Derivative Instruments— The fair value of the interest rate lock commitments and forward sales commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. The pull-through rate assumptions are considered Level 3 valuation inputs and are significant to the interest rate lock commitment valuation; as such, the interest rate lock commitment derivatives are classified as Level 3. The fair value of the interest rate swaps is determined using a discounted cash flow technique incorporating credit valuation adjustments to reflect nonperformance risk in the measurement of fair value. Although the Bank has determined that the majority of the inputs used to value its interest rate swap derivatives fall within Level 2 of the fair value hierarchy, the CVA associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, ~~2020,~~2021, the Bank has assessed the significance of the impact of the CVA on the overall valuation of its interest rate swap positions and has determined that the CVA are not significant to the overall valuation of its interest rate swap derivatives. As a result, the Bank has classified its interest rate swap derivative valuations in Level 2 of the fair value hierarchy.

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

The following table provides a description of the valuation technique, significant unobservable inputs, and qualitative information about the unobservable inputs for the Company's assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at September 30, ~~2020:~~2021:

Financial Instrument

Fair Value (in thousands)

Valuation Technique

Unobservable Input

Range of Inputs

Weighted Average

Residential mortgage servicing rights

~~93,248~~105,834

Discounted cash flow

Constant prepayment rate

~~9.68~~8.20% - ~~79.94%~~72.17%

~~18.10%~~16.21%

Discount rate

~~9.50~~9.50% - 12.50%

~~9.74%~~9.69%

Interest rate lock commitments

~~28,839~~8,258

Internal pricing model

Pull-through rate

~~49.79~~70.00% - 100.00%

~~84.78%~~88.03%

Junior subordinated debentures

~~247,045~~299,508

Discounted cash flow

Credit spread

~~4.36~~1.57% - ~~5.78%~~4.42%

~~4.94%~~3.46%

Generally, increases in the constant prepayment rate or the discount rate utilized in the fair value measurement of the residential mortgage servicing rights will result in a decrease in fair value. Conversely, decreases in the constant prepayment rate or the discount rate will result in an increase in fair value.

An increase in the pull-through rate utilized in the fair value measurement of the interest rate lock commitment derivative will result in an increase in the fair value measurement. Conversely, a decrease in the pull-through rate will result in a decrease in the fair value measurement.

3839

Table of Contents

Management believes that the credit risk adjusted spread utilized in the fair value measurement of the junior subordinated debentures carried at fair value is indicative of the nonperformance risk premium a willing market participant would require under current market conditions, which is an inactive market. Management attributes the change in fair value of the junior subordinated debentures during the period to market changes in the nonperformance expectations and pricing of this type of debt. The widening of the credit risk adjusted spread above the Company's contractual spreads has primarily contributed to the decrease in the estimated fair value. Future contractions in the instrument-specific credit risk adjusted spread relative to the spread currently utilized to measure the Company's junior subordinated debentures at fair value as of September 30, 2020, or the passage of time, will result in an increase in the estimated fair value. Generally, an increase in the credit spread will result in a decrease in the estimated fair value. Conversely, a decrease in the credit spread will result in an increase in the estimated fair value.

The following ~~tables provide~~table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~ 2020:


	Three Months Ended						Three Months Ended
	September 30, 2021						September 30, 2020
(in thousands)	Residential mortgage servicing rights		Interest rate lock commitments, net		Junior subordinated debentures, at fair value		Residential mortgage servicing rights		Interest rate lock commitments, net		Junior subordinated debentures, at fair value
Beginning balance	$	102,699	$	13,210	$	287,723	$	96,356	$	25,537	$	232,936

Change included in earnings	(5,315)		1,301		2,344		(17,122)		3,723		2,536
Change in fair values included in comprehensive income/loss	—		—		11,946		—		—		14,555
Purchases and issuances	8,450		16,007		—		14,014		55,854		—
Sales and settlements	—		(22,260)		(2,505)		—		(56,275)		(2,982)
Ending balance	$	105,834	$	8,258	$	299,508	$	93,248	$	28,839	$	247,045
Change in unrealized gains or losses for the period included in earnings for assets and liabilities held at end of period	$	(634)	$	8,258	$	2,344	$	(12,244)	$	28,839	$	2,536
Change in unrealized gains or losses for the period included in other comprehensive income for assets and liabilities held at end of period	$	—	$	—	$	11,946	$	—	$	—	$	14,555

	Nine Months Ended						Nine Months Ended
	September 30, 2021						September 30, 2020
(in thousands)	Residential mortgage servicing rights		Interest rate lock commitments, net		Junior subordinated debentures, at fair value		Residential mortgage servicing rights		Interest rate lock commitments, net		Junior subordinated debentures, at fair value
Beginning Balance	$	92,907	$	28,144	$	255,217	$	115,010	$	7,056	$	274,812

Change included in earnings	(17,918)		199		7,087		(59,246)		10,946		9,509
Change in fair values included in comprehensive income/loss	—		—		44,504		—		—		(26,857)
Purchases and issuances	30,845		67,730		—		37,484		130,862		—
Sales and settlements	—		(87,815)		(7,300)		—		(120,025)		(10,419)
Ending Balance	$	105,834	$	8,258	$	299,508	$	93,248	$	28,839	$	247,045
Change in unrealized gains or losses for the period included in earnings for assets held at end of period	$	(4,326)	$	8,258	$	7,087	$	(43,997)	$	28,839	$	9,509
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at end of period	$	—	$	—	$	44,504	$	—	$	—	$	(26,857)

Three Months Ended Three Months Ended
September 30, 2020 September 30, 2019
(in thousands) Residential mortgage servicing rights Interest rate lock commitments, net Junior subordinated debentures, at fair value Residential mortgage servicing rights Interest rate lock commitments, net Junior subordinated debentures, at fair value
Beginning balance $ 96,356 $ 25,537 $ 232,936 $ 139,780 $ 8,149 $ 277,028
Transfer out of level 3 0 0 0 (36,191) 0 0
Change included in earnings (17,122) 3,723 2,536 4,210 1,456 4,495
Change in fair values included in comprehensive income/loss 0 0 14,555 0 0 (8,450)
Purchases and issuances 14,014 55,854 0 7,393 9,027 0
Sales and settlements 0 (56,275) (2,982) 0 (9,562) (5,275)
Ending balance $ 93,248 $ 28,839 $ 247,045 $ 115,192 $ 9,070 $ 267,798
Change in unrealized gains or losses for the period included in earnings for assets held at end of period $ (12,244) $ 28,839 $ 2,536 $ 11,045 $ 9,070 $ 4,495
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at end of period $ 0 $ 0 $ 14,555 $ 0 $ 0 $ (8,450)

3940

Table of Contents

Nine Months Ended Nine Months Ended
September 30, 2020 September 30, 2019
Residential mortgage servicing rights Interest rate lock commitments, net Junior subordinated debentures, at fair value Residential mortgage servicing rights Interest rate lock commitments, net Junior subordinated debentures, at fair value
Beginning Balance $ 115,010 $ 7,056 $ 274,812 $ 169,025 $ 6,757 $ 300,870
Transfer out of level 3 0 0 0 (36,191) 0 0
Change included in earnings (59,246) 10,946 9,509 (34,414) 4,455 13,952
Change in fair values included in comprehensive income/loss 0 0 (26,857) 0 0 (32,254)
Purchases and issuances 37,484 130,862 0 16,772 21,318 0
Sales and settlements 0 (120,025) (10,419) 0 (23,460) (14,770)
Ending Balance $ 93,248 $ 28,839 $ 247,045 $ 115,192 $ 9,070 $ 267,798
Change in unrealized gains or losses for the period included in earnings for assets held at end of period $ (43,997) $ 28,839 $ 9,509 $ (14,243) $ 9,070 $ 13,952
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at end of period $ 0 $ 0 $ (26,857) $ 0 $ 0 $ (32,254)

Changes in residential mortgage servicing rights carried at fair value are recorded in residential mortgage banking revenue within non-interest income. Gains (losses) on interest rate lock commitments carried at fair value are recorded in residential mortgage banking revenue within non-interest income. The contractual interest expense on the junior subordinated debentures is recorded on an accrual basis as interest on junior subordinated debentures within interest expense. Settlements related to the junior subordinated debentures represent the payment of accrued interest that is embedded in the fair value of these liabilities.

The change in fair value of junior subordinated debentures is attributable to the change in the instrument specific credit risk; accordingly, the unrealized losses on fair value of junior subordinated debentures of ~~$14.6~~$11.9 million and ~~unrealized gains of $26.9~~$44.5 million ~~respectively,~~ for the three and nine months ended September 30, ~~2020,~~2021, are recorded net of tax as an other comprehensive loss of $8.9 million and $33.1 million, respectively. Comparatively, unrealized losses of $14.6 million and unrealized gains of $26.9 million were recorded net of tax as an other comprehensive loss of $10.8 million and other comprehensive income of $20.0 million, ~~respectively. Comparatively, unrealized gains of $8.5 million and $32.3 million,~~ respectively, ~~were recorded net of tax as an other comprehensive income of $6.3 million and $24.0 million~~ for the three and nine months ended September 30, 2019. The gain recorded for the nine months ended September 30, 2020 is due mostly to an overall increase in the discount rates due to an increase in the credit spread, in addition to the implied forward curve shifting lower. The loss recorded for the three months ended September 30, 2020 was due primarily to a decrease in the credit spread which resulted in a lower discount rate and an increase in the forward curve partially offset by an increase in the spot curve.2020.

Fair Value of Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

From time to time, certain assets are measured at fair value on a nonrecurring basis. These adjustments to fair value generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment, typically on collateral dependent loans.

~~Table of Contents~~

~~Fair Value of Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis~~

The following tables present information about the Company's assets and liabilities measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded during the reporting period. The amounts disclosed below represent the fair values at the time the nonrecurring fair value measurements were made, and not necessarily the fair value as of the dates reported upon.


		September 30, 2020									September 30, 2021
(in thousands)	(in thousands)	Total		Level 1		Level 2		Level 3		(in thousands)	Total		Level 1		Level 2		Level 3
Loans and leases	Loans and leases	$	8,231	$	0	$	0	$	8,231	Loans and leases	$	5,835	$	—	$	—	$	5,835
Goodwill (Wholesale Bank and Retail Bank)		0		0		0		0
Other real estate owned		2,046		0		0		2,046

Total assets measured at fair value on a nonrecurring basis	Total assets measured at fair value on a nonrecurring basis	$	10,277	$	0	$	0	$	10,277	Total assets measured at fair value on a nonrecurring basis	$	5,835	$	—	$	—	$	5,835


		December 31, 2019									December 31, 2020
(in thousands)	(in thousands)	Total		Level 1		Level 2		Level 3		(in thousands)	Total		Level 1		Level 2		Level 3

Loans and leases	Loans and leases	$	18,134	$	0	$	0	$	18,134	Loans and leases	$	8,231	$	—	$	—	$	8,231
Other real estate owned		2,079		0		0		2,079

Total assets measured at fair value on a nonrecurring basis	Total assets measured at fair value on a nonrecurring basis	$	20,213	$	0	$	0	$	20,213	Total assets measured at fair value on a nonrecurring basis	$	8,231	$	—	$	—	$	8,231

The following table presents the losses resulting from nonrecurring fair value adjustments for the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(in thousands)	(in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020

Loans and leases	Loans and leases	$	14,797	$	20,435	$	53,336	$	51,212	Loans and leases	$	8,470	$	14,797	$	43,480	$	53,336
Goodwill impairment (Wholesale Bank and Retail Bank)		0		0		1,784,936		0
Other real estate owned		352		279		499		3,013
Goodwill impairment										Goodwill impairment	—		—		—		1,784,936
Total loss from nonrecurring measurements	Total loss from nonrecurring measurements	$	15,149	$	20,714	$	1,838,771	$	54,225	Total loss from nonrecurring measurements	$	8,470	$	14,797	$	43,480	$	1,838,272

Goodwill was evaluated for impairment as of March 31, 2020, resulting in an impairment charge of $1.8 billion for the ~~Retail Bank and Wholesale Bank reporting units. Refer to~~ ~~Note 11 - Goodwill, for discussion of the Company's goodwill impairment analysis.~~nine months ended September 30, 2020.

The following provides a description of the valuation technique and inputs for the Company's assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis, excluding goodwill. Unobservable inputs and qualitative information about the unobservable inputs are not presented as the fair value is determined by third-party information for loans and ~~leases and other real estate owned.~~leases.

Table of Contents

The loans and leases amounts above represent collateral dependent loans and leases that have been adjusted to fair value. When a loan or non-homogeneous lease is identified as collateral dependent, the Bank measures the impairment using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan or lease, the fair value of collateral is generally estimated by obtaining external appraisals, but in some cases, the value of the collateral may be estimated as having little to no value. When a homogeneous lease or equipment finance agreement becomes 181 days past due, it is determined that the collateral has little to no value. If it is determined that the value of the collateral dependent loan or lease is less than its recorded investment, the Bank recognizes this impairment and adjusts the carrying value of the loan or lease to fair value, less costs to sell, through the allowance for credit losses. The loss represents charge-offs on collateral dependent loans and leases for fair value adjustments based on the fair value of collateral.

~~Table of Contents~~

The other real estate owned amount above represents impaired real estate that has been adjusted to fair value. Other real estate owned represents real estate which the Bank has taken control of in partial or full satisfaction of loans. At the time of foreclosure, other real estate owned is recorded at the lower of the carrying amount of the loan or fair value less costs to sell, which becomes the property's new basis. Any write-downs based on the asset's fair value at the date of acquisition are charged to the allowance for credit losses. After foreclosure, management periodically performs valuations such that the real estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell. Fair value adjustments on other real estate owned are recognized within net loss on real estate owned. The loss represents impairments on other real estate owned for fair value adjustments based on the fair value of the real estate.

Fair Value Option

The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale and loans held for investment accounted for under the fair value option as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


		September 30, 2020						December 31, 2019							September 30, 2021						December 31, 2020
(in thousands)	(in thousands)	Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregate Unpaid Principal Balance		Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregate Unpaid Principal Balance		(in thousands)	Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregate Unpaid Principal Balance		Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregate Unpaid Principal Balance
Loans held for sale	Loans held for sale	$	677,773	$	644,507	$	33,266	$	513,431	$	496,683	$	16,748	Loans held for sale	$	352,466	$	340,670	$	11,796	$	688,079	$	654,555	$	33,524
Loans														Loans	$	353,912	$	340,664	$	13,248	$	—	$	—	$	—

Residential mortgage loans held for sale accounted for under the fair value option are measured initially at fair value with subsequent changes in fair value recognized in earnings. Gains and losses from such changes in fair value are reported as a component of residential mortgage banking revenue. For the three and nine months ended September 30, 2021, the Company recorded net decreases in fair value of $4.5 million and $13.5 million, respectively. For the three and nine months ended September 30, 2020, the Company recorded a net increase in fair value of $2.2 million and $16.5 million, respectively.

Certain residential mortgage loans were initially originated for sale and initially measured at fair value; after origination, the loans were transferred to loans held for investment. Gains and losses from changes in fair value for these loans are reported in earnings as a component of other income. For the three and nine months ended September 30, ~~2019,~~2021, the Company recorded a net ~~decrease~~increase in fair value of ~~$1.9~~$3.4 million and ~~an increase of $5.8~~$5.7 million, respectively.

The Company selected the fair value measurement option for certain junior subordinated debentures. The remaining junior subordinated debentures were acquired through previous business combinations and were measured at fair value at the time of acquisition and subsequently measured at amortized cost.

Accounting for the selected junior subordinated debentures at fair value enables the Company to more closely align financial performance with the economic value of those liabilities. Additionally, it improves the ability to manage the market and interest rate risks associated with the junior subordinated debentures. The junior subordinated debentures measured at fair value and amortized cost are presented as separate line items on the balance sheet. The ending carrying (fair) value of the junior subordinated debentures measured at fair value represents the estimated amount that would be paid to transfer these liabilities in an orderly transaction amongst market participants under current market conditions as of the measurement date.

Due to inactivity in the junior subordinated debenture market and the lack of observable quotes of the Company's, or similar, junior subordinated debenture liabilities or the related trust preferred securities when traded as assets, the Company utilizes an income approach valuation technique to determine the fair value of these liabilities using estimation of market discount rate assumptions. The Company monitors activity in the trust preferred and related markets, to the extent available, evaluates changes related to the current and anticipated future interest rate environment, and considers entity-specific creditworthiness, to validate the reasonableness of the credit risk adjusted spread and effective yield utilized in the discounted cash flow model. The Company also considers changes in the interest rate environment in the valuation, specifically the absolute level and the shape of the slope of the forward swap curve.

Note 11 ~~– Goodwill~~

At September 30, 2020, goodwill totaled $2.7 million, after a goodwill impairment of $1.8 billion was recorded as of March 31, 2020. Goodwill was $1.8 billion at December 31, 2019. Goodwill is required to be allocated to reporting units, which the Company has determined to be the same as its operating segments.

~~Table of Contents~~

~~The following table summarizes the change in the Company's goodwill for the nine months ended September 30, 2020:~~

Goodwill
(in thousands) Gross Accumulated Impairment Total
Balance, December 31, 2019 $ 1,900,727 $ (113,076) $ 1,787,651
Goodwill impairment — (1,784,936) (1,784,936)
Balance, September 30, 2020 $ 1,900,727 $ (1,898,012) $ 2,715

~~As of September 30, 2020 and December 31, 2019, goodwill was allocated to the reporting units as follows:~~

Goodwill
(in thousands) Wholesale Bank Wealth Management Retail Bank Total
Allocated goodwill, December 31, 2019 $ 1,033,744 $ 2,715 $ 751,192 $ 1,787,651
Goodwill impairment (1,033,744) 0 (751,192) (1,784,936)
Allocated goodwill, September 30, 2020 $ 0 $ 2,715 $ 0 $ 2,715

The Company updated its goodwill assessment for the Wholesale Bank and Retail Bank reporting units as of March 31, 2020, due to events and circumstances indicating potential impairment. Impairment of goodwill is the condition that exists when the carrying amount of a reporting unit that includes goodwill exceeds its fair value. A goodwill impairment is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.

The Company assessed qualitative factors that indicated that it was more likely than not that goodwill was impaired as of March 31, 2020. Based on that assessment, the Company determined that for the Wholesale Bank and Retail Bank reporting units, the qualitative analysis determined that there were negative indicators that would require a quantitative assessment of goodwill due to the decline in the current economic environment, specifically interest rates and the Company's stock price, as well as decreasing cash flow projections for these reporting units based on the low interest rate environment and potentially higher credit losses.

The Company performed a quantitative analysis of the Wholesale Bank and Retail Bank reporting units, by comparing the fair value of these reporting units with their carrying amount. The Company estimated the fair value of its Wholesale Bank and Retail Bank reporting units using an income approach to estimate the fair value of both reporting units. The income approach estimates the fair value of the reporting units by discounting management's projections of the reporting units' cash flows, including a terminal value to estimate the fair value of cash flows beyond the final year of projected results, discounted using an estimated cost of capital discount rate. The Company also considered the market and cost approaches when determining the fair value of the reporting units.

The projected cash flows used to estimate fair value of the reporting units was lower than previous projections due to declining interest rate forecasts for a prolonged low-interest rate environment, due to the significant impact of the Federal Reserve's rate cuts and the impact of the COVID-19 pandemic on the economy. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units requires management to make assumptions and estimates regarding the Company's future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax rates, discount rates, growth rates, and other market factors.

Upon completing the quantitative impairment analysis as of March 31, 2020, the Company recorded a goodwill impairment of $1.8 billion, which represented the entire amount of goodwill allocated to the Wholesale Bank and Retail Bank reporting units. The remaining goodwill of $2.7 million after the impairment relates to the Wealth Management reporting unit. As of September 30, 2020, the Company updated its goodwill impairment analysis for the Wealth Management reporting unit by assessing qualitative factors to determine whether the existence of events and circumstances indicated that it is more likely than not that goodwill is impaired. Based upon that assessment, the Company determined that there were no additional factors indicating impairment and no further testing was determined to be necessary as of September 30, 2020.

~~Table of Contents~~

~~Note 12~~ - Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, as well as in the majority of ~~states and in Canada.~~states. As of September 30, ~~2020,~~2021, the Company has a net deferred tax ~~liability~~asset of ~~$13.2~~$8.4 million, which includes ~~$2.0~~$1.3 million of state net operating loss ~~("NOL")~~ carry-forwards, expiring in the tax years of 2029-2031. The Company believes that it is more likely than not that the benefit from only certain state NOL carry-forwards will not be realized and therefore has provided a valuation allowance of $1.1 million against the deferred tax assets relating to these NOL carry-forwards. The Company had gross unrecognized tax benefits of ~~$4.3~~$3.4 million as of September 30, ~~2020.~~2021. If recognized, the unrecognized tax benefit would reduce the ~~2020~~2021 annual effective tax rate by ~~0.27%~~0.56%.

The Company's consolidated effective tax rate as a percentage of pre-tax income (loss) for the ~~three and~~ nine months ended September 30, ~~2020~~2021 was ~~21.3% and (4.4)%~~24.7%, ~~respectively,~~ as compared to ~~23.6% and 24.5%~~(4.4)% for the ~~three and~~ nine months ended September 30, ~~2019.~~2020. The effective tax rate ~~decreased~~increased from the prior year primarily due to the impairment of non-deductible goodwill during the nine months ended September 30, 2020. Additionally, the effective tax rates differed from the statutory rate principally because of state taxes, non-taxable income arising from ~~bank owned~~bank-owned life insurance, income on tax-exempt investment securities ~~non-deductible FDIC premiums~~ and tax credits arising from low-income housing investments.

4442

Table of Contents

Note 12– Subsequent Event

On October 12, 2021, Umpqua and Columbia announced that their boards of directors unanimously approved a Merger Agreement under which the two companies will combine in an all-stock transaction. Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Umpqua, with Umpqua surviving the Merger, and immediately following the Merger and as a part of a single integrated transaction, Umpqua will merge with and into Columbia, with Columbia continuing as the surviving entity. Umpqua shareholders will receive 0.5958 of a share of Columbia stock for each Umpqua share they own. Upon completion of the transaction, Umpqua shareholders will own approximately 62% and Columbia shareholders will own approximately 38% of the combined company.

The completion of the Merger is subject to customary conditions, including (1) approval by Umpqua's and Columbia's shareholders, (2) approval by Columbia's shareholders of an amendment to Columbia's articles of incorporation to increase the number of authorized shares of Columbia's common stock, (3) authorization for listing on the NASDAQ of the shares of Columbia's common stock to be issued in the Merger, (4) the receipt of required regulatory approvals for the Merger from the Federal Reserve Board, Federal Deposit Insurance Corporation and Oregon and Washington state bank regulators, in each case without the imposition of any materially burdensome regulatory condition, (5) effectiveness of the registration statement on Form S-4 for Columbia's common stock to be issued in the Merger, and (6) the absence of any order, injunction or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal. Each party's obligation to complete the Merger is also subject to certain additional customary conditions. The Merger Agreement provides certain termination rights for both Umpqua and Columbia and further provides that, upon termination of the Merger Agreement under certain circumstances, Umpqua or Columbia, as applicable, will be obligated to pay the other party a termination fee of $145.0 million.

At September 30, 2021, Columbia reported $18.6 billion in assets, including $9.4 billion in net loans and $4.8 billion in available for sale debt securities, $16.0 billion in deposits, and $2.3 billion in shareholders' equity.

The transaction is expected to close in mid-2022. A summary of the terms of the Merger Agreement and other related agreements are summarized in, and the Merger Agreement has been filed as an exhibit to, the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on October 12, 2021.

Table of Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Report contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These statements may include statements that expressly or implicitly predict future results, performance or events. Statements other than statements of historical fact are forward-looking statements. You can find many of these statements by looking for words such as "anticipates," "expects," "believes," "estimates," "intends" and "forecast," and words or phrases of similar meaning.

We make forward-looking statements about the proposed transaction between us and Columbia Banking System, Inc.; the projected ~~impact~~impacts on our business operations of the COVID-19 pandemic; Next Gen 2.0 initiatives including store consolidations, new products and services, technology initiatives, operational improvements, and facilities rationalizations; ~~the sale of substantially all of the assets of Umpqua Investments;~~ LIBOR; derivatives and hedging; the results and performance of models and economic forecasts used in our calculation of the ACL; projected sources of funds and the Company's liquidity position; our securities portfolio; loan sales; adequacy of our ~~allowance for credit losses,~~ACL, including the reserve for unfunded commitments; provision for credit losses; non-performing loans and future losses; performance of troubled debt restructurings; our commercial real estate portfolio, its collectability and subsequent charge-offs; resolution of non-accrual loans; PPP forgiveness and SBA fees; mortgage volumes and the impact of rate changes; the economic environment; litigation; dividends; junior subordinated debentures; fair values of certain assets and liabilities, including mortgage servicing rights values and sensitivity analyses; tax rates; deposit pricing; and the effect of accounting pronouncements and changes in accounting methodology. Risks that could cause results to differ from forward-looking statements we make are set forth in our filings with the SEC and include, without limitation: our ability to complete the Merger with Columbia and realize the anticipated benefits of the merger; current and future economic and market conditions, including the effects of declines in housing and commercial real estate prices, high unemployment rates, and any slowdown in economic growth particularly in the western United States; the length and immediate and long-term effects of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and demand for our products; economic forecast variables that are either materially worse or better than end of quarter projections and deterioration in the economy that exceeds current consensus estimates; our ability to effectively manage problem credits; our ability to successfully implement technology, efficiency and operational excellence initiatives; our ability to successfully develop and market new products and technology; changes in laws or regulations; ~~our ability to meet the closing conditions to complete the sale of Umpqua Investments' assets; interest in our stores from potential purchasers;~~ and our ability to successfully negotiate with landlords or reconfigure facilities. We also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, capital requirements, applicable law and regulations (including federal securities laws and state and federal banking laws and regulations), and other factors deemed relevant by the Company's Board of Directors, and ~~will~~may be subject to regulatory approval or conditions.

Forward-looking statements involve substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There are many factors that could cause actual results to differ materially from those contemplated by these forward-looking statements. The COVID-19 pandemic, including the governmental reaction to COVID-19 and the economic impacts, may materially impact our business, liquidity and financial position, results of operations, and stock price, as more fully described in Part II Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q. Risks and uncertainties include those set forth in our filings with the Securities and Exchange Commission ~~(the "SEC")~~ and the following factors that might cause actual results to differ materially from those presented:

•the ability to complete, or any delays in completing, the proposed transaction between us and Columbia;

•the significant risks and uncertainties for our business, results of operations and financial condition, as well as our regulatory capital and liquidity ratios and other regulatory requirements, caused by the COVID-19 pandemic, which will depend on several factors, including the scope and duration of the pandemic, its influence on the economy and financial markets, the continued effectiveness of our work from home arrangements and staffing levels in operational facilities, challenges associated with our return to office plans such as maintaining a safe office environment and integrating at-home and in-office staff, the impact of market participants on which we rely and actions taken by governmental authorities and other third parties in response to the pandemic and the impact of lower equity market valuations on our service and management fee revenue;

•~~continued~~ deterioration in economic conditions that could result in increased loan and lease losses, especially those risks associated with concentrations in real estate related loans;

•our ability to successfully, including on time and on budget, implement and sustain information technology product and system enhancements and operational initiatives;

•our ability to attract new deposits and loans and leases;

•our ability to retain deposits, especially during store consolidations;

Table of Contents

•demand for financial services in our market areas;

~~Table of Contents~~

•competitive market pricing factors;

•our ability to effectively develop and implement new technology;

•continued market interest rate volatility;

•prolonged low interest rate environment;

•continued compression of our net interest margin;

•stability and cost of funding sources;

•continued availability of borrowings and other funding sources such as brokered and public deposits;

•changes in legal or regulatory requirements or the results of regulatory examinations that could increase expenses or restrict growth;

•our ability to recruit and retain key management and staff;

•availability of, and competition for, acquisition opportunities;

•our ability to raise capital or incur debt on reasonable terms;

•regulatory limits on the Bank's ability to pay dividends to the Company;

•financial services reform and the impact of legislation and implementing regulations on our business operations, including our compliance costs, interest expense, and revenue;

•a breach or failure of our operational or security systems, or those of our third-party vendors, including as a result of cyber-attacks; and

•competition, including from financial technology companies.

There are many factors that could cause actual results to differ materially from those contemplated by these forward-looking statements. Forward-looking statements are made as of the date of this Form 10-Q. We do not intend to update these forward-looking statements. Readers should consider any forward-looking statements in light of this explanation, and we caution readers about relying on forward-looking statements.

General

~~Umpqua Holdings Corporation,~~The Company is an Oregon corporation ~~is a~~and the financial holding company of the Bank. The Bank is the largest bank with ~~two principal operating subsidiaries, Umpqua Bank~~headquarters in the Pacific Northwest and ~~Umpqua Investments, Inc. The Bank's wholly-owned subsidiary, Financial Pacific Leasing, Inc., is a commercial equipment leasing company.~~

~~With headquarters located in Roseburg, Oregon, Umpqua Bank~~ is considered one of the most innovative ~~community~~ banks in the United States, recognized ~~nationally and internationally~~ for its ~~unique~~ company culture and customer experience ~~strategy, which we believe differentiates the Company from its competition.~~strategy. The Bank provides a ~~wide~~broad range of banking, ~~wealth management,~~private banking, mortgage and other financial services to corporate, institutional, and individual customers.

~~Umpqua Investments~~ FinPac, a commercial equipment leasing company, is a ~~registered broker-dealer and registered investment advisor with offices in Oregon, Washington, and California, and also offers products and services through~~Bank subsidiary.

On October 12, 2021, Umpqua ~~Bank stores. Umpqua Investments offers~~announced entering into a full range of investment products and services including: stocks, fixed income securities (municipal, corporate, and government bonds, CDs, and money market instruments), mutual funds, annuities, options, retirement planning, advisory account services, goals-based planning and insurance. In September 2020, the Company entered into andefinitive agreement to ~~sell substantially all of~~join together with Columbia. Once the ~~assets of Umpqua Investments~~transaction is completed, the combined organization is expected to ~~Steward Partners.~~be a leading West Coast franchise with more than $50 billion in assets. The ~~acquisition~~transaction is expected to close in ~~the first quarter~~mid-2022, subject to satisfaction of ~~2021.~~customary closing conditions, including receipt of regulatory approvals and approvals from each company's shareholders.

Along with its subsidiaries, the Company is subject to the regulations of state and federal agencies and undergoes regular examinations by these regulatory agencies.

In November 2020, the SEC issued Final Rule 33-10890, Management’s Discussion and Analysis, Selected Financial Data and Supplementary Financial Information, which modernizes and simplifies certain disclosure requirements of Regulation S-K. One update to Item 303 of Regulation S-K allows registrants to compare the results of the most recently completed quarter to the results of either the immediately preceding quarter or the corresponding quarter of the preceding year. We have elected to early adopt this rule change, as management believes that comparing current quarter results to those of the immediately preceding quarter is more useful in identifying current business trends and provides a more meaningful comparison. Accordingly, we have compared the results for the three months ended September 30, 2021 and June 30, 2021, where applicable, throughout this Management's Discussion and Analysis.

4645

Table of Contents

Executive Overview

~~Recent Developments – COVID-19~~

We expect that the COVID-19 pandemic and the related governmental reaction will continue to negatively impact the economy and our business including our results of operations and stock price among other negative impacts. The government's reactions to the COVID-19 pandemic has also had a positive impact on our business, including our involvement in the PPP, as well as increased mortgage loan production fueled by the decline in interest rates, although these benefits may be short-term in nature. The risks to our business are more fully described in Part II, item 1A "Risk Factors" of this Quarterly Report on Form 10-Q. We are closely monitoring the impact of COVID-19 on all aspects of our business.

At this time, we are unable to predict the extent and magnitude of the negative impact on our business of the COVID-19 pandemic and related governmental reaction due to numerous uncertainties. To limit the impact of COVID-19 on our business operations, customers and associates, we have modified our operations to comply with multiple state-level proclamations and Centers for Disease Control and Prevention ("CDC") guidance and best practices by restricting travel, maintaining remote work programs for associates, restricting lobby access to stores and having customers bank by appointment, online, or via our app, increasing facilities cleaning scope and frequency, and deploying resources for new programs such as the Payroll Protection Program ("PPP"). We have also addressed other customer needs during the pandemic by continuing to offer our Umpqua Go-To® application which offers customers and associates a safe and effective way to conduct banking. As of September 30, 2020, we funded approximately 16,900 PPP loans, totaling $2.0 billion, to help businesses maintain their workforce and cover other working capital needs during the COVID-19 pandemic.

We have increased our community support by allocating $3.0 million in grants and investments to organizations providing COVID-19 community relief and small business microloans, activating an associate 3:1 giving match to donations, and initiating virtual volunteerism opportunities. We enhanced associate benefits by introducing supplemental front line associate pay, providing a pandemic pay bank for associates needing additional paid time off due to COVID-19 impacts, and implementing flexible work rotations and remote work for higher-risk associates.

While we do not know and cannot quantify all of the specific impacts, the extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic; actions taken by governmental authorities and other third parties in response to the pandemic; the effect on our customers, counterparties, employees and third party service providers; and the effect on the economy and markets.

Due to the COVID-19 pandemic, the Umpqua Go-To® application's message volumes have increased as the application provides customers and bankers with a socially-distant way to conduct transactions and get answers to critical questions. During this difficult time, we continue to focus on operational excellence and on the well-being of our customers, associates, and communities.

~~Social Justice Initiatives~~

As part of our community support, Umpqua prioritized strategic investments and resource allocation to support minority-owned businesses, which are most vulnerable during the pandemic. This support includes $750,000 in community development and Equity Equivalent ("EQ2") investments to provide support for women and minority owned businesses. Umpqua bankers are providing expertise through virtual volunteering programs and small business banker's hours. We are also providing free use of space at local stores in numerous localities to support their small businesses.

~~Wildfire Support~~

Due to the recent wildfires impacting the West Coast, Umpqua has committed $750,000 in relief across our footprint, including $100,000 in grants for response and recovery; $350,000 in EQ2 to support impacted small businesses in Oregon and $300,000 in EQ2 to support small businesses in California and Washington. We also activated our 3:1 match program to include wildfire relief and increased the eligible associate match. In addition, we support active associate volunteering to organize supply drives, sharing critical information, as well as donating money, time, talent, space, and resources as Umpqua associates are active in the many communities impacted by the wildfires.

~~Table of Contents~~

The following is a discussion of our results for the three and nine months ended September 30, ~~2020~~2021, as compared to the applicable prior periods.

Financial Performance

•Net income per diluted common share was ~~$0.57 and~~$0.49 for the three months ended September 30, 2021, as compared to $0.53 for the three months ended June 30, 2021. Net income per diluted common share was $1.51 for the nine months ended September 30, 2021, as compared to a net loss per diluted common share ~~was $7.60~~of ($7.60) for the ~~three and~~ nine months ended September 30, ~~2020, respectively, as compared to net income per diluted common share of $0.38 and $1.23~~2020. The decrease for the three ~~and nine~~ months ended September 30, ~~2019.~~2021, as compared to the prior quarter, was primarily driven by a decline in non-interest income due to the decrease in residential mortgage banking revenue, as well as the decrease in recapture of the provision for credit losses in the current quarter. The decrease was offset slightly by a decrease in non-interest expense and an increase in net-interest income. The increase in net income for the ~~three~~nine months ended September 30, ~~2020,~~2021 as compared to the same period in the prior year, is due ~~primarily~~mainly to ~~an increase~~the goodwill impairment taken in ~~residential mortgage banking income. The net loss~~2020. In addition, for the nine months ended September 30, ~~2020, is due to the goodwill impairment, increased~~2021, we recorded a recapture of provision for credit losses ~~as well as interest margin compression.~~

•~~As of March 31, 2020,~~compared to provision expense for the ~~Company recorded a goodwill impairment of $1.8 billion. An interim impairment analysis was completed due to the decline~~same period in the economic environment, specifically the impact of significant decreases in interest rates, declines in the Company's stock price, as well as potentially higher credit losses. The non-cash goodwill impairment recorded does not impact tangible equity or our regulatory capital ratios. There was no further goodwill impairment indicated as of September 30, 2020.prior year.

•Net interest margin, on a tax equivalent basis, was ~~3.08% and 3.19%~~3.21% for the three ~~and~~months ended September 30, 2021, as compared to 3.20% for the three months ended June 30, 2021. Net interest margin, on a tax equivalent basis, was 3.20% for the nine months ended September 30, ~~2020, respectively,~~2021, as compared to ~~3.63% and 3.78%~~3.19% for the ~~three and~~ nine months ended September 30, ~~2019.~~2020. The increase for the three months ended September 30, 2021 as compared to the prior quarter was driven by an increase in interest income as a result of higher non-PPP average loans and leases, as well as a decrease in interest expense due to the decline in average rates on deposits, specifically time deposits. The increase in net interest margin for the ~~three and~~ nine months ended September 30, ~~2020,~~2021, compared to the same ~~periods~~period in the prior year, was driven by lower ~~yields~~costs on ~~interest-earning assets offset by higher volume,~~interest-bearing liabilities due to the ~~interest rate cuts that the Federal Reserve instituted as a response to the COVID-19 pandemic.~~decline in deposit costs. The decrease was partially offset by a ~~reduction~~decrease in ~~the cost of interest-bearing liabilities from the Company's management of the cost of our funding sources.~~yields on interest-earning assets.

•Residential mortgage banking revenue was ~~$90.4~~$34.2 million ~~and~~for the three months ended September 30, 2021, as compared to $44.4 million for the three months ended June 30, 2021. Residential mortgage banking revenue was $143.6 million for the nine months ended September 30, 2021, as compared to $191.8 million for the nine months ended September 30, 2020. The decrease for the three and nine months ended September 30, ~~2020, respectively,~~2021, as compared to ~~$47.0 million~~the prior periods, was driven by a decline in for-sale originations and ~~$67.8 million~~in the gain on sale margin due to normalizing margins, caused by rising rates which has resulted in a slow-down in refinancing demand. The decrease for the ~~three and~~ nine months ended September 30, 2019. The increase in residential mortgage banking revenue for the three and nine months ended September 30, 2020 was primarily driven by an increase in originations in the current year due to elevated refinance demand due to lower interest rates. This resulted in increases in the income from the origination and sale of residential mortgages of $67.3 million and $155.9 million, for the three and nine months ended September 30, 2020, respectively,2021, as compared to the ~~same periods in the prior year. This~~previous period, was slightly offset by ~~higher origination expense and by losses~~a lower loss on ~~the~~ fair value ofon the MSR asset ~~due to increases in~~during the ~~prepayment speeds.~~period.

•For-sale mortgage closed loan volume ~~increased~~decreased by ~~128% and 141%~~21% for the three ~~and~~months ended September 30, 2021, as compared to the three months ended June 30, 2021. For-sale mortgage closed loan volume also decreased 21% for the nine months ended September 30, ~~2020, respectively,~~2021, as compared to the ~~same periods in the prior year.~~nine months ended September 30, 2020. In addition, the gain on sale margin ~~increased~~decreased to ~~5.13% and 4.59%,~~3.07% for the three ~~and~~months ended September 30, 2021, as compared to 3.30% for the three months ended June 30, 2021. For the nine months ended September 30, ~~2020, respectively, as compared to 3.72% and 3.40% in the same periods of the prior year. The increase in~~2021, the gain on sale margin ~~is due~~decreased to ~~constrained industry capacity.~~3.46%, as compared to 4.59% for the nine months ended September 30, 2020.

•Total ~~gross~~ loans and leases were ~~$22.4~~$22.0 billion as of September 30, ~~2020,~~2021, an increase of ~~$1.2 billion,~~$190.6 million, as compared to December 31, ~~2019.~~2020. The increase in total loans is primarily due to an increase in the ~~production~~commercial real estate balances of ~~approximately 16,900~~$554.9 million, primarily within multifamily lending and an increase in residential real estate balances of $456.7 million, offset by a decrease of $796.8 million in commercial balances. The decrease in commercial balances mainly relates to the decrease in PPP loans ~~totaling $2.0~~of $1.0 billion ~~net~~during the period, as the majority of ~~deferred fees and costs. Excluding PPP loan production, loan balances declined due to reduced origination activity in~~these loans are forgiven by the ~~current economic environment.~~SBA, as expected.

•Total deposits were ~~$24.7~~$26.9 billion as of September 30, ~~2020,~~2021, an increase of ~~$2.2~~$2.3 billion, compared to December 31, ~~2019.~~2020. This increase was due to growth in ~~non-interest bearing~~ demand, money market, and savings deposits, which is attributable to ancustomer saving habits in the current economic environment, resulting in higher average balances per deposit account. The increase in ~~commercial customers' non-interest bearing accounts to increase their liquidity position, and personal customers decreasing discretionary spending. This increase~~deposits is partially offset by ~~decreases~~a decline in higher cost time deposits.

•Total consolidated assets were $29.4 billion as of September 30, 2020, compared to $28.8 billion at December 31, 2019. The increase was mainly due to the increase in loans due to PPP loan production and an increase in on-balance sheet liquidity, offset by the goodwill impairment recorded in the first quarter of 2020 and an increase in the allowance for credit losses.

4846

Table of Contents

•~~The Company participates in the PPP, offering loans to both customers and non-customers throughout our footprint. As~~Total consolidated assets were $30.9 billion as of September 30, ~~2020, the Company had processed approximately 16,900 PPP loans~~2021, compared to $29.2 billion at December 31, 2020. The increase was mainly due to an increase in on-balance sheet liquidity, as well as an increase in available for sale securities and funded $2.0 billion in PPP loans, with an average customer loan balance of $122,000. The PPP loans will increase loan balances temporarily as PPP specific loan balances will decline as customers complete the applicable loan forgiveness process through the Company and the SBA.loans.

Credit Quality

•Non-performing assets ~~increased~~decreased to ~~$79.1~~$53.5 million, or ~~0.27%~~0.17% of total assets, as of September 30, ~~2020,~~2021, as compared to ~~$67.5~~$69.2 million, or ~~0.23%~~0.24% of total assets, as of December 31, ~~2019.~~2020. Non-performing loans and leases were ~~$76.7~~$51.6 million, or ~~0.34%~~0.24% of total loans and leases, as of September 30, ~~2020,~~2021, as compared to ~~$64.2~~$67.4 million, or ~~0.30%~~0.31% of total loans and leases, as of December 31, ~~2019.~~2020.

•The allowance for credit losses on loans and leases was ~~$345.0~~$257.6 million, as of September 30, ~~2020, an increase~~2021, a decrease of ~~$187.4~~$70.8 million, as compared to December 31, ~~2019.~~2020. The reserve for unfunded commitments was ~~$24.3~~$11.8 million, as of September 30, ~~2020, an increase~~2021, a decrease of ~~$19.2~~$8.5 million, as compared to December 31, ~~2019.~~2020. The ~~significant increases~~decrease in the allowances for credit losses are due to the economic forecasts anticipating a continued economic downturn as a result of the COVID-19 pandemic, as well as the implementation of CECL. The initial adjustment to the allowance for credit losses ~~which includes~~is due to the ~~allowance for~~improvement in economic forecasts used in the credit ~~losses on loans and leases and the reserve for unfunded commitments, with the adoption of CECL as of January 1, 2020, was $53.2 million.~~models.

•The Company had a recapture of ~~credit losses was $338,000 for~~ the ~~three months ended September 30, 2020. The~~ provision for credit losses ~~was $204.8 million for the nine months ended September 30, 2020. This was compared to a provision for credit losses (including the provision related to the RUC)~~ of ~~$23.5~~$18.9 million and ~~$56.8~~$41.9 million ~~respectively,~~ for the three and nine months ended September 30, ~~2019. The decrease~~2021, respectively. This was compared to a recapture of the provision for credit losses of $23.0 million for the three months ended June 30, 2021. For the nine months ended September 30, 2020, ~~compared~~the provision for credit losses was $204.8 million. The recapture of the provision for credit losses in the current periods was due to ~~the same period in 2019, was attributed to a~~ stabilization of credit quality metrics and improved economic forecasts used in credit models as of September 30, 2020, along with a decline in loan balances for the three month period. The increase for the nine months ended September 30, 2020, compared to the same period of the prior year, was attributable to the economic forecasts influenced by the COVID-19 pandemic used in the CECL calculation of the allowance for credit losses. As an annualized percentage of average outstanding loans and leases, the provision for credit losses recorded for the three months ended September 30, 2020 was zero due to the small recapture, and for the nine months ended was 1.24%, as compared to 0.44% and 0.37% for the same periods in 2019.2021.

Liquidity

•Total cash and cash equivalents was ~~$2.2~~$3.7 billion as of September 30, ~~2020,~~2021, an increase of ~~$857.0 million~~$1.2 billion from December 31, ~~2019.~~2020. The increase in cash and cash equivalents ~~reflects~~is consistent with the ~~Bank's current liquidity strategy~~growth in deposit balances, which will provide flexibility to ~~have an elevated on-balance sheet liquidity position to further enhance flexibility due to~~fund growth in the ~~increased market volatility~~lending and ~~uncertainty~~investment portfolios as ~~a result of the COVID-19 pandemic.~~economic conditions permit.

Capital and Growth Initiatives

•Umpqua launched "Next Gen 2.0" as a continuation of our initiative to modernize the Bank. Like its predecessor, the Next Gen 2.0 program includes initiatives to grow revenue, invest in strategic areas for future growth, including technology and digital enhancements, and to continue to advance operational excellence goals to reduce operating costs and invest the savings in strategic growth opportunities. ~~We’re building~~We have focused on continued customer and talent acquisition, converting new PPP customers to expanded relationships with additional products and services, implemented new technology to gain efficiencies and advance the ~~strong foundation established over the past few years~~customer experience, and planned consolidation of stores and back-office facilities for expense reduction. We have also launched new products to ~~continue streamlining the company’s operations in order to accelerate the development of a highly differentiated, human~~provide digital ~~customer experience.~~offerings, as well as consolidated payment options for commercial customers.

•The Company's total risk based capital ratio was ~~15.0%~~14.9% and its Tier 1 common to risk weighted assets ratio was ~~11.7%~~12.0% as of September 30, ~~2020.~~2021. As of December 31, ~~2019,~~2020, the Company's total risk based capital ratio was ~~14.0%~~15.6% and its Tier 1 common to risk weighted assets ratio was ~~11.2%~~12.3%.

•The Company repurchased 4.0 million shares for a total of $78.2 million during the quarter, under the new share repurchase program which authorizes the Company to repurchase up to $400 million of common stock over the next twelve months from time to time in open market transactions, accelerated share repurchases, or in privately negotiated transactions as permitted under applicable rules and regulations. The Company does not anticipate any near-term share repurchases under our existing repurchase program given our pending combination with Columbia.

•The Company paid a quarterly cash ~~dividend~~dividends of $0.21 per common share to shareholders on February 26, 2021, May 28, 2021 and August 31, ~~2020 to shareholders of record as of August 20, 2020.~~2021. The Company ~~has shifted~~may not increase quarterly dividends during the ~~timing~~pendency of ~~any dividend declarations from historical intra-quarter announcements to after quarterly earnings are finalized and applicable regulatory approval processes are complete.~~the Merger.

4947

Table of Contents

Summary of Critical Accounting Policies

Our critical accounting policies are described in detail in the Summary of Critical Accounting Policies section of the Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the SEC on February ~~27, 2020.~~25, 2021. The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in future periods. As of January 1, 2020, the Company implemented CECL, and due to the significance of the implementation, the following Allowance for Credit Losses Policy has been updated from the policies disclosed in our prior year financial statements. The Company's critical accounting policies ~~also~~ include the allowance for credit losses, residential mortgage servicing rights, ~~valuation of goodwill,~~ and fair value. There have been no ~~other~~ material changes ~~to the valuation techniques or models~~in these policies during the nine months ended September 30, ~~2020.~~2021.

~~Allowance for Credit Losses Policy~~

The Bank has established an ACL Committee, which is responsible for, among other things, regularly reviewing the ACL methodology, including allowance levels and ensuring that it is designed and applied in accordance with generally accepted accounting principles. The Company's Audit and Compliance Committee provides board oversight of the ACL process and reviews and approves the ACL methodology on a quarterly basis.

CECL is not prescriptive in the methodology used to determine the expected credit loss estimate. Therefore, management has flexibility in selecting the methodology. However, the expected credit losses must be estimated over a financial asset's contractual term, adjusted for prepayments, utilizing quantitative and qualitative factors.

The estimate of current expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is the starting point for estimating expected credit losses. Adjustments are made to historical loss experience to reflect differences in asset-specific risk characteristics, such as underwriting standards, portfolio mix or asset terms, and differences in economic conditions – both current conditions and reasonable and supportable forecasts. When the Company is not able to make or obtain reasonable and supportable forecasts for the entire life of the financial asset, it has estimated expected credit losses for the remaining life after the forecasted period, using an approach that reverts to historical credit loss information.

The Company utilizes complex models to obtain reasonable and supportable forecasts; most of the models calculate two predictive metrics: the probability of default and loss given default. The PD measures the probability that a loan will default within a given time horizon and primarily measures the adequacy of the debtor's cash flow as the primary source of repayment of the loan or lease. The LGD is the expected loss which would be realized presuming a default has occurred and primarily measures the value of the collateral or other secondary source of repayment related to the collateral.

Loans and leases deemed to be collateral dependent or reasonably expected troubled debt restructured or troubled debt restructured are individually evaluated for loss based on the value of the underlying collateral or a discounted cash flow analysis.

The Company considers various qualitative factors when determining the overall adequacy of the ACL, including changes within the portfolio, changes to Bank policies and processes, as well as external factors, which may result in qualitative overlays to the model results. Loss factors from the models, prepayment speeds, and qualitative factors are input into the Company's CECL accounting application which aggregates the information. The Company then uses two methods to calculate the current expected credit loss: 1) the discounted cash flow method, which is used for all loans except lines of credit and 2) the non-discounted cash flow method which is used for lines of credit due to the difficulty of calculating an effective interest rate when lines of credit have not yet been drawn on.

The reserve for unfunded commitments 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 ACL and RUC are monitored on a regular basis and are based on management's evaluation of numerous factors, including: the CECL model outputs; 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.

Management believes that the ACL was adequate as of September 30, 2020. There is, however, no assurance that future loan losses will not exceed the levels provided for in the ACL and could result in additional provision for loan and lease losses in future periods.

~~Table of Contents~~

Results of Operations

Overview

For the three months ended September 30, ~~2020,~~2021, net income was ~~$124.9~~$108.1 million or ~~$0.57~~$0.49 per diluted common share, ~~and~~compared to net income of $116.1 million or $0.53 per diluted common share for the three months ended June 30, 2021. For the nine months ended September 30, 2021, net income was $331.9 million or $1.51 per diluted common share, which compares to a net loss of $1.7 billion or $7.60 per diluted common share for the nine months ended September 30, ~~2020,~~2020.

In the first quarter of 2021, the Company realigned its operating segments based on changes in management's focus and its internal reporting structure. The Company now reports two segments: Core Banking and Mortgage Banking. This aligns with how we manage the profitability of the Company and also provides greater transparency into the financial contribution of mortgage banking activities.

The Core Banking segment includes all lines of business, except Mortgage Banking, including wholesale, retail, private banking, as well as the operations, technology, and administrative functions of the Bank and Holding Company. The Mortgage Banking segment includes the revenue earned from the production and sale of residential real estate loans, the servicing income from our serviced loan portfolio, the quarterly changes in the MSR asset, and the specific expenses that are related to mortgage banking activities including variable commission expenses. Revenue and related expenses related to residential real estate loans held for investment are included in the Core Banking segment as portfolio loans are an anchor product for our consumer channels and are originated through a variety of channels throughout the Company. Refer to the segment information footnote for additional detail of the segments' financial statements.

The Core Banking segment had net ~~loss was $1.7 billion or $7.60 loss per diluted common share, which compares~~income of $102.3 million for the three months ended September 30, 2021, compared to net income of ~~$84.5~~$108.2 million ~~or $0.38 per diluted common share and $270.3 million or $1.23 per diluted common share~~ for the three ~~and~~months ended June 30, 2021. The decrease in net income is attributable to a decrease in non-interest income, as well as a decrease in the recapture of the provision for credit losses, offset by an increase in net interest income. Net income for the Core Banking segment increased for the nine months ended September 30, ~~2019, respectively.~~2021, as compared to the same period in the prior year, due to the impact of goodwill impairment in 2020, as well as the recapture of the provision for credit losses as economic forecasts improved in the current period.

The ~~increase~~Mortgage Banking segment had net income of $5.8 million for the three months ended September 30, 2021, compared to net income of $8.0 million for the three months ended June 30, 2021. The decrease in net income for the three months ended September 30, ~~2020,~~2021 for the Mortgage Banking segment, compared to the three months ended June 30, 2021, is attributable to lower for-sale mortgage originations and lower gain on sale margin. The closed loan volume declined as a result of rate changes, resulting in a slowing of loan refinance activity. The decrease in net income for the Mortgage Banking segment, for the nine months ended September 30, 2021, compared to the same period of the prior year, ~~is attributable~~was primarily due to ~~an increase in non-interest income due mainly to increased residential mortgage banking revenue from strong mortgage production in the quarter,~~ a decrease in ~~interest expense, as well as a decrease in provision for credit losses, offset partially by a decrease in interest income~~for-sale originations and ~~an increase in non-interest expenses during the period.~~

The decrease in interest expense was driven by a decrease in the expense on time deposits due to lower brokered deposits as the Company has allowed these higher-cost deposits to runoff, as well as the Company reducing promotional and exception pricing on customer money market and time deposits. The decrease in the provison for credit losses for the three months ended September 30, 2020, compared to the same period in 2019, was attributed to a stabilization of credit quality metrics and economic forecasts used in credit models as of September 30, 2020, along with a decline in ~~loan balances for~~ the three month period. The decrease in interest income is driven by lower average yields on interest-earning assets as market or index rates continued to decline. The increase in non-interest expense is due mainly to an increase in home lending compensation related to higher origination volumes during the quarter.

The decrease in net income for the nine months ended September 30, 2020, compared to the same period of the prior year is primarily attributable to the goodwill impairment of $1.8 billion and an increase in provision for credit losses. The goodwill impairment was due to an interim impairment analysis completed as of March 31, 2020, triggered by the deterioration in the economic environment, resulting from the COVID-19 pandemic, specifically the reduction in interest rates, the increase in projected credit losses, and the decline in the Company's stock price. The increase in the provision for credit losses is due to the COVID-19 pandemic influenced economic forecast used in the calculation of the allowance for credit losses using CECL. For the nine months ended September 30, 2019, the Bank also had a one-time gain on ~~the~~ sale margin.

Table of ~~all of the Bank's Visa Inc. Class B common stock. The remaining changes are consistent with the discussion of the three months ended September 30, 2020 above.~~Contents

The following table presents the return on average assets, average common shareholders' equity and average tangible common shareholders' equity for the three months ended September 30, 2021 and June 30, 2021, respectively, as well as the nine months ended September 30, 2021 and September 30, 2020, ~~and 2019.~~respectively. For each period presented, the table includes the calculated ratios based on reported net income. Our return on average common shareholders' equity was negatively impacted as the result of capital required to support goodwill. To the extent this performance metric is used to compare our performance with other financial institutions that do not have merger and acquisition-related intangible assets, we believe it is beneficial to also consider the return on average tangible common shareholders' equity. The return on average tangible common shareholders' equity is calculated by dividing net income by average shareholders' common equity less average goodwill and intangible assets, net (excluding MSRs). The return on average tangible common shareholders' equity is considered a non-GAAP financial measure and should be viewed in conjunction with the return on average common shareholders' equity.

Return on Average Assets, Common Shareholders' Equity and Tangible Common Shareholders' Equity

Three Months Ended Nine Months Ended
(dollars in thousands) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Return on average assets 1.68 % 1.18 % (7.67) % 1.31 %
Return on average common shareholders' equity 19.48 % 7.87 % (72.01) % 8.67 %
Return on average tangible common shareholders' equity 19.62 % 13.67 % (89.45) % 15.32 %
Calculation of average common tangible shareholders' equity:
Average common shareholders' equity $ 2,549,703 $ 4,260,810 $ 3,105,611 $ 4,169,008
Less: average goodwill and other intangible assets, net (18,021) (1,808,191) (605,548) (1,809,583)
Average tangible common shareholders' equity $ 2,531,682 $ 2,452,619 $ 2,500,063 $ 2,359,425

~~Table of Contents~~


	Three Months Ended						Nine Months Ended
(dollars in thousands)	September 30, 2021			June 30, 2021				September 30, 2021			September 30, 2020
Return on average assets	1.40		%	1.54		%		1.48		%	(7.67)		%
Return on average common shareholders' equity	15.82		%	17.25		%		16.47		%	(72.01)		%
Return on average tangible common shareholders' equity	15.88		%	17.33		%		16.55		%	(89.45)		%
Calculation of average common tangible shareholders' equity:
Average common shareholders' equity	$	2,709,641		$	2,700,010			$	2,694,968		$	3,105,611
Less: average goodwill and other intangible assets, net	(10,609)			(12,615)				(12,922)			(605,548)
Average tangible common shareholders' equity	$	2,699,032		$	2,687,395			$	2,682,046		$	2,500,063

Additionally, management believes tangible common equity and the tangible common equity ratio are meaningful measures of capital adequacy. Umpqua believes the exclusion of certain intangible assets in the computation of tangible common equity and tangible common equity ratio provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the operating results and capital of the Company. Tangible common equity is calculated as total shareholders' equity less preferred stock and less goodwill and other intangible assets, net (excluding MSRs). In addition, tangible assets are total assets less goodwill and other intangible assets, net (excluding MSRs). The tangible common equity ratio is calculated as tangible common shareholders' equity divided by tangible assets. The tangible common equity and tangible common equity ratio is considered a non-GAAP financial measure and should be viewed in conjunction with the total shareholders' equity and the total shareholders' equity ratio.

Table of Contents

The following table provides a reconciliation of ending shareholders' equity (GAAP) to ending tangible common equity (non-GAAP), and ending assets (GAAP) to ending tangible assets (non-GAAP) as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


(dollars in thousands)	(dollars in thousands)	September 30, 2020			December 31, 2019			(dollars in thousands)	September 30, 2021			December 31, 2020
Total shareholders' equity	Total shareholders' equity	$	2,610,244		$	4,313,915		Total shareholders' equity	$	2,722,379		$	2,704,577
Subtract:	Subtract:							Subtract:
Goodwill	Goodwill	2,715			1,787,651			Goodwill	—			2,715
Other intangible assets, net	Other intangible assets, net	14,606			18,346			Other intangible assets, net	9,970			13,360
Tangible common shareholders' equity	Tangible common shareholders' equity	$	2,592,923		$	2,507,918		Tangible common shareholders' equity	$	2,712,409		$	2,688,502
Total assets	Total assets	$	29,437,441		$	28,846,809		Total assets	$	30,891,479		$	29,235,175
Subtract:	Subtract:							Subtract:
Goodwill	Goodwill	2,715			1,787,651			Goodwill	—			2,715
Other intangible assets, net	Other intangible assets, net	14,606			18,346			Other intangible assets, net	9,970			13,360
Tangible assets	Tangible assets	$	29,420,120		$	27,040,812		Tangible assets	$	30,881,509		$	29,219,100
Tangible common equity ratio	Tangible common equity ratio	8.81		%	9.27		%	Tangible common equity ratio	8.78		%	9.20		%

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not reviewed or audited. Although we believe these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.

~~Table of Contents~~

Net Interest Income

Net interest income for the three ~~and~~months ended September 30, 2021 was $235.1 million, an increase of $5.3 million compared to the three months ended June 30, 2021. Net interest income for the nine months ended September 30, ~~2020~~2021 was ~~$216.6~~$686.3 million, ~~and $647.6~~an increase of $38.7 million ~~respectively, a decrease of $12.4 million and $46.2 million, respectively,~~ compared to the ~~same periods in 2019. The decrease in net interest income for the three and~~ nine months ended September 30, ~~2020 as~~2020. The increase for the three months ended September 30, 2021 compared to the ~~same periods in 2019,~~prior quarter was driven by ~~lower yields on interest-earning assets offset by~~an increase of $2.7 million in interest income which is a result of higher ~~volume,~~non-PPP average loan balances and taxable securities income growth, and a decrease of $2.6 million in interest expense due to the ~~interest rate cuts that~~decline in high-cost time deposits and term debt in the ~~Federal Reserve instituted as a response~~quarter compared to the ~~COVID-19 pandemic, in addition~~prior period. The increase for the nine months ended September 30, 2021, was due to ~~rate decreases in~~ the ~~second half of 2019. The decrease was partially offset by a~~ lower cost of interest-bearing liabilities due to lower retail and brokered time deposits as the Bank has allowed these higher-cost deposits to runoff. ~~In addition,~~The decrease in interest expense was partially offset by lower average yields on interest-earning assets for the ~~Bank is actively reducing deposit exception pricing to reduce the cost of deposits.~~period.

The net interest margin (net interest income as a percentage of average interest-earning assets) on a fully tax equivalent basis was ~~3.08% and 3.19%~~3.21% for the three ~~and~~months ended September 30, 2021, as compared to 3.20% for the three months ended June 30, 2021. The net interest margin on a fully tax equivalent basis was 3.20% for the nine months ended September 30, ~~2020, respectively,~~2021, as compared to ~~3.63% and 3.78%~~3.19% for the ~~same periods in 2019.~~nine months ended September 30, 2020. The ~~decrease~~increase in net interest margin for the three ~~and~~months ended September 30, 2021, as compared to the three months ended June 30, 2021, was driven by the increase in net interest income. The increase in net interest margin for the nine months ended September 30, ~~2020,~~2021, primarily resulted from a decrease in the ~~average yields on interest-earning assets,~~cost of interest bearing liabilities, partially offset by the decline in the ~~cost~~average yields of ~~interest-bearing liabilities and the increase in average loan and lease balances. In March 2020, in response to the COVID-19 pandemic, the~~interest-earning assets. The Federal Open Market Committee ~~("FOMC") of the Federal Reserve System, lowered the target range for the federal funds rate 150 basis points to a range of 0.00% to 0.25%. The FOMC~~ expects to maintain ~~this~~the target rates at the current levels until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. ~~Key interest rate declines experienced year to date have negatively impacted the Company's net interest margin.~~

The yield on loans and leases ~~decreased by 97 and 81 basis points, respectively,~~ for the three months ended September 30, 2021 increased by 3 basis points as compared to the three months ended June 30, 2021, primarily attributable higher rates on average loans and leases as PPP loan balances decline. The yield on loans and leases for the nine months ended September 30, ~~2020,~~2021 decreased by 20 basis points as compared to the same period in ~~2019,~~2020, primarily attributable to the decrease in ~~short and long-term~~ interest rates as ~~well as the origination of PPP~~compared to prior periods and lower average loans ~~which have a low coupon rate.~~and leases. The cost of interest-bearing liabilities decreased ~~74 and 42~~7 basis points, ~~respectively,~~ for the three ~~and~~months ended September 30, 2021, as compared to the three months ended June 30, 2021, due to the continued run off of higher-cost time deposits, as well as the paydown of borrowings during the period. The cost of interest-bearing liabilities decreased by 56 basis points for the nine months ended September 30, ~~2020,~~2021, as compared to the same period in ~~2019,~~2020, also due to the decrease in interest rates and ~~the runoff of brokered deposits.~~

corresponding deposit pricing strategy, as well as decreased borrowings. Our net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, as well as changes in the yields earned on interest-earning assets and rates paid on deposits and borrowed funds. The Company continues to be "asset-sensitive." ~~As interest rates have declined, the~~The decrease in yields on earning assets has ~~compressed the~~continued to impact net interest margin, even as liabilities reprice downward. Further rate changes will continue to have an impact on our net interest margin. In addition, the increase in average loans and leases in the current period is due to PPP loans, which are expected to be short-term in nature due to SBA forgiveness of these loans, which could cause future net interest margin to decline as loan and lease balances decline.

5350

Table of Contents

The following tables present condensed average balance sheet information, together with interest income and yields on average interest-earning assets, and interest expense and rates paid on average interest-bearing liabilities for the three months ended September 30, 2021 and June 30, 2021, as well as the nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended													Three Months Ended
		September 30, 2020						September 30, 2019							September 30, 2021						June 30, 2021
(dollars in thousands)	(dollars in thousands)	Average Balance		Interest Income or Expense		Average Yields or Rates		Average Balance		Interest Income or Expense		Average Yields or Rates		(dollars in thousands)	Average Balance		Interest Income or Expense		Average Yields or Rates		Average Balance		Interest Income or Expense		Average Yields or Rates
INTEREST-EARNING ASSETS:	INTEREST-EARNING ASSETS:													INTEREST-EARNING ASSETS:
Loans held for sale	Loans held for sale	$	669,646	$	5,248	3.13	%	$	328,155	$	3,953	4.82	%	Loans held for sale	$	465,805	$	3,672	3.15	%	$	468,960	$	3,725	3.18	%
Loans and leases (1)	Loans and leases (1)	22,560,076		224,209		3.96	%	21,170,915		262,158		4.93	%	Loans and leases (1)	21,864,387		220,731		4.02	%	22,040,794		219,745		3.99	%
Taxable securities	Taxable securities	2,797,547		10,878		1.56	%	2,648,092		13,145		1.99	%	Taxable securities	3,436,895		16,315		1.90	%	3,210,771		15,024		1.87	%
Non-taxable securities (2)	Non-taxable securities (2)	237,165		1,845		3.11	%	252,765		2,086		3.30	%	Non-taxable securities (2)	245,904		1,848		3.01	%	247,282		1,864		3.02	%
Temporary investments and interest-bearing cash	Temporary investments and interest-bearing cash	1,827,818		474		0.10	%	759,416		4,204		2.20	%	Temporary investments and interest-bearing cash	3,224,846		1,237		0.15	%	2,835,474		774		0.11	%
Total interest-earning assets	Total interest-earning assets	28,092,252		$	242,654	3.45	%	25,159,343		$	285,546	4.52	%	Total interest-earning assets	29,237,837		$	243,803	3.32	%	28,803,281		$	241,132	3.35	%
Other assets	Other assets	1,441,619						3,197,639						Other assets	1,376,537						1,352,736
Total assets	Total assets	$	29,533,871					$	28,356,982					Total assets	$	30,614,374					$	30,156,017
INTEREST-BEARING LIABILITIES:	INTEREST-BEARING LIABILITIES:													INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits	Interest-bearing demand deposits	$	2,878,529	$	573	0.08	%	$	2,363,626	$	3,117	0.52	%	Interest-bearing demand deposits	$	3,564,040	$	468	0.05	%	$	3,385,336	$	459	0.05	%
Money market deposits	Money market deposits	7,179,705		2,284		0.13	%	6,962,370		16,575		0.94	%	Money market deposits	7,800,144		1,492		0.08	%	7,614,474		1,533		0.08	%
Savings deposits	Savings deposits	1,790,055		179		0.04	%	1,462,198		557		0.15	%	Savings deposits	2,284,077		206		0.04	%	2,171,865		154		0.03	%
Time deposits	Time deposits	3,603,527		16,085		1.78	%	4,501,270		25,627		2.26	%	Time deposits	2,031,494		2,934		0.57	%	2,303,068		4,870		0.85	%
Total interest-bearing deposits	Total interest-bearing deposits	15,451,816		19,121		0.49	%	15,289,464		45,876		1.19	%	Total interest-bearing deposits	15,679,755		5,100		0.13	%	15,474,743		7,016		0.18	%
Repurchase agreements and federal funds purchased	Repurchase agreements and federal funds purchased	378,844		84		0.09	%	313,089		448		0.57	%	Repurchase agreements and federal funds purchased	496,822		88		0.07	%	440,881		68		0.06	%
Borrowings	Borrowings	1,054,153		3,271		1.23	%	860,285		4,238		1.95	%	Borrowings	31,500		149		1.88	%	214,670		866		1.62	%
Junior subordinated debentures	Junior subordinated debentures	320,962		3,249		4.03	%	365,079		5,652		6.14	%	Junior subordinated debentures	375,726		3,014		3.18	%	369,812		3,042		3.30	%
Total interest-bearing liabilities	Total interest-bearing liabilities	17,205,775		$	25,725	0.59	%	16,827,917		$	56,214	1.33	%	Total interest-bearing liabilities	16,583,803		$	8,351	0.20	%	16,500,106		$	10,992	0.27	%
Non-interest-bearing deposits	Non-interest-bearing deposits	9,335,350						6,880,093						Non-interest-bearing deposits	10,960,686						10,582,197
Other liabilities	Other liabilities	443,043						388,162						Other liabilities	360,244						373,704
Total liabilities	Total liabilities	26,984,168						24,096,172						Total liabilities	27,904,733						27,456,007
Common equity	Common equity	2,549,703						4,260,810						Common equity	2,709,641						2,700,010
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	29,533,871					$	28,356,982					Total liabilities and shareholders' equity	$	30,614,374					$	30,156,017
NET INTEREST INCOME	NET INTEREST INCOME			$	216,929					$	229,332			NET INTEREST INCOME			$	235,452					$	230,140
NET INTEREST SPREAD	NET INTEREST SPREAD					2.85��	%					3.19	%	NET INTEREST SPREAD					3.12	%					3.08	%
NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)	NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)					3.08	%					3.63	%	NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)					3.21	%					3.20	%

(1)Non-accrual loans and leases are included in the average balance. (2)Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate. The amount of such adjustment was an addition to recorded income of approximately $377,000 for the three months ended September 30, 2021, as compared to approximately $377,000 for the three months ended June 30, 2021.														(1)Non-accrual loans and leases are included in the average balance. (2)Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate. The amount of such adjustment was an addition to recorded income of approximately $377,000 for the three months ended September 30, 2021, as compared to approximately $377,000 for the three months ended June 30, 2021.

~~(1)Non-accrual loans and leases are included in the average balance.~~

~~(2)~~Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate. The amount of such adjustment was an addition to recorded income of approximately $355,000 for the three months ended September 30, 2020, as compared to $359,000 for the same period in 2019.

5451

Table of Contents

(dollars in thousands) Nine Months Ended
September 30, 2020 September 30, 2019
Average Balance Interest Income or Expense Average Yields or Rates Average Balance Interest Income or Expense Average Yields or Rates
INTEREST-EARNING ASSETS:
Loans held for sale $ 551,583 $ 14,955 3.61 % $ 260,600 $ 10,069 5.15 %
Loans and leases (1)
22,063,582 695,669 4.21 % 20,724,820 778,899 5.02 %
Taxable securities 2,778,460 37,744 1.81 % 2,696,001 44,479 2.20 %
Non-taxable securities (2)
238,059 5,608 3.14 % 270,461 6,991 3.45 %
Temporary investments and interest bearing cash 1,493,352 4,208 0.38 % 567,709 9,837 2.32 %
Total interest-earning assets 27,125,036 $ 758,184 3.73 % 24,519,591 $ 850,275 4.63 %
Other assets 2,024,722 3,112,041
Total assets $ 29,149,758 $ 27,631,632
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits $ 2,667,160 $ 5,264 0.26 % $ 2,338,787 $ 8,555 0.49 %
Money market deposits 7,187,615 18,080 0.34 % 6,702,551 42,943 0.86 %
Savings deposits 1,635,064 618 0.05 % 1,468,449 1,237 0.11 %
Time deposits 4,159,926 61,671 1.98 % 4,381,484 70,826 2.16 %
Total interest-bearing deposits 15,649,765 85,633 0.73 % 14,891,271 123,561 1.11 %
Repurchase agreements and federal funds purchased 363,957 673 0.25 % 325,281 1,661 0.68 %
Borrowings 1,041,181 11,156 1.43 % 852,659 12,484 1.96 %
Junior subordinated debentures 322,356 12,074 5.00 % 378,816 17,520 6.18 %
Total interest-bearing liabilities 17,377,259 $ 109,536 0.84 % 16,448,027 $ 155,226 1.26 %
Non-interest-bearing deposits 8,237,095 6,648,638
Other liabilities 429,793 365,959
Total liabilities 26,044,147 23,462,624
Common equity 3,105,611 4,169,008
Total liabilities and shareholders' equity $ 29,149,758 $ 27,631,632
NET INTEREST INCOME $ 648,648 $ 695,049
NET INTEREST SPREAD 2.89 % 3.37 %
NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)
3.19 % 3.78 %

~~(1)Non-accrual loans and leases are included in the average balance.~~

~~(2)~~Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate. The amount of such adjustment was an addition to recorded income of approximately $1.0 million for the nine months ended September 30, 2020, as compared to $1.2 million for the same period in 2019.


	Nine Months Ended
	September 30, 2021						September 30, 2020
(dollars in thousands)	Average Balance		Interest Income or Expense		Average Yields or Rates		Average Balance		Interest Income or Expense		Average Yields or Rates
INTEREST-EARNING ASSETS:
Loans held for sale	$	545,237	$	12,242	2.99	%	$	551,583	$	14,955	3.61	%
Loans and leases (1)	21,866,569		656,772		4.01	%	22,063,582		695,669		4.21	%
Taxable securities	3,199,653		45,049		1.88	%	2,778,460		37,744		1.81	%
Non-taxable securities (2)	248,617		5,627		3.02	%	238,059		5,608		3.14	%
Temporary investments and interest bearing cash	2,850,639		2,635		0.12	%	1,493,352		4,208		0.38	%
Total interest-earning assets	28,710,715		$	722,325	3.36	%	27,125,036		$	758,184	3.73	%
Other assets	1,348,054						2,024,722
Total assets	$	30,058,769					$	29,149,758
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits	$	3,359,865	$	1,341	0.05	%	$	2,667,160	$	5,264	0.26	%
Money market deposits	7,593,320		4,516		0.08	%	7,187,615		18,080		0.34	%
Savings deposits	2,152,667		523		0.03	%	1,635,064		618		0.05	%
Time deposits	2,336,261		16,414		0.94	%	4,159,926		61,671		1.98	%
Total interest-bearing deposits	15,442,113		22,794		0.20	%	15,649,765		85,633		0.73	%
Repurchase agreements and federal funds purchased	444,919		232		0.07	%	363,957		673		0.25	%
Borrowings	259,890		2,787		1.43	%	1,041,181		11,156		1.43	%
Junior subordinated debentures	363,122		9,108		3.35	%	322,356		12,074		5.00	%
Total interest-bearing liabilities	16,510,044		$	34,921	0.28	%	17,377,259		$	109,536	0.84	%
Non-interest-bearing deposits	10,484,104						8,237,095
Other liabilities	369,653						429,793
Total liabilities	27,363,801						26,044,147
Common equity	2,694,968						3,105,611
Total liabilities and shareholders' equity	$	30,058,769					$	29,149,758
NET INTEREST INCOME			$	687,404					$	648,648
NET INTEREST SPREAD					3.08	%					2.89	%
NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)					3.20	%					3.19	%

(1)Non-accrual loans and leases are included in the average balance. (2)Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate. The amount of such adjustment was an addition to recorded income of approximately $1.1 million for the nine months ended September 30, 2021, as compared to approximately $1.0 million for the same period in 2020.

5552

Table of Contents

The following tables set forth a summary of the changes in tax equivalent net interest income due to changes in average asset and liability balances (volume) and changes in average rates (rate) for the three ~~and~~months ended September 30, 2021 as compared to three months ended June 30, 2021, as well as the nine months ended September 30, 2021 and September 30, 2020, ~~as compared to the same periods in 2019.~~respectively. Changes in tax equivalent interest income and expense, which are not attributable specifically to either volume or rate, are allocated proportionately between both variances.

Three Months Ended September 30,
2020 compared to 2019
Increase (decrease) in interest income and expense due to changes in
(in thousands)
Volume Rate Total
INTEREST-EARNING ASSETS:
Loans held for sale $ 3,055 $ (1,760) $ 1,295
Loans and leases 16,342 (54,291) (37,949)
Taxable securities 718 (2,985) (2,267)
Non-taxable securities (1)
(125) (116) (241)
Temporary investments and interest bearing cash 2,551 (6,281) (3,730)
Total interest-earning assets (1)
22,541 (65,433) (42,892)
INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits 560 (3,104) (2,544)
Money market deposits 502 (14,793) (14,291)
Savings deposits 103 (481) (378)
Time deposits (4,605) (4,937) (9,542)
Repurchase agreements 79 (443) (364)
Borrowings 819 (1,786) (967)
Junior subordinated debentures (624) (1,779) (2,403)
Total interest-bearing liabilities (3,166) (27,323) (30,489)
Net increase (decrease) in net interest income (1)
$ 25,707 $ (38,110) $ (12,403)

~~(1)~~ ~~Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.~~


	Three Months Ended
	September 30, 2021 compared June 30, 2021
	Increase (decrease) in interest income and expense due to changes in
(in thousands)	Volume		Rate		Total
INTEREST-EARNING ASSETS:
Loans held for sale	$	(25)	$	(28)	$	(53)
Loans and leases	(1,065)		2,051		986
Taxable securities	1,073		218		1,291
Non-taxable securities (1)	(10)		(6)		(16)
Temporary investments and interest bearing cash	120		343		463
Total interest-earning assets (1)	93		2,578		2,671
INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits	26		(17)		9
Money market deposits	41		(82)		(41)
Savings deposits	9		43		52
Time deposits	(516)		(1,420)		(1,936)
Repurchase agreements	10		10		20
Borrowings	(837)		120		(717)
Junior subordinated debentures	59		(87)		(28)
Total interest-bearing liabilities	(1,208)		(1,433)		(2,641)
Net increase in net interest income (1)	$	1,301	$	4,011	$	5,312
(1) Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.

5653

Table of Contents

Nine Months Ended September 30,
2020 compared to 2019
Increase (decrease) in interest income and expense due to changes in
(in thousands) Volume Rate Total
INTEREST-EARNING ASSETS:
Loans held for sale $ 8,583 $ (3,697) $ 4,886
Loans and leases 48,034 (131,264) (83,230)
Taxable securities 1,317 (8,052) (6,735)
Non-taxable securities (1)
(794) (589) (1,383)
Temporary investments and interest bearing cash 7,165 (12,794) (5,629)
Total (1)
64,305 (156,396) (92,091)
INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits 1,072 (4,363) (3,291)
Money market 2,909 (27,772) (24,863)
Savings 127 (746) (619)
Time deposits (3,447) (5,708) (9,155)
Repurchase agreements (198) (790) (988)
Borrowings 2,430 (3,758) (1,328)
Junior subordinated debentures (2,388) (3,058) (5,446)
Total interest-bearing liabilities 505 (46,195) (45,690)
Net increase in net interest income (1)
$ 63,800 $ (110,201) $ (46,401)

~~(1)~~ ~~Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.~~


	Nine Months Ended
	September 30, 2021 compared to September 30, 2020
	Increase (decrease) in interest income and expense due to changes in
(in thousands)	Volume		Rate		Total
INTEREST-EARNING ASSETS:
Loans held for sale	$	(170)	$	(2,543)	$	(2,713)
Loans and leases	(6,219)		(32,678)		(38,897)
Taxable securities	5,880		1,425		7,305
Non-taxable securities (1)	243		(224)		19
Temporary investments and interest bearing cash	2,345		(3,918)		(1,573)
Total interest-earning assets (1)	2,079		(37,938)		(35,859)
INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits	1,099		(5,022)		(3,923)
Money market	967		(14,531)		(13,564)
Savings	163		(258)		(95)
Time deposits	(20,580)		(24,677)		(45,257)
Repurchase agreements	124		(565)		(441)
Borrowings	(8,388)		19		(8,369)
Junior subordinated debentures	1,385		(4,351)		(2,966)
Total interest-bearing liabilities	(25,230)		(49,385)		(74,615)
Net increase in net interest income (1)	$	27,309	$	11,447	$	38,756
(1) Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.

Provision for Credit Losses

The Company had an $18.9 million recapture of provision for credit losses ~~was $338,000~~ for the three months ended September 30, ~~2020.~~2021, as compared to a $23.0 million recapture of credit losses for the three months ended June 30, 2021. The Company had a $41.9 million recapture of provision for credit losses ~~was~~for the nine months ended September 30, 2021, as compared to a provision for credit losses of $204.8 million for the nine months ended September 30, 2020. ~~This was compared to a provision of $23.5 million and $56.8 million, respectively,~~The change for the three ~~and nine~~ months ended September 30, ~~2019 (which includes both~~2021, as compared to the three months ended June 30, 2021 was attributable to the stabilizing economic forecast used in the credit models and loan mix changes, which allowed for a recapture of previous provision for ~~loan and lease losses and the provision for the reserve for unfunded commitments).~~credit losses. The change in the provision for ~~three~~credit losses for nine months ended September 30, ~~2020~~2021 as compared to the same prior year period, is primarily attributed to ~~changes in the loan portfolio mix and balances as well as~~ a stabilization of credit quality ~~matrices~~metrics and the improvement in economic forecasts used in credit ~~models~~models. The Company adopted CECL as of January 1, 2020, so there may be volatility in the provision for credit losses as CECL requires a current ~~quarter. The change in~~expected credit loss for the life of loans.

As an annualized percentage of average outstanding loans and leases, the recapture of provision for credit losses recorded for the three months ended September 30, 2021 was (0.34)% as compared to (0.42)% for the three months ended June 30, 2021. As an annualized percentage of average outstanding loans and leases, the recapture of provision for credit losses recorded for the nine months ended September 30, ~~2020 as compared to the same prior year period is primarily attributable to CECL as well as the economic forecasts related to the COVID-19 pandemic.~~2021 was (0.26)%. As an annualized percentage of average outstanding loans and leases, the provision for credit losses ~~recorded for the three months ended September 30, 2020 was zero due to the small amount of recapture for the quarter, and 1.24%~~ for the nine months ended September 30, 2020 ~~as compared to 0.44% and 0.37% for the same periods in 2019.~~was 1.24%.

For the three ~~and~~months ended September 30, 2021, net charge-offs were $6.2 million, as compared to $13.6 million for the three months ended June 30, 2021. For the nine months ended September 30, ~~2020,~~2021, net charge-offs were ~~$13.5~~$37.5 million, ~~and $51.4 million, respectively,~~ as compared to ~~$18.0~~$51.4 million ~~and $44.8 million, respectively,~~ for the ~~three and~~ nine months ended September 30, ~~2019.~~2020. As an annualized percentage of average outstanding loans and leases, net charge-offs for the three ~~and nine~~ months ended September 30, ~~2020 were 0.24% and 0.31%~~2021 was 0.11%, ~~respectively,~~ as compared to ~~0.34% and 0.29%~~0.25% for the ~~same periods in 2019. The increase in~~three months ended June 30, 2021. As an annualized percentage of average outstanding loans and leases, net charge-offs for the nine months ended September 30, ~~2020,~~2021 was ~~primarily due~~0.23%, as compared to ~~a single charge-off on a syndicated national credit to a regional air transportation lessor whose financial conditions and prospects were adversely impacted by COVID-19 in~~0.31% for the ~~first quarter of 2020 as well as charge-offs related to the lease and equipment finance portfolio, which is included in the commercial loan portfolio.~~nine months ended September 30, 2020.

5754

Table of Contents

Typically, loans in a non-accrual status will not have an allowance for credit loss as they will be written down to their net realizable value or charged-off. However, the net realizable value for homogeneous leases and equipment finance agreements are determined by the loss given default calculated by the CECL model, and therefore homogeneous leases and equipment finance agreements on non-accrual will have an allowance for credit loss amount until they become 181 days past due, at which time they are charged-off. The non-accrual leases and equipment finance agreements of ~~$3.8~~$11.8 million as of September 30, ~~2020~~2021 have a related allowance for credit losses of ~~$3.2~~$6.9 million, with the remaining loans written-down to ~~their~~the estimated fair value of the collateral, less estimated costs to sell, and are expected to be resolved with no additional material loss, absent further decline in market prices.

Non-Interest Income

Non-interest income for the three ~~and~~months ended September 30, 2021 was $73.7 million, a decrease of $17.4 million compared to the three months ended June 30, 2021. Non-interest income for the nine months ended September 30, ~~2020~~2021, was ~~$131.9~~$273.6 million, ~~and $288.0~~a decrease of $14.5 million, ~~respectively, an increase of $43.4 million and $32.0 million or 49% and 12%, respectively, as~~ compared to the ~~same periods in 2019.~~nine months ended September 30, 2020. The following table presents the key components of non-interest income for the three months ended September 30, 2021, compared to the three months ended June 30, 2021, as well as the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020:


	Three Months Ended						Nine Months Ended
(in thousands)	September 30, 2021		June 30, 2021		Change Amount		Change Percent		September 30, 2021		September 30, 2020		Change Amount		Change Percent
Service charges on deposits	$	10,941	$	10,310	$	631	6	%	$	30,898	$	30,635	$	263	1	%
Card-based fees	9,111		10,274		(1,163)		(11)	%	26,759		20,436		6,323		31	%
Brokerage revenue	31		1,135		(1,104)		(97)	%	5,081		11,506		(6,425)		(56)	%
Residential mortgage banking revenue, net	34,150		44,443		(10,293)		(23)	%	143,626		191,794		(48,168)		(25)	%
Gain on sale of debt securities, net	—		—		—		N/M		4		190		(186)		(98)	%
(Loss) gain on equity securities, net	(343)		4		(347)		N/M		(1,045)		942		(1,987)		(211)	%
Gain on loan and lease sales, net	4,208		5,318		(1,110)		(21)	%	10,899		3,333		7,566		227	%


Bank owned life insurance income	2,038		2,092		(54)		(3)	%	6,201		6,332		(131)		(2)	%
Other income	13,569		17,499		(3,930)		(22)	%	51,157		22,881		28,276		124	%
Total non-interest income	$	73,705	$	91,075	$	(17,370)	(19)	%	$	273,580	$	288,049	$	(14,469)	(5)	%

During the current year, the Company added the card-based fees line item, which were previously included in the service charges on deposits and other income line items. Prior periods have been reclassified to conform to the current presentation. Card-based fees are comprised of debit and credit card income, ATM fees, and merchant services income. Debit and credit card income is primarily comprised of interchange fees earned when our customers' debit and credit cards are processed through card payment networks. The decrease for the three months ended September 30, 2021, as compared to the prior quarter, was attributable to changes in our agreement with third-party interchange vendors. The increase in the nine months ended September 30, 2021, as compared to prior periods, is attributable to increased merchant processing fees, given strengthening economic activity and lower unemployment rates in our footprint, as businesses are once again open and experiencing increased customer activity.

Brokerage revenue decreased for the three and nine months ended September 30, ~~2020 and 2019:~~

Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2020 2019 Change Amount Change Percent 2020 2019 Change Amount Change Percent
Service charges on deposits $ 14,438 $ 16,627 $ (2,189) (13) % $ 41,907 $ 47,858 $ (5,951) (12) %
Brokerage revenue 3,686 4,060 (374) (9) % 11,506 11,850 (344) (3) %
Residential mortgage banking revenue, net 90,377 47,000 43,377 92 % 191,794 67,760 124,034 183 %
Gain (loss) on sale of debt securities, net — — — — % 190 (7,186) 7,376 (103) %
(Loss) gain on equity securities, net (112) 257 (369) (144) % 942 83,559 (82,617) (99) %
Gain on loan and lease sales, net 1,092 1,762 (670) (38) % 3,333 5,864 (2,531) (43) %
BOLI income 2,087 2,067 20 1 % 6,332 6,328 4 — %
Other income 20,356 16,739 3,617 22 % 32,045 40,042 (7,997) (20) %
Total non-interest income $ 131,924 $ 88,512 $ 43,412 49 % $ 288,049 $ 256,075 $ 31,974 12 %
2021 as compared to prior periods, due to the sale of Umpqua Investments, Inc. in April 2021.

~~Service charges~~The gain on ~~deposits~~loan and lease sales decreased for the three months ended September 30, 2021, as compared to the previous quarter, due to lower SBA loan sales during the period as the three months ended June 30, 2021 had higher than average SBA loan sales. The increase for the nine months ended September 30, 2021, as compared to prior period, was driven by an increase in SBA loan sales which increased due to higher government guarantees and incentives for borrowers.

Table of Contents

Other income for the three months ended September 30, 2021 decreased by ~~$2.2~~$3.9 million as compared to the three months ended June 30, 2021. The decrease is primarily due to the $4.4 million dollar gain related to the sale of Umpqua Investments, Inc. and a $2.3 million advisory fee earned in the prior period, offset by miscellaneous other income items. For the nine months ended September 30, 2021, other income increased by $28.3 million, primarily due to the fluctuation in the gain on the swap derivative fair value of $22.1 million, as the gain on swap derivative fair value was $8.7 million, compared to a loss on swap derivative fair value of $13.4 million in the prior period. For nine months ended September 30, 2021, other income also includes the $4.4 million gain on sale of Umpqua Investments, Inc. during the period, as well as a $2.3 million advisory fee earned during the period. Other income for the three and nine months ended September 30, 2021, includes the gain on the changes in fair value of the held for investment mortgage loans at fair value of $3.4 million and ~~$6.0~~$5.7 million, respectively.

Residential mortgage banking revenue, which is the primary source of income for the Mortgage Banking segment, decreased $10.3 million and $48.2 million for the three and nine months ended September 30, ~~2020~~2021, as compared to ~~the same~~comparison periods, due to a decrease in ~~the prior year. The decrease is primarily related to the Bank waiving certain ATM fees and deposit account related fees~~originations driven by a slowdown in refinancing demand as well as a ~~result of the COVID-19 pandemic. In addition, there has been a change~~decline in customers' spending habits as a result of the COVID-19 pandemic, which has resulted in overdraft and interchange fees decreasing as customers are keeping more funds liquid and making fewer transactions.gain on sale margins.

~~Table of Contents~~

~~Residential~~For-sale mortgage banking revenue for the three and nine months ended September 30, 2020, as compared to the same periods of 2019, increased by $43.4 million and $124.0 million, respectively. The increase for the three and nine month periods was primarily driven by an increase in originations in 2020 due to elevated refinance demand because of lower interest rates, which resulted in an increase in revenue related to originations and sale of residential mortgages of $67.3 million and $155.9 million, respectively, as compared to prior periods. This was offset by higher origination expenses and a higher loss on fair value of the MSR of $17.1 million and $59.2 million for the three and nine months ended September 30, 2020, respectively, compared to a gain of $4.2 millionclosed loan volume for the three months ended September 30, ~~2019 and~~2021, decreased 21% as compared to the three months ended June 30, 2021. In addition, the gain on sale margin decreased to 3.07% for the three months ended September 30, 2021, as compared to 3.30% for the three months ended June 30, 2021. Direct expense related to the origination of for-sale mortgage loans as a ~~loss~~percentage of ~~$34.4 million~~loan production was 2.02% for the three months ended September 30, 2021, as compared to 2.03% for the three months ended June 30, 2021.

For-sale mortgage closed loan volume decreased 21% for the nine months ended September 30, ~~2019. For-sale mortgage closed loan volume increased 128% or $1.1 billion and 141% or $2.9 billion, respectively, for~~2021, as compared to the ~~three and~~ nine months ended September 30, ~~2020, as compared to prior periods. In addition,~~2020. For the nine months ended September 30, 2021, the gain on sale margin ~~increased~~decreased to ~~5.13% and~~3.46%, as compared to 4.59%~~, respectively,~~ for the ~~three and~~ nine months ended September 30, ~~2020,~~2020. Direct expense related to the origination of for-sale mortgage loans as a percentage of loan production was 1.98% for the nine months ended September 30, 2021, compared to ~~3.72% and 3.40% in~~1.92% for the ~~same periods of the prior year due to constrained industry capacity.~~nine months ended September 30, 2020.

Origination volume is generally linked to the level of interest rates. IfWhen rates fall, origination volume would be expected to be elevated relative to historical levels. IfWhen rates rise, origination volume would be expected to ~~fall.~~decline. Margins observed in the current quarter could ~~be expected to~~ narrow somewhat in future periods as mortgage industry capacity constraints ease further and refinance demand ~~is met. In addition, government-sponsored entity investors are increasing fees for refinance loans sold to them starting in December 2020, which may reduce refinance activity and gain on sale margins.~~wanes. The MSR asset value is also sensitive to interest rates, and generally falls with lower rates and rises with higher rates.

Servicing income was ~~$8.8~~$9.2 million ~~and $26.2 million, respectively,~~ for the three ~~and~~months ended September 30, 2021, as compared to $9.1 million for the three months ended June 30, 2021. For the nine months ended September 30, 2021 and 2020, ~~as compared to $11.4~~servicing income was $27.4 million and ~~$33.2~~$26.2 million, for the same periods of 2019. Income was lower primarily due to a smaller portfolio of loans serviced for others, resulting from a sale of part of the servicing portfolio in 2019. Operating expenses associated with mortgage servicing activities are at risk of increasing in future periods due to the potential of higher default frequency as a result of the COVID-19 pandemic.respectively.

The following table presents our residential mortgage banking ~~revenues~~revenue for the three months ended September 30, 2021 and June 30, 2021, as well as the nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended				Nine Months Ended					Three Months Ended						Nine Months Ended
(in thousands)	(in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		(in thousands)	September 30, 2021			June 30, 2021				September 30, 2021			September 30, 2020
Origination and sale	Origination and sale	$	98,703	$	31,432	$	224,831	$	68,956	Origination and sale	$	30,293		$	41,367			$	134,165		$	224,831
Servicing	Servicing	8,796		11,358		26,209		33,218		Servicing	9,172			9,120				27,379			26,209
Change in fair value of MSR asset:	Change in fair value of MSR asset:									Change in fair value of MSR asset:
Changes due to collection/realization of expected cash flows over time	Changes due to collection/realization of expected cash flows over time	(4,878)		(6,835)		(15,249)		(20,171)		Changes due to collection/realization of expected cash flows over time	(4,681)			(4,366)				(13,592)			(15,249)
Changes in valuation inputs or assumptions (1)	Changes in valuation inputs or assumptions (1)	(12,244)		11,045		(43,997)		(14,243)		Changes in valuation inputs or assumptions (1)	(634)			(1,678)				(4,326)			(43,997)
Balance, end of period		$	90,377	$	47,000	$	191,794	$	67,760
Residential mortgage banking revenue, net										Residential mortgage banking revenue, net	$	34,150		$	44,443			$	143,626		$	191,794

LHFS Production Statistics:										LHFS Production Statistics:
Closed loan volume for-sale										Closed loan volume for-sale	$	987,281		$	1,253,023			$	3,875,836		$	4,897,068
Gain on sale margin										Gain on sale margin	3.07		%	3.30		%		3.46		%	4.59		%

(1)The changes in valuation inputs and assumptions principally reflect changes in discount rates and prepayment speeds, which are primarily affected by changes in interest rates.

The loss on sale of debt securities of $7.2 million for the nine months ended September 30, 2019 was due to a strategic restructuring of our available for sale debt securities portfolio to reduce interest rate sensitivity, which has not been repeated in the current periods.

~~Gain on equity securities for the nine months ended September 30, 2019 was due to the one-time gain on sale of all of the shares of Visa Inc. Class B common stock held by the Company.~~

Other income for the three months ended September 30, 2020 increased by $3.6 million, when compared to the same period in the prior year, primarily due to the gain of $5.9 million on the sale of three stores during the three months ended September 30, 2020. Other income decreased by $8.0 million for the nine months ended September 30, 2020 when compared to the same period in the prior year, primarily due to the decline in revenue from market swap fees of $4.3 million and a loss on the swap derivative fair value of $2.3 million.

5956

Table of Contents

Non-Interest Expense

Non-interest expense for the three ~~and~~months ended September 30, 2021 was $183.8 million, a decrease of $5.6 million or 3% compared to the three months ended June 30, 2021. Non-interest expense for the nine months ended September 30, ~~2020~~2021 was ~~$190.2~~$560.7 million, ~~and $2.3 billion, respectively, an increase~~a decrease of ~~$6.6 million and~~ $1.8 billion or ~~4% and 336%~~76%, as compared to the ~~same periods in 2019.~~nine months ended September 30, 2020. Excluding the goodwill impairment taken in 2020, non-interest expense for the nine months ended September 30, ~~2020,~~2021, increased ~~$14.2~~$10.9 million over the same period in the prior year. The following table presents the key elements of non-interest expense for the three months ended September 30, 2021 and June 30, 2021, as well as the nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended								Nine Months Ended
		September 30,								September 30,									Three Months Ended						Nine Months Ended
(in thousands)	(in thousands)	2020		2019		Change Amount		Change Percent		2020		2019		Change Amount		Change Percent		(in thousands)	September 30, 2021		June 30, 2021		Change Amount		Change Percent		September 30, 2021		September 30, 2020		Change Amount		Change Percent
Salaries and employee benefits	Salaries and employee benefits	$	120,337	$	106,819	$	13,518	13	%	$	346,787	$	311,526	$	35,261	11	%	Salaries and employee benefits	$	117,636	$	121,573	$	(3,937)	(3)	%	$	363,343	$	346,787	$	16,556	5	%
Occupancy and equipment, net	Occupancy and equipment, net	36,720		35,446		1,274		4	%	109,892		107,723		2,169		2	%	Occupancy and equipment, net	33,944		34,657		(713)		(2)	%	103,236		109,892		(6,656)		(6)	%
Communications	Communications	2,943		3,617		(674)		(19)	%	9,010		11,743		(2,733)		(23)	%	Communications	2,866		3,004		(138)		(5)	%	8,633		9,010		(377)		(4)	%
Marketing	Marketing	1,859		3,804		(1,945)		(51)	%	6,148		10,842		(4,694)		(43)	%	Marketing	1,651		2,054		(403)		(20)	%	5,077		6,148		(1,071)		(17)	%
Services	Services	13,193		15,326		(2,133)		(14)	%	34,319		40,763		(6,444)		(16)	%	Services	12,017		13,512		(1,495)		(11)	%	36,279		34,319		1,960		6	%
FDIC assessments	FDIC assessments	2,989		2,587		402		16	%	9,502		8,366		1,136		14	%	FDIC assessments	2,136		1,607		529		33	%	6,342		9,502		(3,160)		(33)	%

Intangible amortization	Intangible amortization	1,247		1,405		(158)		(11)	%	3,740		4,214		(474)		(11)	%	Intangible amortization	1,130		1,130		—		—	%	3,390		3,740		(350)		(9)	%

Other expenses	Other expenses	10,919		14,586		(3,667)		(25)	%	30,441		40,420		(9,979)		(25)	%	Other expenses	12,373		11,863		510		4	%	34,445		30,441		4,004		13	%
Non-interest expense before goodwill impairment	Non-interest expense before goodwill impairment	190,207		183,590		6,617		4	%	549,839		535,597		14,242		3	%	Non-interest expense before goodwill impairment	183,753		189,400		(5,647)		(3)	%	560,745		549,839		10,906		2	%
Goodwill impairment	Goodwill impairment	—		—		—		nm		1,784,936		—		1,784,936		nm		Goodwill impairment	—		—		—		N/M		—		1,784,936		(1,784,936)		N/M
Total non-interest expense	Total non-interest expense	$	190,207	$	183,590	$	6,617	4	%	$	2,334,775	$	535,597	$	1,799,178	336	%	Total non-interest expense	$	183,753	$	189,400	$	(5,647)	(3)	%	$	560,745	$	2,334,775	$	(1,774,030)	(76)	%
nm = Not meaningful

Goodwill impairment of $1.8 billion was recorded as of March 31, 2020, ~~due to~~following an interim impairment analysis in the first quarter of 2020 triggered by the decline in interest rates and economic impacts of COVID-19, as well as declines in the Company's stock price. ~~The~~There was no impairment ~~was a result of market volatility and forecasts for a prolonged low interest rate environment, as well as estimated higher credit losses expected due to~~recorded in the ~~economic downturn.~~current period.

Salaries and employee benefits ~~increased~~decreased by ~~$13.5~~$3.9 million ~~and $35.3 million, respectively,~~ for the three ~~and nine~~ months ended September 30, ~~2020 as~~2021, compared to the ~~same periods in the prior year. This increase is primarily related to an increase in home lending compensation of $10.6 million and $31.4 million for the~~ three ~~and nine~~ months ended ~~September~~June 30, ~~2020, respectively, related~~2021. This was primarily due to ~~higher~~the decrease in for-sale loan origination ~~volumes during the period.~~

~~Communications expense decreased by $674,000 and $2.7 million for the three and nine months ended September 30, 2020, respectively, due to~~volume resulting in a decrease in ~~data processing costs.~~

~~Marketing expense decreased by $1.9 million~~Mortgage Banking compensation of $4.2 million. Salaries and $4.7 million, respectively, for the three and nine months ended September 30, 2020, as compared to the same periods in the prior year due to the advertising in 2019 to attract wholesale and middle-market customers and to promote our Umpqua Go-To® app.

Services expense decreased by $2.1 million and $6.4 million, respectively, for the three and nine months ended September 30, 2020, as compared to the same periods in the prior year. The decrease primarily relates to lower consulting fees related to engagements in the same period of the prior year to assist with the identification and implementation of operational efficiencies that did not recur in 2020. In addition, current consulting engagements have been put on hold in some cases due to COVID-19 related to economic uncertainties and cost containment measures.

~~Table of Contents~~

Other non-interest expense decreased by $3.7 million and $10.0 million, respectively, for the three and nine months ended September 30, 2020, as compared to the same periods in the prior year. The decrease for the three and nine months ended September 30, 2020 is primarily related to a decrease in the loss on OREO, a decrease in exit and disposal costs, as well as a decrease in travel expenses as the Bank continues to limit travel and use remote collaboration tools.

~~Income Taxes~~

The Company's consolidated effective tax rate as a percentage of pre-tax income (loss) for the three and nine months ended September 30, 2020, was 21.3% and (4.4)% as compared to 23.6% and 24.5% for the three and nine months ended September 30, 2019. The effective tax rateemployee benefits increased for the nine months ended September 30, ~~2020, declined~~2021, compared to the prior period, due to an increase in incentives and group insurance.

Occupancy and equipment, net decreased by $6.7 million for the nine months ended September 30, 2021, compared to the same period in the prior year. The decrease is primarily attributable to a decrease in rent-related expenses due to the ~~impairment~~consolidation of non-deductible goodwill. Additionally, the effective tax rates differed from the statutory rate principally because of state taxes, non-taxable income arising from bank owned life insurance, income on tax-exempt investment securities, non-deductible FDIC premiumsstore and ~~tax credits arising from low income housing investments.~~back-office locations.

Services for the three months ended September 30, 2021, decreased by $1.5 million as compared to the three months ended June 30, 2021. Services increased by $2.0 million for the nine months ended September 30, 2021 compared to the same period in the prior year. The change is due to increased consulting and professional fees during the first half of 2021.

The FDIC assessment decreased $3.2 million for the nine months ended September 30, 2021, due to a decrease in the Bank's assessment rate.

Other expenses increased by $4.0 million for the nine months ended September 30, 2021, compared to the same period in the prior year. The increase for the nine months ended September 30, 2021 was due to increased exit and disposal costs as the Company closed store locations and exited back-office leases as part of the Next Gen 2.0 strategy. Exit and disposal costs were $9.7 million and $1.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Table of Contents

FINANCIAL CONDITION

Cash and Cash Equivalents

Cash and cash equivalents were ~~$2.2~~$3.7 billion at September 30, ~~2020,~~2021, compared to ~~$1.4~~$2.6 billion at December 31, ~~2019.~~2020. The increase of interest bearing cash and temporary investments reflects ~~management's strategy to adopt an~~strong deposit growth in the period, outpacing loan and investment growth as well as paydowns of the Company's borrowings. An elevated on-balance sheet liquidity ~~position. Having high quality liquid assets~~position enhances the Company's liquidity flexibility given the market volatility and uncertainty in the current environment.

Investment Securities

~~Equity and other securities were $82.8 million at September 30, 2020, up from $80.2 million at December 31, 2019.~~

Investment debt securities available for sale were ~~$2.9~~$3.7 billion as of September 30, ~~2020,~~2021, compared to ~~$2.8~~$2.9 billion at December 31, ~~2019.~~2020. The increase was due to purchases of ~~$595.4 million~~$1.5 billion of investment securities, offset by sales and paydowns of $578.2 million, as well as ~~an increase~~a decrease of ~~$115.1~~$93.5 million in fair value of investment securities available for ~~sale, offset by sales and paydowns of $604.6 million.~~sale.

The following tables present the available for sale and held to maturity investment debt securities portfolio by major type as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


		Investment Securities Available for Sale									Investment Securities Available for Sale
		September 30, 2020				December 31, 2019					September 30, 2021				December 31, 2020
(dollars in thousands)	(dollars in thousands)	Fair Value		%		Fair Value		%		(dollars in thousands)	Fair Value		%		Fair Value		%
U.S. Treasury and agencies	U.S. Treasury and agencies	$	757,953	26	%	$	643,604	23	%	U.S. Treasury and agencies	$	838,977	23	%	$	762,202	26	%
Obligations of states and political subdivisions	Obligations of states and political subdivisions	264,487		9	%	261,094		9	%	Obligations of states and political subdivisions	283,409		7	%	279,511		10	%
Residential mortgage-backed securities and collateralized mortgage obligations	Residential mortgage-backed securities and collateralized mortgage obligations	1,876,260		65	%	1,909,984		68	%	Residential mortgage-backed securities and collateralized mortgage obligations	2,600,785		70	%	1,890,845		64	%

Total available for sale securities	Total available for sale securities	$	2,898,700	100	%	$	2,814,682	100	%	Total available for sale securities	$	3,723,171	100	%	$	2,932,558	100	%


		Investment Securities Held to Maturity									Investment Securities Held to Maturity
		September 30, 2020				December 31, 2019					September 30, 2021				December 31, 2020
(dollars in thousands)	(dollars in thousands)	Amortized Cost		%		Amortized Cost		%		(dollars in thousands)	Amortized Cost		%		Amortized Cost		%

Residential mortgage-backed securities and collateralized mortgage obligations	Residential mortgage-backed securities and collateralized mortgage obligations	$	3,088	100	%	$	3,260	100	%	Residential mortgage-backed securities and collateralized mortgage obligations	$	2,795	100	%	$	3,034	100	%

Total held to maturity securities	Total held to maturity securities	$	3,088	100	%	$	3,260	100	%	Total held to maturity securities	$	2,795	100	%	$	3,034	100	%

We review investment securities on an ongoing basis for the presence of impairment, taking into consideration current market conditions, fair value in relationship to cost, extent and nature of the change in fair value, issuer rating changes and trends, whether we intend to sell a security or if it is likely that we will be required to sell the security before recovery of our amortized cost basis of the investment, which may be maturity, and other factors.

Gross unrealized losses in the available for sale investment portfolio were ~~$548,000~~$38.9 million at September 30, ~~2020.~~2021. This consisted primarily of unrealized losses on residential mortgage-backed securities and collateralized mortgage obligations of ~~$430,000.~~$35.4 million. The unrealized losses were attributable to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities and are not attributable to changes in credit quality. In the opinion of management, no allowance for credit losses was considered necessary on these debt securities as of September 30, ~~2020.~~2021.

Restricted Equity Securities

Restricted equity securities were ~~$50.1~~$10.9 million at September 30, ~~2020~~2021 and ~~$46.5~~$41.7 million at December 31, ~~2019,~~2020, the majority of which represents the Bank's investment in the FHLB of Des Moines. The ~~increase~~decrease is attributable to ~~purchases~~redemptions of FHLB stock during the period due to ~~additional~~decreased FHLB borrowing ~~activity driven by the Company's liquidity strategy to increase on balance-sheet liquidity in the current environment.~~activity. FHLB stock is carried at par and does not have a readily determinable fair value. Ownership of FHLB stock is restricted to the FHLB and member institutions and can only be purchased and redeemed at par.

6258

Table of Contents

Loans and Leases

Total loans and leases outstanding at September 30, ~~2020~~2021 were ~~$22.4~~$22.0 billion, an increase of ~~$1.2 billion~~$190.6 million as compared to December 31, ~~2019.~~2020. The increase is attributable to ~~net~~ new loan and lease originations, with the majority being in multifamily and residential mortgage loans, as well as the transfer of ~~$1.3 billion, primarily due~~$315.9 million from loans held for sale to ~~our participation in the PPP.~~loans held for investment. The increase was partially offset by PPP loan forgiveness and payoffs, as well as loans sold of ~~$57.4~~$171.7 million and net charge-offs of ~~$51.4~~$37.5 million.

The following table presents the concentration distribution of the loan and lease portfolio, net of deferred fees and costs, as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


	September 30, 2021				December 31, 2020
(dollars in thousands)	Amount		%		Amount		%
Commercial real estate
Non-owner occupied term, net	$	3,561,764	16	%	$	3,505,802	16	%
Owner occupied term, net	2,330,338		11	%	2,333,945		11	%
Multifamily, net	3,813,024		17	%	3,349,196		15	%
Construction & development, net	882,778		4	%	828,478		4	%
Residential development, net	177,148		1	%	192,761		1	%
Commercial
Term, net	3,159,466		14	%	4,024,467		18	%
Lines of credit & other, net	930,350		4	%	862,760		4	%
Leases & equipment finance, net	1,457,248		7	%	1,456,630		7	%
Residential
Mortgage, net	4,330,860		20	%	3,871,906		18	%
Home equity loans & lines, net	1,133,823		5	%	1,136,064		5	%
Consumer & other, net	193,141		1	%	217,358		1	%
Total, net of deferred fees and costs	$	21,969,940	100	%	$	21,779,367	100	%

September 30, 2020 December 31, 2019
(dollars in thousands)
Amount Percentage Amount Percentage
Commercial real estate
Non-owner occupied term, net $ 3,533,776 16 % $ 3,545,566 17 %
Owner occupied term, net 2,411,098 11 % 2,496,088 12 %
Multifamily, net 3,389,034 15 % 3,514,774 16 %
Construction & development, net 757,462 3 % 678,740 3 %
Residential development, net 163,400 1 % 189,010 1 %
Commercial
Term, net 4,246,229 19 % 2,232,817 10 %
Lines of credit & other, net 894,782 4 % 1,212,393 6 %
Leases & equipment finance, net 1,496,650 7 % 1,465,489 7 %
Residential
Mortgage, net 4,042,416 18 % 4,215,424 20 %
Home equity loans & lines, net 1,172,697 5 % 1,237,512 6 %
Consumer & other, net 318,929 1 % 407,871 2 %
Total, net of deferred fees and costs $ 22,426,473 100 % $ 21,195,684 100 %

As of September 30, 2021, there were $353.9 million in mortgage loans included in loans held for investment that are carried at fair value, as they were included in loans originated as held for sale that are elected to be fair valued at origination.

In April 2020, the Bank began originating loans to qualified small businesses under the PPP administered by the SBA under the provisions of the CARES Act. Loans covered by the PPP may be eligible for loan forgiveness for certain costs incurred related to payroll, group health care benefit costs and qualifying mortgage, rent and utility payments.SBA. The ~~remaining loan balance after forgiveness of any amounts is still fully guaranteed by the SBA and therefore these loans carry no allowance for credit loss as of September 30, 2020.~~

~~Terms of the PPP loans typically include the following:~~

•~~Fixed interest rate of 1.00%;~~

•~~Loans issued have a maturity date of two or five years, depending on their date of issuance, and have the ability to prepay with no fees;~~

•~~First payment deferred for up to six months, with the potential ability to extend for another six months;~~

•Loan forgiveness up to the full principal amount of the loan and any accrued interest, subject to certain requirements including that no more than 25% of the loan forgiveness amount may be attributable to non-payroll costs;

•~~No collateral or personal guarantees are required;~~

•~~Maximum amount limited to the lesser of $10.0 million or an amount calculated using a payroll-based formula.~~

In return for processing and booking the loan, the SBA will pay the lender a processing fee tiered by the size of the loan; 5% for loans of up to $350,000; 3% for loans greater than $350,000 and less than $2.0 million; and 1% for loans of at least $2.0 million.

Through September 30, 2020, we have funded approximately $2.0 billion of SBA-approved PPP loans to approximately 16,900 customers for an average customer loan balance of $122,000, which are classified as commercial term loans.We expect to recognize the remaining unamortized balance of the PPP-related net loan processing fees ~~of approximately $51.2 million,~~will be recognized as a yield adjustment over the remaining term of these ~~loans.~~loans, although the forgiveness of these loans by the SBA accelerates the recognition of these fees.


(dollars in thousands)	September 30, 2021		December 31, 2020
PPP principal balance	$	747,979	$	1,777,145
PPP deferred fees	(21,242)		(26,934)
Net PPP Balance	$	726,737	$	1,750,211

PPP loan count	7,492		14,788

6359

Table of Contents

~~The following table summarizes our PPP loans broken out by state (within our footprint) as of September 30, 2020:~~

(dollars in thousands) Number of PPP Loans PPP Loan Balances % of Total PPP Loans
Oregon 6,595 $ 726,007 36 %
California 5,161 730,127 36 %
Washington 4,214 416,909 21 %
Idaho 413 46,877 2 %
Nevada 380 56,103 3 %
Other 156 31,356 2 %
Total, net of deferred fees and costs 16,919 $ 2,007,379 100 %

Asset Quality and Non-Performing Assets

The following table summarizes our non-performing assets, ~~and~~ TDR loans, the ACL and asset quality ratios as of September 30, ~~2020~~2021 and December 31, ~~2019:~~

(dollars in thousands)
September 30, 2020 December 31, 2019
Loans and leases on non-accrual status $ 26,425 $ 26,244
Loans and leases past due 90 days or more and accruing (1)
50,269 37,969
Total non-performing loans and leases 76,694 64,213
Other real estate owned 2,369 3,295
Total non-performing assets $ 79,063 $ 67,508
Restructured loans (2)
$ 15,819 $ 18,576
Allowance credit losses on loans and leases $ 345,049 $ 157,629
Reserve for unfunded commitments 24,306 5,106
Allowance for credit losses $ 369,355 $ 162,735
Asset quality ratios:
Non-performing assets to total assets 0.27 % 0.23 %
Non-performing loans and leases to total loans and leases 0.34 % 0.30 %
Allowance for credit losses on loans and leases to total loans and leases 1.54 % 0.74 %
Allowance for credit losses to total loans and leases 1.65 % 0.77 %
Allowance for credit losses to total non-performing loans and leases 482 % 253 %
2020:


(dollars in thousands)	September 30, 2021			December 31, 2020
Loans and leases on non-accrual status	$	24,152		$	31,076
Loans and leases past due 90 days or more and accruing	27,490			36,361
Total non-performing loans and leases	51,642			67,437
Other real estate owned	1,868			1,810
Total non-performing assets	$	53,510		$	69,247
Restructured loans (1)	$	9,849		$	14,991
Allowance credit losses on loans and leases	$	257,560		$	328,401
Reserve for unfunded commitments	11,752			20,286
Allowance for credit losses	$	269,312		$	348,687
Asset quality ratios:
Non-performing assets to total assets	0.17		%	0.24		%
Non-performing loans and leases to total loans and leases	0.24		%	0.31		%
Allowance for credit losses on loans and leases to total loans and leases	1.17		%	1.51		%
Allowance for credit losses to total loans and leases	1.23		%	1.60		%
Allowance for credit losses to total non-performing loans and leases	521		%	517		%

(1)Excludes government guaranteed GNMA mortgage loans that Umpqua has the right but not the obligation to repurchase totaling $20.0 million and $4.3 million as of September 30, 2020 and December 31, 2019, respectively.

~~(2)~~Represents accruing TDR loans performing according to their restructured terms.

At September 30, ~~2020~~2021 and December 31, ~~2019, troubled debt restructurings~~2020, TDRs of ~~$15.8~~$9.8 million and ~~$18.6~~$15.0 million, respectively, were classified as accruing ~~TDR~~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 new TDR loan to be considered performing and on accrual status, the loan's collateral coverage generally will be greater than or equal to 100% of the loan balance, the loan must be 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.

A further decline in the economic conditions due to the COVID-19 pandemic as well as in our general market areas or other factors could adversely impact individual borrowers or the loan portfolio in general. Accordingly, there can be no assurance that loans will not become 90 days or more past due, placed on non-accrual status, restructured or transferred to other real estate owned in the future. ~~Umpqua is committed to helping borrowers during this unprecedented time of uncertainty and is working with customers on payment deferrals, forbearances, and other loan modifications.~~

~~Table of Contents~~

COVID-19 Related Payment Deferrals and Forbearance

Due to the deterioration of the USU.S. economy resulting from the COVID-19 pandemic, the Company ~~has~~ had an increase in loan payment deferral and forbearance requests. Once a deferral or forbearance request is received, a late charge waiver is put in place and payments are suspended for ~~up to six months.~~an agreed-upon period. Accrued and unpaid interest during the deferral period will be collected upon the expiration of the deferral or on a regular repayment schedule at the end of the deferral period. For certain loan types, the maturity date may be extended ~~one to six months~~ to allow for full amortization. ~~These~~In accordance with the deferral guidance at the federal and state levels, these loans are generally classified based on their past due status prior to their deferral ~~period, so they~~period; as such, are classified as performing loans that accrue interest.

Table of Contents

A summary of outstanding loan balances with active payment deferral or forbearance as of September 30, ~~2020~~2021 are shown in the table below, disaggregated by major types of loans and leases:


	Loans with Deferrals or Forbearances
(dollars in thousands)	Number of Loans	Loan Balance Outstanding		% of Loan Portfolio
Commercial real estate	8	$	58,086	1	%





Commercial	4	469		—	%



Residential	148	73,732		1	%


Consumer & other, net	12	202		—	%
Total	172	$	132,489	1	%

Loans with Deferrals or Forbearances
(dollars in thousands) Number of Loans Loan Balance Outstanding % of Loan Portfolio
Commercial real estate
Non-owner occupied term, net 27 $ 143,423 4.1 %
Owner occupied term, net 29 61,142 2.5 %
Multifamily, net 9 3,866 0.1 %
Construction & development, net 1 1,637 0.2 %
Commercial
Term, net 20 65,506 1.5 %
Lines of credit & other, net 22 1,463 0.2 %
Leases & equipment finance, net 1,785 67,529 4.5 %
Residential
Mortgage, net 1,122 427,977 10.6 %
Home equity loans & lines, net 57 7,327 0.6 %
Consumer & other, net 125 2,467 0.8 %
Total 3,197 $ 782,337 3.5 %

~~Included in~~Excluded from the mortgage loans with payment deferrals or forbearance in the above table are ~~$107.4~~$121.0 million of repurchased GNMA loans ~~repurchased~~on deferral, as the credit risk of these loans are guaranteed by government programs such as the ~~Bank from GNMA during the quarter, due to the fact that GNMA considers them delinquent~~Federal Housing Agency, Veterans Affairs, and ~~the Bank had the right to repurchase the loans.~~USDA Rural Development.

The Bank continues to monitor COVID-19 deferrals and if a customer continues to experience financial difficulty after the initial deferral and further concessions are granted, the loan will be reviewed to determine if a TDR designation is appropriate. ~~As of October 31, 2020, the Company had $562.9 million in loans on deferral or forbearance, reflecting a positive trend as compared to loans with deferrals or forbearances as of September 30, 2020.~~

~~Table of Contents~~

Allowance for Credit Losses

The ACL totaled ~~$369.4~~$269.3 million at September 30, ~~2020, an increase~~2021, a decrease of ~~$206.6~~$79.4 million from ~~$162.7~~$348.7 million at December 31, ~~2019.~~2020. The following table shows the activity in the ACL for the three months ended September 30, 2021 and June 30, 2021, as well as for the nine months ended September 30, ~~2020~~2021 and ~~2019:~~ 2020:


		Three Months Ended						Nine Months Ended
(dollars in thousands)		September 30, 2021			June 30, 2021			September 30, 2021			September 30, 2020
Allowance for credit losses on loans and leases
	Balance, beginning of period	$	279,887		$	311,283		$	328,401		$	157,629
	Impact of CECL adoption	—			—			—			49,999
	Adjusted balance, beginning of period	279,887			311,283			328,401			207,628
	(Recapture) provision for credit losses on loans and leases	(16,132)			(17,775)			(33,381)			188,771
	Charge-offs	(10,373)			(17,079)			(48,367)			(60,554)
	Recoveries	4,178			3,458			10,907			9,204
	Net charge-offs	(6,195)			(13,621)			(37,460)			(51,350)
	Balance, end of period	$	257,560		$	279,887		$	257,560		$	345,049
Reserve for unfunded commitments
	Balance, beginning of period	$	14,539		$	19,760		$	20,286		$	5,106
	Impact of CECL adoption	—			—			—			3,238
	Adjusted balance, beginning of period	14,539			19,760			20,286			8,344
	(Recapture) provision for credit losses on unfunded commitments	(2,787)			(5,221)			(8,534)			15,962
	Balance, end of period	11,752			14,539			11,752			24,306
Total allowance for credit losses		$	269,312		$	294,426		$	269,312		$	369,355
As a percentage of average loans and leases (annualized):
	Net charge-offs	0.11		%	0.25		%	0.23		%	0.31		%
	(Recapture) provision for credit losses	(0.34)		%	(0.42)		%	(0.26)		%	1.24		%
Recoveries as a percentage of charge-offs		40.28		%	20.25		%	22.55		%	15.20		%

Three Months Ended Nine Months Ended
(dollars in thousands) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Allowance for credit losses on loans and leases
Balance, beginning of period $ 356,745 $ 151,069 $ 157,629 $ 144,871
Impact of adoption of CECL — — 49,999 —
Adjusted balance, beginning of period 356,745 151,069 207,628 144,871
Provision for credit losses on loans and leases 1,785 23,227 188,771 56,263
Charge-offs (16,646) (23,112) (60,554) (56,971)
Recoveries 3,165 5,104 9,204 12,125
Net charge-offs (13,481) (18,008) (51,350) (44,846)
Balance, end of period $ 345,049 $ 156,288 $ 345,049 $ 156,288
Reserve for unfunded commitments
Balance, beginning of period $ 26,368 $ 4,857 $ 5,106 $ 4,523
Impact of adoption of CECL — — 3,238 —
Adjusted balance, beginning of period 26,368 4,857 8,344 4,523
(Recapture) provision for credit losses on unfunded commitments (2,062) 228 15,962 562
Balance, end of period 24,306 5,085 24,306 5,085
Total allowance for credit losses $ 369,355 $ 161,373 $ 369,355 $ 161,373
As a percentage of average loans and leases (annualized):
Net charge-offs 0.24 % 0.34 % 0.31 % 0.29 %
Provision for credit losses (1) (2)
— % 0.44 % 1.24 % 0.37 %
Recoveries as a percentage of charge-offs 19.01 % 22.08 % 15.20 % 21.28 %

~~(1)~~ ~~For comparability, the provision for credit losses as a percentage~~Table of ~~average loans and leases annualized includes both the provision for loan and lease losses and the provision for unfunded commitments in prior periods.~~Contents

~~(2)~~ The total provision for credit losses disclosed in this table does not include the recapture or provision related to accrued interest on loans deferred due to COVID-19, which is included in the provision for credit losses in the income statement for the three and nine months ended September 30, 2020.

With the adoption of CECL on January 1, 2020, we recorded a one-time cumulative-effect pre-tax adjustment in the amount of $53.2 million. The allowance for credit losses on loans and leases increased by $50.0 million and the allowance for unfunded commitments increased by $3.2 million, resulting in a January 1, 2020, or day 1, balance of the Allowance for Credit Losses of $216.0 million.

The ~~recapture of or~~(recapture) provision for credit losses includes the (recapture) provision for loan and lease losses, (recapture) provision ~~(recapture)~~ for unfunded commitments, and the provision (recapture) ~~provision~~ for credit losses related to accrued interest on ~~loans deferred due to COVID-19.~~loans. The recapture of ~~credit losses was $338,000 for~~ the ~~three months ended September 30, 2020. The~~ provision for credit losses was ~~$204.8~~$18.9 million and $41.9 million for the three and nine months ended September 30, ~~2020. The decrease from $23.5 million for the three months ended September 30, 2019 was~~2021, respectively, which is due to the stabilization of credit quality metrics and economic forecasts used in credit models as compared to prior periods in 2020, along with the decline in loan balances as compared to September 30, 2019. In addition, the Bank used CECL in the current year, but incurred loss in the prior year. CECL is expected to cause the provision for credit losses to be more volatile as we now reflect current expected credit losses, instead of incurred losses. The increase from $56.8 million for the nine months ended September 30, 2019 was principally attributable to the COVID-19 pandemic and its impact on the forecasts used to determine the expected credit losses of the loan and lease portfolio in the current year.models.

~~Table of Contents~~

The following table sets forth the allocation of the allowance for credit losses on loans and leases and percent of loans in each category to total loans and leases as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


		September 30, 2020				December 31, 2019					September 30, 2021				December 31, 2020
(dollars in thousands)	(dollars in thousands)	Amount		% Loans to total loans		Amount		% Loans to total loans		(dollars in thousands)	Amount		% Loans to total loans		Amount		% Loans to total loans
Commercial real estate	Commercial real estate	$	134,055	46	%	$	50,847	49	%	Commercial real estate	$	108,014	49	%	$	141,710	47	%
Commercial	Commercial	164,836		30	%	73,820		23	%	Commercial	118,934		25	%	150,864		29	%
Residential	Residential	35,194		23	%	24,714		26	%	Residential	27,280		25	%	27,964		23	%
Consumer & other	Consumer & other	10,964		1	%	8,248		2	%	Consumer & other	3,332		1	%	7,863		1	%

Allowance for credit losses on loans and leases	Allowance for credit losses on loans and leases	$	345,049			$	157,629			Allowance for credit losses on loans and leases	$	257,560			$	328,401

The following table shows the change in the allowance for credit losses from June 30, ~~2020~~2021 to September 30, ~~2020:~~

June 30, 2020 Q3 2020 net charge-offs (Release)/ reserve build September 30, 2020 % of Loan and Leases Outstanding
Commercial real estate $ 173,636 $ 61 $ (19,214) $ 154,483 1.51 %
Commercial 155,536 (13,382) 24,405 166,559 2.51 %
Residential 42,609 287 (6,183) 36,713 0.70 %
Consumer 11,332 (447) 715 11,600 3.64 %
Total allowance for credit losses(1)
$ 383,113 $ (13,481) $ (277) $ 369,355 1.65 %
% of Loans and leases outstanding 1.69 % 1.65 %
% of Loans and leases outstanding - excluding PPP Loans 1.85 % 1.81 %

~~(1)~~ 2021:The total allowance for credit losses disclosed in this table does not include the recapture or provision related to accrued interest on loans deferred due to COVID-19, which is included in the provision for credit losses in the income statement for the three and nine months ended September 30, 2020.


(dollars in thousands)	June 30, 2021			Q3 2021 net (charge-offs) recoveries		Reserve build/(release)		September 30, 2021			% of Loan and Leases Outstanding
Commercial real estate	$	139,045		$	(796)	$	(23,414)	$	114,835		1.07	%
Commercial	123,535			(5,175)		3,159		121,519			2.19	%
Residential	27,006			281		1,950		29,237			0.54	%
Consumer & Other	4,840			(505)		(614)		3,721			1.93	%
Total allowance for credit losses	$	294,426		$	(6,195)	$	(18,919)	$	269,312
% of loans and leases outstanding	1.33		%					1.23		%

To calculate the ACL, the CECL models use a forecast of future economic conditions and are dependent upon specific macroeconomic variables that are relevant to each of the Bank's loan and lease portfolios. For the third quarter of 2021, the Bank used Moody's Analytics August ~~Consensus forecast; key~~consensus economic forecast. Key components include a ~~US economy experiencing strong growth, then slow growth thereafter,~~U.S. real GDP average annualized growth of ~~6.6% from Q2-Q4 2020,~~4.9% through 2022 and average unemployment rate for 2021 of ~~10.7%~~5.5% dropping to 4.2% in ~~Q3 2020 with a return to less than 5% unemployment by 2024.~~2022. The models for calculating the ACL are sensitive to changes in these and other economic variables, which could result in volatility as these assumptions change over time. In addition, the forward-looking assumptions revert to historical data when they reach the point where future assumptions are no longer estimated.

Within the ACLL as of September 30, 2020, we had a qualitative overlay of $40.6 million related to loans and leases, which is above and beyond the model results. The majority of this overlay resulted from approximately $20.0 million in small ticket leases that are past due greater than 60 days after completing their deferral period. These will most likely result in an increase in charge-offs in the next quarter, but have already been fully reserved for in the ACL.

We believe that the allowance for credit losses as of September 30, ~~2020~~2021 is sufficient to absorb losses inherent in the loan and lease portfolio and in credit commitments outstanding as of that date based on the information available. If the economic conditions ~~continue to~~ decline or are worse than economic forecasts predict, the Bank may need additional provisions for credit losses in future periods.

6762

Table of Contents

Residential Mortgage Servicing Rights

The following table presents the changes in our residential mortgage servicing rights portfolio for the three months ended September 30, 2021 and June 30, 2021, as well as the nine months ended September 30, ~~2020~~2021 and ~~2019:~~ 2020:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(in thousands)	(in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		(in thousands)	September 30, 2021		June 30, 2021			September 30, 2021		September 30, 2020
Balance, beginning of period	Balance, beginning of period	$	96,356	$	139,780	$	115,010	$	169,025	Balance, beginning of period	$	102,699	$	100,413		$	92,907	$	115,010
Additions for new MSR capitalized	Additions for new MSR capitalized	14,014		7,393		37,484		16,772		Additions for new MSR capitalized	8,450		8,330			30,845		37,484

Changes in fair value:	Changes in fair value:									Changes in fair value:
Changes due to collection/realization of expected cash flows over time	Changes due to collection/realization of expected cash flows over time	(4,878)		(6,835)		(15,249)		(20,171)		Changes due to collection/realization of expected cash flows over time	(4,681)		(4,366)			(13,592)		(15,249)
Changes due to valuation inputs or assumptions (1)	Changes due to valuation inputs or assumptions (1)	(12,244)		11,045		(43,997)		(14,243)		Changes due to valuation inputs or assumptions (1)	(634)		(1,678)			(4,326)		(43,997)
Balance, end of period	Balance, end of period	$	93,248	$	151,383	$	93,248	$	151,383	Balance, end of period	$	105,834	$	102,699		$	105,834	$	93,248

(1)The changes in valuation inputs and assumptions principally reflect changes in discount rates and prepayment speeds, which are primarily affected by changes in interest rates.

Information related to our residential serviced loan portfolio as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 was as follows:


(dollars in thousands)	(dollars in thousands)	September 30, 2020			December 31, 2019			(dollars in thousands)	September 30, 2021			December 31, 2020
Balance of loans serviced for others	Balance of loans serviced for others	$	12,964,361		$	12,276,943		Balance of loans serviced for others	$	12,853,291		$	13,026,720
MSR as a percentage of serviced loans	MSR as a percentage of serviced loans	0.72		%	0.94		%	MSR as a percentage of serviced loans	0.82		%	0.71		%

~~Mortgage~~Residential mortgage servicing rights are adjusted to fair value quarterly with the change recorded in residential mortgage banking revenue. The value of servicing rights can fluctuate based on changes in interest rates and other factors. Generally, as interest rates decline and borrowers are able to take advantage of a refinance incentive, prepayments increase, and the total value of existing servicing rights declines as expectations of future servicing ~~fees~~fee collections decline. Historically, the fair value of our residential mortgage servicing rights will increase as market rates for mortgage loans rise and decrease if market rates fall. Mortgage refinance volumes remain ~~elevated~~elevated; however, accelerated prepayment speeds have slowed due to ~~low mortgage~~a flattening of long-term interest rates during the ~~current periods, which caused accelerated prepayments and higher expectations for prepayment speeds in the future.~~quarter.

~~The fair value of the MSR asset decreased by $12.2 million and $44.0 million, respectively, for the three and nine months ended September 30, 2020, due~~Due to changes to inputs in the valuation model including changes in discount rates and prepayment speeds, ~~which was due to decreases in~~ the ~~long term interest rates during~~fair value of the ~~period.~~MSR asset decreased by $634,000 and $4.3 million for the three and nine months ended September 30, 2021, respectively. The fair value of the MSR asset decreased ~~$4.9~~by $4.7 million and ~~$15.2~~$13.6 million, respectively, due to the passage of time, including the impact of regularly scheduled repayments, paydowns and payoffs during the three and nine months ended September 30, ~~2020.~~2021.

~~Goodwill~~

At September 30, 2020 and December 31, 2019, the Company had goodwill of $2.7 million and $1.8 billion, respectively. Goodwill is recorded in connection with business combinations and represents the excess of the purchase price over the estimated fair value of the net assets acquired. Goodwill impairment of $1.8 billion was recorded as of March 31, 2020, due to an interim impairment analysis triggered by the decline in interest rates and economic impacts of COVID-19, as well as declines in the Company's stock price. The impairment was a result of market volatility and forecasts for a prolonged low interest rate environment, as well as higher credit losses expected due to the forecasted economic downturn.

Deposits

Total deposits were ~~$24.7~~$26.9 billion at September 30, ~~2020,~~2021, an increase of ~~$2.2~~$2.3 billion, as compared to December 31, ~~2019.~~2020. The increase is mainly attributable to growth in non-interest bearing and interest bearing demand deposits and money market balances, offset by a decline in time deposits. The increase in non-maturity deposit account categories is ~~driven by~~attributable to the impact of economic assistance payments, in addition to increased customer savings rates as customers look to increase their own liquidity in this uncertain ~~environment, in addition, the increase is attributable to the impact of economic assistance payments.~~environment. The decrease in time deposits is mainly due to ~~lower brokered deposits as~~ the ~~Company has allowed these~~runoff of higher-cost ~~deposits to runoff, as well as the Company reducing its exception pricing on customer money market and~~ time deposits.

6863

Table of Contents

The following table presents the deposit balances by ~~major~~ category as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


		September 30, 2020				December 31, 2019					September 30, 2021				December 31, 2020
(dollars in thousands)	(dollars in thousands)	Amount		Percentage		Amount		Percentage		(dollars in thousands)	Amount		%		Amount		%
Non-interest bearing demand	Non-interest bearing demand	$	9,475,244	38	%	$	6,913,375	31	%	Non-interest bearing demand	$	11,121,127	41	%	$	9,632,773	39	%
Interest bearing demand	Interest bearing demand	2,931,990		12	%	2,524,534		11	%	Interest bearing demand	3,758,019		14	%	3,051,487		12	%
Money market	Money market	7,160,838		29	%	6,930,815		31	%	Money market	7,780,442		29	%	7,173,920		29	%
Savings	Savings	1,848,639		8	%	1,471,475		7	%	Savings	2,325,929		9	%	1,912,752		8	%
Time, $100,000 or greater		2,230,542		9	%	3,420,446		15	%
Time, less than $100,000		1,022,530		4	%	1,220,859		5	%
Time, greater than $250,000										Time, greater than $250,000	524,752		2	%	899,563		4	%
Time, $250,000 or less										Time, $250,000 or less	1,398,128		5	%	1,951,706		8	%
Total deposits	Total deposits	$	24,669,783	100	%	$	22,481,504	100	%	Total deposits	$	26,908,397	100	%	$	24,622,201	100	%

The Company's brokered deposits totaled ~~$523.2~~$353.8 million at September 30, ~~2020,~~2021, compared to ~~$1.2 billion~~$424.1 million at December 31, ~~2019.~~2020.

Borrowings

At September 30, ~~2020,~~2021, the Bank had outstanding ~~$388.0~~$467.8 million of securities sold under agreements to repurchase, an increase of ~~$76.7~~$92.4 million from December 31, ~~2019.~~2020. The Bank had outstanding borrowings consisting of advances from the FHLB of ~~$1.0 billion~~$6.4 million at September 30, ~~2020,~~2021, which ~~increased $89.9~~decreased $765.1 million from December 31, ~~2019; the increase~~2020. The decrease is attributable to ~~additional borrowing activity primarily driven by~~maturity payoffs during the ~~Company's liquidity strategy.~~period. The remaining FHLB ~~advances are secured by investment securities and loans secured by real estate. The FHLB advances have~~advance has a fixed interest ~~rates ranging from 0.60% to~~rate of 7.10% and ~~mature~~matures in ~~2020 through~~ 2030.

Junior Subordinated Debentures

We had junior subordinated debentures with carrying values of ~~$335.4~~$387.6 million and ~~$363.3~~$343.5 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The ~~decrease~~increase is mainly due to the ~~$26.9~~$44.5 million ~~decline~~change in fair value for the junior subordinated debentures elected to be carried at fair value, which is due ~~mostly~~ to a decrease in the discount rates caused by a decrease in the credit spread paired with an increase in the ~~credit spread, and the~~ implied forward curve, ~~shifting lower.~~partially offset by an increase in the long end of the SWAP spot curve. As of September 30, ~~2020,~~2021, substantially all of the junior subordinated debentures had interest rates that are adjustable on a quarterly basis based on a spread over ~~three month~~three-month LIBOR.

Liquidity and Cash Flow

The principal objective of our liquidity management program is to maintain the Bank's ability to meet the day-to-day cash flow requirements of our customers who either wish to withdraw funds or to draw upon credit facilities to meet their cash needs. The Bank's liquidity strategy ~~was adjusted to adopt~~includes an elevated on-balance sheet liquidity position to ~~further enhance~~grow deposit balances to provide flexibility ~~due~~ to ~~the increased market volatility~~fund growth in lending and ~~uncertainty~~investment portfolios, as ~~a result of the COVID-19 pandemic.~~well as deleverage liabilities as economic conditions permit. As a result, the Company believes that it has sufficient cash and access to borrowings to effectively manage through the COVID-19 pandemic as well as meet its working capital and other needs. The Company will continue to prudently evaluate and ~~expand~~maintain liquidity sources, including the ~~management of availability~~ability to fund future loan growth and ~~utilization of~~manage our borrowing sources.

We monitor the sources and uses of funds on a daily basis to maintain an acceptable liquidity position. One source of funds includes public deposits. Individual state laws require banks to collateralize public deposits, typically as a percentage of their public deposit balance in excess of FDIC insurance. Public deposits represented 7%5% of total deposits at September 30, ~~2020~~2021 and 9%7% of total deposits at December 31, ~~2019.~~2020. The amount of collateral required varies by state and may also vary by institution within each state, depending on the individual state's risk assessment of depository institutions. Changes in the pledging requirements for uninsured public deposits may require pledging additional collateral to secure these deposits, drawing on other sources of funds to finance the purchase of assets that would be available to be pledged to satisfy a pledging requirement, or could lead to the withdrawal of certain public deposits from the Bank. In addition to liquidity from core deposits and the repayments and maturities of loans and investment securities, the Bank can utilize established uncommitted federal funds lines of credit, sell securities under agreements to repurchase, borrow on a secured basis from the FHLB or issue brokered certificates of deposit.

6964

Table of Contents

The Bank had available lines of credit with the FHLB totaling ~~$6.3~~$8.5 billion at September 30, ~~2020,~~2021, subject to certain collateral requirements, namely the amount of pledged loans and investment securities. The Bank had available lines of credit with the Federal Reserve totaling ~~$456.4~~$915.8 million, subject to certain collateral requirements, ~~namely~~including eligibility and advance rates on the amount of ~~certain~~ pledged ~~loans.~~loans and investment securities. The Bank had uncommitted federal funds line of credit agreements with additional financial institutions totaling $460.0 million at September 30, ~~2020.~~2021. Availability of these lines is subject to federal funds balances available for loan and continued borrower eligibility. These lines are intended to support short-term liquidity needs, and the agreements may restrict consecutive day usage.

The Company is a separate entity from the Bank and must provide for its own liquidity. Substantially all of the Company's revenues are obtained from dividends declared and paid by the Bank. There were ~~$163.0~~$350.0 million of dividends paid by the Bank to the Company in the nine months ended September 30, ~~2020.~~2021, including the special dividend of $200.0 million paid in July 2021, to fund the repurchase plan announced by the Company. There are statutory and regulatory provisions that limit the ability of the Bank to pay dividends to the Company. The Company recorded a net loss of $7.60 per diluted common share for the nine months ended September 30, 2020, due to a $1.8 billion goodwill impairment charge recorded during the period. As a result, the Company has an accumulated deficit, instead of retained earnings at September 30, 2020.

~~Due to the accumulated deficit, the Company~~ is required to notify the Board of Governors of the Federal Reserve System ("FRB") prior to declaring and paying a cash dividend to our shareholders and may not pay a dividend if the FRB objects. Additionally, the Company will be required to seek FDIC and Oregon Division of Financial Regulation approval for quarterly dividends from Umpqua Bank to the Company. ~~In the second quarter, the Company changed the~~The timing of ~~its~~the quarterly dividend ~~to shareholders from an intra-quarter announcement to~~is after ~~quarterly~~each quarter's earnings ~~are released. The shift in announcement timing was made~~release to provide the ~~Company’s~~Company's Board of Directors and regulators with the opportunity to review final quarterly financial results and financial projections, prior to ~~approval~~the announcement of any ~~dividends. The~~dividend. Due to the Company's announcement of its pending merger with Columbia, Umpqua is restricted from paying quarterly cash dividends in excess of the current level and from repurchasing shares of Company ~~expects to continue this cadence for dividend payments in future quarters.~~common stock until the transaction is closed.

As disclosed in the Condensed Consolidated Statements of Cash Flows, net cash provided by operating activities was $541.5 million during the nine months ended September 30, 2021, with the difference between cash provided by operating activities and net income consisting primarily of proceeds from the sale of loans held for sale of $4.1 billion and the decrease in other assets of $161.1 million, offset by originations of loans held for sale of $3.9 billion, the gain on sale of loans of $124.8 million and recapture of provision for loan and lease losses of $41.9 million. This compares to net cash used in operating activities ~~was $81.0~~of $81.7 million during the nine months ended September 30, 2020, with the difference between cash used in operating activities and net loss consisting ~~primarily~~ of goodwill impairment of $1.8 billion, proceeds from the sale of loans held for sale of $5.0 billion, and provision for loan and lease losses of $204.8 million, offset by originations of loans held for sale of $4.9 billion, the net increase in other assets of ~~$231.8~~$232.5 million and ~~the~~ gain on sale of loans of $212.4 million. ~~This compares to net~~

Net cash of $764.9 million used in ~~operating~~investing activities ~~of $77.9 million~~ during the nine months ended September 30, ~~2019, with the difference between cash provided by operating activities~~2021, consisted principally of purchases of available for sale investment securities of $1.5 billion and net ~~income consisting of~~loan originations of ~~loans held for sale of $2.0 billion, the increase in other assets of $179.3 million, gain on equity securities of $83.6 million, and gain on sale of loans of $65.7~~$85.5 million, offset by proceeds from available for sale investment securities of $578.2 million and the ~~sale~~proceeds from sales of loans ~~held for sale~~and leases of $1.9 billion, provision for loan and lease losses of $56.3 million, a loss on fair value of residential mortgage servicing rights carried at fair value of $34.4 million, and depreciation, amortization and accretion of $33.1$182.6 million.

~~Net~~ This compares to net cash of $1.4 billion used in investing activities during the nine months ended September 30, 2020, which primarily consisted ~~principally~~ of net loan originations of $1.3 billion, purchases of investment securities available for sale ~~investment securities~~ of $595.4 million, and net cash paid in divestiture of stores of $81.2 million, offset by proceeds from investment securities available for sale ~~investment securities~~ of $604.6 million and the proceeds from sales of loans of $60.8 million. ~~This compares to net~~

Net cash of ~~$908.9 million used in investing~~$1.4 billion provided by financing activities during the nine months ended September 30, ~~2019, which~~2021, primarily consisted ~~principally~~ of $2.3 billion net ~~loan originations~~increase in deposits and the net increase in securities sold under agreements to repurchase of ~~$1.2 billion, purchases of available for sale investment securities of $563.6 million, purchases of restricted equity securities of $220.2 million and net cash paid in divestiture of a store of $44.6~~$92.4 million, offset by ~~proceeds from available for sale investment securities~~$765.0 million repayment of ~~$778.3~~borrowings, $138.2 million ~~redemption~~ of ~~restricted equity securities~~dividends paid on common stock, and the repurchase and retirement of ~~$206.0 million, proceeds from the sale~~common stock of ~~loans and leases of $88.8 million and proceeds from sale of equity securities of $81.9~~$80.7 million.

~~Net~~ This compares to net cash of $2.3 billion provided by financing activities during the nine months ended September 30, 2020, primarily consisted of $2.3 billion net increase in deposits, ~~and~~ proceeds from borrowings of $600.0 million, offset by $510.0 million repayment of borrowings and $138.7 million of dividends paid on common stock. This compares to net cash of $1.6 billion provided by financing activities during the nine months ended September 30, 2019, which consisted primarily of $1.3 billion net increase in deposits and proceeds from borrowings of $810.7 million, offset by $455.7 million repayment of borrowings and $138.9 million of dividends paid on common stock.

Although we expect the Bank's and the Company's liquidity positions to remain satisfactory, ~~during 2020,~~ it is possible that our deposit growth may not be maintained at previous levels due to pricing pressure, store consolidations, or customers' spending ~~habits due to the COVID-19 pandemic.~~habits. In addition, in order to generate deposit growth, our pricing may need to be adjusted in a manner that results in increased interest expense on deposits. The pending merger with Columbia may have an impact on Umpqua's liquidity position and strategy in the future.

~~Table of Contents~~

Off-balance-Sheet Arrangements

Information regarding Off-Balance-Sheet Arrangements is included in Note 6 of the Notes to Condensed Consolidated Financial Statements.

Table of Contents

Concentrations of Credit Risk

Information regarding Concentrations of Credit Risk is included in Note 6 of the Notes to Condensed Consolidated Financial Statements.

Capital Resources

Shareholders' equity at September 30, ~~2020~~2021 was ~~$2.6 billion, a decrease of $1.7 billion from December 31, 2019.~~$2.7 billion. The ~~decrease~~increase in shareholders' equity during the nine months ended September 30, ~~2020~~2021 was principally due to net income, offset by the other comprehensive loss, net ~~loss~~of tax, cash dividends paid, and stock repurchased during the ~~period, related mainly to the goodwill impairment as of March 31, 2020, and resulted in an accumulated deficit as of September 30, 2020.~~period.

The Company's dividend policy considers, among other things, earnings, regulatory capital levels, the overall payout ratio and expected asset growth to determine the amount of dividends declared, if any, on a quarterly basis. There is no assurance that future cash dividends on common shares will be declared or increased. We cannot predict the extent of the economic decline due to COVID-19 or other factors that could result in inadequate earnings, regulatory restrictions and limitations, changes to our capital requirements, or a decision to increase capital by retention of earnings, that may result in the inability to pay dividends at previous levels, or at all. Umpqua is restricted from paying quarterly cash dividends in excess of the current level until the Merger is closed.

~~Due to the accumulated deficit, the Company is required to notify the Board of Governors~~The timing of the FRB prior to declaring and paying a cash dividend to our shareholders and may not pay a dividend if the FRB objects. Additionally, the Company will be required to seek FDIC and Oregon Division of Financial Regulation approval for quarterly dividends from Umpqua Bank to the Company. In the second quarter of 2020, the Company changed the timing of its quarterly dividend ~~from an intra-quarter announcement to~~is after ~~quarterly~~each quarter's earnings ~~release. The shift in announcement timing was made~~release to provide the ~~Company’s~~Company's Board of Directors ~~and regulators~~with the opportunity to review final quarterly financial results and financial projections, prior to the announcement of any dividend. ~~The~~On August 9, 2021, the Company ~~expects to continue this cadence~~declared a cash dividend in ~~future quarters.~~the amount of $0.21 per common share based on second quarter 2021 performance, which was paid on August 31, 2021.

The following table presents cash dividends declared and dividend payout ratios (dividends declared per common share divided by basic earnings per common share) for the three months ended September 30, 2021 and June 30, 2021, as well as the nine months ended September 30, ~~2020~~2021 and ~~the three and nine months ended September 30, 2019.~~

Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Dividend declared per common share $ 0.21 $ 0.21 $ 0.42 $ 0.63
Dividend payout ratio 37 % 55 % (6) % 51 %
2020:


	Three Months Ended						Nine Months Ended
	September 30, 2021			June 30, 2021				September 30, 2021			September 30, 2020
Dividend declared per common share	$	0.21		$	0.21			$	0.63		$	0.42
Dividend payout ratio	43		%	40		%		42		%	(6)		%

In July 2021, the Company announced that its Board of Directors approved a new share repurchase program which authorizes the Company to repurchase up to $400 million of common stock over the next twelve months from time to time in open market transactions, accelerated share repurchases, or in privately negotiated transactions as permitted under applicable rules and regulations. The program replaces and supersedes the previously approved share repurchase program which was scheduled to expire on July 31, 2021. As of September 30, ~~2020,~~2021, a total of ~~9.5~~$321.8 million ~~shares are~~remained available ~~for~~to repurchase shares under the ~~Company's current~~new share repurchase ~~plan.~~program. During the nine months ended September 30, ~~2020, 331,000~~2021, 4.0 million shares were repurchased under the new plan.

The repurchase program is currently halted, based on the announced merger with Columbia and in accordance with the Merger Agreement. The Company may not purchase any shares under this ~~plan. The Board of Directors approved an extension of~~program until the ~~repurchase plan to July 31, 2021.~~Merger is closed. The timing and amount of future repurchases ~~will~~would depend upon the market price for our common stock, securities laws restricting repurchases, asset growth, earnings, ~~and~~ our capital ~~plan.~~plan, and bank or bank holding company regulatory approvals. In addition, our stock plans provide that option and award holders may pay for the exercise price and tax withholdings in part or entirely by tendering previously held shares.

7166

Table of Contents

The following table shows the Company's consolidated and the Bank's capital adequacy ratios compared to the regulatory minimum capital ratio and the regulatory minimum capital ratio needed to qualify as a "well-capitalized" institution, as calculated under regulatory guidelines of the Basel ~~Committee on Banking Supervision to the Basel capital framework ("Basel III")~~III at September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

Actual For Capital Adequacy purposes To be Well Capitalized
(dollars in thousands)
Amount Ratio Amount Ratio Amount Ratio
September 30, 2020
Total Capital
(to Risk Weighted Assets)
Consolidated $ 3,256,042 15.02 % $ 1,733,969 8.00 % $ 2,167,461 10.00 %
Umpqua Bank $ 3,043,589 14.05 % $ 1,733,430 8.00 % $ 2,166,788 10.00 %
Tier I Capital
(to Risk Weighted Assets)
Consolidated $ 2,534,109 11.69 % $ 1,300,476 6.00 % $ 1,733,969 8.00 %
Umpqua Bank $ 2,772,741 12.80 % $ 1,300,073 6.00 % $ 1,733,430 8.00 %
Tier I Common
(to Risk Weighted Assets)
Consolidated $ 2,534,109 11.69 % $ 975,357 4.50 % $ 1,408,849 6.50 %
Umpqua Bank $ 2,772,741 12.80 % $ 975,055 4.50 % $ 1,408,412 6.50 %
Tier I Capital
(to Average Assets)
Consolidated $ 2,534,109 8.59 % $ 1,179,486 4.00 % $ 1,474,357 5.00 %
Umpqua Bank $ 2,772,741 9.41 % $ 1,179,085 4.00 % $ 1,473,856 5.00 %
December 31, 2019
Total Capital
(to Risk Weighted Assets)
Consolidated $ 3,104,444 13.96 % $ 1,779,265 8.00 % $ 2,224,081 10.00 %
Umpqua Bank $ 2,945,830 13.26 % $ 1,777,265 8.00 % $ 2,221,581 10.00 %
Tier I Capital
(to Risk Weighted Assets)
Consolidated $ 2,490,709 11.20 % $ 1,334,449 6.00 % $ 1,779,265 8.00 %
Umpqua Bank $ 2,783,095 12.53 % $ 1,332,949 6.00 % $ 1,777,265 8.00 %
Tier I Common
(to Risk Weighted Assets)
Consolidated $ 2,490,709 11.20 % $ 1,000,837 4.50 % $ 1,445,653 6.50 %
Umpqua Bank $ 2,783,095 12.53 % $ 999,712 4.50 % $ 1,444,028 6.50 %
Tier I Capital
(to Average Assets)
Consolidated $ 2,490,709 9.16 % $ 1,087,509 4.00 % $ 1,359,387 5.00 %
Umpqua Bank $ 2,783,095 10.24 % $ 1,086,999 4.00 % $ 1,358,749 5.00 %


	Actual				For Capital Adequacy purposes				To be Well Capitalized
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2021
Total Capital
(to Risk Weighted Assets)
Consolidated	$	3,391,310	14.88	%	$	1,823,052	8.00	%	$	2,278,815	10.00	%
Umpqua Bank	$	3,048,815	13.38	%	$	1,823,416	8.00	%	$	2,279,269	10.00	%
Tier I Capital
(to Risk Weighted Assets)
Consolidated	$	2,742,229	12.03	%	$	1,367,289	6.00	%	$	1,823,052	8.00	%
Umpqua Bank	$	2,850,732	12.51	%	$	1,367,562	6.00	%	$	1,823,416	8.00	%
Tier I Common
(to Risk Weighted Assets)
Consolidated	$	2,742,229	12.03	%	$	1,025,467	4.50	%	$	1,481,230	6.50	%
Umpqua Bank	$	2,850,732	12.51	%	$	1,025,671	4.50	%	$	1,481,525	6.50	%
Tier I Capital
(to Average Assets)
Consolidated	$	2,742,229	8.96	%	$	1,223,942	4.00	%	$	1,529,927	5.00	%
Umpqua Bank	$	2,850,732	9.31	%	$	1,224,669	4.00	%	$	1,530,836	5.00	%
December 31, 2020
Total Capital
(to Risk Weighted Assets)
Consolidated	$	3,347,926	15.63	%	$	1,713,891	8.00	%	$	2,142,364	10.00	%
Umpqua Bank	$	3,134,116	14.63	%	$	1,713,809	8.00	%	$	2,142,262	10.00	%
Tier I Capital
(to Risk Weighted Assets)
Consolidated	$	2,636,194	12.31	%	$	1,285,418	6.00	%	$	1,713,891	8.00	%
Umpqua Bank	$	2,873,383	13.41	%	$	1,285,357	6.00	%	$	1,713,809	8.00	%
Tier I Common
(to Risk Weighted Assets)
Consolidated	$	2,636,194	12.31	%	$	964,064	4.50	%	$	1,392,536	6.50	%
Umpqua Bank	$	2,873,383	13.41	%	$	964,018	4.50	%	$	1,392,470	6.50	%
Tier I Capital
(to Average Assets)
Consolidated	$	2,636,194	8.98	%	$	1,174,129	4.00	%	$	1,467,661	5.00	%
Umpqua Bank	$	2,873,383	9.79	%	$	1,174,065	4.00	%	$	1,467,581	5.00	%

~~Along with enactment of the CARES Act,~~In 2020, the federal bank regulatory authorities ~~issued an interim final~~finalized a rule to provide banking organizations that ~~are required to implement~~implemented CECL ~~before the end of~~in 2020 the option to delay the estimated impact on regulatory capital by up to two years, with a three-year transition period to phase out the cumulative benefit to regulatory capital provided during the two-year delay. The Company ~~has~~ elected this capital relief and will delay the estimated regulatory capital impact of adopting CECL, relative to the incurred loss methodology's effect on regulatory capital.

7267

Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our assessment of market risk as of September 30, ~~2020~~2021 indicates there are no material changes in the qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2019. However due to the impact of declining interest rates resulting from the Federal Reserve monetary policy and programs, and market reaction to the economic impact of the COVID-19 pandemic, the estimated impact on our net interest income over a one-year time horizon has shifted.

~~Interest Rate Simulation Impact on Net Interest Income~~

~~As of September 30, 2020 and December 31, 2019 and 2018:~~

September 30, 2020 December 31, 2019 December 31, 2018
Up 300 basis points 8.6 % 5.9 % 4.9 %
Up 200 basis points 5.9 % 4.1 % 3.3 %
Up 100 basis points 3.0 % 2.2 % 1.7 %
Down 100 basis points (1.5) % (3.8) % (2.8) %
Down 200 basis points (2.1) % (7.4) % (6.3) %
Down 300 basis points (2.3) % (9.4) % (9.5) %

For the scenarios shown, the interest rate simulation assumes a parallel and sustained shift in market interest rates ratably over a twelve-month period and no change in the composition or size of the balance sheet.

As rates have declined, our asset sensitivity in an increasing rate environment has increased. This is due to interest-bearing assets projected to reprice in greater velocity or magnitude in comparison to interest bearing liabilities, and also due to significant growth in non-interest bearing deposits which are not sensitive to changing interest rates in the simulation.In a declining rate environment, the reduced sensitivity, compared to year-end simulation results, reflects more interest-bearing assets at or near rate floors and the assumption that market interest rates do not go negative.

The short-term interest rate environment is primarily a function of the monetary policy of the FRB. The principal tools of the Federal Reserve for implementing monetary policy are open market operations, or the purchases and sales of U.S. Treasury and Federal agency securities, as well as the establishment of a short-term target rate. The Federal Reserve's objective for open market operations has varied over the years, but the focus has gradually shifted toward attaining a specified level of the federal funds rate to achieve the long-run goals of price stability and sustainable economic growth. The federal funds rate is the basis for overnight funding and drives the short end of the yield curve. Longer maturities are influenced by the market's expectations for economic growth and inflation, but are also influenced by Federal Reserve purchases and sales and expectations of monetary policy going forward.

In March 2020, in response to the COVID-19 pandemic, its effect on economic activity in the near term and the risk it poses to the economic outlook, the FOMC lowered the target range for the federal funds rate 150 basis points to 0.00% to 0.25%. At its September 2020 meeting the FOMC noted it expects to maintain an accommodating stance of monetary policy until the outcomes of maximum employment and inflation at a rate of 2% over the longer run is achieved. Maintaining the current level of the federal funds rate could cause overall interest rates to fall, which may negatively impact financial performance. Increases in the federal funds rate and the unwinding of its balance sheet could cause overall interest rates to rise, which may negatively impact the U.S. real estate markets and affect deposit growth and pricing. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of collateral securing loans, which could negatively affect our financial performance.

~~Table of Contents~~

~~LIBOR Transition~~

In 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it would no longer require banks to submit rates for LIBOR after 2021. The Alternative Reference Rates Committee ("ARRC") is a group of private-market participants convened by the FRB and the New York Fed to help ensure a successful transition from U.S. dollar LIBOR to a more robust reference rate, its recommended alternative, the Secured Overnight Financing Rate. In addition, the ARRC has noted that though near-term interim steps in the transition may be delayed given the current economic environment with the global pandemic, it remains clear that the financial system should continue to move to transition by the end of 2021.The Company holds financial instruments that will be impacted by the discontinuance of LIBOR, primarily certain loans, derivatives, and junior subordinated debentures that use LIBOR as the benchmark rate. The Company anticipates these financial instruments will require transition to new reference rates. This transition will occur over time as many of these arrangements do not have an alternative rate referenced in their contracts. The Company has commenced an enterprise-wide transition program with program deliverables including business strategy, product design and pricing strategy, instrument contract remediation, and systems and processes.These deliverables include milestones that address operational changes, targeted communications and education planning, and to identify, assess, monitor and remediate risks associated with the transition.2020.

Item 4. Controls and Procedures

Our management, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, has concluded that our disclosure controls and procedures are effective in timely alerting them to information relating to us that is required to be included in our periodic filings with the SEC. The disclosure controls and procedures were last evaluated by management as of September 30, ~~2020.~~2021.

~~While we have incorporated additional controls related to our CECL accounting processes into our existing internal control environment, there was no~~No change in internal control over financial reporting ~~that~~ occurred during the quarter ended September 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Due to the nature of our business, we are involved in legal proceedings that arise in the ordinary course of our business. While the outcome of these matters is currently not determinable, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed under "Part I--Item 1A--Risk Factors" in our Form 10-K for the year ended December 31, ~~2019.~~2020. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. ~~Other than as described below, there~~

As a result of Umpqua entering into a merger agreement with Columbia, certain risk factors have been ~~no other material changes~~identified:

Umpqua may not be able to complete the merger with Columbia, as the completion is contingent upon the satisfaction of a number of conditions, some of which are beyond both Umpqua's and Columbia's control.

Adoption of the merger agreement is subject to customary closing conditions, including the receipt of regulatory approvals and the requisite approvals of both Umpqua's and Columbia's shareholders. Conditions to the closing of the merger may not be fulfilled in a timely manner or at all, and accordingly, the merger may not be completed. In addition, the parties can mutually decide to terminate the merger agreement at any time, or Umpqua or Columbia may unilaterally elect to terminate the merger agreement. If the merger agreement is terminated under certain circumstances, Umpqua may be required to pay a $145.0 million termination fee to Columbia.

Umpqua and Columbia may also be subject to lawsuits challenging the merger, and adverse rulings in these lawsuits may delay or prevent the merger from being completed or require Umpqua or Columbia to incur significant costs to defend or settle these lawsuits. Any delay in completing the ~~risk factors described~~merger could cause Umpqua not to realize, or be delayed in ~~our Form 10-K.~~realizing, some or all of the benefits that the Company expects to achieve if the merger is successfully completed within the anticipated time frame.

7468

Table of Contents

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the merger.

Before the Merger and the bank merger may be completed, Umpqua and Columbia must obtain approvals from the Federal Reserve Board, the FDIC, the Director of the Oregon Department of Consumer and Business Services and the Director of the Washington Department of Financial Institutions. Other approvals, waivers or consents from regulators may also be required. In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each party. An adverse development in either party's regulatory standing or other factors could result in an inability to obtain approval or delay their receipt. Regulators may impose conditions on the completion of the Merger or the bank merger or require changes to the terms of the Merger or the bank merger. Such conditions or changes could have the effect of delaying or preventing completion of the Merger or the bank merger or imposing additional costs on or limiting the revenues of the combined company following the Merger and the bank merger, any of which might have an adverse effect on the combined company following the merger.

Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the merger may not be realized.

Umpqua and Columbia have operated and, until the completion of the Merger, will continue to operate independently. The ~~COVID-19 pandemic has~~success of the Merger, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully combine and integrate the businesses of Umpqua and Columbia in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of either company's ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely ~~impacted our~~affect the combined company's ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. The loss of key employees could adversely affect Umpqua's ability to successfully conduct its business, ~~and~~which could have an adverse effect on Umpqua's financial results and the ~~ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including~~value of its common stock. If Umpqua experiences difficulties with the ~~scope and duration~~integration process, the anticipated benefits of the ~~pandemic~~merger may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause Umpqua or Columbia to lose customers or cause customers to remove their accounts from Umpqua or Columbia and ~~actions taken by governmental authorities in response~~move their business to competing financial institutions. Integration efforts between the ~~pandemic.~~two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Umpqua and Columbia during this transition period and for an undetermined period after completion of the Merger on the combined company. In addition, the actual cost savings of the Merger could be less than anticipated.

~~The COVID-19 pandemic has negatively impacted~~Termination of the economy, changed customer behaviors, disrupted supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. The pandemic has resulted in temporary and long-term closures of many businesses and the institution of social distancing and stay at home/sheltering in place requirements in the states and communities we serve. As a result, the demand for our products and services may be significantly impacted, which could adversely affect our revenue. The pandemic could continue to result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, unemployment levels continue to rise, regional economic conditions worsen, or government stimulus programs are scaled back or eliminated. Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic. In response to the pandemic, we have initiated relief programs designed to support our customers and communities including payment deferral programs, deferral-related and other fee waivers, suspended residential property foreclosure sales, and other expanded assistance for customers. Future governmental actions may require additional types of customer-related responses thatmerger agreement could negatively impact ~~our financial results. We could~~Umpqua.

If the merger agreement is terminated, there may be ~~required~~various consequences. For example, Umpqua's businesses may have been impacted adversely by the failure to ~~take capital actions in response~~pursue other beneficial opportunities due to the ~~COVID-19 pandemic, including reducing dividends and eliminating stock repurchases. The extent to which~~focus of management on the COVID-19 pandemic continues to impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and durationMerger, without realizing any of the ~~pandemic; actions taken by governmental authorities and other third parties in response~~anticipated benefits of completing the merger. Also, Umpqua has devoted significant internal resources to the ~~pandemic;~~pursuit of the ~~effect on our customers, counterparties, employees and third party service providers;~~Merger and the ~~effect on economies and markets. To~~expected benefit of those resource allocations would be lost if the Merger is not completed. Additionally, if the merger agreement is terminated, the market price of Umpqua's common stock could decline to the extent that the ~~COVID-19 pandemic continues~~current market prices reflect a market assumption that the merger will be completed. If the merger agreement is terminated under certain circumstances, Umpqua may be required to pay to Columbia a termination fee of $145.0 million.

Umpqua will be subject to business uncertainties and contractual restrictions while the Merger is pending that could adversely affect our business and ~~financial performance, it may also have~~operations.

Uncertainty about the effect of ~~heightening many~~the Merger on employees, customers and other persons Umpqua has a business relationship with may have an adverse effect on Umpqua's business, operations, and stock price. These uncertainties may impair Umpqua's ability to attract, retain and motivate key personnel until the Merger is completed, and could cause customers and others that deal with Umpqua to seek to change existing business relationships. Retention of certain employees by Umpqua may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with Umpqua. These retention challenges could require Umpqua to incur additional expenses in order to retain key employees. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Umpqua, Umpqua's business could be harmed. In addition, subject to certain exceptions, each of Umpqua and Columbia has agreed to operate its business in the ordinary course prior to closing and to refrain from taking certain actions. Umpqua may delay or abandon projects and other business decisions could be deferred during the pendency of the merger.

Table of Contents

Umpqua will incur substantial expenses related to the merger.

Both Umpqua and Columbia will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. Many of the expenses related to integration of the two companies are difficult to accurately estimate and could exceed anticipated cost savings the companies expect to achieve. If the Merger is not completed, Umpqua would have to recognize transactions costs and other ~~risks identified~~expenses in connection with the ~~"Risk Factors" section~~Merger without realizing the expected benefits of ~~our most recently filed~~the Merger. There are many factors beyond the Company's control that could affect the total amount or the timing of charges to earnings.

The merger agreement limits Umpqua's ability to pursue acquisition proposals.

The merger agreement prohibits Umpqua from soliciting, initiating, knowingly encouraging or knowingly facilitating certain third‑party acquisition proposals. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Umpqua from considering or proposing such an acquisition.

The other risk factors that could affect the Company's financial condition or operating results remain unchanged from those previously disclosed in Umpqua's Annual Report on Form ~~10-K.~~

~~We have adopted new accounting guidance, specifically CECL, to account~~10-K for ~~our credit losses that may be more volatile and may adversely impact our financial statements when forecasted market conditions change.~~

~~In January 2020,~~ the ~~Company adopted the FASB Accounting Standard Update, "Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments~~," which replaces the previous "incurred loss" model for recognizing credit losses with an "expected loss" model referred to as CECL. Under CECL, we are required to present certain financial assets carried at amortized cost, such as loans and leases held for investment, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the "incurred loss" model, which delays recognition until it is probable a loss has been incurred. CECL may create more volatility in the level of our allowance for credit losses.year ended December 31, 2020.

Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)Not applicable

(b)Not applicable

(c)The following table provides information about repurchases of common stock by the Company during the quarter ended September 30, ~~2020:~~2021:

Period
Total number of Common Shares Purchased (1)
Average Price Paid per Common Share
Total Number of Shares Purchased as Part of Publicly Announced Plan (2)
Maximum Number of Remaining Shares that May be Purchased at Period End under the Plan
7/1/20 - 7/31/20 1,299 $ 11.24 — 9,524,429
8/1/20 - 8/31/20 177 $ 11.05 — 9,524,429
9/1/20 - 9/30/20 47 $ 10.52 — 9,524,429
Total for quarter 1,523 $ 11.20 —


Period	Total number of Common Shares Purchased (1)	Average Price Paid per Common Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (2)	Maximum Dollar Value of Shares that May be Purchased at Period End under the Plan
7/1/21 - 7/31/21	862,127	$	18.86	860,828	$	383,765,495
8/1/21 - 8/31/21	3,148,950	$	19.68	3,148,891	$	321,797,719
9/1/21 - 9/30/21	731	$	19.28	—	$	321,797,719
Total for quarter	4,011,808	$	19.50	4,009,719

~~Table of Contents~~

(1)Common shares repurchased by the Company during the quarter consist of cancellation of ~~1,523~~2,089 shares to be issued upon vesting of restricted stock awards to pay withholding taxes. During the three months ended September 30, ~~2020, no~~2021, 4.0 million shares were repurchased pursuant to the Company's publicly announced corporate stock repurchase plan described in (2) below.

(2)~~The Company's~~As of July 21, 2021, the Company approved a new share repurchase ~~plan,~~program which ~~was first approved by its Board of Directors and announced in August 2003, was amended on September 29, 2011~~authorizes the Company to ~~increase the number~~repurchase up to $400 million of common ~~shares available for~~stock over the next twelve months from time to time in open market transactions, accelerated share repurchases, or in privately negotiated transactions as permitted under applicable rules and regulations. This effectively ended the previous share repurchase ~~under the plan to 15 million shares. The repurchase program has been extended multiple times by the board with the current expiration date of July 31, 2021.~~plan. As of September 30, ~~2020,~~2021, a total of ~~9.5~~$321.8 million ~~shares~~ remained available ~~for repurchase.~~to repurchase shares. The timing and amount of future repurchases will depend upon the market price for our common stock, laws and regulations restricting repurchases, asset growth, earnings, ~~and~~ our capital ~~plan.~~plan and bank or bank holding company regulatory approvals. In addition, the repurchase program was halted with the announcement of the proposed merger with Columbia and as required under the Merger Agreement.

Item 3. Defaults upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

7671

Table of Contents

Item 6. Exhibits


Exhibit #			Description

2.1			(a) Agreement and Plan of Merger by and among Umpqua Holdings Corporation, Columbia Banking System, Inc, and Cascade Merger Sub, Inc..

3.1			~~(a)~~(b ) Restated Articles of Incorporation, as amended

3.2			~~(b)~~(c ) Bylaws, as amended

4.1			~~(c)~~(d ) Specimen Common Stock Certificate

4.2			The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company.

10.1*			Umpqua Holdings Corporation Notice of Performance Share Award based on relative ROATCE performance

31.1			Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2			Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.3			Certification of Principal Accounting Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32			Certification of Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS			Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2020,~~2021, formatted in Inline XBRL (included in Exhibit 101)


*			Compensatory plan or arrangement

(a)			Incorporated by reference to Exhibit 2.1 to Form 8-K filed October 15, 2021

(b)			Incorporated by reference to Exhibit 3.1 to Form 8-K filed April 23, 2018

(c)			Incorporated by reference to Exhibit 99.2 to Form 8-K filed March 24, 2020

(d)			Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-8 (No. 333-77259) filed April 28, 1999

~~(a) Incorporated by reference to Exhibit 3.1 to Form 8-K filed April 23, 2018~~

~~(b) Incorporated by reference to Exhibit 99.2 to Form 8-K filed March 24, 2020~~

~~(c) Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-8 (No. 333-77259) filed April 28, 1999~~

7772

Table of Contents

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		UMPQUA HOLDINGS CORPORATION
		(Registrant)

Dated	November ~~5, 2020~~4, 2021	/s/ Cort L. O'Haver
		Cort L. O'Haver President and Chief Executive Officer

Dated	November ~~5, 2020~~4, 2021	/s/ Ronald L. Farnsworth
		Ronald L. Farnsworth Executive Vice President/Chief Financial Officer and Principal Financial Officer

Dated	November ~~5, 2020~~4, 2021	/s/ Lisa M. White
		Lisa M. White Senior Vice President/Corporate Controller and Principal Accounting Officer

7873


GLOSSARY		3
PART I. FINANCIAL INFORMATION		34
Item 1.	Financial Statements (unaudited)	34
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4544
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7368
Item 4.	Controls and Procedures	7468
Part II. OTHER INFORMATION		7468
Item 1.	Legal Proceedings	7468
Item 1A.	Risk Factors	7468
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7570
Item 3.	Defaults Upon Senior Securities	7671
Item 4.	Mine Safety Disclosures	7671
Item 5.	Other Information	7671
Item 6.	Exhibits	7772

SIGNATURES		7873


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income (Loss)
(in thousands, except shares)	Shares	Amount						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)
Cumulative effect adjustment (1)				(244)				(244)
Balance at March 31, 2019	220,457,208	$	3,511,731	$	629,877	$	(29,282)	$	4,112,326
Net income				111,810				111,810
Other comprehensive income, net of tax						48,395		48,395
Stock-based compensation		2,722						2,722
Stock repurchased and retired	(4,113)	(62)						(62)
Issuances of common stock under stock plans	45,589	0						0
Cash dividends on common stock ($0.21 per share)				(46,684)				(46,684)
Balance at June 30, 2019	220,498,684	$	3,514,391	$	695,003	$	19,113	$	4,228,507
Net income				84,502				84,502
Other comprehensive income, net of tax						25,851		25,851
Stock-based compensation		2,350						2,350
Stock repurchased and retired	(300,719)	(5,248)						(5,248)
Issuances of common stock under stock plans	14,169	0						0
Cash dividends on common stock ($0.21 per share)				(46,446)				(46,446)
Balance at September 30, 2019	220,212,134	$	3,511,493	$	733,059	$	44,964	$	4,289,516
Net income				83,750				83,750
Other comprehensive loss, net of tax						(15,415)		(15,415)
Stock-based compensation		2,547						2,547
Stock repurchased and retired	(2,483)	(40)						(40)
Issuances of common stock under stock plans	19,631	0						0
Cash dividends on common stock ($0.21 per share)				(46,443)				(46,443)
Balance at December 31, 2019	220,229,282	$	3,514,000	$	770,366	$	29,549	$	4,313,915


	December 31, 2019				January 1, 2020

(in thousands)	Allowance for Loan and Lease Losses		Reserve for Unfunded Commitments		Allowance for Credit Losses on Loans and Leases		Reserve for Unfunded Commitments		$ Increase (decrease)		% Increase (decrease)
Commercial real estate, net	$	50,847	$	534	$	55,924	$	4,564	$	9,107	18	%
Commercial, net	73,820		2,539		117,829		2,052		43,522		57	%
Residential, net	24,714		149		26,813		1,416		3,366		14	%
Consumer & other, net	8,248		1,884		7,062		312		(2,758)		(27)	%
Total	$	157,629	$	5,106	$	207,628	$	8,344	$	53,237	33	%


	Three Months Ended September 30, 2020
(in thousands)	Wholesale Bank		Wealth Management		Retail Bank		Home Lending		Corporate & Other (2)		Consolidated
Net interest income	$	118,913	$	5,777	$	57,938	$	17,937	$	16,009	$	216,574
Provision (recapture) for credit losses	5,999		(572)		(78)		(5,753)		66		(338)
Non-interest income	15,298		4,007		18,481		90,593		3,545		131,924

Non-interest expense	60,935		8,050		58,666		49,014		13,542		190,207
Income before income taxes	67,277		2,306		17,831		65,269		5,946		158,629
Provision (benefit) for income taxes (1)	14,317		577		3,795		16,317		(1,248)		33,758
Net income	$	52,960	$	1,729	$	14,036	$	48,952	$	7,194	$	124,871

Notable fair value adjustments included in non-interest income:
Residential mortgage servicing rights	$	0	$	0	$	0	$	(17,122)	$	0	$	(17,122)
Interest rate swaps	1,765		0		0		0		0		1,765


	Goodwill
(in thousands)	Gross		Accumulated Impairment		Total
Balance, December 31, 2019	$	1,900,727	$	(113,076)	$	1,787,651
Goodwill impairment	—		(1,784,936)		(1,784,936)
Balance, September 30, 2020	$	1,900,727	$	(1,898,012)	$	2,715


	Three Months Ended September 30,
	2020 compared to 2019
	Increase (decrease) in interest income and expense due to changes in
(in thousands)	Volume		Rate		Total
INTEREST-EARNING ASSETS:
Loans held for sale	$	3,055	$	(1,760)	$	1,295
Loans and leases	16,342		(54,291)		(37,949)
Taxable securities	718		(2,985)		(2,267)
Non-taxable securities (1)	(125)		(116)		(241)
Temporary investments and interest bearing cash	2,551		(6,281)		(3,730)
Total interest-earning assets (1)	22,541		(65,433)		(42,892)
INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits	560		(3,104)		(2,544)
Money market deposits	502		(14,793)		(14,291)
Savings deposits	103		(481)		(378)
Time deposits	(4,605)		(4,937)		(9,542)
Repurchase agreements	79		(443)		(364)
Borrowings	819		(1,786)		(967)
Junior subordinated debentures	(624)		(1,779)		(2,403)
Total interest-bearing liabilities	(3,166)		(27,323)		(30,489)
Net increase (decrease) in net interest income (1)	$	25,707	$	(38,110)	$	(12,403)


	Nine Months Ended September 30,
	2020 compared to 2019
	Increase (decrease) in interest income and expense due to changes in
(in thousands)	Volume		Rate		Total
INTEREST-EARNING ASSETS:
Loans held for sale	$	8,583	$	(3,697)	$	4,886
Loans and leases	48,034		(131,264)		(83,230)
Taxable securities	1,317		(8,052)		(6,735)
Non-taxable securities (1)	(794)		(589)		(1,383)
Temporary investments and interest bearing cash	7,165		(12,794)		(5,629)
Total (1)	64,305		(156,396)		(92,091)
INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits	1,072		(4,363)		(3,291)
Money market	2,909		(27,772)		(24,863)
Savings	127		(746)		(619)
Time deposits	(3,447)		(5,708)		(9,155)
Repurchase agreements	(198)		(790)		(988)
Borrowings	2,430		(3,758)		(1,328)
Junior subordinated debentures	(2,388)		(3,058)		(5,446)
Total interest-bearing liabilities	505		(46,195)		(45,690)
Net increase in net interest income (1)	$	63,800	$	(110,201)	$	(46,401)


(dollars in thousands)	Number of PPP Loans	PPP Loan Balances		% of Total PPP Loans
Oregon	6,595	$	726,007	36	%
California	5,161	730,127		36	%
Washington	4,214	416,909		21	%
Idaho	413	46,877		2	%
Nevada	380	56,103		3	%
Other	156	31,356		2	%
Total, net of deferred fees and costs	16,919	$	2,007,379	100	%


	June 30, 2020			Q3 2020 net charge-offs		(Release)/ reserve build		September 30, 2020			% of Loan and Leases Outstanding
Commercial real estate	$	173,636		$	61	$	(19,214)	$	154,483		1.51	%
Commercial	155,536			(13,382)		24,405		166,559			2.51	%
Residential	42,609			287		(6,183)		36,713			0.70	%
Consumer	11,332			(447)		715		11,600			3.64	%
Total allowance for credit losses(1)	$	383,113		$	(13,481)	$	(277)	$	369,355		1.65	%
% of Loans and leases outstanding	1.69		%					1.65		%
% of Loans and leases outstanding - excluding PPP Loans	1.85		%					1.81		%


	September 30, 2020		December 31, 2019		December 31, 2018
Up 300 basis points	8.6	%	5.9	%	4.9	%
Up 200 basis points	5.9	%	4.1	%	3.3	%
Up 100 basis points	3.0	%	2.2	%	1.7	%
Down 100 basis points	(1.5)	%	(3.8)	%	(2.8)	%
Down 200 basis points	(2.1)	%	(7.4)	%	(6.3)	%
Down 300 basis points	(2.3)	%	(9.4)	%	(9.5)	%